Cayman Airways earnings, costs drop

Revenues for the Cayman Islands’
national airline are projected to drop some 17 per cent – or about $9 million –
when government’s budget year ends on 30 June.

The good news, according to the
airline’s Acting CEO Fabian Whorms, is that operating costs are expected to
fall even more; between $10 million to $12 million by that date.

“Without (cost-cutting) measures
put in place, this decline would have been worse,” Mr. Whorms told members of
the Legislative Assembly.

Among the cost reductions made by
Cayman Airways since July 2009 was the elimination of about 45 staff positions.
Mr. Whorms said the airline’s “head count” went from about 400 to 355 in the
past year.

CAL has also cut the frequency in
some of its flying schedules, as well as renegotiating leases on its aircraft –
a move thatsaved some $1.2 million.

The final budget reduction
generally depends on fuel costs, which continue to plague the airline industry
world wide.

Mr. Whorms told members of the LA’s
Public Accounts Committee that the cost-savings comes amid a “significant
restructuring” at the airline in mid-2009, following Cayman’s general election.
The CEO said it was just the latest in a “host of disruptions and turbulence”
to affect the airline.

Since 2005, Cayman Airways has been
led by five different chief executive officers, has implemented a new ticket
reservation system and has undergone management changes brought about following
the Lufthansa audit of 2006-2008.

The findings of that audit have
never been made public.

Mr. Whorms said the airline has not
remained current on its audited financial statements, partly due to a lack of
government funding support for its external audit contract.

Cayman Airways’ annual financial
statements are actually not audited by the Cayman Islands Auditor General’s
office. The airline has a separate auditing contract with PriceWaterhouseCoopers
that costs between $100,000 and $150,000. The auditor general’s office then has
to double-check the work of the private firm before the financial reports are
signed off on.

“This creates additional delays,”
Mr. Whorms said.

Acting Auditor General Garnet
Harrison said there’s no legal requirement that Cayman Airways must use an
outside firm. However, he said, in practice, the airline’s financial statements
are quite complex and added that the audit office simply doesn’t have enough resources
to complete its own audit on the airline.

“Basically, PWC assigns one or two
staff members to audit Cayman Airways between May and October each year,” he
said.

The airline’s Chief Financial
Officer Paul Tibbetts said Cayman Airways gets a lower rate from the audit firm
because they use them during what is generally considered the “off-season” for
accountants.

Sister Islands MLA
Moses Kirkconnell said he wasn’t entirely comfortable with the outside auditing
arrangement.

“It seems to me…we should be trying
to figure out how to save Cayman Airways $500,000 to $600,000 in this deal,”
Mr. Kirkconnell said.

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