Minister of Finance Chris Sinckler says at no time did he guarantee to REDjet or made a commitment to inject $8 million into that airline.
In a clear the air statement during today’s Budget in Parliament, Sinckler.
“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,” he said.
Sinckler said: “In the last few weeks a rather unfortunate set of statements and commentaries have emerged following the collapse of the Barbados registered airline REDjet, which have sought to, in the least, question this administration’s support of this business venture, and at worst cast aspersions on members of this Government including myself as to our alleged commitments to the principals of this company.”
The Minister, in setting the record straight, gave details of a meeting last October at the request of the principals of the company.
“During the course of the meeting I was made aware by company officials that the company was having severe financial difficulties just months into its operations, blamed in large part as they put it to ‘Government’s’ delay in granting the airline permission to fly in a timely manner. I was told that the delays severely affected their business plan as they couldn’t get sufficient routes when they wanted them to increase their load factors and earn enough money keep the operation profitable,” he said.
Sinckler said the principals asked if the Ministry of Finance would be willing to issue them with a sovereign guarantee so as to allow for them to go to a financial institution to raise resources to support their operations.
“I immediately indicated to the principals that this was not possible as Government cannot issue a guarantee for a private company.”
A January meeting was also convened including other ministers, where REDjet officials were threatening to close the airline in a few weeks time if some level of support was not forthcoming from Government.
“Having discussed the matter at length the meeting came to a number of broad understandings which included a commitment from Government to explore the possibility of assisting with the arrangement of a facility through the BTA that would allow for a small capital injection in the airline and a marketing support initiative. REDjet on the other hand undertook to itself inject sufficient additional capital into the company as to keep it in operation, produce for analysis by Government its financial statements so we could ascertain the true state of the airline, and a new revamped business model” he added.
Sinckler recalled that the airline did submit its financial accounts for the period up to February 2012 and these were sent for analysis by our business and financial analysts in the Ministry of Finance.
“I received from the Permanet Secretary in Finance a copy of that analysis which concluded in part that based on the accounts submitted ‘…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.”
Sinckler said he immediately informed the Prime Minister and other colleagues of the findings of the financial review but they still agreed to try to see if it were possible to assist in anyway.
“It was made clear to the principals of REDjet that one of the conditions for any level of Government support was that the airline had to remain in the air. This would entail the shareholders putting in sufficient resources to capitalize the airline to allow for continue operation,” he said, noting that that BTA then finalised a marketing and operational support programme which was submitted to the Ministry of Finance.
Sinckler said he was then shocked to hear the breaking news that days after launching a new regional route that Redjet’s principals were pulling it from the sky.
“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,” he said. (CM)
