Government Assumes Full Responsibility for Air Jamaica

The Government of Jamaica has assumed full responsibility for the management and operation of the national airline, Air Jamaica, with immediate effect, with the objective of making the airline a fiscally sound entity in the near future.
Finance and Planning Minister, Dr. Omar Davies made the announcement today (December 23) at a press conference, held at the Ministry’s Heroes’ Circle offices. The Minister emphasised that this arrangement was only a temporary measure.
“This administration has no desire to retain permanent ownership and control of Air Jamaica. Our objective is to restructure the entity, such that it will be able to attract adequate equity capital from private investors,” said Dr. Davies.
Government’s intervention comes out of concern for the national economy, and follows “intense discussions” between Government, and majority shareholders, Air Jamaica Acquisition Group (AJAG) Limited, which together have been seeking solutions to the airline’s current indebtedness.
“These deliberations have been aimed at rationalising the Government of Jamaica’s shareholding in the company as well as taking steps to fundamentally restructure operations,” said Dr. Davies.
After weeks of dialogue between Government and AJAG, an agreement has been reached and both parties will inject US$25 million and US$20 million respectively, to stem the airline’s current operational losses.Additionally, all AJAG members on the Air Jamaica Board and Air Jamaica Holdings Limited will resign with immediate effect.
A new interim nine-member Board has been appointed for an initial six-month period, which will last until June 2005.
Dr. Vincent Lawrence, who will occupy the position of Executive Chairman, will head the interim Board and will be supported by Aubyn Hill, who will head the Restructuring Office.
Acknowledging that the airline industry was currently faced with serious challenges, with several carriers in, or on the verge of bankruptcy, the Finance Minister told journalists that a management consulting firm, SABRE Airline Solutions was contracted to review the airline’s operations and make recommendations that would chart the course for returning the entity to economic viability.
The consultants have determined that “financial restructuring is fundamental to the future viability of the airline”, and have identified five other critical operations-related areas that must be restructured, from which savings of approximately US$32 million can be realised in 2005 and subsequent years.
The areas earmarked for streamlining are fuel conservation; maintenance and engineering; aircraft lease arrangements; staff remuneration; and network/route rationalisation.
Meanwhile, Dr. Davies lauded the AJAG Group for its contribution to the airline and by extension the island, over the past 10 years.
“There can be no question that the group, under the Chairmanship of the Hon. Gordon ‘Butch’ Stewart, has firmly established the airline as a reliable, world-class operation, which has opened up new gateways, stimulating increased visitor traffic to Jamaica,” he said.
The Finance Minister also voiced the Government’s appreciation for and acceptance of Mr. Stewart’s “offer of co-operation” from himself and members of his team.
Minister Davies gave the assurance that the transition and restructuring exercise would not hamper the efficiency and operations of the airline.”With co-operation between all the critical players, the transition will be seamless and Air Jamaica will indeed continue to ‘Soar to New Heights’,” he said.The Government of Jamaica previously managed the operations of Air Jamaica, before privatising the entity in 1994.