THE EDITOR, Sir:
AIR JAMAICA'S poor financial position has featured recently in the pages of The Gleaner as a result of questions to the Government tabled in the Senate by Senator Munroe.
The facts adduced are that, in the 10 years since privatisation, the airline has incurred losses of some US$560 million and presently carries a debt of US$683 million of which US$136 million is owed to the Government of Jamaica.
No figure was given for the proportion of the balance of the debt (US$547 million) that is guaranteed by the Government.
In assessing the financial performance of Air Jamaica since privatisation in 1994, it should be borne in mind that the purchasers of the airline were given a clean slate to start including on the staff side where they started with no employees. They set salaries, staff levels and hired all the staff all staff of the government-owned airline (including those rehired) being paid severance by the government.
At present, the airline earns annual revenues of some US$440 million against annual costs of around US$500 million generating an annual loss of US$60 million.
WORSE ON HORIZON
Bad as this is there is worse on the horizon. The new breed of low-cost airlines (Jet Blue in New York; AirTran in Atlanta and Spirit in Ft. Lauderdale) all have Jamaica in their expansion plans. Their costs are significantly lower than Air Jamaica's and they offer fares as low as US$0.10 a mile which would translate into US$59 from Kingston to Miami.
Across the board low-cost airline competition for Air Jamaica in its US market can be expected to result in a revenue decline perhaps as high as 25 per cent adding around US$100 million a year to the current US$60 million a year loss.
An annual loss of US$150 million or more is clearly not sustainable, even for the Government which seems to cover Air Jamaica's losses as well as its debts even though it only owns 25 per cent of the business.
I raise this now as a warning storm clouds on the horizon so that the decision-makers can get the facts, review the options and come to a rational decision as to the best future course of action.
CO-OPERATE RATHER THAN COMPETE
My own view is well-known. The only way to create a profitable, self sustaining airline system for the Caribbean is for the existing airlines in the region to co-ordinate and co-operate rather than compete a functional merger while retaining their individual identities. There is enough outside competition in the system so there is no danger of creating a monopoly through this solution.
Air Jamaica is a fine airline, but its very survival could be in doubt unless action is taken to come up with a solution that does not involve continuing massive annual losses.
There is a solution available up to now there has not been the will to adopt it perhaps larger losses are necessary before commonsense prevails. Let us hope that is not the case.
I am, etc
JOHN GILMORE
jptgilmore@hotmail.com
Edinburgh, Scotland
