Senator Says Reform Bahamasair

Speaking to a Kiwanis Club meeting at the Nassau Yacht Club, the senator attempted to show how what he saw as much-needed reform to the aviation industry would benefit members of the voluntary organization.

"Image for a few seconds the net national gain if those funds (normally spent subsidizing Bahamasair) were instead spent on those vital social services that your organization is known to support," Mr. Musgrove said.

"Image if those funds were used to assist in raising the national living standard and to also assist in reducing the rising costs of living that we are presently experiencing."

Bahamasair

Mr. Musgrove cited a review of Bahamasair Holdings Limited last audited financial statements, which noted that the company incurred a net loss of $19,919,242 for the year ended June 30, 2006, and has had substantial recurring losses as evidenced by the accumulated deficit of $397,989,377 at that date.

"Moreover," the auditor said, "as at June 30, 2006, the Company’s current liabilities exceed its total assets by $70,006,867. 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."

Mr. Musgrove reminded the group that in addition to the funds allocated to Bahamasair in the 2007/2008 budget, the government allocated $11.3 million in supplementary funding to Bahamasair during its mid-year budget review.

"Given Bahamasair’s dependence on the government to cover its routine expenses - such as engine and landing gear repairs, ground handling charges, medical insurance, hanger repairs and ground handling charges – which are the norm given the nature of the business, it should be obvious to all and sundry that Bahamasair will never realize a profit as it is presently structured," he said.

The senator also challenged what he called "the long-believed myth that because the airline provides a national service then the taxpayers should not mind footing the bill."

"It is now time that we dispel the long-held view that Bahamasair should be classified as an essential government service and should continue to operate without amending its business and operation model," he said.

Mr. Musgrove endorsed market forces dictating the price of certain goods and services, with the air transportation business being one such area.

He said there remains a business culture within The Bahamas in which government-funded or government-owned entities compete directly with privately owned and operated entities.

Despite the growth in the air travel business, he said, there appears to be the perception that a price war is taking place as these private operators are being forced to compete against each other on the one hand. They are also completing with the national airline on the other hand, which has "unlimited" financial resources and is not held to the same financial standards as the privately owned companies.

He said that while Sky Bahamas and Western Air should be applauded for having invested millions of dollars in pursuing the Bahamian dream, we should also note that this industry is being undermined with the assistance of the visible hand of government, with the possibility of creating bad blood between young and promising businesses.

In fact, the CEO of Sky Bahamas has publicly voiced his concern that Sky’s financial survival is daily under threat due to the increase in competition coupled with the increasing costs of fuel, which closed on Monday April 21, 2008, at a whopping $117.48 per barrel.

"In my relatively short life," the senator said, "one of the lessons I have learnt is that opportunity always present itself to enable any market imbalance to be corrected and we have such an opportunity right before us and we must be cognizant and embrace and implement these opportunities."

Aviation Reform Opportunities

As Mr. Musgrove sees it, the opportunity is ripe for the aviation industry to grow and at the same time to reduce the financial burden Bahamasair continues to have on the Bahamian taxpayer.

"Therefore," he said, "we should not sit by and allow this opportunity to reform a vital industry to pass us by."

He called for a vigorous campaign to have the role of Bahamasair changed so the millions of taxpayers’ dollars spent subsidizing the company every year can be invested in other areas.

He said he found it hard to contemplate how the owners of Sky Bahamas or Western Air or any other Bahamian-owned and operated air charter company could continue to survive when their business is driven by the prevailing market conditions.

Mr. Musgrove advocated turning Bahamasair into a regulatory institution, in additional to flight duties.

He said given Bahamasair’s safety record and the highly skilled personnel employed by our national airline, those skills could be used to mitigate the fear that many have about the reliability and safety of some of those offering scheduled flights throughout the Family Islands.

"Hear me clear," he said. "I unequivocally agree that no government policy should result in any Bahamian losing their job. Now that that is clear, image the opportunities that will become available if we can marry the expertise of Bahamasair along with the Civil Aviation Department and increase Bahamasair’s role to providing enhanced oversight to the air transportation industry, which is predominantly Bahamian owned."

In addition to allowing the likes of Sky and Western and the other companies operating regular schedule flight to access Bahamasair’s reservation platform, he said, then Bahamasair could truly become the national airline by ensuring access to all major airports.

The senator raised the possibility of cross-border opportunities for Bahamasair were there freedom in the aviation industry within the borders.

"For me, a major concern continues to be that periodically we have persons who are strongly convinced that while reform is required within many areas of our national existence," Mr. Musgrove said, "we somehow lack the compassion to demand that our leaders develop the will to follow through on those changes."

"Yes," he added, "we all live everyday with the notion that our country cannot maximize its development model if we continue to maintain those government entities, which remain a financial burden given our limit resources, not being freed up to assist in other areas of development."