Govt. to Allocate $27 Billion for Exit Cost of Air Jamaica

The Government will be allocating $27 billion in the 2010/2011 Budget to cover the cost of the administration’s exiting responsibilities for Air Jamaica.
“We are hopeful that before we get to the new financial year, we would have secured an arrangement for the privatisation, if not, the arrangements for its closure would be triggered by April 1, 2010,” Prime Minister, Hon. Bruce Golding has said.
“This means that the necessary notices will be served and the funds which will be provided in the budget will be dedicated to winding it up as quickly as possible,” he added.
The Prime Minster was making a statement on the privatisation of Air Jamaica, in the House of Representatives on February 10.
Mr. Golding explained that shortly after taking office, the Government announced the decision to divest Air Jamaica. In pursuance of this decision, the Government established a Privatisation Committee, headed by the Hon. Dennis Lalor, to oversee the divestment of Air Jamaica.
An Invitation for Expression of Interest was issued in April 2008 simultaneously with the launch of the Air Jamaica Privatisation website (airjamaicatransaction.org), which contained detailed information on the requirements that potential interests should have. Seven companies responded. Of these, four were considered to have fulfilled the technical and financial criteria as stated in the published invitation.
The Prime Minister further explained that at the extended deadline for submission of firm offers, June 30, 2009, two bids were received from Caribbean Airlines and Indigo Partners. On conclusion of the evaluation, Indigo Partners were evaluated as marginally superior to Caribbean Airlines.
Based on these findings, the Cabinet gave approval for negotiations to be entered into with Indigo Partners. These negotiations continued for more than four months, but the parties were not able to reach a satisfactory agreement.
“In November, the decision was taken, with the approval of Cabinet, to terminate the negotiations and to enter into negotiations with the second-ranked bidder, Caribbean Airlines. These negotiations are well advanced but have not yet been concluded. A non-binding Letter of Intent has been signed with a target date for completion by March 31, 2010,” Mr. Golding said.
Meanwhile, the Prime Minister disclosed that the Government would be selling the two aeroplanes it owns to cover outstanding taxes owed to the United States Internal Revenue Service (IRS), as well as the United States Department of Agriculture.
“We owe a lot of money. We have had to use diplomatic channels to avoid our planes being seized for non payment of fees that are owed to the Government of the United States of America, the IRS in particular,” Mr. Golding said.
The Prime Minister also mentioned that the Ministry of Finance and the Public Service is now negotiating to sell the five floors Air Jamaica occupies on Harbour Street in downtown Kingston. “The proceeds from that sale will be used to help to continue operations for the next few months until a decision is made,” Mr. Golding said.
Since its inception in 1969, Air Jamaica has accumulated losses of over US$1.4 billion or J$126 billion. In the last 3 years alone, it has incurred losses of US$337 million or J$31 billion.
“The Government understands the emotions that are aroused in determining the future of Air Jamaica. All of us share the pride that those colourful airplanes evoke, whether we are seated in one of them or watching from the ground as they soar to their wuthering heights,” Mr. Golding said.
“But that pride has come at a huge cost – $126 billion over the last 40 years, $31 billion over the last 3 years – and it has helped to deprive us of the pride we should have been able to have in seeing our children go to good schools and the sick to good health facilities. We have to get our priorities right,” Mr. Golding emphasised.