Rid of its pre-pandemic trajectory to a financial recovery, which so far has been elusive, regional carrier Caribbean Airlines Limited, CAL, is seeking funds to stay in the air, on a loan of $ 65 million. US contracted last year having proved insufficient to cover operating costs amid a near loss of revenues.
Officials at the airline say CAL is seeking “external funding” and has the blessing of its major shareholder, the government of Trinidad and Tobago, in an attempt to secure new funding. The Jamaican government is also a minority shareholder in the airline.
CEO Garvin Medera declined to comment on the airline’s financial health and fired the Financial Gleaner to the company’s public relations managers. Corporate communications manager Dionne Ligoure confirmed that the new funding sought was in addition to the loan guaranteed by the Trinidadian government in 2020.
“Due to the sensitive stage of the discussions, the amount and source of funding sought is confidential information,” Ligoure said by email. The source of the 2020 government-guaranteed loan was also not disclosed.
CAL officials also decline to elaborate on the extent of the airline’s current cash needs to withstand the near wiping out of revenue and growing losses caused by the COVID-19 pandemic. The public relations official said the airline’s cash requirements are “competitively sensitive information” that would not be disclosed.
The use of “external financing” suggests that the government of neither Trinidad nor Jamaica, which has held a 16 percent stake in the airline since its 2011 sale of Air Jamaica’s assets to CAL, is prepared to provide the money needed to bail out the airline. business. The financing options open to CAL include more loans, a sale of equity or outright sale of stakes by both shareholders, with new financial partners providing operational liquidity, or the issuance of corporate bonds. business.
Like other airlines around the world, Caribbean Airlines’ operations nearly came to a halt in March of last year after regional governments and other countries around the world closed their air and sea borders in an attempt to limit the spread of the coronavirus.
Service is being gradually restored to certain destinations in the Caribbean and North America. However, flights to Canada are on hold again, as this country has banned flights from the Caribbean and Mexico in an attempt to avoid new, more infectious strains of the coronavirus. Service to Cuba was also withdrawn again as the government reimposed lockdowns there in response to an increase in viral infections.
“Caribbean Airlines continues to examine all options regarding its strategic direction,” Ligoure said of the airline’s actions in light of the financial tsunami caused by the COVID-19 pandemic.
“Once the borders opened on some regional destinations, the airline mobilized resources,” she noted – an apparent reference to the resumption of some routes with the help of the 2020 loan.
The Trinidad and Tobago government announced in May last year that it had guaranteed a $ 65 million loan to the airline after it was unable to pay expenses, including staff salaries, while income from the airline was drying up amid the collapse of the global travel market. The government had revealed a year earlier that it was servicing a debt of US $ 75 million for CAL.
Even though revenues fell, the airline continued to accumulate significant operating expenses. CAL said, for example, that two aircraft leases ended in 2020 and those aircraft have been “re-delivered” to the airline to continue operations.
“Caribbean Airlines was also able to continue its planned expansion in the Eastern Caribbean, albeit at a slower pace. The airline’s cargo operations continued throughout the pandemic and expanded with the introduction of cargo charter services on the ATR and 737 fleet, ”Ligoure said.
CAL management has taken the knife into operations, seeking to cut spending across the board in an attempt to weather COVID financial waves, including pay cuts and contract freezes, among other unspecified measures.
“In October 2020, the airline made the very difficult decision to put some employees on technical layoff in order to preserve its long-term viability,” Ligoure said.
To achieve “long-term sustainability,” CAL, according to its management, “has developed a tactical plan and a number of initiatives are reportedly underway to support the business. The reduction in costs is also continuing in other areas of the company ”.
Ligoure declined to comment further on the tactical plan. She also declined to comment specifically on whether the airline would follow through on plans announced by its CEO in a precedent. Financial Gleaner interview, to acquire several Boeing 737 Max aircraft that have recently been the subject of controversy around the world over safety concerns, but are now returning to service.
“Caribbean Airlines is continuing to review all options regarding its strategic direction and related fleet requirements,” was all the airline’s public relations manager said on the matter.
Another regional airline, LIAT, which mainly serves the Eastern Caribbean, collapsed last year under the weight of debts amounting to some $ 80 million in unpaid salaries to staff and $ 100 million to creditors.
A recent attempt to relaunch the airline met resistance from some shareholder governments in the Eastern Caribbean, notably Barbados and Saint Vincent, who refused to recertify LIAT for operation in their countries and expressed their preference for the permanent disconnection of the loss-making entity. and support a new island-hopping startup airline.
Globally, airlines continue to be in dire straits, having been hit early and hard by border closures and widespread fear of flying during the pandemic. Some governments have resorted to major bailouts for major airlines with a focus on loans, loan guarantees, grants and unemployment benefits for displaced workers.