The challenges of subsidising a national airline that has always struggled to make money has been a tricky one for successive governments.
The financial picture at Cayman Airways remains bleak with government’s annual investment in the airline now running to more than $18 million.
Even with that investment the national carrier is struggling under the burden of between $10 million and $14 million of debt to the Cayman Islands Airport Authority.
The debts were highlighted earlier this year when it was revealed that the national carrier owed $3.2 million in landing fees alone.
At the time the airline’s CEO Fabian Whorms said it had remained current with its fees since 2010 and was looking to address the backlog. He said the fees owed to the CIAA were part of a larger $19 million debt owed to several Government departments including the Civil Aviation Authority, Customs and Immigration.
A deal to negotiate a bank loan to cover the debt fell through and has left the airline and government to explore alternatives.
Mr. Whorms said the airline had been able to remain current with its fees since its government subsidy was increased in 2010.
The concept of government subsidising a private business is challenging for some. But the value of having an island airline was hammered home during Hurricane Ivan when Cayman Airways was instrumental in helping get people off the island to safety. The airline also provided a valuable service bringing supplies to the island in the aftermath of the storm.
The 2009 revenue from Cabinet was $10.5 million, increased the following year to $15 million, a nearly 33 per cent growth, providing not only the airline’s annual operating budget, but also the resources to address its informal debts.
Government also agreed to an additional annual $5.1 million “equity injection” for 10 years to help repay the airline’s formal historical debt, bank borrowings of $33 million.
In the 2012/13 budget, government boosted revenues from Cabinet to $18.1 million, alongside the $5.1 million equity injection.
The larger allocations, Mr. Whorms said, have “allowed the airline, in essence, to keep current with landing fee payments to the CIAA (since July 2010).”
“It should be noted that Cayman Airways has so far not undertaken any formal bank loans in the last three years to address any of its operating expenses,” he said. “With the improved funding model now in place, Cayman Airways, since the beginning of fiscal 10/11 (July 2010), has been better positioned to meet its current landing fee obligations to the CIAA and is continuing to work with the CIAA and the Cayman Islands government to find an appropriate treatment for the historical debt to the CIAA that existed prior to July 2010.”
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