I am sure the media are aware that I have been one of the Government’s representatives on Air Jamaica’s Board of Directors for some time now. As such, I can profess some amount of knowledge on the airline. Over the past three months, questions have been raised in the public arena on the role of government members in relation to the airline’s debt situation in general and specifically its debt to government.
I wish to state that,despite the insistence of the Directors that regular payments must be made, the airline’s management was unable to do so, due to the continuing high losses.
The fact is that the airline has been virtually insolvent for a number of years and has had to rely heavily on government’s financial support through direct loans, credit facility guarantees and periodic debt to equity conversions. Consequently, discussions have been in train for sometime on the most effective and efficient methodology to apply to ensure the operation of the airline, without the continued heavy reliance on government, and by extension, additional cost to the taxpayer. Cost cuts were identified and several successfully implemented, but important areas such as employee cost savings, for example, salaries and related costs, were not achieved.
It is against this background that we undertook a due diligence in the operations of the airline, as well as the development of a business plan by reputed international airline consultants, Sabre Airline Solutions, to find ways to improve the company’s operating performance.
Sabre has identified six critical operations-related areas that must be restructured and from which expense savings of approximately US 32 million can be realized in 2005 and subsequent years. The areas are:
. Fuel conservation . Maintenance and engineering . Aircraft Lease Costs . Crew and staff remuneration . Network/route rationalization
Financial restructuring is therefore fundamental to the future viability of the airline. Consequently, all stakeholders, management, crew, ground staff, creditors, suppliers and government will have to make significant sacrifices and adjustments as we seek to bring viability and competitive market arrangements to the airline.
As the major source of funding for Air Jamaica, the Government has therefore undertaken the task of ensuring that the business plan objectives and debt restructuring are achieved within the shortest possible time.
Dr. Davis has announced the appointment of Mr. Aubyn Hill who will undertake the restructuring exercise. He will report to me directly on the implementation plan. The restructuring will be conducted in tandem with new management arrangements for the airline. It is envisaged that this exercise should take six months. In the interim, the airline will continue to honour its obligations to the traveling public. We wish to reiterate that all schedules, ticket purchases, agreements with travel agents and other partners are valid and will be honoured.
AIR JAMAICA WILL CONTINUE TO FLY DURING THE RESTRUCTURING PROCESS
We are also now actively working on restructuring the management team to ensure continuity. We have been meeting with the current management of the airline and will continue these meetings with all categories of staff as well as the trade unions. As soon as these arrangements are finalized an announcement will be made.
I am sure some of the more investigative-oriented journalists among you will seek to recall the objectives of the divestment of the airline ten years ago. These were: The establishment of a sound financial, commercial and managerial basis for the future sustained viable operation of the company The injection of adequate equity capital to relieve the company of its high debt servicing; Reorganization of the Company to establish its operations on a prudent commercial basis, at internationally recognized standards of airline efficiency and with a view to becoming profitable; Guaranteeing sustained continuing service having special regard to the needs of the tourist industry Enabling the company to respond more effectively to the increasing competitive aviation environment.The intervening period between 1994 and 2004 has been dynamic, with challenges in both the local, regional and international economic and aviation environments. Some of the original objectives have been fulfilled. Primary among them are the airline’s contribution to the tourism industry, its positioning as a competitor of note in the marketplace, and the collective national pride of Jamaicans at home and abroad in their airline.
It is therefore in recognition of these factors that the Government has taken the decision to temporarily assume responsibility for Air Jamaica to re-establish it on a sound financial footing and with the high quality of service for which it has become renowned under the management of AJAG, led by the Honourable Gordon ‘Butch’ Stewart and his team.
I know I speak for my fellow Directors, partners in the tourism, manufacturing and business sectors, as well as the general traveling public, in expressing our sincere appreciation for the tremendous work of the Company over the past decade, in repositioning the airline into a household word and a first choice for Jamaicans here and overseas as well as visitors to the island.
The mandate of the new Board is to maintain this position whilst pursuing viability through rightsizing, in order to realize operating surpluses and overall cost savings and thus achieve viability. It is our hope that when viability is achieved, this will encourage private investors to once again actively pursue equity in the airline.
Thank you ladies and gentlemen, and may I use this opportunity to wish for you all a blessed and peaceful season and a prosperous 2005.
