In the early 1990s, U.S. air carrier Southwest Airlines offered a promotion called “Friends Fly Free” – where a paying passenger could obtain a second ticket at no cost. The two-for-one special was considered the best deal in the industry.
For some in the Cayman Islands, there has been even a sweeter deal. You see, Cayman Airways board members who served before 2009 were awarded unlimited free flights for themselves and their dependents – for life!
In 2009, the policy was adjusted, according to the airline’s Chief Financial Officer Paul Tibbetts, so that newer board members (and their dependents) are now eligible for free flights while they serve on the board, plus an equivalent duration after they resign from the board. (For example, a board member serving for five years would get free tickets during their tenure, plus an additional five years afterward.)
Mr. Tibbetts told the Legislative Assembly’s Public Accounts Committee, “Board members get no monetary compensation. In exchange for their serving they get flight benefits.”
As we reported in last Friday’s Compass, about 100 people have free flights under the old policy and 30 under the new policy. Together, they take about 250 flights each year.
That number isn’t included in the 3,000 free flights given away each year to Cayman Airways staff, retired staff and their dependents – who, unlike the board members, have to fly on a “standby” basis, meaning they’ll get bumped if the flight is full of paying passengers. This is a standard benefit for employees in the airline industry.
(For comparison and disclosure, Compass employees get a free copy of the daily newspaper – if they can find one around the office.)
Mr. Tibbetts said it’s tough to quantify the costs to Cayman Airways of providing the free flight benefits. We believe him.
First, for staffers flying on standby, the presumption is the seats they are taking wouldn’t have been sold anyway. But even for the board members getting standard tickets for free, the calculation isn’t as simple as multiplying the number of free tickets by an “average” listed airfare.
The “squishiness” in accounting is directly related to the fundamental problem in trying to evaluate the utility of Cayman Airways. Because certain routes (deemed “strategically valuable” by tourism officials) are subsidized heavily by Cayman’s government, not all plane fares are created equal. For example, to use ballpark figures cited by Cayman Airways CEO Fabian Whorms in front of the PAC, the advertised airfare between Grand Cayman and New York City may be $299 … but in reality it “costs” another $300 per passenger to operate that flight, which the government covers in the form of annual subsidies.
Tourism and airline officials point to consultancy reports and theorize about marketing in order to justify why Cayman Airways’ loss-making routes (i.e., Chicago, Dallas, NYC) provide an overall net benefit to the country. We tend to agree with those assertions.
Nevertheless, Cayman Airways has become an expensive proposition. The airline receives government subsidies of $20 million to $25 million per year. That’s the equivalent of about $400 annually for each man, woman and child resident in these islands.
It is, therefore, essential that our national airline not be perceived as a train (more precisely, a “gravy train”) for directors, their relatives, and current and former staffers.