‘Quasi-government companies are killing us,’ says MLA Arden McLean
For the second time in a week, opposition lawmakers on Friday railed against the government’s continuing approval of multimillion-dollar subsidies for quasi-public entities.
On Wednesday, lawmakers reviewed the losses of the Cayman Islands Maritime Authority. The target on Friday was Cayman Airways.
“When I first came here, the Cayman Airways subsidy was $5 million; 14 years later we’re somewhere over $20 million,” said East End MLA Arden McLean.
“We hear rumors of decisions being made by that company that just [don’t] make sense,” the independent MLA said. “The time has come where somebody needs to be held responsible for those anticipated poor decisions.”
Mr. McLean’s remark about “anticipated poor decisions” related to an indemnity Cayman Islands lawmakers agreed to renew for Cayman Airways board members, essentially protecting them from personal liability in making official decisions that could cost the airline money.
Deputy Premier Moses Kirkconnell proposed the indemnity as an extension of the one that was granted to CAL board members in 2010 under the previous United Democratic Party government.
Mr. Kirkconnell said the indemnity was needed “primarily due to the difficult financial circumstances in which the company operates.” It is estimated that government’s subsidy to Cayman Airways, including funds granted to the airline from Cabinet and debt payoffs, will reach $23 million for the 2013/14 budget year.
“It gives the impression that it’s a money pit and we keep throwing money into it,” Mr. McLean said. “No company in this world would keep anyone on that puts them at risk.
“These quasi-government companies are killing us,” Mr. McLean said, opining that earlier attempts to reform the airline – such as the Lufthansa evaluation in 2006 – had cost at least one government minister his seat in the Legislative Assembly.
Mr. Kirkconnell said he understood Mr. McLean’s concerns, but indicated that the East End MLA wasn’t necessarily looking at the big picture. He said Mr. McLean should shift his thoughts away from Cayman Airways being a “profit center” and think of the Cayman Islands as the profit center.
“[CAL management] could simply say ‘we have a mandate to make money, so they would not fly to New York, they would not fly to Chicago, they would not fly to Dallas, Panama, Honduras, or Tampa,” Mr. Kirkconnell said. “They would fly to Miami and fly to Kingston and they would do the run to Little Cayman and Cayman Brac because of the necessity of that route.
“If they ran those routes, it is very possible that Cayman Airways would deliver a million dollars to the treasury of this country. But when you bring tourists to this island and when you can pick the gateways that you want to encourage people to come from and you see stay-over tourism is up 7 percent…Cayman Airways is a big part of that.”
Not having the territory’s air carrier would likely mean, rather than subsidizing the local airline, Cayman would have to subsidize American Airlines or Delta or another foreign carrier, Mr. Kirkconnell said.
“[Other countries without their own airlines] have to pay a subsidy in cash, they have to pay a seat guarantee…and [the foreign airlines] actually control the price for the route that they fly.”
Continuing to pay the subsidy to CAL means more than 300 locally based airline employees – more than 90 percent of them Caymanian – spend money in the local economy, Mr. Kirkconnell said.
Although Opposition Leader McKeeva Bush noted that nothing Mr. McLean said was wrong, he made a number of comments supporting the deputy premier’s version of the Cayman Airways story.
“I’d rather struggle to find $25 million than to have to be dependent on any international airline,” Mr. Bush said during the debate on the indemnity. “[Other Caribbean countries] are paying $1,000 [a seat] for flights, and when American [Airlines] wants to shift their flights around, you’re at the mercy of those companies.
“We only know too well the day when trouble hits us that we have nobody to depend on for airlift and, in an emergency, its not so easy to just go and get a plane.”
Mr. Bush made reference to an analysis of the local airline by Deloitte that stated that Cayman Airways brings in more than $200 million to the local economy, even if government continues to suffer an annual loss operating the airline.
The opposition leader said that money was worth more than Mr. McLean’s earlier referenced Lufthansa report: “Two million spent and all you got is a lion showing his rear-end on the tail [of the plane],” Mr. Bush said.