By TAMARA McKENZIE, Assistant News Editor, tamara@nasguard.com

Despite investing millions over the past 25 years to keep the cash-strapped national flag carrier afloat, Bahamasair is still some $70 million in debt, the airline's chairman admitted Wednesday.

"Basically our debt is in respect of carried forward deficit and that is in the order of $70 million," said Bahamasair's chairman J. Barrie Farrington in an exclusive interview with The Nassau Guardian. "It seems that ever since the airline was formed in 1973, a profit has never been realized and millions of dollars have been poured into the airline."

As a part of its mid-year budget presented to Parliament last month, the government allocated a total of $19,180,000 for those loss-making public sector enterprises, of which Bahamasair was included. Prime Minister Hubert Ingraham said the additional payments allocated to Bahamasair in the 2007/08 mid-year budget were for maintenance and capital equipment, but he highlighted that over the last 12 years, from 1996 to 2007, Bahamasair had received supplementary appropriations totaling $96.9 million and some "fundamental decisions" had to be made because at least 20 percent of the money borrowed by The Bahamas government, under the disguise of capital expenditure, will continue to be transferred to the national flag carrier, as well as the Water & Sewerage Corporation and ZNS, to pay operational expenses such as salaries, office supplies and consumable such as gasoline and diesel.

According to Farrington, the airline's' board of directors was given a mandate from the government to re-examine ways to restructure the airline, in order to substantially diminish or eliminate the financial burden that is placed on tax payers and the Public Treasury.

"We are developing a report that would hopefully, by mid-year, allow us to send to the government some recommendations that would bring about significant changes to the way that Bahamasair is operated," Farrington said. "First and foremost, we have to find a way to produce a streamlined, more efficient, cost effective and in some way profitable airline. Obviously, all the numbers have to work and we have to produce a plan, together with a financial model that will make sense and this is what we have to prepare and present to government by June 30."

Farrington could not state if privatization of the national flag carrier was imminent, noting that the concept of privatization for the airline was somewhat hard to define. He did state, however, that the board understands the basic mandate of the government, which is to create an operation that is "beneficial" and not a financial burden on the treasury.

"We've got a board that is very much engaged and committed to developing such a plan and we believe that we have executive management's understanding that this is the direction in which we are going," Farrington said. "We will obviously in the process engage the union leadership, in so far as getting them to be familiar with what we want to do, and the extent to which bargaining unit employees could be affected but that's in the future. We have a number of stakeholders in respect of an outcome and we will ensure, that as best as we can, we go through a consultative process in order to get to the right objective and the right ending [for Bahamasair]."

The last concrete talks related to privatizing the national flag carrier were in May 2005, when the former Progressive Liberal Party government announced that it was negotiating with the world's largest management consultancy firm, McKinsey & Company, to have the cash-strapped airline privatized. At the time, former minister with responsibility for Bahamasair Bradley Roberts, said the company was to attract a foreign partner that would own less than 50 percent of the equity in the national flag carrier, while Bahamians and the government would own the majority of the equity.

But for a number of years, Roberts and other persons who chaired the Bahamasair board all sung the same chorus of Bahamasair continuously losing money. In 2003, while giving his contribution on a resolution for a government guarantee loan of $7.25 million for Bahamasair, Roberts told parliamentarians that once the service quality and reliability level at Bahamasair was raised, the airline would be in a much better position to negotiate an equitable price for the airline to be privatized. "With sound planning, it is expected that we would get there within 12-18 months," he envisioned. However, five years later, the newly-elected Free National Movement government appears to be stumped when it comes to putting a damper on the financial hemorrhaging encountered at Bahamasair.

Farrington told The Guardian that the board is in the process of updating the McKinsey & Co. privatization report, which outlined ways to diminish costs, and also made recommendations on how to keep the airline afloat and in operation. "We want to look at a number of options, that I am unable to describe to you at this stage, of what the airline would look like in the future," Farrington said.

The Bahamasair board chairman said that in examining Bahamasair's profit margin over the years, it sometimes reached a point where it "nearly" broke even, but a huge profit was never realized. He said Bahamasair has three jets that are categorized as being "old" by modern standards and they are considered a "grave expense". He also factored in the high cost of fuel and increasing competition.

"We have to compete with Spirit, Continental and American [airlines], and we only operate between here and Florida," Farrington said. "The cost of maintenance is high and the cost of labor is high, so that in itself is another consideration. We don't operate in a fashion that enables us to produce the right profit margins....the government has said that we have reached a point where we need to adopt some definitive plans that would lift us out of this quagmire of high costs and these deficits."

In the meantime, Farrington said while a lot of people opt not to fly the national flag carrier, they are truly working hard on improving its on-time performance and lifting the standard of service it offers to passengers.

"There is no reason why, irrespective of the challenges that confront the airline, that we can't provide a first-class high standard of service, whether it be at check in, on the planes or with making reservations and the like. We want high quality service, customer satisfaction, on-time performance and right now one thing is certain: We have an impeccable record when it comes to safety and that is one part of our service that we won't compromise on," Farrington said.