Says William's involvement is against corporate governance code�
PHILIPSBURG--The Government Accountants Bureau SOAB, in its report of September 3, 2010, on Windward Islands Airways International Winair, classifies the airline's financial position as "alarming" and lacking in cash flow to ensure that its operational activities can be executed at an optimal level.
The report says that although Winair has been able to remain operational through, among other things, not paying its creditors, the question is how much longer the situation can be allowed to continue without significant financial support and a comprehensive business plan.
Moreover, the report indicates that management and the Supervisory Board of Winair have not laid out a specific plan of approach to take the airline out of the financially-strapped position in which it finds itself, and management is ultimately responsible for the disappointing results at Winair.
Additionally, the report concludes that Supervisory Board Chairman Fernando William, perhaps due to the absence of a Chief Financial Officer (CFO), is too involved in operational matters; in particular, accounting issues.
In some respects, SOAB explains, William's involvement goes beyond oversight to actual implementation, which is undesirable in terms of good corporate governance, in SOAB's opinion. SOAB stressed that in his role as Chairman of the Board, Williams should not be in a position where he oversees actions that he himself has executed.
Winair Managing Director Edwin Hodge agreed that, while the situation was not "desirable" with no CFO on board and considering Winair's financial position, the Supervisory Board had entrusted certain financial administrative matters to William.
In an exclusive report published earlier by The Daily Herald, Hodge said: "I began my period in office with the company already in debt with no working capital, no injections and with an overpaid Chief Financial Officer who was only plugging figures. He was later dismissed."
The report points out that, without a CFO employed at Winair since 2005, financial reports had been submitted "substantially late," sometimes as many as four years late. SOAB said Hodge had informed it that financial controls had not been executed due to financial reasons.
According to Hodge, financial controls cost NAf. 72,000 annually and Winair was not in a position to carry that cost. The draft financial statements of 2008 and the draft profit and loss statements of 2009 and the first four months of 2010 have yet to be audited. The fact that these draft statements were compiled before the finances of the previous years were controlled led SOAB to conclude that it was possible that inaccurate figures were in play.
SOAB noted that it was obvious from the minutes of Supervisory Board meetings that certain issues required more specialised knowledge and were not discussed with enough detail. Although the financial situation was discussed during these meetings, possible concrete solutions were not identified by the board.
The report on Winair by SOAB was commissioned by the Taskforce Winair that was established on November 9, 2009.
The role of this taskforce was to advise former Minister of Constitutional Affairs of the Netherlands Antilles Roland Duncan and former Minister of Transport Camiel Eurlings on the transfer of Winair's shares, submit a "due diligence report" and look into air service agreements with regard to Saba and St. Eustatius, once those islands achieved new constitutional statuses.
SOAB's task was to provide a reliable financial and economic picture of Winair from 2004 to 2008, a detailed description of the factors that caused the negative financial situation, and an "expert opinion" on the overall financial and economic environment of Winair.
SOAB presented its final report to the taskforce on September 3, 2010. The taskforce in turn presented its report with SOAB's findings to Duncan on September 15, 2010. Duncan submitted both reports to the former Executive Council of St. Maarten and former Commissioner of Constitutional Affairs William Marlin on the same day.
The SOAB report also said Winair must find ways to increase income structurally, decrease expenditures structurally and re-examine the type of aircraft it utilised, how many aircraft it had in service, and what the airline realistically required in terms of human resources.
In that context, and partly based on the findings of the SOAB report, current Winair Shareholder Representative Prime Minister Sarah Wescot-Williams has asked the members of Winair's Supervisory Board to tender their resignations to facilitate the establishment of a change management team, and a new management and operational structure, in an effort to save the airline.
If they do not, the Prime Minister said she intended to use whatever means were available to her to dismiss them.
To guide the new plan and structure of Winair, the government plans to put a change management team in place to work in collaboration with a new managing body. Current Managing Director Edwin Hodge has been asked to stay on as Chief Operations Officer.
The intention is to appoint a Chief Executive Officer (CEO) with extensive airline experience to serve alongside Hodge and a CFO.
With Winair severely under-funded and the prolonged effects of the worldwide economic slowdown, the company has not managed to slow the tide of losses, losing NAf. 2.2 million in 2008, NAf. 1.5 million in 2009 and NAf. 2 million in 2010. As a connecting carrier to other islands, Winair relies heavily on North American and European traffic to balance its income.
Hodge also attributed financial losses to increased competition, high payroll cost, high cost at airports, airfares in Saba and Statia that were too low "due to the continuous interference by governmental bodies" and competitors operating larger aircraft and offering lower fares to the same destinations Winair services.
Also contributing to losses, Hodge said, was the "forced usage" of common use terminals at PJIA resulting in what he termed "forced expenses" of some NAf. 450,000 per year. He also mentioned the burden of some underperforming routes and high aircraft leases, "due to the fact that aircraft had to be sold and leased back as we had no funds to purchase engines and other aircraft. Winair had to cycle its aircraft, as our then-shareholders were not giving any more guarantees," he said.
Insurance cost also went up due to increased aircraft value, to more than US $2 million per aircraft. Finally, Hodge explained that Winair currently operated with carrying capacity reduced by three passengers per aircraft, due to increased passenger weight. In other words, the airline can no longer accommodate 19 passengers on its Twin Otters with luggage, because the average weight of passengers has gone up over the years.
Most of Hodge's explanations for Winair's financial losses were echoed by SOAB in its report. However, SOAB noted that the company appeared to be stagnant in a developmental stage where much was based on trial and error. That conclusion was drawn based on the fact that, after a number of years, there was still no comprehensive and strategic plan in place for how to rescue the airline from the negative financial situation.
According to SOAB, Winair's actions concentrate more on increasing revenues and less on other problems such as improving the profitability of existing destinations and debt repayment. It noted that some decisions had been reversed in a relatively short period after they had been implemented. It said this was a clear indication of a lack of a business to which the relevant decisions should fit and adhere.
Hodge did not agree with SOAB's conclusion. According to SOAB, Hodge contended that actions taken at Winair were only taken after research and analysis. Considering the financial situation of the airline, management could only concentrate on issues it could directly influence, Hodge said.
The structural financial and operational problems (debts) were seen as issues that had to be solved by the shareholder.
SOAB disagreed and pointed out that Winair's debts had increased by approximately NAf. 6 million since the moratorium on payments (bankruptcy protection) in 2004 had been lifted. In SOAB's opinion, this was caused by disappointing results for which management was responsible.
Chamonix Taxonomy Equality US politics Butterflies US Congress
No comments:
Post a Comment