Cayman Airways owes $3.2 million to the Cayman Islands Airports Authority in unpaid landing fees, part of an accumulated debt of between $10 million and $14 million owed to the entity stretching back a decade.
Initial figures supplied by the airports authority indicate that Cayman Airways and its wholly owned subsidiary Cayman Airways Express, owed $4.32 million to the authority for landing fees during the four year period between 2009 and 2012, but later acknowledged a $1.1 million payment by the airline, reducing the total to $3.2 million.
By contrast, the six main overseas carriers using Owen Roberts International Airport in Grand Cayman paid $1.03 million in landing fees in 2012 alone, and $4.049 million since 2009.
Landing fees are billed to every arriving aircraft, based on weight and time of arrival and are charged monthly to regular users such as international airlines.
Cayman Airways Limited President and Chief Executive Officer Fabian Whorms on Thursday moved to address the issue, saying the national carrier and its wholly owned subsidiary have remained current with the fees since mid-2010, and are seeking to address the backlog.
“The bulk of landing fees owed to the CIAA primarily pertain to the period before July 2010 and is a historical debt to the CIAA, the treatment of which is still pending,” Mr. Whorms said, explaining the fees are included in the airports authority debt, itself part of an informal, larger $19 million debt to several government departments, including the Civil Aviation Authority, Customs and Immigration.
Formal versus informal debt relates to bank loans and contractual repayment structures, while the latter refers to internal backlogs accumulated through delayed recompense for fees and charges.
“In mid-2010 the Cayman Islands government agreed for Cayman Airways to borrow some CI$19 million to address all of the airline’s outstanding non-bank debt at the time,” Mr. Whorms said, “including these landing fees owed to the CIAA.”
The loan was part of efforts by former Premier McKeeva Bush to gain what has become known as “the Cohen loan” from a New York financier, and would have converted into “formal” debt Cayman Airways’ $19 million arrears. Because government was under strict borrowing limits, however, imposed both by London and internal auditors, the loan was never realised, leaving the airline still in debt to the authority.
Mr. Whorms indicated the airline had discharged all landing fees since July 2010, except for the previous three months, which were scheduled to be paid in the next few days.
Because the bank loans had not materialised, Mr. Whorms said, “The Cayman Islands government and Cayman Airways, with the support of the CIAA have been exploring various alternatives to address the CIAA’s portion of the airline’s historical debt.”
He declined to elaborate on what various alternatives might comprise.
The significance of the July 2010 date, he said, was that government agreed that fiscal year to boost its subsidies to the airline, which has never earned a profit, instead supported by revenue from Cabinet.
The 2009 revenue from Cabinet was $10.5 million, increased the following year to $15 million, a nearly 33 per cent growth, providing not only the airline’s annual operating budget, but also the resources to address its informal debts.
Government also agreed to an additional annual $5.1 million “equity injection” for 10 years to help repay the airline’s formal historical debt, bank borrowings of $33 million.
In the 2012/13 budget, government boosted revenues from Cabinet to $18.1 million, alongside the $5.1 million equity injection.
The larger allocations, Mr. Whorms said, have “allowed the airline, in essence, to keep current with landing fee payments to the CIAA (since July 2010).”
“It should be noted that Cayman Airways has so far not undertaken any formal bank loans in the last three years to address any of its operating expenses,” he said. “With the improved funding model now in place, Cayman Airways, since the beginning of fiscal 10/11 (July 2010), has been better positioned to meet its current landing fee obligations to the CIAA and is continuing to work with the CIAA and the Cayman Islands government to find an appropriate treatment for the historical debt to the CIAA that existed prior to July 2010”.
Still, independent analysts said those debts, whether formal or informal, could jeopardise efforts to redevelop local airports.
Industry experts say the International Air Transport Association and the International Civil Aviation Organisation require all airlines to pay their fair share because any airport has to operate, to pay salaries and to grow. An entity not paying puts all the others at risk. They say the need to support an airport and the fees that are coming in cannot be segregated.
Edward Jerrard, a lecturer in aviation studies at the University College of the Cayman Islands, said solutions are available and could prove of benefit to the airline, the airport and the Cayman Islands.
“If a public-private partnership were to rebuild the airport”, he said, “that would relieve the government of further obligations for salaries, pensions, all sorts of things. Everyone would be under private ownership. The government would save, say $10 million per year, and that offsets the Cayman Airways’ debts. It could be very positive in that sense.”