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DeSilva softens tone on revenue guarantees

Revenue guarantees paid to airlines should be a shared responsibility, the tourism minister has said.

The move is an apparent softening of the line Zane DeSilva took in the House of Assembly last month when he insisted airport operators Skyport should foot the bill for the cash paid to airlines.

Mr DeSilva said last week that minimum revenue guarantees, up to $2 million a year in some years, should be divided among tourism industry players.

He said: “You can call it a minimum revenue guarantee or marketing, but at the end of the day, no matter what we call it, all the stakeholders should have skin in the game.

“I'm not saying that the Bermuda Tourism Authority, Bermuda Government or Skyport should bear the brunt entirely or individually, but Skyport, who are now recipients of all the income for the airport, should play their part, whether that's 70 per cent, 80 per cent or 25 per cent.

“All I can tell you is that as far as I'm concerned, it's not on my agenda for us, the Government, to pay in its entirety.”

Mr DeSilva told the House last month that it was “unthinkable that we would sit idly by while taxpayers are forced to bear a financial responsibility that rightly rests with Skyport”.

He added that the Government was not on the hook for the minimum revenue guarantees at present. The minister did not elaborate in his latest comments, saying that the guarantees were confidential.

Mr DeSilva added: “I think most in the industry know MRGs are agreed from time to time. When MRGs are in place, it ultimately comes from the taxpayer.”

The payouts to airlines appeared in the annual financial statements for the Government's Consolidated Fund. Later statements referred to air service agreements with unnamed “commercial airlines” rather than specific airlines.

Two airline agreements were vested in the newly created Bermuda Airport Authority in March 2017 and the Government established letters of credit with HSBC for $500,000 and the Bank of Butterfield for $100,000.

The Government's estimated liability for air service agreements was $1.15 million on March 31, 2016, but the report noted an additional agreement signed in October 2016 which put the public purse on the hook for an additional $552,000.

The 2015 financial statement for agreements with two airlines gave an estimated liability of $1.18 million.

That report also listed an additional air service agreement in September 2015, with the Government entering an irrevocable letter of credit with Butterfield Bank for $900,000.

The Government's agreements had gone from two to three airlines, with an estimated liability of $2.72 million in 2014.

The report for the year ended March 31, 2013 gave the total payout as $1.63 million.

The statements for the 2011-12 financial year revealed that in February 2012 the Government paid American Airlines $361,536 under its air service agreement, which required the island to compensate the company for any shortfall in its minimum revenue on its Bermuda-Miami service.

WestJet was given more than $3.7 million between August 2011 and June 2012.

The BAA was set up as a government quango to take over from the Department of Airport Operations, under the airport redevelopment deal with the Canadian Commercial Corporation and the contractor Aecon.

Softened line: Zane DeSilva, the tourism minister

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Published December 10, 2018 at 8:00 am (Updated December 10, 2018 at 7:13 am)

DeSilva softens tone on revenue guarantees

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