Stabroek News
May 18, 2001

GA 2000's chance of clinching a deal with the investor it is in negotiations with is slim as of now and receivership for the troubled national airline is the more likely prospect, sources say.

The airline has racked up US$8 million in debt, almost US$5 million of which represents losses incurred since privatisation in April 1999. The remainder comprises a US$2.2 million liability absorbed from the old operation and G$160M is a credit facility the airline has with Demerara Bank Limited (DBL) and for which a debenture was issued. The old Guyana Airways Corporation had accumulated a debt of US$9 million before being privatised.

The government has refused to bail out the airline, sources say, and Stabroek News understands that the investor, representing a consortium, is trying to have monies invested in other ventures released but this is taking some time.

The investor, Stabroek News understands, is very keen on taking control of the airline by making a substantial equity investment but the question is one of timing.

The airline has already suspended its operations and yesterday its communications consultant, Public Communications Consultants Limited (PCCL), indicated that a definitive pronouncement on the airline's future will be made on Monday.

The suspension occurred because the airline has no means of replenishing its cash flow and has been unable to secure bridging finance to renew its lease arrangement with Ansett International in Australia for the 757 aircraft.

The carrier has been making alternative flight arrangements for its passengers with North American Airlines and British West Indian Airways (BWIA).

The investor is willing to inject the resources required to secure the lease arrangement with Ansett and to invest further in the airline to dilute the current shareholding and allow it to have a controlling interest. It is further keen on bringing in new management.

However, it is unlikely that the investor would be able to secure the financing to do so by Monday, sources say. This means that the airline could go into receivership with Demerara Bank Limited which has the first lien on the assets of the airline and it is highly likely that a manager/receiver will be appointed.

The prospective investor may eventually be able to secure controlling interest in the airline in an arrangement with DBL, once he can have his resources released. The name of the consortium with which the airline is negotiating is being withheld from the media.

The old Guyana Airways Corporation had wracked up large debts in 1999 before the government had sought to privatise the airline. After a few months of negotiation, the government entered into a joint venture arrangement with Aviation Investments, a consortium of local businesses. Controlling interest and management of the airline was vested with the private partner. The government's equity in the airline was worth US$1.7 million whilst Aviation Investment's equity was US$1.8M.

However, the goodwill of the airline was damaged and the privatised airline ran into teething problems quite early. The flights were usually booked to 80% capacity only on one leg of the journey. It also saw changes in its share ownership and lost two of its chief executive officers, Anthony Mekdeci and more recently Tom Scarlett.

Signs of trouble came several months ago when reports abounded of the airline being bankrupt. However, the airline described its problem as "cash flow difficulties". It also revealed that it was negotiating with two buyers to give up control of the carrier.

But two weeks ago, the airline consolidated its flight schedule out of New York from four days of the week to three days per week and one day to Toronto, and revealed that it was only talking to one investor.

However, a week after the consolidation of the flight schedule, the airline was forced to suspend its operations completely because it could not renew its lease arrangement with the Australian company Ansett International.

Yesterday, a statement from PCCL said the board of directors of the airline has confirmed the temporary suspension of the airline's operation and will make a definitive announcement on its future on Monday.

The statement said the airline was committed to making alternative flight arrangements for all passengers currently holding return tickets with priority being given to passengers in Guyana and North America who are scheduled to fly within the next five days.

Passengers are being asked to visit the airline offices to confirm these arrangements. The statement also said that ticket holders with reservations after May 23rd are to contact the office by phone to facilitate priority passengers.

"The airline is doing everything possible to transfer ticket holders on the first available flight opportunity to either BWIA or North American Airlines. In cases where alternative flight arrangements are not possible on or close to the passengers' scheduled departure with GA 2000, the airline will consider refunding the unutilised cost of the ticket," the statement said.

The airline is also apologising "sincerely" to all of its customers for the inconvenience caused and assures that the airline's reservation staff are doing everything possible to take care of them under very difficult circumstances.