CAL boss insists new planes will save cash

| 27/11/2018 | 90 Comments
Cayman News Service

One of Cayman Airways’ new 737 Max 800 aircraft

(CNS): The chief executive officer of Cayman Airways Ltd, Fabian Whorms, has defended the airline’s decision to acquire four new planes, despite its significant debt and the need for millions of dollars in cash injections from the public purse to keep the airline going. Whorms told Finance Committee last week that the fleet had to be replaced and in the long run, the new 737 Max 800’s will be “cost neutral” because of the savings on fuel, maintenance, loads and the new routes. But both Whorms and Tourism Minister Moses Kirkconnell were reluctant to reveal the actual cost of the planes, claiming it was commercially sensitive.

In what became at times a testy exchange among members, especially after House Speaker McKeeva Bush attempted to direct Finance Committee Chair Roy McTaggart to close down the opposition’s line of questioning about the costs, Whorms indicated that CAL had secured a very good deal. Kirkconnell backed him up, stressing the important role Cayman Airways has played, and continues to play, in supporting and growing overnight guest numbers.

It appears that the new planes, which will be leased, could cost the airline around $10 million per year, though that figure has not been confirmed. However, Whorms said that the reduction in fuel and maintenance costs, among other savings, would in the long-term level out the impact. He also noted the ability of these new aircraft to fly new routes.

The questions about the finances of the airline arose as the committee queried a CI$7.5 million additional equity investment. During the exchange, Whorms explained that the extra money required in the supplementary appropriation was nothing to do with the new planes but was part of a debt CAL has owed for some time to the Cayman Islands Airports Authority, which they had hoped would be written off.

He said he did not think the airline should have to pay parking and landing fees to CIAA because Owen Roberts International was CAL’s home airport and the airline had nowhere else to park. But he said that for various reasons the authority had indicated that it could not write off the fees after all. And so the debt had to be paid and the additional funds would simply be passed through to the CIAA.

Whorms revealed that the airline also has other debts that it continues to pay, amounting to around $30 million. Against that background, Opposition Leader Ezzard Miller began asking if it was prudent to buy four new expensive planes when it was still carrying a large debt and had received significant output payments from government.

The CEO argued that they were leased and it was a good investment, but he would not give the full details of the financial package.

Kirkconnell said the opposition was requesting “some very sensitive information” and he was “reluctant” to reveal it in public, considering the sensitive competitive environment in which CAL operated. But Miller pointed out that the negotiations regarding the planes was complete, since the first one is expected in a matter of days, and that the money came from the public purse. 

Nevertheless, the minister, the CEO and then the speaker all insisted that this type of information should not be public. As Kirkconnell justified the new planes, he noted that a business case had been done and the current fleet was at the end of its life. The new aircraft would bring their own savings, he told the committee.

Whorms said these planes were the best choice for CAL and were very “competitively tendered”, which resulted in a good deal, as he indicated that CAL had negotiated them for almost half price. They would eventually turn out to be cheaper that the current jets, he claimed, and there would be “substantial savings” coming from quality of service and other “tremendous benefits”.

These might not offset all costs, but if the planes help the airline grow its revenue by around 5%, they will pay for themselves, he said and even indicated there would be opportunities for CAL to sub-let the aircraft at a profit.  

As the opposition was gradually able to entice a little more information from Whorms, the speaker interjected, asking if they should be having such a discussion as he indicated that the government had the majority and could shut down the questions. He suggested that the “press will twist things” and “these determinations should not be in public as these things do a lot of damage”, as he directed McTaggart to wrap up the discussion. 

As things became increasingly tense, Kirkconnell interjected by trying to rally everyone around the national pride the public has in Cayman Airways. He said the value of the airline to Cayman was multiplied by the people it brings and the jobs generated directly and indirectly. He accepted that there were systemic and historical problems with the airline’s debt because it had never been properly capitalised, but it was the future routes that would help bring the best returns.

See the Finance Committee questioning of CAL CEO on the CIGTV channel below starting at 50:20 and ending at 1:51:10

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Category: Government Finance, Politics

Comments (90)

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  1. Anonymous says:

    A change in flight schedules would help. Here’s some hints.

    Fly to Miami from GCM Monday mornings for arrival time of 7am. This allows for Cayman business travellers to get to the office in Florida. Now do the same for NY.

    Evenings leave GCM at 6pm to Miami or NY.

    Start flying to Atlanta and Texas. Cayman used to have a very significant relationship with Texas. This could be seasonal.

    Make the flights to Cayman Brac and Little Cayman under $100 including taxes.

    Fly direct to Ft Lauderdale and Orlando/Tampa. Even if this is seasonal.

    Have real specials. $200 round trip for the first 10 passengers. Back of the plane seats. $300 for the middle set and the regular seats the regular price.

    Want to make money? Sell food on board. Patties, rum cake, sandwiches, cheese boards, charcuterie etc.

    On public holidays/long weekends when it is obvious more people will fly. Schedule more flights! Fly 4 times that day.

    If people want hot food. They can preorder online.

    Stop bleeding money by cutting out all the free flights. Or significantly reducing them to one a year. Not unlimited forever for every single family member. Every Caymanian in Cayman is related “cause your daddy is not your daddy and he don’t know” Thank you Barefoot man for that verse.

    Politicians should pay for all flights unless it is paid by govt for govt business. That still means it is paid and not just written off or outright free. Anything free to a politician is flat out corruption.

  2. Anonymous says:

    me na whan dead man! tha easy for you to say. ?

  3. David says:

    CAL will never make money, it doesn’t have to.

    This plane will never fly enough to even remotely cover its costs.

    It’s a status symbol for the lodge members that run the company. It’s not their money what do they care.

    The amount of money pissed away in this company that could be spent on our youth. It’s disgusting and Cayman Airways is the last Bastion of corruption in our government and someone is making money in there.

    The only reason the public is not able to see their books is because they have no books.

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  4. Anonymous says:

    Stop freebie tickets for politicians, employees and their families. Then we will listen.

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    • Anonymous says:

      Who paid for the entourage to fly to Seattle and bring back this plane?? Hotel and all. Or is that a secret too??

  5. Anonymous says:

    Jamaica and the Bahamas do not have a national airline. Jamaica once did. Both countries have seen tourism numbers continue to increase to record numbers, including investments in new hotels and resorts and both don’t have one thing that Cayman has, which is it’s much safer for our visitors. Jamaicans also had a patriotic pride in their national airlines dubbed the National Bird before commonsense and fiscal prudence prevailed over intangible national pride.
    The government should have the courage to do what is right – privatize or liquidate Cayman Airways. The old tired arguments no longer have any utility or relevance, especially when we need to invest in critical infrastructure to reach a first-world status.
    The truth is that there are so many foreign carriers flying to Cayman that have the reach and marketing capacity to advertise the Cayman Islands, which DOT and CAL do not have.
    Lets trim the fat and excesses!

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    • Anonymous says:

      Bahamasair has been operating since 1973 and continues to today. It is the national airline of the Bahamas, with a fleet of nine planes.

  6. Anonymous says:

    Here are a few facts that need to be considered by the Board of CAL and the Ministry
    .
    1. CAL projected loss in 2018 is $4.5 million with $33+ million in subsidy and no monthly lease payments.
    2. Revenue for 2018 down 5% Miami flights reduced from 3 to 2 daily in peak season December because of low demand.
    3. How much fuel wil the 800 Max save on 1.5 hr flights 60% of CAL flights are less than 1.5 hr.

    4. Where will the revenue (8-10 million) come from to pay the lease on the 2 new panes next year

    5. How much is it costing CAL/Ministry to fly supporters to Seattle to fly back free on this new plane
    Just saying this does not make a lot of sense

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  7. Anonymous says:

    It seems that sometimes pride gets in the way of common sense. The minister is correct that stayover visitors bring most value and arrive by air, but they don’t all arrive on Cayman Airways. If Cayman airways doesn’t bring them, the other carriers will, and the majority are in fact arriving on the other carriers. How convenient to defend the cost position by hiding behind ‘sensitive’ information. A term we are hearing more and more from government that promised transparency.

    It has been proven over and over that government run businesses do not work. The CEO is bound by government decisions. The employees of Cayman Airways are largely loyal and professional, but does the government listen to them? These modern aircraft are cheaper and more fuel efficient but only if you fly the heck out of them. They will not be cost efficient running a few hours a day. New routes based on origin analysis of incoming passengers is greatly flawed. For instance, how many of these passengers are using loyalty programs for their annual vacations? Why are passengers likely to book on Cayman Airways what incentive is there?

    I hope I am proven wrong, but we have seen new routes fail before. The line between profit and loss in the airline business is very thin, yield management is vital to success not a ‘let’s see if it works’ approach.

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    • Anonymous says:

      6:14. It’s not just that CAL tries to fly routes that make no economic sense but the way they persist in operating them while the service makes huge losses. Even worse is when they try to fly routes that already have a more than adequate service from the US carriers. It’s like someone wakes up in the morning and suddenly decides to pick a new destination at random. If a real airline did that they’d have gone bust years ago.

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    • Anonymous says:

      An idea behind ‘routes based on origin analysis of incoming passengers’ is not to poach from other carriers but that if those people like coming here (even if on their loyalty miles) then additional more direct airlift may attract even more tourists from that direction.

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      • Anonymous says:

        Yes, you are right if you are not worried about making a profit. Profitable airlines would not consider a ‘may’.

    • Anonymous says:

      This isn’t an issue with the 737 Max 8 it’s simply what happens when third world airlines operate high-tech jets without proper technical support. It’s not the first time this has happened and it for sure won’t be the last.

  8. Air crab says:

    I really don’t believe Cayman pride is worth the hundreds of millions of dollars of losses that CAL has accumulated over the years. We have more than enough international airlines serving these islands all of which are far more efficient and business minded than CAL. These new jets have opened up yet another can of whorms, setting the stage for even greater losses in the future. If CAL is still losing tons of money when we have record air arrivals, even when it does not pay parking or landing fees and even hangs on to departure and airport taxes, the writing is on the wall.

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  9. Anonymous says:

    i only fly cayman air when i have to….like cinico referrals…they charge 20 bucks a bag??? say they need extra revenue for new planes purchase…go figure?

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  10. Anonymous says:

    OK – I know the topic here is CAL and the new planes but who is sitting just offscreen to the left during the comments? WHY are they surfing the web and looking at Facebook during these discussions? Seriously! Zoom in on the smartphone just on the edge of the screen and you can see that the MLA or whomever it is is simply surfing the web!!!! W…T…F???? This is what we pay our elected officials for? I’m laughing and crying at the same time!

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  11. Anonymous says:

    I’ve been a life-long proponent and supporter of Cayman Airways. But, I hate Miami airport. So it was great for me when, some years ago, I could fly CAL to Fort Lauderdale. Then they stopped that route. Last week I traveled to FLL on Southwest and had a great fare, great service, free baggage and was able to avoid MIA. So, despite my affinity for CAL, they’ve lost me as a customer to South Florida.

    As usual, CAL doesn’t know how to make $$$. They insist on MIA being their preferred South Florida gateway, add costs for all bags and maintain higher fares. Not a formula for continued success! How will this help to pay for new planes?!

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    • Totally disgusted says:

      FLL is a much nicer and easier airport to navigate so your comments are spot on.

      Like you, when I have to travel to MIA again, I will be using Southwest to FLL where 2 bags are free, change fees are minimal and the service is better. I will then either rent a car or take Tri Rail to MIA.

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  12. Anonymous says:

    Ahhhhhh Mac, the Master Manipulator.

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  13. Bin there-dun that says:

    Deja Vu. Remember Norman and the 737-400s? Truman had to crawl to Ireland to negotiate us out of that disaster.

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  14. Anonymous says:

    the lodge gets any and everything it wants in cayman! done….deal….?

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  15. Totally disgusted says:

    I flew CAL this past weekend. On both flights I inquired about upgrading to Business Class and was told that it was full. No problem. At least not a problem until I got on board and saw that there were at least 2 seats on each flight that was occupied by KX employees. Now we know that those business class seats were not paid for yet the airline could have earned a few extra pennies had they been honest and allowed me, and maybe othes who wished to upgrade to do so. If KX wishes to check their passenger manifest, it was KX102 on 23rd Nov and KX103 on 25th Nov.

    As of now, I will NOT be utilizing CAL no more as there are now 2 options to fly into FLL using JetBlue and Southwest.

    Cayman Airways is being run by the same persons who performed miserably at Air Jamaica contributing to that airlines demise and it appears that KX is being taken down that same trajectory.

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    • Go Cal says:

      We know they have great success at doing everything. Their country is booming with no poverty or crime. Nothing to see hear please move on.
      What a mess.

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  16. Tom says:

    They need sell lot of tickets and no free/give away tickets as leasing cost will be around $1.2 million per month to lease 4 planes! It need keep plane flying all time not parking at airport.

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  17. Anonymous says:

    hummmm….wonder what else boeing is not telling owners about its newest aircraft? as per after lionair crash?

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    • Anonymous says:

      The latest on the Lion Air crash is exactly what someone posted in earlier comments – Third World airline maintenance standards rather than a Boeing issue. It’s going to be interesting to see how CAL handle this upgrade because it’s a technological huge step up.

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  18. I won't be flying CAL says:

    Until Cayman Airways can confirm that all of their pilots have been trained to deal with the the potential for failure of the MCAS system, and can provide evidence that all of their pilots have received such training, I will not be flying on a Cayman Airways Max 8.

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    • Anonymous says:

      what a ludicrous statement. Read about the system then read about the lionair accident.

      The training consists of “flip on the cut-out switch when MCAS erroneously activates”. Job done.

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      • Anonymous says:

        So all passengers will have to deal with is the occasional short nose-dive? A few seconds of mortal terror, some broken bones, bruises, damaged/lost property etc. while the pilots look for the switch? Is that all we’re worried about here? What a bunch of snowflakes.

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        • Anonymous says:

          And for the record, I (11.59am) fully supported this acquisition. I was very excited for the first plane to arrive, and wanted to fly on it as soon as possible. I will gawk at the interior photos when they get released too. But a crash or significant incident with one of these planes could easily finish the airline off for good, and I value my life. I, and I suspect many others, will need a higher level of confidence than now exists to get on one of those planes, being flown by a very small airline (with great pilots, but we all have our limits).

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    • Anonymous says:

      I hope you hold other non-Caymanian airlines to the same standard otherwise this is just a brain fart on CNS.

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    • Anonymous says:

      Stupid can’t even be fixed with duct tape.

  19. Anonymous says:

    sell cal….governments should not/cannot run airlines…
    worried about hurricane airlift?….just make it part of the new owners contract that all planes must be availble during hurricane warnings.
    worried about losing national identity?…make it part of new owners contract that all planes must retain cayman flag decal.

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  20. Anonymous says:

    the real question….how many cal passengers actually pay for their seats?

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  21. Anonymous says:

    Is it possible that they simply don’t know what the final costs will be? They will depend on the terms of the lease and are probably not fixed. That’s one of the reasons why we need more details of this deal.

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  22. Anonymous says:

    cal = 5 star cost for 3 star quality. boycott it at every opportunity.

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  23. Anonymous says:

    cal… a perfect representation of the civil service and caymanian employment.

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  24. Anonymous says:

    boycott cal and any airline that charges people $450 for a 1 hr flight and still loses money.

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  25. Anonymous says:

    Don’t disagree about the BS being spouted but it’s not entirely fair to judge the decision on the financial performance of the airline alone. Longer routes, including access to US West Coast, will bring lots more of the right kind of tourist – longer stay, higher income bracket. The airline may be less profitable but the island won’t be.

    I’d be far more concerned at spending $300m to bring the same number of non-spending people on ships, whilst wrecking our single biggest tourism draw – our lovely environment.

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  26. Anonymous says:

    Can’t take McKeeva serious as long as he’s dressed in that frock and wig.

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  27. Anonymous says:

    What has CIG ever done that ended up being “cost neutral”?

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  28. Anonymous says:

    Nice spin Mr. Whorms. So, by saving cash with these new planes does that mean CAL will be self sufficient by 2050? Don’t think so, as it’s anyone’s guess how much the public purse will be funding CAL by then.

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  29. Anonymous says:

    In today’s political landscape, my first check is, is this person Lodge?
    If so, the bullshit meter tends to swing heavily to the right, very close to the red zone.
    So no, I do not believe a word of it and time will prove it.

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    • Anonymous says:

      Enough with this continuous “Lodge” insinuation for Pete’s sake !

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      • Anonymous says:

        It’s time we had the list of everyone in that organisation in one place so we can come to a conclusion about how pernicious it is.

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        • Anonymous says:

          Pernicious… love it, but more google got more definition hits from cayman today than in the last 10 years… lol… KISS or you will lock up the internet… (Just trying to see if I can get more searches than you… lol)

      • Anonymous says:

        The person who seem to be stuck on lodge applied to join and they said no, one hundred times no, don’t come around no more, no more, hit the road Jack.

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  30. Anonymous says:

    As we can see from this exchange the CIG is now attempting to say anything they do not want to disclose to the public is “commercially sensitive”
    Even when the deal is signed and the monies paid with the products on their way, they will still try to shut down questions, and obscure information from the citizens

    They will do this with the port if they have their way as well, the people will never know all of the information and they will say everything is commercially sensitive as long as it suits them

    Mckeeva Bush needs to be removed as speaker immediately

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  31. Anonymous says:

    With every sitting of the LA we see more and more that Mckeeva has no desire to even pretend to be impartial in his role as speaker. In the speaker resigns from his party once he or she has assumed the speaker-ship. Here we allow this farce of independence from the presiding officer who is aiding and abetting the incompetence of the elected government from the speaker’s chair, whether it is suspending MLAs, shutting down lines of questions or simply dismissing questions and motions offhand. Every day Mckeeva sits in that chair and wears that wig he degrades the office of speaker and the Legislative assembly as a whole

    The day that sees Mckeeva no longer a member of the Legislative Assembly cannot come too quickly

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  32. Anonymous says:

    Then there is the suitcase costs. It is a bit frustrating that when you travel there are certain things that are mandatory such as a suit case. It is like making a button up shirt without buttons. I wouldn’t mind if they include it in the ticket costs but it’s crazy to stand in line for hours and when you get to the counter another 1 hour for them to sort and process the fee, then on the way back the same thing and again more cost to bring back the same suit case you got charged for going. This policy and process stinks!

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    • Anonymous says:

      Not to mention the fact that, since they started charging for luggage, passengers are bringing bigger and bigger “carry-on” bags into the cabin. They try to stuff these into the overhead bins, further slowing down the boarding process, as half of them dont fit and end up having to be checked as baggage….Smh

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    • Anonymous says:

      How about the fact that you can spent $700 on a round trip flight and then, God forbid, something happens and you need to fly home early and you have to end up buying a brand new ticket and you’re not reimbursed for the return trip home you already paid. How is that even legal? I paid for the trip home, how is it I have to pay again for what I have already paid for and they are still losing money?

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      • Anonymous says:

        Maybe because when you buy a $700 (before travel) ticket and you use 1 portion of it you only have the remaining one-way plus unused taxes available not including any possible fee associated with the fare for changing your initial contract purchased with any airline, not just KX.

      • Anonymous says:

        And about still losing money after paying again for what you already paid for, we cant be sure you even paid so callate la boca. You might be 1 of them ones that get them freebies your colleagues above claim they give out.

        As a retired non-caymanian I prefer the national carrier over my US carriers for many reasons, particularly for the superior service they provide with that have no issue paying their business class and would pay for my bags if I had to even.

        And no, I am not the rich kind of retired non-caymanian either but I am not cheap to spending for quality in a product.

        Leave Cayman Airways alone.

  33. Anonymous says:

    Boy all you get from these guys is “don’t worry everything will be alright”, they should go to the recording studio.
    Hope they got the big bucks to back up their champagne & caviar dreams. Port also on the spending spree – Whoopee!

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  34. Anonymous says:

    Never needed them. The 800s would be better. Now we see why the new baggage fees.

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  35. Elvis says:

    Well it must be true then

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  36. PAX says:

    Whorms said the new planes would be “cost neutral” so basically we make no money. Gain/loss balance each other. So where’s the profit? Are we always just comfortable making no money/breaking even? Why do they throw words around willy-nilly if they’re not sure of meaning? Never cease to amaze me!

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  37. Anonymous says:

    Complete and utter BS by CAL. The fact that they won’t reveal the details proves it because in the ‘sensitive competitive environment in which CAL operated’ anyone with any aviation industry connections can not only gain access to the figures but use them. The real danger here is that if CIG are willing to subsidise CAL to the levels it currently does we could be shut out of the US market.

    That aside, a country with a population of under 60K taking on four 737 Max 8s doesn’t make sense. Someone should be doing a serious forensic audit of this whole deal because it stinks of kickbacks.

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    • Anonymous says:

      All the free-loading family members going to love the nice new seats and quiet engines. Are their free seats in Fabians numbers?

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    • Anonymous says:

      Seems like everything the Honorable Minister touches has a stink to it. And they thought Big Mac was bad!

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  38. Anonymous says:

    And these guys are never wrong.

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  39. Anonymous says:

    E 190?
    A 220?

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    • Anonymous says:

      Look at FlyBe, Porter and Air Canada Express. Bombardier Q400. 70-ish seats and almost as fast as a jet for 500 mile or less trips. The world’s most modern turbo prop fully capable of Cayman Brac, Jamaica, Honduras and even Miami trips. Why fly 1/2 empty when you can fill these fuel sipping turbo props?

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      • Anonymous says:

        Oh please, stop it with your common sense.

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      • Anonymous says:

        Which caymanian you think is gonna get on a prop when AA and SW have shiny new jets?

        E190 was looked at previously, maintence costs are too prohibitive. A220 costs more than the Maxes to lease these days.

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      • Anonymous says:

        Good point 9:15. I remember making the 450-mile flight from San Juan to Bonaire on an American Eagle 70-seat twin-turboprop with no problems. This is a status issue not a business plan.

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