By Al Edwards, Financial EditorTHE massive increase in fuel prices has forced Air Jamaica to follow its major competitors in adjusting air fares.
Effective immediately, increases of up to US$40 will be applied to most published fares for round trip travel between Jamaica and the U.S., between Jamaica and the Caribbean, and also between the U.S. and the Caribbean.
Air Jamaica's chief executive officer, Christopher Zacca, says the current hike in fuel prices has dealt a crippling financial blow to the company. According to Mr. Zacca, "While the airline has successfully implemented a sustained conservation programme in an effort to cut costs and reduce the impact of the high fuel prices, fuel costs
continue to spiral out of control.
"Over the past few months, the airline has been absorbing the massive increases in fuel prices in an effort to avoid a fare increase to its loyal customers. We have now come to a point where we have no option but to pass on the costs if we are to remain viable."
Several other major U.S. airlines serving the region have already increased their fares.
Fuel prices have reached the highest levels in 21 years. In November, a gallon of jet fuel was 89 cents; this week, a gallon of jet fuel costs in excess of US$1.26. For the first three months of this year, Air Jamaica's fuel bill jumped more than US$4.2 million, or J$260 million over budget. Mr. Zacca says if the current prices remain until year-end, the airline will have to pay an additional US$18 million, or J$1.1 billion, for fuel.
Air Jamaica has for the last few days appeared reluctant in raising ticket prices and has now had to follow a number of other carriers, more notably American Airlines and Continental, in raising fares.
Mr. Zacca explained: "Unlike your neighbourhood supermarket, the national carrier has to be very cautious about passing on increasing costs. The national airline is operating in an environment where competitive prices are critical therefore the options are limited."
Air Jamaica has gone through some turbulence over the last few years. The events of September 11, 2001, decimated its revenue base and it reported losses of some US$90 million the following year. It then undertook a number of cost cutting measures to keep the airline viable and has still not fully recovered. It even changed some of its senior personnel and asked many to take pay cuts. The latest spike in oil prices is yet another obstacle that it has to surmount. It has under the leadership of Gordon 'Butch' Stewart and Chris Zacca taken these blows squarely on the chin but managed to remain on its feet and steadfast in its resolve to keep its operations viable.
Yesterday, U.S. crude futures settled at US$40.92 a barrel, down 58 cents on the day but inside a dollar of the US$41.85 all time high in the 21-year history of the New York Mercantile Exchange contract.
