Author: Airline Industry Information

AIRLINE INDUSTRY INFORMATION-(C)1997-2005 M2 COMMUNICATIONS LTD

The government in the US Virgin Islands has been criticised for promising a subsidy for American Eagle flights between two islands.

Senators have reportedly asked how the administration of the US territory intends to pay for the agreed subsidy, signed by Lieutenant Governor Vargrave Richards in November last year, The Associated Press reported. The flights started in December 2004 and the agreement may cost the government up to USD1.3m before the expiry date on 1 May 2005.

A motion for Richards to explain how the subsidy will be paid for has been passed by the Senate. The administration is struggling with a USD1bn debt which has made it difficult to realise promised wage increases to employees and start new projects.

Richards has reportedly said that the money will be taken from a special fund for island development and that the agreement with American Eagle is necessary because the demand is higher than the available flights. This claim has been denied by Cape Air, another airline, which has said that its seven daily flights from St. Thomas to St. Croix operate with an average of about 55% of the available capacity.

American Eagle has declined to comment.

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