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[Barbados, REDjet] No bail-out promised for REDjet

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[Barbados, REDjet] No bail-out promised for REDjet

Unread post by bimjim » Thu Jun 28, 2012

http://news.barbadostoday.bb/barticlene ... icle=18149

[Barbados, REDjet] No bail-out promised for REDjet
27 June, 2012

The Freundel Stuart Administration did not promise bankrupt airline REDjet an $8 million bail-out.

But even if it had pumped that amount of funds into the carrier, Minister of Finance Chris Sinckler asserted tonight, the company was in so much financial strife that its failure was virtually inevitable.

Sinckler used his Budget presentation to respond to claims that Government had backed out of an arrangement to help REDjet out of its financial difficulties.

He said the precarious state of the organisation was communicated to him as far back as October last year and again in January this year, and efforts had started for a “possible” provision of aid, but nothing was finalised up to the time the airline grounded its planes and eventually ceased operations.

The St. Michael North West MP told the Lower House:

“So that Mr. Speaker Sir, it is not true to say that I or anybody else in this Government misled REDjet or reneged on any promise to lend financial assistance to that company. REDjet was a private operation not a Government department. It had no right to any direct financial assistance from Government and was promised none.

“Having given potentially million of dollars in concessions to the company we still undertook to try to see how it would be possible to get it through a surprisingly early and difficult financial period.

“In the end the airline clearly did not have sufficient of its own private capital to survive and even if the eight million dollars were given immediately upon request it is clear that it would have only postponed the inevitable,” he added.

Calling statements related to the $8 million “rather unfortunate”, the minister said an analysis of the company’s books by experts in his ministry had raised the alarm that its operations were unsustainable.

Quoting from that examination, he said the Ministry of Finance team had concluded, based on REDjet’s submitted accounts that “not only has Airone Ventures Inc. been making substantial losses, but also the Company has been budgeting to make these losses”.

“The actual revenues and budgeted revenues are not sufficient to cover the respective costs. More critically, the revenues are not even sufficient to cover the Company’s variable costs comprising passenger and aircraft costs and thus cannot make any contribution towards maintenance and overhead costs. This is not sustainable. As a consequence of the foregoing the management accounts indicate that the Company is technically insolvent,” the document stated.

Sinckler said even after this was discovered, Government via the Barbados Tourism Authority continued to see how it could help the airline, but that officials were then surprised that “in the middle of these negotiations while the BTA was awaiting the final term sheet from a preferred lender for submission to the Ministry of Finance for approval, all of us were shocked to hear the breaking news that days after launching a new regional route that REDjet’s principals were pulling it from the sky.

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