Mixed bag for Cayman Airways overview

The Auditor General has just issued a report into the efficiency and effectiveness of Cayman Airways and the report finds the national airline’s performance “mixed” overall.

Sue Winspear, the Auditor General, noted that it was a good thing that CAL had fulfilled the ten key roles it set out in its strategic plans, and said, in particular, CAL provided 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.

But she added:

“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.”

Ms Winspear said that despite having a range of goals and performance measures, CAL did not report effectively on its performance against these to the Parliament and public, hampering scrutiny of its performance.

The report also stated that CAL had improved its fleet, which should improve its performance.

On the positive side, Ms. 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 favourable terms and prices for leasing these aircraft.”

In addition, she said, CAL realised all of the benefits it expected from modernising its fleet, which she commended.

“CAL can further build on the opportunities the new aircraft offer, such as increasing baggage revenue from the increased capacity,” she advised.

The report stated 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 stated that CAL makes losses on three of the four route categories and 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 at 31 December 2022.

Ms Winspear further commented: “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.”

She went on to say that CAL was not fully funded by the Government for Strategic Domestic routes that provided 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,” she said.

The report also stated that CAL did not usually receive the funding it requested as part of the budgeting process and often received supplementary appropriations.

On this, Ms 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.”

“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,” she added.