After years of heavy losses, bankrupt BWIA West Indies Airways is being closed and a new carrier formed to follow in its footsteps.
The aim is for start-up Caribbean Airlines to be profitable by 2009, says Peter Davies, the carrier’s chief executive. Once negotiations with BWIA’s four unions are concluded on settlement packages for its workforce of 1,700, the Trinidad and Tobago government, which owns 97% of BWIA, will release $250 million to finance the transition.
Trinidad-based Caribbean Airlines will begin operating in January with a staff of “significantly less than 700”, says Davies, and with a substantially lower cost base than its predecessor. It will start with a clean balance sheet. A large portion of the $250 million will be spent on honouring all of BWIA’s liabilities and the staff payments, but the remaining $60-70 million will provide the new carrier with plenty of working capital to invest in new systems and in areas such as spares provisioning.
“The government has made it clear this is the last capital injection they will make,” says Davies. At some point the government will release Caribbean Airlines either through an initial public offering or by finding a buyer, he adds.
Even before the new carrier starts Davies is axing unprofitable routes in the Caribbean and its loss-making Washington service. Outside the Caribbean BWIA also serves London, Miami, New York and Toronto. Two of its seven Boeing 737-800s are being returned to their lessors. BWIA also operates two Airbus A340-300s.
Although revenues will initially dip by as much as 20% with the route closures, Davies sees Caribbean Airlines growing again soon. “Part of the strategy is to build an intra-Caribbean network,” he says.
This means extending its operations in Antigua and Barbados and expanding into Puerto Rico. “It is not a question of retreating. It is one of reassessing our priorities and building a viable network for spring 2007.” ■
Source: Airline Business
