Marshalls airline suffers $2.5M loss
MAJURO — The 2008 audit of Air Marshall Islands released Friday demonstrates the financial devastation that more than seven months without regular air service caused for the national airline. The financial collapse of the airline has fueled government interest in selling the airline established 29 years ago.
The audit, by Deloitte and Touche, was issued by the Marshall Islands Auditor General to the Nitijela or parliament.
It shows that while revenues were more than $3.4 million in fiscal year 2007, the airline’s revenues tanked last year, dropping to $1 million.
Coupled with virtually no reduction in spending, the government’s national airline — before its government bailout money — had a more than $2.5 million deficit, compared to $500,000 in losses in 2007.
Marshall Islands President Litokwa Tomeing indicated his government’s interest in selling the national airline in comments to the parliament earlier this month, pointing to the airline’s continuing drain on increasingly scarce government funds.
The Marshall Islands government, with a heavy injection of funds from Taiwan, which has diplomatic ties with this nation, saved the airline in FY 2008, injecting more than $2.7 million to keep it afloat, the audit shows.
This compares to a government subsidy of $100,000 in 2007.
Despite a nearly two-thirds drop in revenue last year, Air Marshall Islands barely cut its expenses, spending $3.9 million in 2007 and $3.6 million in 2008.
From September 2007 until April 2008, AMI flew few regular flights as both its computer airplanes were repeatedly grounded with a variety of mechanical problems.
Auditors also found five “significant deficiencies” in AMI’s management of its operations.
These included such problems as charging customers the wrong prices for cargo, recording prior year expenses to the current year, and lack of timely reconciliation of income and expenses.
In another criticism of AMI’s management system, auditors said there was no reconciliation between the accounting and inventory departments resulting in incomplete or inconsistent information. This problem was also pointed out in the audits for 2006 and 2007. AMI officials responded that because of a reduction in staff and big sample size, the “process is quite challenging,” and added “this will be corrected accordingly.”
Another problem area found was a $55,000 transaction that was not supported by valid documents. This same problem was reported in the 2007 audit. AMI responded “we will require supporting documents or reconciliation of accounts before any adjustments are made in the general ledger.”
The audit also points out that AMI had a $1 million loan with a local bank that required payment of $24,700 monthly payment. It was backed by a time certificate of deposit, or TCD, owned by the Marshall Islands Development Bank. When AMI didn’t meet its payment schedule, the bank seized the million dollar TCD belonging to MIDB in December 2007.
“The foreclosure (on the TCD) transferred (AMI’s) liability from a note payable to (the bank) to a payable to the Marshall Islands government,” the audit said.
