Govt providing $2m safety net to airlines
Government continues to promise significant subsidies to airlines serving Bermuda, the Consolidated Fund financial statements show.
The Consolidated Fund report for the fiscal year ended March 2011 showed Government entered into two further minimum revenue agreements with airlines flying to Bermuda.
Government gave irrevocable Letters of Credit issued by HSBC Bermuda promising a further $2 million in total to American Airlines and WestJet should they not meet their minimum revenue requirements.
The report showed a revenue guaranty agreement of a 10 percent profit margin was made with low cost carrier WestJet on June 1, 2010, a month after it launched Toronto-Bermuda service to compete with Air Canada. In return for a guaranty to pay $500,000 to WestJet, the carrier agreed to fly three times a week from November 2010 to April 30, 2011.
Neither Government nor WestJet would comment on whether its profit margin reached the 10 percent set out in the guaranty period, or if any or all of the $500,000 promised was paid.
A WestJet spokeswoman said yesterday the airline continues to fly to Bermuda three times a week, adding: “We will continue this service level as we transition into our summer schedule which begins late April/early May.”
According to the Consolidated Fund report, Government also made an agreement with American Airlines in November 2010 to provide regular service between Miami and Bermuda through November 2011. It delivered an LOC agreeing to pay American $1.5 million for any revenue shortfall during the period.
Government also did not comment on that agreement, or whether American met its target.
An American Airlines spokesman said yesterday the carrier has a once daily flight from Miami to Bermuda, adding: “American continuously reviews its route network; however, I can tell you that there are currently no changes planned for this route.”
It was disclosed by Government in March 2010 that nearly $2 million was paid out to airlines serving Bermuda over three years dating back to 2007 due to failure to meet revenue projections.
Between November 2007 and March 2008 US Airways failed to meet its revenue target for a Washington DC flight to the Island, resulting in Government paying the airline $952,300 for the six-month period.
Similar agreements were made with JetBlue and Government has said it paid more than $500,000 to United Airlines for a revenue shortfall for its seasonal Chicago service.