BWIA must cut costs now or go into receivership by month end
-CEO Aleong warns
Stabroek News
October 3, 2002

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BWIA must reduce its operational costs immediately or go into receivership by month end, BWIA Chief Executive Officer (CEO), Conrad Aleong has warned.

To this end the regional airline has taken a number of decisions, including cuts in salaries for the directors, executives and the CEO. However, salaries of employees will not be reduced but 40 Dash-8 pilots will be retrenched.

Aleong has announced a ten per cent pay cut for Board directors and five per cent for the executives and seven per cent for himself as CEO. He said the airline needs to save US$1 million per month for BWIA to survive.

The Trinidad Express and Trinidad Guardian yesterday reported Aleong speaking about the initiatives to BWIA staff on Monday night at a meeting at Crowne Plaza. He also addressed Port-of-Spain Rotarians on the issue yesterday and held a press conference on the airline’s plans for restructuring in an attempt to save the company from creditors.

According to the two newspapers, employees will not have to take a salary cut but if they do not agree to the concessions, the company will go into receivership by the end of the month.

The restructuring, BWIA Chairman Lawrence Duprey said in the Guardian, will include a move towards becoming a low-cost carrier as opposed to a full-service one.

The airline’s representatives were due to meet with the unions representing BWIA workers today to discuss the terms.

The Guardian quoted Aleong as saying: “If we get efficiencies in the way work is organised, we will be able to achieve the type of savings we are looking for from the employee costs without affecting salaries. All of this, however, rests on employees agreeing with those concessions.”

Predicting that with the concessions the airline should be back on its feet again by mid-2004, Aleong said that the 40 pilots operating the Dash-8 aircrafts will be retrenched by January 31, 2003. The pilots, he said, have no say in the retrenchment under the collective agreement.

The Express reported him as saying that the Dash-8 fleet would be up for sale or lease. Pilots and support staff from the other terminated fleets will undergo retraining and be absorbed into the remaining fleets.

The airline was expected to release its financial statements for the last quarter yesterday, the Guardian said. Aleong was quoted as saying that BWIA debt adds up to US$48 million, while its current liabilities total US$118 million.

This is offset by the airline’s current assets which total US$84.2 million of which collectibles make up the bulk.

Referring to the company’s cost structure, he said, that 59 per cent accounted for fixed costs, such as loans and leases and could not be touched.

The other 41 per cent includes cargo, passenger services, distribution and marketing from which it is expected the US$1 million per month will be saved.

According to the Express, BWIA is hoping to save US$240,000 monthly by reducing its catering costs, US$200,000 by lowering its computer reservation costs, and US$4,000 in airport concessions.

A cost reduction team has been put together by the airline to reduce its miscellaneous expenses by US$210,000. However, the bulk of the cost reduction, US$310,000, is expected to come from the employees.

The Guardian said that other measures include restructuring the airline into three separate entities in terms of the management of the 49 per cent of Tobago Express and 55 per cent of a catering service it owns. The airline is to also take on a technical service to carry out its maintenance duties.

In a half-yearly review, Aleong noted that for the first six months of this year BWIA lost US$54 million. For the same period last year BWIA posted a US$6 million profit.

The six-month loss comes despite a US$6.9 million reduction in operating expenses from 2001 following the terrorist attack on the US which led to a decline in the travel and tourism industries. This was compounded by a US$52 million drop in operating revenue, while operating expenses went up US$7 million.

The airline now finds itself with current liabilities outstripping current assets by US$213 million.

Last year current liabilities were US$119 million more than current assets.

According to the Express, Aleong said that in July and August this year, when BWIA usually earned 40 per cent of its annual revenue, it faced increasingly stiff competition from chartered flights which undercut conventional airline prices.

The Express quoted Aleong as having said that BWIA will be simplifying its fleet from five aircraft types to only two, the Airbus A340 and the Boeing 737.

While most of BWIA’s current routes could be covered by the two aircraft types, half of the current regional business would be dropped.

Giving an industry perspective about the pilots’ retrenchment, Aleong said in the Guardian that other airlines sent workers home as early as September following the September 11 terrorist attack last year while BWIA held out until March 2002.

In the Guardian, too, Duprey said “BWIA’s half year results reflect the industry’s condition in general, where most full-service airlines are sustaining losses and suffering liquidity problems, and some major carriers such as US Airways and United Airlines have filed for bankruptcy protection or are about to do so.”

Duprey repeated his claim that if the airline does not restructure and reorganise it will have no alternative but to place itself in the hands of its creditors. (Miranda La Rose)