Will the highly touted deal, which would see Caribbean Airlines Limited buying out Air Jamaica, be consummated?

That is the question being asked by aviation experts both locally and internationally. While the Jamaican authorities are pressing for the deal to be sealed as soon as possible, which also means Jamaica would then own 16 percent of Caribbean Airlines, there remain serious concerns in Port-of-Spain about bringing the deal to a close. As a matter of fact, well-placed sources believe the powers that be are looking for an excuse not to sign.

As it stands, Caribbean Airlines has until April 30, the unfettered right, without penalty, to walk away from the deal and inside sources strongly suggest that the exercise of this right might be evolving into a policy. One might even go so far as to predict Finance Minister Winston Dookeran might be approached soon for funding — a treasury crisis is indeed looming.

Although persons close to the decision makers of CAL would insist no such move was being planned, indications are the “profitable” routes taken over by Caribbean Airlines 11 months ago have turned out to be not so profitable.

Remember, that committee, headed by former BWIA CEO Conrad Aleong, was set up by Dookeran to look into the viability of the merger/sale of Air Jamaica immediately following last year’s general election. It is understood even as far back as then, certain concerns which were raised in its report, were now emerging more acutely.

The veil of silence which was spread tightly around the negotiations left the Trinidad and Tobago public completely in that dark about what was actually happening and even now, with a mere 30 days to go before the deal is supposed to be consummated, the general public has hardly been enlightened about the details.

As far as the Trinidad and Tobago public is concerned, they have never been told whether or not any independent economic and operational analysis was undertaken to demonstrate the economic viability of the merged airlines.

“An independent survey is the key going forward. Without the conclusion of an independent study as to the viability of a regional airline based on Caribbean Airlines, Air Jamaica and LIAT (in any combination), the only logical choice for Trinidad and Tobago would be to exercise its right to walk away from the initial merger,” a Canadian aviation lawyer told Business Day.

He added such a study could be led by the International Finance Corporation of the World Bank (IFC) which handled the Caribbean Airlines -Air Jamaica merger.

“As matters stand,” he continued, “there is a very serious possibility, if not yet a probability, that the current Caribbean Airlines-Air Jamaica merger will not be finalised prior to the April 30 deadline- whether because of the shelving pro tem of the CAL board results in no decision being made, or because of a conscious decision on the part of the government of Trinidad and Tobago to cut its losses and retrench to a more limited airline role.”

Unconfirmed reports out of Kingston reveal the Air Jamaica element of the merged entity has been losing millions monthly. But a senior official in Piarco, while agreeing the carrier was losing money on the Air Jamaica routes, insisted it was not in the realm of millions. Until audited figures are disclosed, the Trinidad and Tobago taxpayer would have to wait for the full picture.

One local expert has said in its first year of operating the “Jamaica routes”, CAL’s losses would have topped US$50 million. “And that after the fuel subsidy. That is more than the quantum of new equity which the government of Trinidad and Tobago committed to inject into CAL to cushion the CAL/JM transaction,” he said.

In addition, the fuel subsidy afforded by Trinidad and Tobago to Caribbean Airlines, was effectively doubled by its extension to the Air Jamaica operations. In 2008, the last year for which audited figures are available, Caribbean Airlines alone used 26 million gallons.

It is now estimated that with the Air Jamaica operations added, usage has almost doubled to close to 48 million gallons, so that the overall monthly fuel subsidy is around US$6 million.

If the losses on the Air Jamaica routes are added to the US$6 million fuel subsidy, that figure can get real close to US$11 million, even if the Caribbean Airlines’ routes are breaking even and even inclusive of the fuel subsidy, which is possible though unlikely.

Another concern raised by a local expert is that CAL has only been granted a one-year exemption by the United States Department of Transportation (DOT) and he wondered how could CAL proceed to conclude the Air Jamaica deal on such a temporary footing in respect of the commercially viable vital US routes rights.

He added that the one year exemption was a long way from full government of Jamaica designation of CAL.

(Courtesy of Trinidad Newsday)