THE EDITOR, Sir:
Your September 13 article "Air Jamaica may need financial assistance," has just been brought to my attention and warrants comment.As a founding member of the Air Jamaica Acquisition Group that negotiated the purchase of Air Jamaica from the Government I have watched the development of the airline with interest. Air Jamaica is a national asset well respected throughout the aviation world for the quality of its people and product and operational integrity.
On the financial side it is another matter. Since privatisation the airline has cost the Jamaican taxpayer substantially more than when it was wholly owned by the Government. The ownership of the airline continues to operate the business on the basis that operating losses will be funded by the taxpayer, either directly or indirectly through government loan guarantees with no adverse impact on their ownership and control over the airline.
In a normal business environment where additional capital is required each partner has the option to invest on a pro rata basis or see his percentage ownership diluted. In the case of Air Jamaica the government has covered the losses incurred by the private sector owners who remain in direct control.
Meanwhile, the private sector owners continue to invest in their other business enterprises in Jamaica and elsewhere confident that any losses at the airline will be covered by the taxpayer. The most recent example of this is the opening of the EC $20 million 284-room Sandals Grande in St. Lucia by Air Jamaica's largest private sector shareholder and chairman, Gordon P. Stewart.
The private sector shareholders initially laid the blame for Air Jamaica's losses on the government - for the Category 2 designation of Jamaica by the US FAA preventing route expansion or the use of new aircraft on routes to the United States - claiming this was not within their competence. In fact it was clearly laid down in US law that any route expansion or change of aircraft would cause a review by the FAA. Air Jamaica chose to acquire new aircraft without ensuring that the FAA Category 1 framework was in place. A business choice with business consequences for which the taxpayer was called to account.
The most recent losses, post 9/11, as detailed in your article are as a result of Air Jamaica cutting back less than the industry at large and incurring losses as a consequence. This may well have been a good thing for the overall tourism industry in Jamaica - an industry in which Mr. Stewart has a major financial interest - and my point is not to criticise Air Jamaica for that decision but to draw the attention of the Jamaican taxpayer to the next step.
If Air Jamaica requires government assistance to cover those losses over and above its pro rata shareholding in the airline, the government's ownership interest in the airline (and say in its decision-making) should be increased accordingly. I continue to wish Air Jamaica well - a world class airline and a credit to the country - but, given the coincidence of the announcements of more government money needed for Air Jamaica and the opening of the Sandals Grande in St. Lucia - I felt that I should alert your readers to some of the implications - a further taxpayer investment in Air Jamaica may well be money well spent but the taxpayer should get full value for that investment on normal commercial terms.
I am, etc.,
JOHN GILMORE
jptgilmore@hotmail.com
Edinburgh
Scotland
Via Go-Jamaica
