AIR JAMAICA, the national carrier, began implementing a number of cost-cutting measures yesterday as the crisis in the airline industry deepens and war with Iraq looms.
The measures include a reduction in some staff categories, salary givebacks, renegotiating aircraft lease rates and modified operating schedules.
The positions of two vice-presidents, seven departmental directors, two senior managers, 14 other management staff and four non-management staff have been eliminated with immediate effect as the airline reorganises its structure to deal more effectively with the fall-out in the travel industry.
In addition, staff members have been asked to give back between three and ten per cent of their salary for three months starting with the April pay period.
The CEO and vice-presidents have volunteered to take a 10 per cent cut and directors and general managers a six per cent cut. In addition to the staff reductions and salary give back, Air Jamaica has reduced its capacity to lower its operational costs and rationalise the number of flights in line with reduced demand. It has also been renegotiating the terms of its aircraft leases to get better prices.
The measures should yield annual savings of $130m from the combination of staff cuts and salary giveback, and savings of $750m in operational and aircraft lease costs.
Chief Executive Officer of Air Jamaica, Christopher Zacca, says these measures are the first in a series to help guarantee the viability of the airline. He says the short-term goal of the airline is no longer profit but mere survival in a hostile travel environment.
According to Mr. Zacca, Air Jamaica regrets having to lose valuable staff members who have made invaluable contributions to the airline but in light of the pending war and the deteriorating conditions in the industry, there was no other choice. It is believed that Air Jamaica has already sustained a loss of US$90 million. Last year, it was seeking US$70 million in bridge financing to alleviate its woes. However, the company annouced this year that that figure had now come down to US$35 million. Last month, Air Jamaica's President, Bruce Nobles, resigned his post with immediate effect, saying he was missing his family and wanted to spend more time with them.
This is the first time since September 11, 2001, when the crisis in the airline industry started that Air Jamaica is cutting staff. In the last 18-months over 120-thousand jobs have been cut in the airline industry, over US$18 billion in losses recorded, many major carriers have either filed for or are on the verge of bankruptcy and fuel prices have skyrocketed. Mr. Zacca says if there is a war and the state of the industry worsens, additional restructuring of the airline would be necessary to ensure its long-term viability.
In a letter to staff the CEO said, "I know that most of us had hoped that by this time we would have experienced a turnaround in the industry. Unfortunately, it is just the opposite and the crisis will no doubt intensify before we see any improvements. Should war break out, airlines will lose billions of dollars more, will be forced to cut additional jobs and many may even face bankruptcy. Clearly, if the financial state of the industry and our airline continues to deteriorate, additional restructuring of the organisation would be necessary."
Just this week, the Air Transport Association, ATA in the United States warned that financially fragile airlines would go under if there is a war against Iraq. It said fuel is at unbearably high prices, airline cash reserves are nearly exhausted and the ability to borrow is virtually non-existent. The ATA is predicting that a war will result in the loss of up to 98,000 more jobs and billions of dollars in losses for airlines already battered by the fall-out after 9/11. It cautioned that massive economic damage to commercial aviation would severely impact the world economy with air service cuts to many smaller and medium-sized communities and more unemployment. It said that the tourism and hospitality industries stand to lose almost four jobs for every airline employee forced into the unemployment line.
