Once saddled with burgeoning “historical debts” of around $50 million, it appears Cayman’s national airline may finally be climbing out of a debt spiral that had threatened its operations in 2009/10.
Cayman Airways board Chairman Philip Rankin said last week that the historical debt – which was $48.4 million when he joined the board in 2009 – has been reduced to around $19 million.
CAL Chief Executive Officer Fabian Whorms confirmed that it will take the airline until the end of this decade to pay off the remainder, if it stays on course.
“CAL is currently on track to be debt-free in four years,” Mr. Whorms said, adding that the airline has not initiated any new borrowing under the present administration.
The dire debt situation was publicly reported in mid-2010 during a meeting of the Legislative Assembly’s Finance Committee.
Then-CAL Chairman Jude Scott explained at the time that the national airline had amassed between $50 million and $51 million in “under-funded losses” over a number of years. Mr. Scott said “chronic under-funding” by government had left the airline to make up the difference in sometimes creative ways.
“In some cases [the airline used] formal borrowings, and in some cases they used informal borrowings,” he said, not explaining what was meant by the latter.
At that time, the board decided to begin paying down the airline’s debt at a rate of $5.1 million per year. Keeping that payment schedule would allow the airline to erase its historical debt by mid-2020, if no other borrowing was undertaken. The money is paid as part of the government’s subsidy to the airline, which now surpasses $20 million per year.
Once the debt is paid off, it is likely that Cayman Airways will still require government assistance to continue operations.
Mr. Whorms explained last week that Cayman Airways will receive about $2.6 million in the next year to subsidize flights between Grand Cayman and the Sister Islands, routes on which the airline has always lost money. Another $13.8 million has been budgeted to support flights to “strategic U.S. and regional gateways” that the board members and government view as key tourism markets.
The total amount government pays to support domestic and strategic international flights has been reduced by about $1.4 million since the 2014/15 budget year, Mr. Whorms said.