Govt paid out millions to airlines
With air passenger numbers flagging, the Bermuda Government had to pay out millions to airline companies to cover the cost of North American routes in 2011 and 2012.
Canadian airline WestJet alone received more than $3.6 million in three separate payments made between August 2011 and June 2012.
And in February last year, American Airlines was given $361,536 to cover a revenue shortfall for the fiscal year ending November, 2011.
The figures emerged in Governments Consolidated Fund financial statements covering the year up to March 31, 2012, issued on Friday.
Former Tourism Minister Wayne Furbert said last night that failure to make revenue guarantee deals with airlines would mean losing routes.
WestJet received $1.26 million in August, 2011, to cover shortfalls in its guaranteed revenue from November, 2010 through April, 2011. The following February, the company was paid a further $1 million for May through October, 2011.
Bermuda simultaneously sealed agreements with both WestJet and American to guarantee revenues on their flights to the Island.
In November, 2011, WestJet agreed to run a daily Toronto flight through April, 2012, while American Airlines signed on for one year to link Bermuda with Miami International Airport, to end in November, 2012.
In June of last year, Bermuda paid WestJet an additional $1.45 million to cover shortcomings for the winter 2011 revenue guarantee.
Acknowledging that countries like Bermuda have a challenge getting flights here, Mr Furbert described the payouts as just part of the cost of doing business.
What we have in place is a minimum revenue guarantee, which kicks in when the airlines dont make that certain particular load, Mr Furbert said, saying the deals were common across the Caribbean and around the world.
He added: We entered the contracts with WestJet because we were trying to bring down the cost of travel to Bermuda. As a result, arrivals with Air Canada went up. But now the new Minister [Shawn Crockwell] has a bigger challenge this year, because Air Canada is pulling back to three days a week. And thats during the height of the season.
But Mr Crockwell is the Minister of Tourism and Transport, so he can potentially go and negotiate better arrangements.
Cutting deals with airlines wasnt optional, the Shadow Tourism Minister added.
Its either that, or lose the route, he said. Now its up to us to increase the numbers of people getting on those flights, Mr Furbert said. I am sorry to see that Air Canada has pulled back to three days. That may have an impact — loads may go down and prices will go up. That would kill some of our market up there.
Now we have to get our advertising moving to get rid of our payouts. Thats the challenge. You enter these minimum revenue guarantees and hope your marketing will bring in the people.
Air Canada is trimming its daily service in anticipation of future demand, the company announced last week.
New Tourism Board chairman David Dodwell last night declined to comment, deferring to Mr Crockwell.