The Chairman of the now bankrupt Guyana Airways 2000, Yesu Persaud, blames the failure to find a strategic investor to bail out the airline on the country's unstable political climate. GA 2000 suspended its operations in May and on Tuesday a receiver was appointed by one of its creditors, Demerara Bank Ltd (DBL). Persaud is chairman of DBL as well.
Stabroek News
August 3, 2001
Persaud regretted that the failure of "the first major joint venture between a group of local private sector investors and government, working together and dedicated to the establishment of a viable national air carrier, has not been successful".
He also bemoaned the government's inability to substantially support GA2000 as other governments did their national carriers because of its involvement with the International Monetary Fund (IMF). This, he said, resulted in the airline having to use about US$5 million of its assets to secure working capital at commercial rates of interest to maintain its operations.
GA 2000 went into receivership on Tuesday at the instance of DBL which appointed chartered accountant Ronald Alli as receiver. Alli's primary function would be to dispose of GA 2000's assets to ensure that DBL recovers its money, which is secured by a first charge, and to disburse the remainder among the other creditors.
In a statement announcing the appointment of Alli, DBL said that "the value of the assets charged to the Demerara Bank Ltd as secured creditors are sufficient to cover the outstanding debts of GA 2000 to the bank and the bank is confident of recovering the full dues of GA 2000."
Among GA 2000's assets are its Main Street head office, the domestic hangar at Timehri, aircraft spares and office equipment. Besides its liabilities to DBL, the airline's other creditors are expected to include the New York Port Authority which operated JFK airport, the airline caterers in New York and Guyana and a number of passengers who were unable to travel despite holding tickets.
In relation to the latter category, GA 2000 in June said that it has some "US$1 million in cash deposits combined in a special trust in Toronto, with First Data Marketing Services, a US credit card management service and with the Airline Reporting Committee covering travel agencies, specifically for the purpose of protecting passengers." It is not clear if ticket holders will have a claim on these funds.
In a statement released after DBL appointed Alli as receiver, Persaud said that every effort to "attract new investment and explore an operational alliance with other airlines has met with a marked disinclination to invest in Guyana at this time because of the prevailing political climate."
The statement recalled that when GA 2000 began operations in July 1999, it had a cash flow problem from the inception as it had assumed some US$2.2 million in liabilities from the Guyana Airways Corporation which it had acquired. This required the airline to immediately deposit in excess of US$1.2M against outstanding debts and for start-up costs to permit the airline to begin business, leaving the sum of only US$800,000 in working capital at the disposal of management. This, the statement noted, was "less than the sum necessary to meet the payment of one month's lease for its aircraft."
The airline started with US$1.8 million put up by private shareholders and government's equity holdings of US$1.7 million, based on the net value of the assets from the Guyana Airways Corporation.
Other start-up challenges which faced GA 2000, according to the statement, was the need to recover passenger traffic confidence lost when GAC closed its operations, competing with a North American charter airline, absorbing the doubling of fuel costs and facing a price war with the major scheduled airline servicing Guyana, British West Indian Airways.
It said too that its entry into the sector as the national flag carrier "almost immediately resulted in a reduction of some 40 per cent of airline passenger fares and relief from reservation delays and over-booking which had seriously begun to affect the passenger traffic out of Guyana."
Persaud said that GA 2000 "had become a major foreign exchange earner for the country, flying over 20,000 Guyanese home in the peak summer and Christmas seasons last year, who collectively spent at least US$20 million during their visits."
But the statement noted that despite quickly recovering its share of passenger traffic within its first year of operation the airline could not survive without increasing its working capital.
"The airline had, therefore, entered into negotiations with potential investors who had continued to express strong interest in purchasing majority control of the airline."
But the statement quoted Persaud as saying that "even under the most ideal conditions a new airline could not reasonably be expected to return a profit within its first four to five years of operation."
According to Persaud, BWIA did not return a profit for over 50 years of its operations and largely depended on the Government of Trinidad and Tobago to keep it in the air.
The same, he said, was true of the support received by Air Jamaica from its government and LIAT from Caribbean governments.
He pointed out that the loss of employment by its 160 staff would have "tragic consequences for Guyana" as the creation of this many jobs for qualified and skilled persons would demand an investment of several million US dollars.
GA 2000 staff included highly trained pilots, retrained at considerable expense to the airline, along with engineers, cabin crew, marketing and other very experienced and technically qualified airline staff.
Persaud also acknowledged the tremendous contribution and commitment made by the employees of GA 2000 at every level and often at personal sacrifice, to its progress.