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By Giff Johnson

MAJURO, Marshall Islands (Marianas Variety, March 15) – The national airline of the Marshall Islands lost nearly US$5 million over a three year period, the latest Auditor General’s report to the Nitijela, the local legislature, shows. In addition to its huge losses, Air Marshall Islands obtained multi-million dollar subsidies from the government to keep its planes in the air.

It lost nearly US$2 million in both 2002 and 2003, but reduced its losses to about US$1 million in 2004, producing a three-year operating loss of over US$4.7 million.

The audit, filed late last week with the legislature, also shows that the Marshall Islands government injected a total of US$1.5 million into the airline during fiscal years 2002 and 2003, and another US$1,850,000 between October 1, 2003 and August 15, 2005. In 2003, the government’s cabinet approved a loan to the airline of US$1.6 million and in June 2005, Air Marshall Islands obtained an US$800,000 bank loan, the audit reported.

The audit states that Air Marshall Islands’ operating loss in fiscal year2002 was US$1,870,047 and its operating loss in fiscal year2003 was US$1,924,853.

In 2004, Air Marshall Islands increased revenues by nearly US$700,000 over 2003, and reduced its spending by more than US$200,000 to account for the lower level of loss that year.

Air Marshall Islands general manager Dan Fitzpatrick, who took over management of the airline in mid-2004, said in an interview Monday that preliminary indications are that 2005 was one of the airline’s "best" years, with losses well under US$1 million. Reducing the number of unprofitable flights to sparsely populated outer islands helped reduce the losses last year, he said.

The audit reported that because the airline didn’t have adequate accounting records and its internal control over financial reporting was poor, "we were unable to form an opinion regarding trade receivables, expendable parts, accounts payable and air traffic liability" — information that the audit said was essential to determining the results of operations for the years ended September 30, 2003 and 2002.

A major part of the national airline’s financial woes centered around unpaid government travel on the domestic airline. The audit said that the airline "advanced" the Marshall Islands government through unpaid travel US$1,750,000 during the fiscal year ended September 30, 2000. The airline later deducted payroll taxes totaling US$224,283 for fiscal year 2002 and 2003, and earlier accumulated delinquent payroll taxes, penalties and interest amounting to US$731,837 against the amount advanced to the national government in travel, the audit said.

"Air Marshall Islands management expects that the remaining advance balance of US$793,880 and $914,149 as of September 30, 2003 and 2002, respectively, will be applied against future payroll taxes withheld by (the airline)," the audit said.

March 15, 2006

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