Mingo: Airport personnel cost has to be reduced
AIRPORT — The outcome of an analysis, with the goal to secure the business continuity during the COVID-19 crisis, brought the executive team of the PJIA operating company, PJIAE, to the difficult conclusion that personnel cost has to be reduced. That is the core message of a two-page letter sent to the staff of PJIAE by the management team. The letter is signed by Chief Executive Officer Brian Mingo and co-signed by Chief Operations Officer Michel Hyman.
“I recognize that this news is very disappointing to all and hoped we would not have had to take these steps. But with each passing month, the financial impact of the coronavirus has become more apparent and heavier.” Mingo writes in the letter, which outlines the financial impact of the coronavirus for PJIAE.
In the letter, Mingo goes on to explain that following the May 2020 decision to cut the labor packages of government-owned companies by 12,5% across the board, the government of St. Maarten “has set a deadline for the introduction of proposed personnel cost reduction measures, as part of the conditions to receive support from the Netherlands (Kingdom Government).”
Mingo writes that this cost reduction analysis had already started earlier in April, “because the Airport has virtually no revenues, and therefore is in an even more difficult position than other government owned companies.” The airport, therefore, has an even bigger cost challenge to face, according to Mingo, who writes that this has been already shared with the unions in April. “The core of this proposal was basic pay only, meaning canceling of the year 2020 bonuses, deferment of vacation pays until further notice, and no overtime during this difficult period.”
“The executive team will consult with the unions the coming days on the best way forward to realize the required and necessary reduction in personnel costs keeping the interest of all and the company into account.” Mingo continues in the letter. “All to guarantee the future of our airport, with little to significant lower revenues coming in, only reducing third party expenses is not enough. With no income we are depleting our cash and bank balances to pay the staff salaries.”
“We realize that our outstanding bonuses and vacation pays are overdue to employees. However, at this time we do not think it will be financially responsible to pay out these outstanding bonuses and vacation pays.” Mingo continued. “The unions have provided their input. We appreciate their response and we will use their input to have further discussions.”
Mingo explains that during this period, the insurance proceeds and World Bank/EIB bank funding has been released. “These funds are primarily committed and dedicated to the reconstruction costs of the Terminal only and cannot be used otherwise. There is a small amount available for business interruption. While these funds prevent us from taking even harsher measures, it is not enough to cover all the costs.”
“The long-term business continuity of the airport is crucial and therefore we need to make sure that the available limited cash we have, will cover our expenses and debt obligations, to bridge the period that the market has been fully recovered, which is expected in 2023.” Mingo also mentioned that 2020 Atlantic Hurricane season commenced on June 1st, “which could lead to other business interruptions.”
“The impact of this crisis is far worse than Hurricane Irma, which we were still recovering from. Since the middle of March 2020, when the restricted airspace started, flights have come to a standstill, except for cargo, medical evacuation and repatriation flights. Since then, the impact on the revenues of the airport is obviously dramatic and it moved close to zero. We expect that the impact of revenues to remain very serious for the remainder of 2020 and 2021 at least. Even with an optimistic assumption of recovery of passenger volumes to 35% by end 2020 and 50-60% in 2021 compared to 2019, the loss of revenues compared to our business plan will be in the order of ANG 200 million ($111M USD, Ed.) up to 2023.”
“The impact of COVID-19 requires us to act proactively on both financial and social impacts. Immediately when PJIAE knew the outlook was grim, we implemented a barebone operational model. We adjusted the needed services from contractors to a minimum and adjusted their charges significantly. These reductions with the contractors varied between the range of 50% – 75%. This had a significant impact on these contractors and their staff in terms of work for the airport. We eliminated all unnecessary expenditures. Further, we put on hold all planned and necessary capital expenditures other than the work needed to rebuild the Airport Terminal.”
Mingo concludes the letter to the staff by writing: “We appreciate all your hard work. With the help of the PJIAE Covid-19 Taskforce, we take all possible measures to keep you, our passengers and the entire airport community safe. We will keep you informed on the final decisions on the cost reduction measures.”
The staff is asked to speak with their direct manager or contact HR if they have any questions.
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Photo captions: Photo of SXM Airport is taken from Soualignewsday.com. The above photo is taken from the SXM Airport Facebook Page.
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