US$35 Million Raised to Repay Air Jamaica’s Debt

Executive Chairman of Air Jamaica Limited, Dr. Vincent Lawrence, has announced that US$35 million was raised between December 23 and 31 to facilitate the repayment of debt incurred by the airline.The sum includes $5 million of the $20 million, which former chairman Gordon “Butch” Stewart had committed to the government as part of the takeover process.
Dr. Lawrence, who was speaking at a press conference this morning (Jan. 5) at the Air Jamaica Building on Harbour Street, informed that a preliminary review of the financial performance of the company indicated that a loss of some US$90 million had been incurred for 2004, which was substantially higher than had been estimated. The unaudited data in respect of the 2004 performance of the airline will be made available at the end of January, he indicated.
“In the meantime, we have been looking into the restructuring of large amounts of liabilities and have begun meetings with the airline’s creditors, while seeking long-term financing for the airline,” he told journalists, adding, “understandably, we cannot give further details on these initiatives at this time. However, they do include submissions to the government that a significant portion of the company’s debt to government to be converted to equity”.
Dr. Lawrence advised that within another week, Air Jamaica would arrange for negotiations with HEART/Trust NTA, the National Housing Trust (NHT) and the National Insurance Scheme (NIS) to schedule payments of outstanding amounts. Similar arrangements are to be made with the Civil Aviation Authority and the Airports Authority of Jamaica.
On December 23, the government announced that it would be assuming full responsibility and operation of the national airline, following a period of sustained financial loss, which had significantly affected the viability of the national carrier.
After weeks of dialogue between government and majority shareholders Air Jamaica Acquisition Group (AJAG), an agreement was reached whereby both parties would inject US$25 million and US$20 million respectively, to stem the airline’s operational losses.
Other major aspects of the restructuring programme including crew and staff restructuring, route rationalization, aircraft lease management, fuel management and improved maintenance and engineering, would be addressed as a matter of urgency, the Chairman told journalists.
Explaining that capital costs would have to be incurred in the first instance to successfully carry out the restructuring process, Dr. Lawrence said, “these expenditures include aircraft return costs, inventory spares for aircraft, staff redundancy costs, improved technological systems, operations consolidation.we will endeavour however, to ensure that the payback period for any such one off cost would be within 12 to 18 months”.
He pointed out that the cash requirements for this year would still be significant but were expected to be less than in 2004. “The result however, should be improved viability for the company, by significant reduction in both operational expenses and our losses.”