‘Sometimes projects fail; airport expansion killed airline’—Premier
Offering no apologies, Dr Smith today, January 15, 2019, told lawmakers in the House of Assembly (HoA) government entered into the Agreement with Castleton Holdings to bring about a BVI Airways, in order to boost the tourism industry.
Airport Expansion
Finally providing a ‘comprehensive report’ on what transpired that led to the loss of the $7.2M dollars from the coffers, Dr Smith said in 2016, BVI Airways submitted a complaint to “Government, regarding our plans to expand the runway at the airport.”
According to the complaint, “our runway expansion plans undermined BVI Airways ability to raise capital from investors because a longer runway would mean competition from legacy carriers…BVI Airways claimed many of its potential investors were no longer interested in the venture if they had to compete with these larger airlines… From this point forward, the project began to slowly unravel.”
Smith told Legislators in the HoA, “BVI Airways still had to pay for flight and ground crews, service their debt and pay for other expenses – but had no revenue and no access to new investors… Put simply, the company was running out of money….BVI Airways came to Government asking for additional money from us.”
No Path Forward
According to the Finance Minister, “Government could see no path toward responsibly increasing our commitment.”
As such, “…the best we could do, was bring forward to payment schedule of the 7 million dollars we had committed to provide… We did so in the belief that it would be sufficient to get BVI Airways up and running, at which time we hoped that revenue from ticket sales combined with renewed investor interest would make the company viable….As it turned out, that goal was never reached.”
Dr Smith was adamant, the money was not put into any person’s pockets, “Nobody got rich off this project.”
Paid Pilots, etc
Dr Smith insists, the $7M paid over to BVI Airway was in fact spent, paying salaries to pilots, flight attendants and ground crews.
“It was spent with consultants and lawyers to secure the complex regulatory approvals required to begin operations… It was spent paying off debts to banks that provided the financing to acquire the two aircrafts.”
He said, “that is not to say that there is not blame to go around…There is, after all, one great unanswered question about this whole saga, which why BVI Airways began this project when they had to know that we intended to expand the runway, which would eventually mean competition from larger carriers.”
Knew Risks
An unapologetic Premier said however, “what I can tell you, the people of the BVI is simply this - your Government entered into this project with full knowledge of the risks, but also a sincere belief that those risks were worth taking…No Government can effectively serve the people of the BVI if it is not willing to take risks.”
According to Dr Smith, “when we built the new cruise ship pier – it was a huge risk….When we built the new hospital – it was a huge risk,” and spoke too of the establishment of the community college.
He conceded however “not all the risks Government taken on have worked out, sometimes projects fail. Certainly, that appears to be the case with BVI Airways.”
Dr Smith said the project had come with a promise of doubling the amount of persons landing in the Territory.
He told members of the House that in September of 2014, the VI Government was presented with a Feasibility Report in September of 2014, which predicted that over a three year term the venture would result in net cash flow of some $2.6M and over a longer five year term, produce a net cash flow of approximately $10.5M.
He said “In other words, this study found that if Government was willing to provide initial financial support to BVI Airways to get up and running, then within a few short years the company would become profitable and could operate without further taxpayer funding.”
Dr Smith insists too that “most importantly, the report, which was conducted by a highly respected industry expert, projected an increase of roughly 450 thousand air passengers per year to the BVI – more than double the existing air passenger volume at the time.”
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22 Responses to “‘Sometimes projects fail; airport expansion killed airline’—Premier ”
Why was the $7.2M payment front loaded instead of payments made in 6 installments as outlined in the agreement? If the payments were to be performance-based, why were payments made if the targets were not met? Since taxpayers paid for two planes, where are the planes and when will the BVI be taking custody of them? Did BVI Airways see the NDP government as an easy prey and rolled it for $7.2M? Did the opposition ringing the alarm bell stop the BVI Airways from picking the taxpayers pocket for more cold cash? Should the negotiators on this fiasco be banned from negotiating on behalf of the taxpayers? Who was on the negotiating team? Do they need to be cat-o-nine tailed? What was the role and responsibility of the HOA, if any, in this broad daylight fleecing? In the history of bad deals, where does this one ranks? 1st. What action is being taken to retrieve the taxpayers $7.2M and if so what is the prospect of retrieving the money?
So am I to understand that the contract promised an extended runway and to pay for the airline expenses and marketing. I respect Dr Smith but he needs to be held fully accountable for this. It's an embarrassment to any democracy and the governor need to have him charged the minute he dissolves house of assembly. My lord
That money was not Dr. Smith own but he behaving so much so. I cannot vote for this NDP government. They all need to be good gone.
Dr Smith insists, the $7M paid over to BVI Airway was in fact spent, paying salaries to pilots, flight attendants and ground crews. Can this statement really be true. Pilots, flight attendants and ground crew to where, to my recollection one of the planes took some athletes to some place in the Caribbean, cannot even remember where. Otherwise than that to the best of my recollection these planes never fly so why were these people paid? Interestingly, no one get rich off of the 7.2 million, Really? Well then the money was tied in a bag and thrown into the incinerator. As I always say, these big brain politicians always think we the people of the BVI are fools.