BAHAMASAIR will use $9.3m of its total budget in the new fiscal year on heavy maintenance to its aircraft and another $1m to move the headquarters to a building complex on Blake Road.

According to Tourism and Aviation Minister Dionisio D’Aguilar, the former administration’s plan to purchase five new ATR aircraft at a cost of $120m to avoid exorbitant maintenance failed, leaving it now strapped with loans that can no longer be extended.

As a result, the government had to increase the airline’s allocation. In the previous fiscal year, Bahamasair received $13.4m - however for the approaching year, it will receive $22.4m.

“The greatest challenge to Bahamasair meeting its financial targets is the rising cost of fuel,” the minister said during his contribution to the 2019/2020 Budget.

“The company spent $11.8m on fuel in 2017 and $18m on fuel in 2019. As tensions rise between the United States and China and Iran, this will negatively impact Bahamasair’s fuel costs as oil prices have recently risen to $85 a barrel when the experts were predicting that oil prices would in the low $70s for most of 2019.”

He continued: “On April 25, 2016, Bahamasair borrowed $120m - mostly in US dollars - at 8.3 percent to purchase the five new ATR aircraft, buy some parts, and pay off some old loans. The dream was that these new aircraft would reduce maintenance costs so much so that Bahamasair would be able to generate sufficient additional cash flow to service these loans.

“Needless to say, that was another one of those PLP dreams that never materialised and now that these loans have to be paid off over the next seven years - no more extensions on principal repayments allowed - you will see a $9m increase in the Budget allocation for Bahamasair going from $13.4m this year to $22.4m for next year.

“This $9m increase will be used to make principal repayments of $6m plus help mitigate some of the annual interest costs which will total approximately $9.5m for this year and next year.”

“Bahamasair plans to spend almost $12m on capital projects in the 2019/20 Budget year. Almost 80 percent or $9.3m of that total will be spent on heavy maintenance and engine overhauls, but $1m is planned to facilitate the move of the company’s headquarters from its current location, which is a 50 year old building still reeling from damages inflicted when Hurricane Matthew struck in October 2016, to a building complex on Blake Road, formerly used by Doctor’s Hospital,” Mr D’Aguilar said.