(CMR) Despite making a significant contribution of over $200 million to the Cayman Islands economy annually, Cayman Airways Limited has been operating at a deficit, a report from the Office of the Auditor General has revealed. The AG report also stated that how the national carrier is funded is unclear.
The report, The Efficiency and Effectiveness of Cayman Airways, was issued by the Office of the Auditor General (OAG) today, 11 March.
The report states that measuring CAL’s performance against its goals, measures, and key performance indicators is challenging, but where performance can be measured, it is mixed.
Sue Winspear, the Auditor General, said, “It is pleasing to report that CAL has fulfilled the ten key roles it set out in its strategic plans. In particular, CAL provides an essential inter-island air bridge across the three islands, contributes over $200 million annually to the economy and played a crucial role during the COVID-19 pandemic.”
“However, measuring CAL’s performance is challenging because not all of its measures are specific, measurable, achievable, relevant and time-bound. This makes it difficult to assess value for money. Where it can be measured, CAL’s performance is mixed.” Winspear explained.
The Auditor General said, “Despite having a range of goals and performance measures, CAL does not report effectively on its performance against these to the Parliament and public, hampering scrutiny of its performance.”
The report also states that CAL has improved its fleet, which should improve its performance.
Winspear said, “The Government approved CAL's plan to replace its four larger aircraft with an equal number of new ones in 2016. It is pleasing to note that CAL received favorable terms and prices for leasing these aircraft.” Ms. Winspear continues, “In addition, CAL has realized all of the benefits it expected from modernizing its fleet. This is commendable. CAL can further build on the opportunities the new aircraft offer, such as increasing baggage revenue from the increased capacity.”
The report states that the Government uses CAL to support its national priorities for domestic air services and services to and from destinations it identifies as key to expanding the Cayman Islands’ tourism base and economic development.
CAL receives government funding through the Airlift Framework, which specifies four route categories – Core, Strategic Domestic, Strategic Tourism, and Surplus. The Government gave CAL $152.5 million in funding between 2018 and 2022. The report states that CAL makes losses on three of the four route categories.
The report also states that CAL reported deficits in each of the five years 2018 to 2022. CAL’s total losses in this period amounted to $34 million, resulting in an overall deficit position of $25 million as of 31 December 2022.
The Auditor General said, “CAL received over $150 million in government funding in the five years 2018 to 2022. However, it is unclear what that government funding is intended to cover. Without this clarity, the Government cannot hold CAL’s management and Board to account for CAL’s financial performance.”
Winspear added, “CAL is not fully funded by the Government for Strategic Domestic routes that provide essential lifeline services between the three islands. It is not clear why the funding model does not cover all costs that are not covered by passenger fares.”
“I urge CAL and the Government to urgently revise the Airlift Framework to make clear what the Government’s funding is intended to cover,” Winspear continued
The report also states that CAL does not usually receive the funding it requests as part of the budgeting process and often receives supplementary appropriations.
Winspear said, “It is disappointing that CAL and the Government do not set realistic budgets. I have commented many times before on the shortcomings of the current budgeting framework and how inadequate budgeting consistently results in the need for supplementary appropriations. This is yet another example.”
Winspear added, “Combined, the funding model and budgeting process impact CAL’s financial performance and the level of deficits incurred. I encourage CAL and the Government to set realistic budgets to allow adequate monitoring and measuring of CAL's financial performance.”
This report and the original OAG reports on which this report is based are available at www.auditorgeneral.gov.ky.
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