By LUCIUS C WHITE

One of the most compelling arguments for getting rid of Air Jamaica by any means is the distressing record of losses accumulated in excess of US $1.4 billion.  This mountain of debt is the result of almost unbroken sequence of annual losses since its inception. It is now argued that enough is enough. The time has come to do something about Air Jamaica and the decision is for the government to divest itself of that entity. It is ironic that the body charged with the duty was named the Air Jamaica Divestment Committee and if head of the group, Dennis Lalor’s answer to questions regarding the divestment is to be accepted, there was also ambivalence in the objective of the divestment programme. To avoid misrepresenting Mr Lalor, I have reproduced the answers he gave as reported in the Daily Gleaner of February 22, 2010.

The objective of the divestment project was twofold

(1) Given the intensely competitive environment in which Air Jamaica operates – an environment dominated by large, privately owned airlines – it was determined that there was no economic rationale for the continued involvement in Air Jamaica by the Government. In fact, analysis showed that some of the weaknesses of Air Jamaica – for example, its ability to improve its overall operational performance and its difficulties in forging alliances with other carriers – were attributable to its status as a state-owned airline.

Therefore, the first objective of the divestment project was to ensure the long term, sustainable development of Air Jamaica, through a partnership between the Government and a private sector investor who had adequate technical expertise and financial strength and who would implement a sound business plan for Air Jamaica’s future.

(2) It was estimated that the cost of Air Jamaica to the Government was unsustainable. It has been noted that the airline experienced losses in 40 of its 42 years of existence. As at the end of June 2009, Air Jamaica’s financial statement showed an accumulated deficit of US$1.4 billion.

The second objective therefore was to effect the removal of Air Jamaica from the national budget, so that resources could be released to support critical infrastructural and social services.

In clear unambiguous, decisive and definitive language we are told; it was determined that there was no economic rationale for the continued involvement in Air Jamaica by the government. Yet, from the very same source in the same subsection (1) we are told, “therefore the first objective of the divestment project was to ensure the long term, sustainable development of Air Jamaica, through a partnership between the government and a private sector investor who had adequate technical expertise and financial strength and who would implement a sound business plan for Air Jamaica’s future”.

The country needs to know why, after having determined that there was no economic rationale for the continued involvement in Air Jamaica by the government, the government, through the Divestment Committee’s first objective, was to ensure the long term sustainable development of Air Jamaica through a partnership between the Government and the private sector. With no economic rationale for the continued involvement in Air Jamaica by the Government, what is the reason for seeking a private sector partner?  If seeking a private sector partner was not sufficiently contrary to its own findings, the pursuing and ultimately taking of another government as majority partner seems to be the full limit of contradiction.  Are we to expect that the Trinidad Government-owned Caribbean Airlines will not be encumbered by the problems the committee gave as justification for government to get out of the airline business? We are advised that those JALPA members who seek to preserve Air Jamaica were being emotional and sentimental. How shall we describe those who are seeking partners for Government’s continued participation in an activity in which they had already determined that there was no economic rationale to be involved?

The losses incurred by Air Jamaica in 40 of 42 years of operation are a fact of history. Since the losses prevailed across regime changes and even increased with private sector partnership, should we not look to see what makes Air Jamaica so consistent in making losses? The truth is, the reasons for Air Jamaica’s losses are no secret and we do not need a multi-million- dollar commission of enquiry to tell us that.

The under-capitalization of Air Jamaica from its inception and through out its existence, would have been a significant contributor.

There has always been a deliberate policy to use Air Jamaica as a loss leader for the benefit of the tourism sector.

To discuss Air Jamaica’s losses without mentioning the above factors is disingenuous to say the least. For as long as the policy to support tourism via Air Jamaica remains; Air Jamaica will continue to lose money. There is absolutely no reason for Air Jamaica to be different to any privately-owned airlines, if the matter of proper capitalization and a change of policy as far is the tourism sector is concerned are not addressed. Most other factors which would affect the bottom line of the company could be corrected by management adopting the proper “best practices”.

I am very sure we have been informed that there were two quarters of operational profits. What are the circumstances which permitted the profit? If it did not occur from a windfall from the sale of some assets, then what would prevent replicating the performance regularly? Those who think that Air Jamaica has a problem because it is government-owned should tell us what Air Jamaica’s financial record was like for the period it was in the control of the private sector. It is my contention that it is the proper financing, along with policies and managerial efficiencies, which determines profitability.  Is it not a fact that there is current arrangement under which Air Jamaica provides free tickets to political representatives? These are the types of fringes that could be trimmed which inconvenience free riders but nobody else, yet could impact the bottom line.

The decision to fold Air Jamaica in order to fulfill the commitment given to the IMF to have it sold or liquidated by a specified date is being implemented. Surely if one loss-making company is removed from the budget and is replaced by another that bears a different name but is itself a loss maker, will not that item remain a budget item in red?

I wonder what provisions are made to accommodate losses that we are going to pick up as shareholders in a losing Caribbean Airlines. On the other hand, if the government is not a partner in any of the operating airlines then and only then we can be sure that Airline will not appear as an item of cost in the budget. So why are we pursuing a policy of partnership rather than disposal of Air Jamaica? Could it be that JALPA’s plan, which is not a partnership proposal, is not in keeping with the government’s plan to get a partner? It was a misnomer to have named the committee the Divestment Committee. It should have been named the Restructuring or Partner Finding Committee.

Much time and money could have been saved.