CAL’s US$21M subsidy keeps airline flying

| 08/09/2016 | 30 Comments
CNS Business

Cayman Airways Boeing 737-300

(CNS Business): The latest audit of the national flag carrier has reinforced the fact that while Cayman Airways Ltd is turning its financial losses around, it is still very heavily dependent on a government subsidy of around US$21 million per year and would not be a viable entity without it. But the management team has pointed to the strategic importance of the public cash injected into the airline to ensure that Cayman retains control of its broader airlift to support tourism policy and connect all three islands. CEO Fabian Whorms told the Public Accounts Committee last week that the airline provides value for money.

When properly and strategically utilized to help keep airline prices low and bring high-spending tourists from parts of North America to the islands, the direct cash paid to support CAL comes back to government and the broader economy through fees and taxes and the money tourists spend.

Like many other parts of the public sector, some 10% of the government subsidy is spent supporting the Sister Islands. Flights between Grand Cayman, Cayman Brac and Little Cayman are heavily subsidised because, Whorms explained, those routes could never pay for themselves. But with no other connection, the Sister Islands depend extensively on CAL.

Around US$2.6 million of the subsidy paid to the airline is earmarked for the strategic domestic air service. Whorms explained that this cash is counted as operating revenue and used for strategic reasons directly to cover the expenses of the air service between Grand Cayman and the Sister Islands.

The bulk of the cash CAL gets from the public purse is used to boost the tourism sector. Whorms said money going to the Strategic Tourism, Regional and Core Air Services of around US$13.8 million is also counted as operating revenue by the airline to cover losses incurred in providing direct air service to strategic US and regional gateways that are identified as key source markets for expanding the Cayman Islands tourism. These gateways are worked out in conjunction with the airline, the department and ministry of tourism to try to get as much “bang for the dollar” as possible, he said.

The airline has an historic debt problem, owing back fees to Owen Roberts International Airport and bank loans that were taken out in the past to cover what Whorms said were the strategic operating losses when government was not covering the full costs of the routes it wanted CAL to service. Around US$5.1 million is also pumped into the airline every year directly from government for old debt.

But Whorms said the amount government is injecting into the airline is going in the right direction. In the 15/16 budget year the airline’s strategic cash injection for the domestic and overseas losses was US$1.4 million less than the previous year.

See Whorms explain CAL’s value for money at PAC hearing below:

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Category: Government, Local Business, Stay-over tourism, Tourism, Transport

Comments (30)

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  1. Anonymous says:

    Add a Monday morning flight back from Miami that arrives in time for ppl to get to work at 8am. Also have a Monday morning flight out of grand cayman that allows ppl to get to Miami in time for work at 8am. Figure out a way that there is no overnighting in Miami as I realize that this is what is being avoided. Then, once that is figured out. Do that daily….

    Four times a year pick different routes. E.g. Four times a year fly straight to Texas. Four times a year fly straight to panama. Four times a year fly straight to North Carolina, Minnesota, Washington, Los Angeles etc. pick a place.

    Get a flight that is cheaper to get to Toronto twice a week.

  2. Annie says:

    I love CAL, and always choose them over other carriers when the route allows. No lines in Miami at check in, two free bags, friendly faces… Just hate that crappy gate with no good food, and the one scary old ice cream vending machine (probably refilled by that evil Foster’s clown). This is the only good use of my duty dollars that I have seen. I get nothing for my money but those two free bags, an Otis Spunkmeyer muffin, and half gallon of rum punch. Do not take my sunshine away.

  3. Anonymous says:

    We have your ANSWER to fair market demands – lower airline taxes!! Yes, We CAN lower our OWN taxes and hence be the best buy in the market- want to fill planes? Start with our own region. See CEO conference guest speaker- this makes sense!! http://www.fidelityceo.com/tourism-chiefs-urged-to-drop-travel-taxes

  4. Allar says:

    I agree, how can they claim turning a profit? The CEO and Chairman should be shame of them selves bring such bullshit to the public. The reason Cal will never be any better is because of poor management, just take for example, one pilot is retiring February next year and they have just sent him to get type rated on the 737-800 which will not be in service until Nov-Dec of this year at a cost of about $12k. WHY WHY do our tax payers money get spent this way so reckless. The pilots association is also another reason for lots of friction. The CEO needs to go and the chairman, start a fresh give them a one time subsidy of $25 million and send the new guys away and make it known that in one year you must break even or come with you resignation in hand period full stop. We need to stop pussy footing with our tax paying dollars, enough is enough

    • Anonymous says:

      So let me get this straight? We are paying for 737 training for an employee that will only fly this type of plane for 2 months? $12,000 fee for two months? Perhaps we should be recruiting the replacement now who CAN fly the 737-800? A two month handover would be money much better spent!?!

  5. Anonymous says:

    Any other Caribbean Islands that have flights coming from American, Delta , US Air or the like have to pay millions to those airlines or they won’t fly in.

    Most islands have to pay American at least $5 million a year just to get them to fly but that oes not gaurrantee fair (or low) prices, it does not gaurrantee frequency, it does not give the island the opportunity to choose gateways or flight times.

    No other airline will fly in extra flights to help evacuate people before during or after a hurricane.

    No other airline is interestd in flying cargo flights to supply our island with needed goods.

    You want to know why Cayman is in so much better of a position than so many other islands, Cayman Air is one of the main reasons. We are not the only one with a beach.

    If we want to fill these new hotels that are being built and keep our economy going we need Cayman Air!!!

    • Anonymous says:

      “Any other Caribbean Islands that have flights coming from American, Delta , US Air or the like have to pay millions to those airlines or they won’t fly in.”

      What complete BS! The reality is that every year US airlines pay $millions in taxes and landing fees to operate these services. Please don’t troll the comments on this website.

    • Michael says:

      Free market determines supply and demand not mr. Worms and the ci government
      And I maybe mistaken but when the Island last who was the last airline to go?
      In a modern world of instant data and communication there is just no reason strong enough for this gross inefficiency and waste of valuable funds, perhaps funds that could help solve the ecological disaster call mt trash more.
      It’s important to consider that this subsidy is going to increase over time with newer aircraft coming and not to mention the accumulated long term debt of what $50 million?
      It will eventually make hsa look good.

  6. Anonymous says:

    What a pile of absolute rubbish this article is.
    Government pays CAL to fly on tourism routes to help feed the island with the covetted high net worth clients. CIG also pays to subsidize the route over to the sister islands because they would be in trouble without it.
    If you want CAL to make mopney they would have to fly only the routes that do so, but we would end up with no tourists.

  7. Michael says:

    Who is going to buy a business that has losses of 21 million a year?
    There is no rational reason for us to be paying for this.
    If the general public actually knew what some of the employees of cal were making relative to how much they work there would be protests at the gates.
    It’s time to reveal what is going on inside cal that has cost the country 100’s of millions of dollars.
    Fabian by the way you are not able to control what major airlines charge, that is what you cling to in order to legitimize your salary.

  8. Anonymous says:

    As CAL is a publicly owned entity, can they please provide a list of all of the directors that are entitled to free flights in order for the Cayman public to know who we are paying this subsidy for?

    Thank you.

  9. Anonymous says:

    OK so here is the question. How many tourists fly in and out on CAL from destinations that there is no competitive flight available from other operators. If the tourists can / will hop another flight anyway we don’t need to subsidise CAL to ring them here.That means you can wipe out any justification for subsidising the MIA route for starters.

    The problem you are then going to get is that CAL becomes uncompetitive on MIA and so doesn’t get any pax so stops that route. That means that it gets less hours out of its planes so the cost per mile goes up so the subsidy for the other routes goes up – to much the same as it was when flying the MIA route. The reality of the maths though is that the cost per pax bought in that would not have come with other carriers if CAL didn’t exist goes through the roof.

    So lets forget the phoney economics. Is there an argument that Cayman needs to possess its own airlift capability for hurricane preparedness purposes? Possibly but I suspect that the cost of standby charter arrangements would be rather less than this subsidy. Is there an argument that without CAL Caymanians can’t pursue a career in aircraft maintenance / flight attendant / piloting without leaving the island. Possibly but so what. There a re a large number of careers unavailable to Caymanians on Island.

    Don’t get me wrong, I fly CAL out of preference and it would be a shame to see it go but at 21M per year would it be at the top of the list of things to keep… sorry no.

  10. Anonymous says:

    Sell CAL to dart. He will sort it out and save us some money. Speaking of dart that landfill is still there and nothing will happen until uncle dart takes it over. Have a nice day!

    • Annie says:

      Really, are you daft. He will hire them for a fair salary, milk them for info, fire them and hire some cruise ship lackey with a high school degree for a quarter of the cost. And immigration will give him the permit.

  11. Anonymous says:

    $21m per year subsidy is just not worth it. Monies could be better spent to benefit the people of the islands for eg. education and giving civil servants a better pay. Other countries like Jamaica had to sell their National Airline as it was just not feasible and cost the Government too much dollars. Wake up Cayman, if we are not prudent spenders we will live to regret it.

  12. Anonymous says:

    Cayman Airways needs to stop its sponsoring of events if this be the case. Every event is being sponsored by CAL! go figure not its not its by the peeps of Cayman and The Government.

  13. Anonymous says:

    Free flights for those with connections while you milk the ordinary tax payers to keep the business afloat! What an utter disgrace CAL is.

  14. Anonymous says:

    Any idea how much of the revenue over the years is due to Cuba flights (Cuba and related Miami)? This will likely go away once US tourism is allowed to Cuba.

    • Anonymous says:

      The answer is a lot, in fact it’s probably their only route that makes a decent profit. I can’t remember when CAL took this service over from Cubana but since then they must have flown thousands (hundreds of thousands?) of US citizens into Cuba bypassing the travel embargo. I bet they’re already seeing that business dropping off and I’d give it about six months before the route becomes unprofitable.

  15. Caymankind says:

    CAL is a political football full of votes but run by a core group of political bobble heads, loyalists and the Cayman Airways Pilots Association.

    Governments do not seek any value for money and continue to provide over 20 million in annual subsidies without holding the management and board to any standards of accountability. It is a complete joke and no one is interested in stopping the waste. How are routes chosen is a business case presented or is it dreamt up by the ministry of tourism? So much waste and giveaways in the name of politics.

    CNS please print the names of all persons on the board who are getting the travel benefits past and present.

  16. Anonymous says:

    Fabian Whorms should be fired after that BS response. No wonder CAL is a mess.

    • Anonymous says:

      Fabian is actually a very smart guy and wasted in this position. His only weakness in my opinion is his choice of words designed to be deliberately ambigous and convincing. The same argument he puts forward for the airline being value for money by the injection of money into the economy by the people it transports here, is equally true for any carrier serving Cayman. However if it costs $2 for every $1 of cash into the economy then obviously it is a fools choice. The cleverness in all this is that there is no proof of the relationship of the economy and the airline, but clever words can make it sound convincing, even external auditors can only base their assumptions on empirical evidence.

    • Anonymous says:

      The word ‘delusional’ always comes to mind when I read Whorms’ statements.

    • Anonymous says:

      why CAL cannot be profitable

      1. Ceo with 180,000 t0 200,000 salary.
      2. All co pilots on 737 making over 8000 per month and captains making over 12,000.
      3. 0ver a thousand person fly free this include 350 employees and family. Former employees and spouses and all former Board of directors and their family fly free.
      4. Vps and other management making 10,000 to 12,000 a month salary.
      5. Too many employee get feight shipped for free.
      6.What is with your out dated employee hand book about all staff must wear clean under wear?
      7. CAL loosing contracts for dispatching other airlines because they were not cpmpetetive.
      There is more but what is the point?

  17. Bean Counter says:

    If CAL is getting a 21 million annual subsidy how can they claim to be turning a profit or breaking even?

    If Paul Tibbetts CFO and Philip Rankin or any other accounting guru can make such a claim their professional qualifications should be taken away immediately

    • Anonymous says:

      Bean Counter, clearly you have not graduated from the School of Trumanomics. The great man once remarked of Cayman Airways in the House -and without a hint of irony: “So, Mr Speaker, I am pleased to announce that Cayman Airways has made a profit after subsidy”.

  18. Anonymous says:

    privatise cal….it will be a win-win-win-win…..

    • Anonymous says:

      Who would buy it? The real answer is to get rid of the jets and run all the routes to the USA on a codeshare basis with major US carriers. The airline could then lease something like a couple of Dash 8s and concentrate on providing regional services where it might make some money. What kills CAL financially is trying to go head to head with major carriers on routes to the USA – it’s just a plain daft business model.

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