STATEMENT BY DR. OMAR DAVIES ON THE INTERVENTION BY THE GOVERNMENT OF JAMAICA IN AIR JAMAICA


The current situation of Air Jamaica, in particular the airline’s debt to the Government of Jamaica and other creditors, has received a great deal of publicity in recent weeks. The details of the actual level of indebtedness and the main reasons for this were articulated on November 19, by Minister Burchell Whiteman, Minister of Information, in response to questions posed in the Senate.
As is accepted by everyone, the airline industry worldwide faces serious challenges. Several of the major North America airlines are either in, or on the verge of, bankruptcy. The problems of the industry have been exacerbated by steep increases in fuel prices during this year. Not surprising, these factors have impacted negatively on Air Jamaica’s operations.
In recognition of the increase in indebtedness, significant operating difficulties as well as the generic challenges facing the industry, the Government and the majority shareholders, the AJAG Group, have been involved in intense discussions about the future of the airline. These deliberations have been aimed at rationalizing the GOJ’s shareholding in the company as well as taking steps to fundamentally restructure operations. To this end, the management consulting firm, SABRE Airlines Solutions, was contracted to review Air Jamaica’s operations and to make concrete recommendations on the steps needed to rectify the situation and place the company on the road to financial viability.
At this point, I wish to say something about the tenure of AJAG Group as majority shareholders. 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. Mr. Stewart has personally dedicated a great deal of time and energy in marketing the airline as a national asset. This has been done whilst maintaining the highest safety standards and providing an improved quality of service.
The Government of Jamaica has consistently maintained, through statements by the Prime Minister and also by myself, the Administration’s commitment to the National Airline. This commitment is based both on the recognized value to the economy in general, and in particular its impact on tourism. This sector is on a growth path which, apart from a significant expansion of room capacity, will have positive spin-offs for several other areas of the economy.
After weeks of dialogue, joint recognition of the enormity of challenges which face the airline and the explicit desire of the majority shareholders to return to their core business have led the parties to agree to the following:
a) The injection of (US)$20 million by the majority shareholders as well as the facilitation of additional credit of (US)$25 million by the GOJ. These resources are to partially address the operational losses being recorded by the airline; and
b) The Government of Jamaica will assume full responsibility for the airline, effective today, December 23, 2004. Concurrently, all AJAG members of the Board of Directors and Air Jamaica Holdings Limited will resign with immediate effect.
I now turn to the new interim Board which has been appointed for an initial six-month period lasting to June 30, 2005. Dr. the Hon Vincent Lawrence will occupy the position as Executive Chairman for that period with his priority mandate to oversee the restructuring activity and to recruit and appoint an appropriately qualified CEO with extensive airline experience.
Supporting Dr. Lawrence will be Mr. Aubyn Hill who will head the Restructuring Office which the shareholders have agreed to establish. This office will have the immediate responsibility of implementing the new structure for the airline which will allow it to move toward a path of viability. Mr. Hill has a distinguished track record, particularly in the restructuring of companies.
The other members of the Interim Board are (i)Hon. Derick Latibeaudiere (ii) Mr. Keith Senior (iii) Mr. Paul Pennicoke, Executive Director, JTB (iv) Ms. Millicent Hughes, Accountant General (v) Mr. Aubyn Hill (vi) Mr. O. K. Melhado (vii) Mr. Noel Sloley and (viii) Hon Noel Hylton.
The Long Term: In looking at the long-term, I wish to reiterate the Government’s position that 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. Our action at this time has been taken in the interest of the national economy.
I wish to reassure the country, the traveling public, the airline’s travel partners, the tourism sector and Air Jamaica staff members that the Administration is committed to a viable national airline which will serve as a major catalyst for the economy.
I wish to reiterate that the discussions between the AJAG Group and the Government of Jamaica team have been conducted in the most amicable way with our common objective being to ensure that the airline is made viable, even whilst maintaining the excellent standards which have been established. In this regard, Mr. Stewart has given his personal commitment that he and members of his team are available to work with us in whatever way possible to ensure the success of the airline as we enter this new stage. This offer of cooperation is one which I deeply appreciate and gladly accept.
Finally, to all persons who presently do business, or plan to do business with the airline, let me assure you that there will be no disruption of any sort of the operations of the airline. With cooperation between all the critical players, the transition will be seamless and Air Jamaica will indeed “Soar to New Heights”.

JIS Social