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Bahamasair ‘a valuable asset’ for investors

Aviation sources suggest airline worth over $20 million
Guardian Business Reporter

Published: Oct 23, 2013

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Bahamasair could be quite an attractive asset for potential investors, valued at well over $20 million, aviation sources have estimated.

Currently, the airline’s liabilities are estimated to be slightly over $40 million, which consists of government debt, national insurance, unearned revenue, other taxes and outstanding loans against the purchase of its two Boeing 737-500 aircraft.

Out of that $40 million, $16 million is reportedly government debt.

Recognizing this fact, Guardian Business understands that if the government wanted to sell Bahamasair, the $16 million owed to them could be written off, leaving the airline with $24 million in liabilities.  It’s a move that could essentially level off the assets and the liabilities, making the airline much more manageable.

On the assets side of the business, in its seven-aircraft fleet Bahamasair owns its five Bombardier Dash 8s, each valued at approximately $4 million according to the most recent Aircraft Bluebook.  Bahamasair has approximately $6 million in aircraft spares inventory.

In addition to its tangible assets, Bahamasair reportedly has a perfect safety record and owns the reciprocal rights for services in the United States, two features that would be a big gain for an investor.

When looking at both the airline’s assets and liabilities, Bahamasair could be valuable to an investor.

However, in its 2012 annual report, Bahamasair spent $94 million on operational expenses but only generated $71 million in revenue, creating a $23 million deficit.

And out of that figure, $27 million was spent on salaries for its 632-member staff.  Labor costs remain the airline’s biggest impediment and could  possibly detract investors.

In the past, consultants have told Bahamasair executives that it needs to reduce its staffing to 500.

While Prime Minister Perry Christie recently denied that any deal has been made with the Chinese in relation to Bahamasair’s privatization, he believes that a public/private partnership would be the best solution going forward as the government looks to reform Bahamasair.

It is no secret that the national flag carrier continues to be a financial strain on the government, offering an estimated $25 million in subsidies on an annual basis.  The airline has incurred more than $500 million in losses since its creation in 1973.

Earlier this year, the Ministry of Finance mandated the airline to reduce its expenses by 25 percent in 2013 and 10 percent each year thereafter.

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