BWIA 772
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Bwia The Costly Fleet Restructuring!

Fri Aug 01, 2003 5:15 am

As some who have been following this Trini soap opra will know that the airlines CEO has left and have been replaced by 2 general managers. Tom Yew who worked with the airline for years and was the GM for Tobago express. He is also the senior of the 2 GM!! The second GM is Paul Schuzt who was the airlines Chief Financial Officer.

Thursday 31st July 2003

BWIA's year of the black horse


BWIA’s fleet improvement exercise, which was meant to increase the airline’s profits, contributed significantly to its overall losses last year.

The 12-month period was described by the carrier’s former chief executive officer Conrad Aleong in its 2002 Annual Report as “a year of holding on to the reins of a runaway horse.”

Aleong’s words were poignant, maybe even profound, since in the Chinese calendar 2002 was the “Year of the Horse.”

Furthermore, in Chinese astrology 2002 was the “Year of the Black Horse.”

One Web site on the subject, www.familyculture. com, noted that Chinese astrologist Shelly Wu said in 2002 many people would have found themselves at the crossroad and last year would have been a changing point – “a celebration of change.”

The site also says: “The New Year (2002) rings in all of the good and ends all of the bad. It is a time to renew ourselves. More importantly, the Lunar New Year brings us hope.”

A rough ride

Although one could argue whether BWIA’s fate was influenced in any way by the Chinese calendar, last year certainly proved to be a year of change for the airline and for Aleong.

Some may say the bucking horse (the beleaguered BWIA) proved to be too wild for Aleong who was eventually forced out of the saddle as the airline’s CEO on May 29.

Last year also saw the beginning of what would be a renewal for the carrier’s structure which has ended up costing a great deal of money.

In its long-delayed 2002 Annual Report, BWIA noted that last year’s fleet restructuring exercise resulted in additional expenses of more than $90 million (US$14 million).

The initiative included the disposal of BWIA’s two ageing L-1011s, which resulted in a loss of more than $55 million (US$8 million) to the airline, referred to in the annual report as an impairment loss.

The restructuring also saw the purchase of two new aircraft. (See box)

On page 33 of its Annual Report, under the section entitled Property, Plant and Equipment, BWIA noted: “The (BWIA) Group is in the process of restructuring its fleet of aircraft and has recognised the impairment loss on the related aircraft and expendables amounting to $90,018,000 (US$14,289,000.) The carrying value of the related items has been written down to its recoverable amount.”

The minus touch

For the latter part of 2002, BWIA’s management stressed the need for a reduction in its labour costs and blamed the airline’s dire finances on the unions which refused to sign an initial US$300,000 worth of labour concessions.

The concessions were part of a US$1 million-per-month cost-cutting initiative.

In the report, Aleong noted that with cuts in catering and infrastructure expenses achieved, “even these major actions were insufficient, hence voluntary labour concessions of US$260,000 per month were sought. Little or no co-operation from labour representatives was received. Immaterial amounts were achieved. This prompted the urgent need in late 2002, to seek funding from the Government”.

But the report indicated that BWIA reduced its staff costs from $376.5 million (US$60 million) in 2001 to $362.2 million (US$57.5 million) last year.

Questions surrounding the decision by BWIA to dispose of its TriStars, which added US$14 million to the airline’s losses have been raised by BWIA captain Joseph Gonzalves.

Contacted Friday, BWIA spokesperson Clint Williams said the airline was unwilling to comment on the specifics of its annual report at this time.

The Business Guardian was informed that the airline’s former chief financial officer and the new general manager in charge of operations, Paul Schutz, had a key role in preparing the report, but he was reported to be out of the country last week.

In the annual report, Schutz attributed the airline’s problems to the eight per cent decline (US$19.2 million) in passenger revenue. The airline’s total revenue, however, declined by 5.4 per cent or US$14.6 million.

BWIA’s overall group loss after taxation for 2002 was more than US$34 million ($216 million), which was an increase of more than US$33 million ($211 million) from the previous year.

BWIA’s group loss after taxation for 2001 was US$694,000 ($4,349,000).

Had the airline delayed the disposal of its TriStars, it might have saved the US$14.2 million in operating expenses. The decision to dispose accounts for 77 per cent of the airline’s operating loss of US$18.4 million. The decision to retrench workers, allegedly taken in late 2002, added another US$8.2 million to the airline’s red ink.

These two restructuring decisions, which may redound to the airline’s long-term benefit, contributed 65 per cent of the airline’s US$34.4 million losses last year.

The good, the bad and the money

In the spirit of the “Year of the Black Horse,” Aleong (who was in office when the 2002 Annual Report was being prepared) stressed that all was not as bad as it seemed.

“While the Group loss of US$34.4 million was very disappointing, it must be kept in perspective that US$14.3 million resulted from a one-time write down in aircraft assets and US$8.2 was a provision for separation costs. The loss from ordinary operations was therefore smaller at US$11.9 million,” he stated.

Still owing millions of US dollars to several local and foreign creditors, while it seeks to secure continued State financing, BWIA again blamed international events for its present predicament, while insisting that its management team did the best it could.

BWIA’s chairman, Lawrence Duprey, who said in May that he was too busy building his own global company to have attended any of BWIA’s then crisis board meetings, noted in the Annual Report: “2002 stands as the year in which the worst possible predictions of the impact of the September 11, 2001 terror acts on the airline industry would come true.”

However, since the “Year of the Black Horse” was to be a year of the good as well as the bad, Duprey stressed: “BWIA was still in business at the end of 2002, when several other international airlines had shut down, is indeed remarkable. The strategies adopted were equal to the best the industry could offer.”

Aircraft purchases for 2002
June 16: Refurbished Airbus Industrie A340-300
(average price $452 million (US72 million)
Leased from International Leasing Finance Corporation.
Dec 12: Brand new Boeing 737 December 12. (BWIA’s 7th).
Leased from General Electric Capital
Aviation Services — US$230,000 a month.

Guadian newspaper 31st July 2003
Eagles Soar!
BWIA 772
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RE: Bwia The Costly Fleet Restructuring!

Fri Aug 01, 2003 5:22 am

By the way i also heard that the airline cant afford to get the c check or d check which ever one it is done for the Md83 that is sitting at dallas fort worth!! I also was told that the airline's fleet needs maintainence but the airline cant afford it!!! Remember they fired the maintainence staff in January of 2003 so they have to send the aircraft out side of Trinidad where labour costs will be much higher!!!
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RE: Bwia The Costly Fleet Restructuring!

Fri Aug 01, 2003 7:49 am

BWIA is surely in a bad way then if it cannot maintain its own fleet! After all it was said that the fleet renewal would ultimately save it money - it is too bad that it has cost it in this way. Perhaps it should have stuck with the TriStars and MD83s, parts for which would certainly be much cheaper than for the 738 and A340.

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BWIA 772
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Posts: 1613
Joined: Sun May 12, 2002 2:33 am

RE: Bwia The Costly Fleet Restructuring!

Fri Aug 01, 2003 3:21 pm


I think that the decision to phase out the Md 83s was a good one but the decision to go ahead with the 340 seems to be the one that hurt the airline the most and now they are stuck with the sole 340 while having to wet lease an L1011 from euro atlantic!!! Dont talk about the wet leasing that has to be done when the 340 is down!!

Well the former CEO ultimatley had one goal and thats to be the man that changed the BWIA logo, introduced new aircrafts etc but the expense of this may be BWIA. I certainly hope that when another book is written about caribbean airlines that this is highlighted!!!
Eagles Soar!

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