Bahamasair considering route sharing to slash annual deficit
Bahamasair Managing Director Henry Woods said the airline’s new planes and expanded airlift would contribute to cutting costs and increasing revenue in efforts to reduce the airline’s nearly $600 million deficit. Woods said the company is working “aggressively” towards a revised business model to reduce its dependency on government subsidy.
Speaking with Guardian Business yesterday, Woods said Bahamasair is also considering a proposal for route sharing domestically with local airlines such as Sky Bahamas, LeAir Charter Services, and Pineapple Air.
“The new aircraft and expanded routes are going to reduce maintenance and fuel costs. In this business, labor is number one in terms of cost, then fuel, followed by maintenance. We are able to put a dent in fuel and maintenance costs by changing the fleets,” said Woods.
The airline borrowed $100 million from local banks for five new French planes.
Still, in its annual report for the year ending June 30 2014, accountants HLB Galanis and Co. reported that Bahamasair’s deficit increased to $555.1 million, based on a net loss for fiscal year 2013/2014 (FY2013/2014) of $15.7 million.
In note 2 of the annotated report, the accountants say, “These factors raise significant doubt as to whether the company will be able to
continue as a going concern without the continued financial support of the government. The government has agreed to provide such financial support and assistance to the company to enable it to meet its obligations and continue as a going concern. Based on the government’s commitment, management believes the going concern basis to be appropriate.”
Bahamasair reported that instead of a budgeted $15 million, actual funding received from the government – the sole shareholder of Bahamasair – for FY2013/2014 was $17.06 million.
The report disclosed that the airline finished the fiscal year $15.7 million in the hole.
Despite growing concerns over the company’s financial position, Woods said he hopes that Bahamasair would reduce government funding to single digits in the next three years.
“For the forseeable future, we will rely on government subsidy. But, each year we have lessened that burden,” Woods said.
“We are aggressively trying to get into a new mode of a revised business model which seeks to reduce the dependency on government subsidy,” said Woods.
“I am not saying eliminate it. We want to reduce it significantly and ease the burden on the taxpayers,” Woods said.
In June, Bahamasair will offer direct flights from Freeport to Orlando, Nassau to West Palm Beach, and later this year is expected to offer flights from Nassau to Tampa. Those new routes would contribute to increasing revenue for the airline.
Woods said one of the largest impediments faced by Bahamasair is competition.
“We are getting it internationally and domestically,” he said.
The managing director pointed out that the company wants to engage other local airlines in route sharing.
“We hope the day would come where the meeting of the minds would bring about route sharing with other local companies, which would encourage them to operate into some of the less dense routes. They operate aircrafts with lower costs. So, what may be break-even or profitable to them would not be to Bahamasair,” Woods said.
According to Woods, the board is considering a proposal for outsourcing some of Bahamasair’s routes to smaller carriers. Those flights would remain under oversight by Bahamasair and regulators.
“We are trying to encourage the powers to consider route sharing domestically whereby the routes would continue to be Bahamasair routes but operated by smaller carriers, which is common throughout the industry,” said Woods.