Grounded BVI Airways has checkered past

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https://www.linkedin.com/pulse/grounded ... -chlumecky

Grounded BVI Airways has checkered past
Ken Silva
August 21, 2017

To reach the British Virgin Islands from the U.S., travelers generally have two options: They can fly to Puerto Rico and make a connecting flight to the BVI, or they can take the less expensive but longer route of flying to the U.S. Virgin Islands and taking a ferry.

This needs to change for the territory to compete with more-easily accessible offshore centers like the Cayman Islands and others, according to industry practitioners.

Government officials there tried to make that change happen when they provided local carrier BVI Airways with a US$7 million subsidy agreement in January 2016 to establish a direct route to Miami by October of that year. However, BVI Airways has yet to conduct a single flight to the U.S., and with the company laying off its entire flight crew last week, citing financial difficulties, many doubt whether it ever will.

BVI Premier Orlando Smith faces a motion of no confidence by opposition legislators in the territory’s legislative assembly this week due in large part to his role in driving the BVI Airways agreement, which provides no apparent way for his government to recover more than US$7 million his administration pumped into the airline.

Unsavory history

The history of BVI Airways – which is marred with lawsuits, financial woes and allegations of impropriety – raises questions about why government partnered with the company in the first place.

The airline was founded in 2009 by two U.S. businessmen and a company owned by the family of former longtime BVI legislator Cyril Romney. At the time, it offered flights between Tortola, Dominica, Antigua and St. Maarten, but after amassing hundreds of thousands of dollars of liabilities over the next five years, BVI Airways stopped conducting flights in 2014.

Allegedly owing the BVI Airports Authority US$176,758 in various fees, the airline was sued by the authority, and a judge issued an order allowing the BVIAA to seize the airline’s aircraft until the company paid at least US$75,000.

Despite the fact that BVI Airways never paid what it allegedly owed, according to Premier Smith, its executives were in discussions with government throughout 2014 and 2015 about starting a publicly subsidized route to Miami. Those discussions culminated in the January 2016 US$7 million subsidy agreement, which was touted by both parties as a “partnership” and an “investment” that would be a “game changer” for the territory’s financial services and tourism sectors.

At the time, residents were told that direct flights would begin by October.

When October came and went with no applications submitted to any of the required U.S. regulatory authorities, opposition legislators and others in the community began questioning whether their “investment” would yield any results.

More questions

Questions became more frequent and furious in March, when more details were uncovered about the checkered past of the airline and some of its executives by weekly newspaper The BVI Beacon.

For instance, it was made public that BVI Airways CEO Jerry Willoughby, Executive Vice President Pauline Jones and Safety Director Joseph Pampalone all worked with a New York-based corporation called Baltia Air Lines, which has never operated a commercial flight or generated revenue despite being in existence since 1989, according to a U.S. Securities and Exchange Commission filing from March 2016 (Baltia rebranded to USGlobal Airways earlier this year, but still has yet to launch).

Willoughby denied playing a significant role with Baltia at the time, stating through his publicist that he was a “paid consultant” for a short period in 2010, but was never an executive or in senior management.

That statement, however, was contradicted by 2009 company filings with the U.S. Department of Transportation, which named him as a shareholder and director of flight operations. Willoughby’s own LinkedIn page also stated at the time that he was Baltia’s director of flight operations from April 2009 to October 2011 – the page was apparently taken down shortly after the BVI Airways CEO was questioned about his role with Baltia.

Another finding revealed at the time was that the company is partially owned by a Delaware-based entity named Colchester Aviation, shielding the identity of 25.9 percent of the BVI Airways shareholders. Premier Smith has declined to name all the BVI Airways shareholders on the grounds that such information would be “prejudicial” to the airline if it were public, but has not explained why that is.

Allegations of insider trading

BVI Opposition Leader Andrew Fahie has also made allegations that the company conducted insider trading and owed the government of Dominica money – though he has not provide any evidence to back these claims, which BVI Airways called slanderous.

BVI Airways was further hampered in March by objections filed by two other airlines with the U.S. Department of Transportation, asking the department to deny BVI Airways’ permit on the grounds that they were never served with the airline’s application, which they claimed was legally required. They also argued that BVI Airways’ relationship with government presents a conflict of interest and gives the airline an unfair competitive advantage.

The DOT granted the permit application over the objections of the rival airlines, and BVI Airways looked ready to launch after receiving U.S. Federal Aviation Administration and U.S. Transportation Security Administration approvals in late June and early July, respectively.

Layoffs in July

However, the airline laid off its entire flight crew soon after receiving those approvals.

In a written statement, BVI Airways executives attributed its financial woes to unfulfilled obligations by the government, as well as recent efforts to expand the territory’s airport.

The airport-expansion efforts, the executives claimed, hampered their ability to raise private capital because an expanded runway would attract competing airlines that would also offer direct flights to the United States. This claim was made despite the fact that the airport expansion project has been a priority for the BVI administration since it took power in 2011.

The executives also stated that government has “unfulfilled obligations” with the company, including promised updates to the airport’s terminal and additional Customs Department personnel.

The government, for its part, strongly disputed those claims.

“The government has provided all the financial support agreed between ourselves and BVI Airways, and furthermore, the Airports Authority has put in place most of what was agreed to enhance the arrivals and departure experience of BVI Airways passengers, including an office, additional seating, air conditioning and two ticket counters,” stated Premier Smith. “Having provided the agreed support, this government and people are awaiting the commencement of the much-anticipated direct Miami-BVI flight.”

Along with the motion of no confidence, the premier is also scheduled this week to be questioned by opposition members about whether government can recover its investment – now at some US$7.2 million – and whether the airline would require more public funding to launch.

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Tomas Chlumecky, Global Aviation Business Development Executive:

This smells of corruption, some ties to infamous Baltia Airlines, a 28 year airline that has never flown a single passenger.

To get $7.2 million from the BVI Government to start the 2 x ARJ100 operation and run out of money before 1st flight means there are idiots running the show, why did they buy the ARJ100's and then lease them through another company ?

Anyone or anything connected with Baltia Airlines now or in the past needs to be looked at with great suspicion. How do you go bust before 1st flight with $7.2M? I have started up several airlines for investors, you don't lose your investment unless someone is out to screw you.