Barbados breaks silence on REDjet
BRIDGETOWN, Barbados, Thursday June 28, 2012 – In a surprise disclosure, Barbados Minister of Finance Christopher Sinckler has revealed that bankrupt low-cost carrier REDjet had budgeted deficits throughout its operations.
This was revealed by Minister Sinckler as he brought his government’s annual Financial Statement and Budgetary Proposal before the House of Assembly on Tuesday (June 26) evening.
In drawing his budget presentation to a close, Minister Sinckler said he wished to “set the record straight” as he opened up about his government’s position on REDjet after facing much public criticism since the failure of the Barbados-based airline. The Minister stated that in a bid to come to the ailing REDjet’s assistance before it declared bankruptcy, the government had requested copies of its financial statements in order to assess how the airline could be kept afloat.
According to Sinckler, after receiving financial accounts for the airline up to February 2012, the permanent secretary in his ministry made the following damning assessment:
“…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.”
Sincker said that he immediately informed prime minister Freundel Stuart and his Cabinet colleagues of the findings of the financial review, but the decision was still made to financially assist the airline, as long as it remained flying.
Furthermore, he said, the Barbados Tourism Authority (BTA) subsequently finalized a marketing and operational support programme for the airline, which was approved by Ministry of Finance, and instructions were given to the BTA to proceed to negotiate with a local financial institution to secure the financing necessary to support the plan for Redjet.
However, said Sinckler, in the middle of these negotiations, while the BTA was awaiting the final term sheet from a preferred lender for submission to the Ministry of Finance for approval, Redjet stopped flying. He added that any further possibility of government rendering financial assistance to the airline was “snuffed out” when the company declared bankruptcy.
The minister of finance insisted that it was untrue that his government had 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 pointed out.
“Having given potentially million of dollars in concessions to the company we still undertook to try to see how it would be possible to get it through a surprisingly early and difficult financial period. In the end the airline clearly did not have sufficient of its own private capital to survive and even if the eight million dollars were given immediately upon request it is clear that it would have only postponed the inevitable. May the company rest in peace,” Sinckler concluded.