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Air Jamaica not to blame for CAL’s losses says Dennis Lalor

Dennis-Lalor

The only Caribbean Airlines (CAL) director who wasn’t fired from the board yesterday says he’s very concerned about the financial health of the national carrier.

The surviving director, Jamaican businessman Denis Lalor, told the Express yesterday shortly after the CAL board was fired by Finance Minister Larry Howai that he does not believe the acquisition by CAL of Air Jamaica’s routes in 2011 was the reason the company has found itself facing multi-million-dollar losses.

Lalor was the only member of the former CAL board to be included in the new composition, which was announced by Howai yesterday after the board was fired. 

Lalor said he was informed there would be changes to the board, and he was hopeful the new board would turn the company around. 

The new board includes chairman Philip Marshall and directors Vishnu Dhanpaul, Indira Ramkissoon, Courtney McNish and Patricia Kong-Ting.

Lalor is the Jamaican Government’s representative on the CAL board. Jamaica owns 16 per cent of CAL.

In the past two years, CAL’s accumulated losses have been over $1 billion. 

On May 4, 2012, former finance minister Winston Dookeran disclosed to Parliament that the airline made an unaudited loss of US$52.8 million ($339.5 million) for 2011, while Air Jamaica recorded an unaudited loss of US$38.1 million ($245.2 million) for 2011.

 Finance Minister Larry Howai on Tuesday told the Senate CAL’s losses for 2012 were $704 million. The company also has to write off $200 million in lost cargo revenue and credit card fraud, an exclusive Express investigation has found. 

Lalor explained that as head of the Divestment Committee of Air Jamaica, CAL was one of nine airlines that had presented an attractive offer to acquire its routes. He said the only money the Trinidad and Tobago Government had to put out was US$49.6 million to offset the routes and the fuel subsidy. He said the revenue stream from the routes was in the vicinity of US$200 million and Air Jamaica had a 60 per cent load factor attributed to its diaspora.

“CAL did not have to do any marketing for the Air Jamaica brand. I had hoped that this investment in the airline would have done what the Federation, Caricom and the West Indies Cricket team had failed to do, which was to create a unified Caribbean airline,” he said. Questioned on what he felt caused the losses incurred by Jamaica, Lalor simply responded that CAL had “inexperience in dealing with tourism, they wanted to stamp their Trinidad ownership on the operations and they were insensitive to the nuances of marketing”.

The Sunday Express has reported that the actual performance for the Air Jamaica opera­tion from May to December 2010 was a loss of US$21 million “for various reasons”, and US$38 million for 2011. 

“Given the expansion of the combined ope­rations, the level of expenditure and cash payments has increased significantly, especially in the areas of fuel costs, flight operations, aircraft leases and marketing two separate brands. The increases in fuel payments were directly linked to the increased number of flights across the network matched by the global increase in fuel prices and restricted rebates from the Government over the period. Other areas of increased cash outflow occurred in the areas of employee cost, maintenance and engine reserves and aircraft parts. As a result, it was necessary to utilise the deficits that were being incurred,” an internal report on the acquisition had stated.

“I am obviously distressed because that was not the airline I knew three years ago,” he said.

Asked if more changes were expected at CAL, Lalor conceded that there must be changes if the airline has to move forward. Pushed to explain whether jobs were on the line, he cryptically responded that there would be more instalments in the CAL story in the future.

“The problem with the airline has been the management, but the board did nothing to deal with it. You can’t change a problem in an organisation by using the same people who caused the problem,” a source close to CAL told the Express.

Former CAL chairman Rabindra Moonan and Minister in the Ministry of Finance Vasant Bharath had both observed that the Air Jamaica deal had cost CAL millions.

Moonan yesterday said he was “taken aback” by the decision to fire him, but he was hopeful the new board would follow the transformation plan, which was designed under his tenure.

Minister in the Ministry of Finance and Trade Minister Vasant Bharath is expected to head to Jamaica on June 4 with a team which includes acting chief executive Robert Corbie and chief ginancial officer Shiva Ramnarine.

The visit is to meet with Jamaica’s Transport Minister, Dr Omar Davies, and other officials to discuss the company plans for Air Jamaica moving forward.