Fuel costs hit CAL hard

Cayman Airways will spend 35 per cent more than it anticipated this year to provide flights to its various travel destinations.

Nearly all of that increase, about $4 million, is due to the skyrocketing price of fuel.

‘The landscape has changed,’ Tourism Minister Charles Clifford told the Legislative Assembly’s Finance Committee. ‘I believe that the aviation industry is in crisis at this point…or will be headed that way later this summer. There has already been a significant downturn in the demand for travel.’

‘Fuel has increased 80 per cent in the last 12 months, and Mr. Chairman (addressing Financial Secretary Kenneth Jefferson); this isn’t the end of the road.’

Mr. Clifford said it was important to bear in mind the role the national airline plays in the development and economy of Cayman. He stressed that the Islands do not want to be at the mercy of foreign air carriers especially in the event of a hurricane evacuation.

Mr. Clifford said the airline has looked at ways to cut costs, including fuelling planes outside the Cayman Islands where prices are considerably cheaper.

He also said CAL had considered what’s known as fuel hedging, the practice of purchasing large quantities of fuel at a fixed price to guard against large sudden cost increases. However, the minister noted that practice was risky at best and that no decision had been made as to whether Cayman Airways should hedge fuel.

Mr. Clifford said the airline had cut its unreported ticket sales down substantially, from an estimated $385,000 to about $10,000.

CAL Board of Directors Chairwoman Angelyn Hernandez told the committee that administrative cost cutting procedures had been put in place wherever possible, but there was a limit to what the airline could do.

‘Our largest expenses are fuel and staff,’ Ms Hernandez said. ‘We have no control over fuel and we need our staff.’

Ms Hernandez estimated that CAL’s overall budget would have improved by some $2 million this year if not for rapidly rising fuel costs and evacuation operations during Hurricane Dean, which were estimated at $500,000.

Opposition Leader McKeeva Bush asked during the committee hearing whether Cayman Airways was making a profit on any of its travel routes.

The only flight making money for CAL after expenses was the one to Kingston, Jamaica, according to Mr. Clifford. He identified travel routes to Chicago, Boston and Fort Lauderdale as the largest money losers. Boston and Fort Lauderdale have been cut from the travel schedule.

Ms Hernandez said the New York flight, added last year, was performing particularly well although still operating at an overall loss.

‘The airline has never been able to fly without assistance from government,’ Mr. Clifford said.