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Bahamasair could be privatized by summer's end
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Posted by:Jan 27th 2005, 02:06:28 pm
Fig Tree News TeamB'air could go private by summer (Nassau Guardian)

World's largest consulting firm for airlines to oversee exercise

By KEVA LIGHTBOURNE,Guardian Staff Reporter

Bahamasair could be privatised by Summer's end this year.

This according to Minister of Works and Utilities Bradley Roberts, who announced on Wednesday that the government has contracted the world's largest consulting firm for airlines, McKinsey and Company, at a cost of $1 million to oversee the exercise.

McKinsey and Company will work along with other governmental agencies to develop a low cost airline business plan, identify prospective partners and funding, as well as launch a salable initial public offering, all in preparation for privatisation.

"Their consultancy started last week and would have a duration of four months at a competitive fee of $1 million which the Government expects to partially recover from the recapitalisation of the national flag carrier. We are fortunate to have been able to negotiate such a reasonable fee for the broad range of aforementioned services they are providing," Minister Roberts said.

He explained that the intention is to attract a foreign partner who will own less than 50 per cent of the equity in a national flag carrier, while Bahamians and the Government will own the majority of equity. Minister Roberts added that advice was received from

Washington counsel, that to qualify as a national Flag carrier, in accordance with American rules and regulations, with all of the attendant benefits and advantages relative to route and gate rights, the airline would have to be majority owned and effectively managed by locals.

"We are confident that sufficient local capital exists to invest in a well functioning, low cost, profitable national flag carrier," Minister Roberts said, while flanked by executives from Bahamasair's Board and the Airport Authority.

Bahamasair is hoping that its efforts to privatise will not be as frustrating as those of the Bahamas Telecommunications Company.

(However, he warned that employees must brace themselves, as the exercise is expected to go full steam ahead, and depending on the report there maybe cutbacks and downsizing.

"Let me say from what I have read about the airline aviation business, it is going through change and shake-out and Bahamasair is no exception, or any other airline for that matter. And as the old people would say, if you have to cut the cloth to fit the suit, that is the bottom line. Those who are caught up in the aviation business in the United States and elsewhere, in Jamaica and in Trinidad, they all know what they have been going through and are going through at the present time. I am sure that the employees of Bahamasair are not naive to the realities of what is happening in the aviation business today," Minister Roberts said.

"I think that in the best interest of the Bahamian people, the advice that these experts will provide to us will be used as a barometer as to what course of action we ought to be taking," he said.

In November Bahamasair's executive management team had put forth a proposal to the union to accept a 12 per cent salary reduction and give up other benefits or face the prospect of 200 lay-offs. It is believed that proposal is still up in the air.

Accordingly, Minister Roberts said the Government is very optimistic that it will find a buyer by its Summer deadline. He revealed that already a number of entities have expressed interest in the purchasing Bahamasair, but he shied away from announcing what price the Government is seeking.

He did note however, that the intention is not to advance the airline with any "major liabilities. That would be a disaster to start off with."

Within the airline sector McKinsey has served more than 30 airlines worldwide over the past five years. They have completed more than 340 engagements within the industry during this period. Their clients have ranged from some of the largest carriers in all regions of the world to national flag carriers in Europe, Asia, Latin America, the Middle East, and Africa. They have significant experience in the field of airline restructuring, privatisation, and mergers and acquisitions. The firm is globally renowned as a leading advisor to CEO's on the most critical business issues.

McKinsey's airline experience includes numerous situations in which they have worked with governments to develop business plans to reposition national flag carriers to deal with today's challenging airline environment. Their experience also includes extensive work in the areas of: privatisation, alliances, mergers and acquisitions, low cost carrier development, cost restructuring, marketing, sales and distribution, product/service design, operations and effectiveness, and organisational design.

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