Bahamasair SeeksTo Expand U.S. Routes
Bahamasair may begin flying into Raleigh, North Carolina; Richmond, Virginia and Cleveland, Ohio.
Bahamasair's Managing Director Paul Major says although the airline experienced a reduction of losses by 50 percent during the last fiscal year, it needs to make about $100 million in revenue to generate a profit.
In an interview with Love 97 CEO Wendall Jones, Mr. Major said about $70 million to $80 million is spent annually on costs at the national airline.
“You need the counters, the aircraft, the staff, the equipment out on the ramp,' he said. “By the time you've done that, about $80 million [is] gone, so you have to be making over $80 million to make a profit.
“The only way you could do that is by flying more and longer routes. The only way you could do that is by having sufficient aircraft to do it. Now that we've started to get the aircraft, we've got to start to exploit that.'
Mr. Major said Bahamasair may begin flying into Raleigh, North Carolina; Richmond, Virginia and Cleveland, Ohio.
The airline reduced its financial hemorrhaging from $27 million for the fiscal year 2002/2003 to $13.5 million in 2003/2004. Mr. Major is confident the airline is well positioned to repeat that accomplishment during the 2004/2005 fiscal year.
According to Mr. Major, there was a combination of factors involved in the substantial cut in losses during the last fiscal year, including the Dash 8 aircraft that were purchased back in 1992 now being “fully depreciated.'
Mr. Major said after buying a number of Dash 8 aircraft last December, the company had no need to employ additional wet lease.
He added that revenue grew by $3 million during the last fiscal year, in addition to the airline realizing savings in maintenance overhead and a reduction in staff.
Bahamasair staff was reduced from between 832 in 2000 to 680 in 2004.
Mr. Major also attributed Bahamasair's turnaround to the professionalism of staff, adding that management has experienced “no difficulty' with political involvement.
“None whatsoever,' he said. “[Works and Utilities Minister Bradley Roberts] is a businessman so he understands how businesses run and he understands that if you have a competent board and management, you really only need to provide them with the tools and the support to get the job done. If any of those two things are not present, he would do what he has to make that right.'
Mr. Major said he believes Bahamasair will further reduce its losses in the next 12 months because he is confident revenue will increase.
However, he admitted that he doesn't believe the airline will “turn the corner' during that period mainly due to the “new competitive pressure.'
“If the other guy drops his fares,' Mr. Major said, “we have to drop ours otherwise we're out of business. If you can't do anything about your costs, your losses start to go the wrong way…those pressures are going to kick in and when they do we're going to feel the pinch.'
Mr. Major denied that Bahamasair has lost business to American Airlines.
Statistics show that over the past 18 months, Bahamasair's percentage of the market share has grown as American Airline has about 38 percent of the Florida market and Bahamasair has historically had about 32 percent, according to Mr. Major.
“We've now gone to about 34 to 35 percent,' he said. “I wouldn't say that we have lost nor (are) certainly losing. We may not have as many flights but we're moving almost as much capacity. We also supplement our jet service with Dash 8's in between.'
He added that 88 percent of Bahamasair's traffic has historically been Bahamians with only 12 percent tourists, but that is fast changing.
Mr. Major said Bahamians account for 86 percent of Bahamasair's traffic while tourists account for14 percent. He added that the aim is to have 70 percent Bahamians onboard and 30 percent tourists by the end of the 2004/2005 fiscal year.
As for the privatization of Bahamasair, Mr. Major said the airline's management is now in the process of contracting consultant to assist the airline through a five-year business plan, assist in finding equity, technical and operational partners and in the implementation of privatization.
He said an equity partner would assist in injecting capital into Bahamasair, therefore sharing the risk with the government.
“You would hope that that partner also has the technical wherewithal and possibly assets that would be combined with yours to be able to make this a profitable venture,' he said.
Speaking to the airline's stability in the aftermath of the September 11, 2001 terror attacks on America, Mr. said operationally, the major change at Bahamasair following 9/11 was the increased security and the costs associated with that.
Mr. Major said when he joined the airline in 2000, management was able to boost revenue to $71 million from $66 million the year before, hitting a growth path.
“This was by getting our schedule off a little earlier in the morning and flying a little later at night and some other things,' he said.
However, post 9/11 revenue declined to about $61 million, Mr. Major indicated.
“So you could see why the losses began to skyrocket,' he said. “The revenues were going the wrong way and your expenses, the wrong way…there were fewer people traveling, yet you had to pay these incremental costs to be able to continue flying.'
Although admitting that Bahamasair has offered “shabby service' over time, Mr. Major said the airline has done a great job in improving its image over the past nine months to a year.
Hadassah Hall, The Bahama Journal