COME tomorrow, State-carrier Caribbean Airlines (CAL) will aim to reduce its salary bill by sending some employees on no-pay leave, reducing the salaries of others and temporarily laying off a third group.
It is a move to keep the airline operational and is in line with cost-cutting that has been implemented in many airlines around the world as a result of the slowdown in international travel caused by the Covid-19 pandemic.
Since Covid-19 hit the Caribbean in March 2020, the airline’s flights and its revenue have dwindled as borders were closed to contain the spread of the virus.
The Sunday Express was told that this will affect about 1,700 employees to varying degrees, but the most immediate impact will be felt by the company’s 250 pilots and about 375 flight attendants.
CAL’s proposals were made at a meeting that the board of the Trinidad and Tobago Airline Pilots Association (TTALPA) held with the airline’s vice-president of Human Resources, Roger Berkeley, on September 16, 2020.
CAL proposed to place its contract pilots, who are over 60, on no-pay leave for a three-month period from October to December 2020. The airline also proposed to reduce the salaries of all other staff by between 15 and 20 per cent, based on their salary levels for a period of six- to eight-month period, starting on Monday, when the airline’s October pay cycle begins.
Since T&T’s borders closed on March 23, CAL has paid all employees their full salaries, while the airline operated on a restricted basis, offering special flights to bring nationals home and take students back to their universities. .
From May, CAL was mostly funded from the US$65 million ($442 million) Government-guaranteed loan.
The airline’s chief executive Garvin Medera had told the company’s staff then that while CAL was able to fund April’s salaries it would need external funding for the coming months.
In May, Finance Minister Colm Imbert announced that the Government had guaranteed the loan with the justification that: “Caribbean Airlines is earning no money at this point in time.”
The Sunday Express understands that the majority of the Government loan funded salaries and eased some of the debt the airline had acquired during its operations.
While most Caribbean borders are now reopened, and CAL has managed to expand its regional service by setting up hubs in Barbados and Jamaica and filling the gap left by LIAT, T&T’s borders remain closed. The airline operated the hub in Kingston to fly commercial passengers to The Bahamas, the US and Canada. The hub in Barbados, transports passengers to the Eastern Caribbean.
CAL now operates cargo flights and flights authorised by the Minister of National Security.
The state of
The operations of the airline over the past few months were recorded in the minutes of the September 16 meeting:
1) “CAL is currently working with the Government via the Minister of Finance, to provide options for revenue generation and to recommend where they can cut costs. In an attempt to secure additional funding for the airline, they must show that they are not reliant on Government funding and show where effective and reasonable cost reduction measures would make sense.”
2) That the Government has indicated to the airline that January 2021 is the earliest that Trinidad’s borders can expect to be reopened.
3) That the leases for the aircraft have been negotiated where possible.
4) Cargo is generating minimal revenue and the loads on the Caribbean flights have been quite low.
5) The airline doesn’t expect to recover passenger loads of 85 per cent until 2024.
CAL will still take ownership of two additional ATR’s.
The TTALPA is challenging CAL’s decision on how it treats with its pilots.
Berkeley said CAL estimates it will save US$1 million with the implementation of these measures.
In a letter to TTALPA, Berkeley explained that as the pandemic continues and the airline is still virtually grounded as the borders of T&T remain closed, it must reduce its operational costs.
“As a result of this continuing situation, it is necessary for us, as a business, to consider alternative approaches to funding and cost management. One of the major areas of cost is salaries. With the implementation of the following proposals, CAL expects to reduce the airline’s salary cost while giving both the airline and its employees the best chance of recovery within the time frame of eight to twelve months.
“In respect of the pilot body, this general proposal will be specifically applied as follows in accordance with Article 31, i Ciii: Leave of absence without pay:
• The required number of pilots for POS will be determined and then reviewed on a monthly basis.
• The number of pilots who will be given a leave of absence without pay will then be determined once the number is decided at 1 above. Employment status and Last In First Out (LIFO) will generally be used to determine the order in which pilots will take their leave of absence.
• Temporary Salary Reduction of between 15 and 20 per cent of salary for all operating staff, depending on salary level, for eight months beginning October 1, 2020.
In response, TTALPA said it wanted to discuss the 90-day leave being proposed as there are “alternatives that might be more equitable and acceptable to those affected, such as an across-the-board temporary salary sacrifice that would be repaid after the return to ‘normal’ operations”.
“In the event that we have no alternative but to consider a temporary leave of absence for pilots, we would insist that this be done in accordance with Article 31 (i) (f) of our Collective Agreement ie on the basis of the Last In First Out (LIFO) principle. In this regard, we wish to advise that we are not in agreement with any proposal to single out those pilots who have continued in employment beyond age 60 for consideration, by fleet or other basis, that runs contrary to the LIFO principle,” it said.
The letter was dated September 21, signed by Captain Larry Imamshah.
Contacted yesterday, Imamshah declined to comment on the letter.
In an e-mail to staff yesterday, CAL CEO Medera said consultations continue with stakeholders.
“While these consultations continue, it was our intention to share specifics with you once the proper processes were completed.
“As you know, globally, airlines are experiencing unprecedented challenges caused by the Covid-19 pandemic. In fact, the International Air Transport Association (IATA) is expecting airlines to lose around $84 billion in 2020, making it the worst financial year in the history of aviation.
“In some respects, Caribbean Airlines has been fortunate based on support from our main shareholder. However, diminishing revenue, driven by several factors including border closures at our main base, and in other significant markets, as well as limited demand, has meant that like many airlines worldwide our costs have outstripped our earnings.
“Regrettably, the present situation is that the company’s cash position continues to be extremely tenuous and we now have to take further steps to streamline expenses and manage cash.
“Based on the existing circumstances, collective and individual sacrifice is the only way we can get past the current scenario. The details of the way forward will be shared with you early next week by myself and the Human Resources Department, along with questions and answers that should allay your concerns,” he said.
Last year, the company released its unaudited 2018 financial results which said the airline has made a profit of $42 million.
The statement showed that while the airline recorded $158 million in earnings before interest and tax on international routes, it made negative $47 million on the airbridge. The company’s net income from international flights and other operations was $109 million, while domestic airbridge operations made a net loss of $67 million with total revenues increased by 11 per cent to $292 million.
The last time CAL, which is majority-owned by the Government, presented annual financial statements to the public was in 2015, for its 2014 performance, when it recorded a US$60 million loss.
On the day T&T recorded its first Covid-19 postive patient on March 12, CAL was set to rebrand its operations. The Sunday Express was unable to get a figure on the cost of the rebrand.