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Nicholas defies Cabinet on aircraft deal

Cabinet ratified the decision of Caribbean Airlines (CAL) to acquire nine turboprop aircraft from Avions de Transport Regional (ATR) at its meeting on September 16, after the matter was considered on September 9, according to the Cabinet Note on the issue. “Cabinet agreed that CAL enter into an agreement with ATR for the purchase of nine ATR 72-600 turboprop aircraft, for its domestic and regional operations on the terms outlined in the draft Heads of Agreement attached as Appendix V to the Note,” according to the Note. Following the Cabinet decision, CAL went ahead and signed the US$200 million ($1.28 billion) contract to purchase the nine 68-seat aircraft from ATR on September 27, according to the homepage of the aircraft manufacturer’s Web site.

Despite Cabinet approval and a signed contract for the acquisition of the nine aircrafts from ATR, CAL’s new chairman, George Nicholas, is seeking to overturn the contract, Cabinet-level sources told the Sunday Guardian. And CAL’s CEO Ian Brunton, who was at the forefront in negotiating the ATR deal, was fired by Nicholas-led board, installed less than a month ago, as a result of disagreement over which firm state-owned CAL should seal the billion-dollar deal with to buy new aircraft. In fact, Nicholas is reported to have gone against the wishes of Works and Transport Minister Jack Warner, who had been working along with Brunton to acquire the aircraft from ATR.In the signed contract, ATR expressed a willingness to support CAL in the establishment of a complete pilot training centre with flight simulator capability. ATR is a joint venture between major European aerospace companies EADS and Alenia Aeronautica, a Finmeccanica company.

Finmeccanica is the Italian provider of helicopters to T&T’s Air Guard. ATR also committed to invest a minimum of US$800,000 in the establishment of a heavy maintenance repair facility in T&T. This facility was meant to save substantial costs by avoiding foreign maintenance fees and has the potential to develop into a regional centre of turboprop maintenance. The nine ATR aircraft, each priced at around US$19 million, were to be used for domestic and regional operations and to boost revenue at the state enterprise, especially on the Jamaican routes.Approval for additional fleet was sanctioned by the previous CAL board, headed by Arthur Lok Jack, in January 2010.The agreement to acquire the aircraft from ATR is listed in a Cabinet Minute No– 719, dated September 9, when the matter was considered. Cabinet’s decision was confirmed at the meeting on September 16.

Cabinet also agreed at its September 16 meeting that CAL would enter into lease extensions for the five Boeing 737-800 jet aircraft which operate on its international routes. This lease is with International Lease Finance Corporation (ILFC) for the period of 54 months from the date of expiration on the previous leases. And Cabinet approved the CAL proposal to enter into a new lease arrangement with ILFC for three additional, used B737-800 aircraft for the company’s Jamaican operations on the understanding that Air Jamaica’s three Airbus aircraft would be immediately phased out.The term of this lease was also for 54 months. The airline is projecting that the routes of CAL’s Air Jamaica subsidiary would increase the revenues of the Piarco-based company by over 60 per cent.The airline also entered into an arrangement with CIT Leasing Corporation for a ninth Boeing 737-800 jet aircraft for its international routes.

These agreements, Cabinet noted, were not expected to cost the State any additional funding. The leases for the existing aircraft are set to expire between 2011 and 2012, and sources revealed that if CAL had failed to reach an agreement it may have impacted negatively on passengers. In addition, airline sources disclosed that the current fleet being used by the airline has failed to adequately meet the growing demands of the airline. Due to the competitive industry, CAL also noted that it was vital to replace the five Bombardier Dash-8 turboprop aircraft due to the poor conditions and high maintenance fees.Warner, the line minister for CAL, has openly expressed his displeasure over Brunton's termination.He is awaiting instructions from the Prime Minister on how to proceed in the matter. Yesterday, Warner, at a media briefing at his Port-of-Spain office, refused to comment on the CAL matter. Efforts to contact Persad-Bissessar proved unsuccessful.

 

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