Air Jamaica to Codeshare with Virgin Atlantic – Airline announces exit from London route

The management of Air Jamaica yesterday confirmed that it will discontinue its service to London effective October 28 and will enter into a code share agreement with Virgin Atlantic, in which the Air Jamaica code will be placed on all Virgin Atlantic flights between Jamaica and London Gatwick.
Passengers presently ticketed on Air Jamaica for travel after October 28 will be accommodated on Virgin Atlantic at no additional cost.
Under the agreement, Virgin Atlantic will operate four roundtrips per week from London Gatwick beginning October 30, with twice-weekly services to Kingston in addition to Virgin’s current twice-weekly services to Montego Bay. The Virgin Atlantic code will be added to Air Jamaica’s domestic flights between Kingston and Montego Bay.
“This new partnership allows Air Jamaica to continue our UK presence through Virgin Atlantic’s much larger marketing and operational matrix. We’ll be able take advantage of Virgin Atlantic’s global network, and together we will feed and flow passengers through our common gateway cities in North America and the Caribbean. Equally important, this agreement allows us to significantly improve our operating results by simplifying our operation and allowing us to concentrate on our core routes throughout the region with our narrow-bodied fleet,” said Mike Conway, Air Jamaica’s President and CEO.
Tickets for the new code share flights will go on sale immediately with the reservation networks of both airlines linked.
Under the agreement, passengers traveling between Jamaica and London Heathrow will also be able to take advantage of free stop-overs at common gateway cities at Miami, JFK, Newark, Chicago O’Hare, and Los Angeles, and with respect to London Gatwick, the same would apply to Orlando and Barbados.
For more information, passengers in Jamaica may telephone 1-888-359-2475 and in the UK, 0208-570-7999.
London Route
Question & Answer
Why is Air Jamaica cutting the London route?
Air Jamaica is faced with the need to significantly improve its financial performance. As part of the necessary restructuring has been the review of the viability of major routes. Over the last three years the substantial increases in fuel prices, along with the impact on fares due to additional scheduled and charter flights, has made the London route very uneconomical. Unlike the other carriers servicing this route, this is Air Jamaica’s only long haul route and requires a special office in London and two dedicated wide body aircraft to provide the service. This puts the company in a very uncompetitive position. It has been therefore necessary to take, what has been a very difficult decision, to discontinue this service and enter into a code share relationship with another carrier.
Why did Air Jamaica select Virgin Atlantic as its code share partner?
Both BA and VS presented very comprehensive proposals over the several month period in which negotiations were taking place. In the final analysis the decision to go with VS was based on what was viewed as the best overall choice for the airline and Jamaica.
What arrangements are in place for passengers booked for travel after October 28?
Virgin Atlantic will accommodate all passengers at the price they have paid on its flights departing after October 28th
After October 28, what happens to aircraft that serviced the route?
The two A340 aircraft currently on lease will be returned to the lessor on an early lease termination or subleased to another carrier. Either way, we do not expect any material loss on the disposition of these aircraft.
What has been the recent financial performance of the London route?
Air Jamaica experienced a negative contribution on the route of approximately US$ 27 million in 2006. With additional competition and rising fuel prices in 2007, we would expect the loss for the full year 2007 to exceed US$ 30 million, or approximately US$ 2.5 million per month. Our exit from the route will eliminate these losses effective November 2007, and the new and the comprehensive code-share agreement with Virgin Atlantic is expected to result in a net positive contribution.
What are the financial benefits of a code share agreement versus operating the route?
In addition to eliminating the significant losses on the route, Air Jamaica will no longer be burdened with operating a long-haul North Atlantic route that requires two expensive wide-body aircraft that are unique to the rest of our fleet. In effect, we will be eliminating “the airline within the airline” and its negative performance, which impacts on the entire airline.
Will there be staff redundancies in London and Jamaica?
We will be closing the London office. Virgin Atlantic has agreed to provide, where possible, employment opportunities for the approximate 20 staff members in London. To the extent we have excess personnel in other locations, we plan work with the groups affected so that there should be a very reduced impact on these employees.
Will fares be more expensive under the code share agreement?
There remains considerable capacity and competition on the route from both scheduled and charter carriers that are likely to discipline the market in terms of fare structure. As with any route, further changes in capacity, price of fuel and consumer demand could impact fare levels in the future.
Will Air Jamaica continue marketing in the UK?
Not directly, but service to the UK will be offered by JM with our code under the code-share agreement with VS. In addition, we plan to initiate an innovative joint program with VS whereby service to the UK will also be offered over our common gateways in the USA and the EC. This service, for example, will allow our passengers to travel on JM to MIA, MCO, JFK, EWR ORD and BGI, and connect to VS to UK with no stopover penalty – in essence, two cities for the price of one. With the exception of MCO, VS’s gateway cities in the USA go nonstop into LHR.
Will Jamaica’s tourism industry lose market share from the UK?
It is anticipated that Virgin Atlantic with their additional flights and planned increase in activities through their tour arm, Virgin Holidays, Jamaica will continue to see an uninterrupted flow of traffic from the UK and points beyond.
Why give up premium Heathrow landing rights, which other airlines are eager to have?
It is in keeping with the strategic assessment of a profitable way forward for Air Jamaica. The elimination of the losses from the route is a major component of the financial gap that needs to be closed if the airline is to achieve self-reliance and profitability. In addition, LHR is an expensive airport which airlines use on routes that yield substantially higher fares compared to what can be generated on flights to Jamaica. There is no benefit to operating highly sought after slots if they cannot be put to productive and profitable use.
How likely will Air Jamaica regain its Heathrow slots in the future?
Should, for any reason, JM decide to re-enter the UK market, there are provisions under our agreement with VS to have slots made available to us at Gatwick.
How much did we get from the sale of the Heathrow slot?
This information is proprietary, but we are confident that through the extensive negotiation process, we received a fair market value price for the slots.
If Air Jamaica is to be profitable shouldn’t we be adding routes instead of cutting back?
By eliminating service on a route(s) that have a significant drag on profitability and little or no prospects for a reversal of this trend, this allows our airline to increase service on routes that are performing better as well as putting us in a better position to add routes that have much higher prospects of generating a positive contribution.
Will more routes be cut?
Nothing further is planned at this time.