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Wehby says divestment to major airline could be concluded by March 2009
BY INGRID BROWN Sunday Observer staff reporter browni@jamaicaobserver.com
Sunday, January 06, 2008
The Government has short-listed four major airline firms from which one will be chosen to take a stake in Air Jamaica within another year, according to Don Wehby, minister without portfolio in the Ministry of Finance.
Wehby declined to name the four companies, offering only that they were chosen from a list of several entities that had expressed an interest in the Government's equity partnership proposal.
"The response from potential partners has been overwhelming, and there are some very serious partners with a lot of good plans and capital who we are speaking to now," Wehby told the Sunday Observer last week.
He explained that the partner the Government was seeking must be a major company with airline experience.
"In other words, they should run a reputable airline and they should also have a lot of capital to run it (Air Jamaica) efficiently," he said.
Second, Wehby said, the firm must present a very clear plan of how they intend to increase the flow of tourists into Jamaica, and third, they must be willing to maintain the Air Jamaica brand on the aircraft.
In addition to those criteria, he said, the decision as to which firm the Government will do business with will be determined by the best price.
"The response to keep the Air Jamaica brand has been overwhelming, and the people we have had discussions with agree that it would suit the partnership to have Air Jamaica continue flying," Wehby told the Sunday Observer.
He said that based on the seriousness of the talks, a new partner should be identified and the divestment concluded by March 2009.
"The idea is to not have Air Jamaica costing taxpayers any money by 2009, as the charge on this year's budget is close to $4 billion," he said.
Hobbled by losses and huge debts, Air Jamaica has been a drain on the public purse for years, sparking frequent calls on the previous Government and the current administration to divest the airline.
The present Jamaica Labour Party (JLP) Government, in its manifesto for the September 3, 2007 general elections, said it was committed to pursuing negotiations for an equity partnership with a suitable international airline to revitalise Air Jamaica and to integrate it within a wider network of destinations and connections.
"The Government would retain part ownership of Air Jamaica, which would retain its name and its unique Jamaican characteristics and would continue to serve the routes that are significant to local travellers, tourism and the Jamaican Diaspora," the JLP said.
Asked what stake in the airline the Government would retain, Wehby said, "Because we are still in the negotiating stage we have not yet made a decision on that, but we will be able to say as soon as we do."
Wehby said that the Government was now in the process of identifying an investment banker and an aeronautics specialist to assist in choosing the best company from the four short-listed offers.
This process, he added, could be fast-tracked if the World Bank's offer of a grant becomes available in another month.
"It is a very attractive offer we are reviewing," he added when pressed to state the figure.
"We have not accepted the grant yet," said Wehby. "However, the offer letter says it is there to help in privatisation of the airline, which means we could determine if we want to use it to hire an investment banker."
He explained that the business of divestment and identifying a partner is very specialised, and requires persons with experience who can guide the process and assist in determining what is the best deal and the right partner.
"While we are having discussions with airlines and they have come directly to us, it is extremely important that we appoint someone who has experience in this business - an investment banker and aeronautics specialist - to really determine that we get the best deal possible," he said.
"There is a procedure that we have to go through with the National Contracts Committee to tender for the selection of the investment banker and aeronautics specialist," Wehby said. "That is the stage we are at, and we have a short-list of people we are looking at."
Wehby said that despite the debt held by Air Jamaica, the carrier, coupled with Jamaica's geographical location, the Montego Bay hub and the Norman Manley Airport all offer a lot of business opportunities that a well-capitalised airline can take advantage of.
"All that is a jewel of an asset for any person flying an aircraft because it opens the gateway not only to North America but to Central and South America," he said. "So there is a lot of value with Air Jamaica."
Asked what gains Air Jamaica has so far made from the code share agreement signed with Virgin Atlantic Airways and which became effective last November, Wehby said he was not yet able to say.
"The management and board will review and send the report on the code share by the end of this month when I have my regular meeting with the board chairman," he said.
BY INGRID BROWN Sunday Observer staff reporter browni@jamaicaobserver.com
Sunday, January 06, 2008
The Government has short-listed four major airline firms from which one will be chosen to take a stake in Air Jamaica within another year, according to Don Wehby, minister without portfolio in the Ministry of Finance.
Wehby declined to name the four companies, offering only that they were chosen from a list of several entities that had expressed an interest in the Government's equity partnership proposal.
"The response from potential partners has been overwhelming, and there are some very serious partners with a lot of good plans and capital who we are speaking to now," Wehby told the Sunday Observer last week.
He explained that the partner the Government was seeking must be a major company with airline experience.
"In other words, they should run a reputable airline and they should also have a lot of capital to run it (Air Jamaica) efficiently," he said.
Second, Wehby said, the firm must present a very clear plan of how they intend to increase the flow of tourists into Jamaica, and third, they must be willing to maintain the Air Jamaica brand on the aircraft.
In addition to those criteria, he said, the decision as to which firm the Government will do business with will be determined by the best price.
"The response to keep the Air Jamaica brand has been overwhelming, and the people we have had discussions with agree that it would suit the partnership to have Air Jamaica continue flying," Wehby told the Sunday Observer.
He said that based on the seriousness of the talks, a new partner should be identified and the divestment concluded by March 2009.
"The idea is to not have Air Jamaica costing taxpayers any money by 2009, as the charge on this year's budget is close to $4 billion," he said.
Hobbled by losses and huge debts, Air Jamaica has been a drain on the public purse for years, sparking frequent calls on the previous Government and the current administration to divest the airline.
The present Jamaica Labour Party (JLP) Government, in its manifesto for the September 3, 2007 general elections, said it was committed to pursuing negotiations for an equity partnership with a suitable international airline to revitalise Air Jamaica and to integrate it within a wider network of destinations and connections.
"The Government would retain part ownership of Air Jamaica, which would retain its name and its unique Jamaican characteristics and would continue to serve the routes that are significant to local travellers, tourism and the Jamaican Diaspora," the JLP said.
Asked what stake in the airline the Government would retain, Wehby said, "Because we are still in the negotiating stage we have not yet made a decision on that, but we will be able to say as soon as we do."
Wehby said that the Government was now in the process of identifying an investment banker and an aeronautics specialist to assist in choosing the best company from the four short-listed offers.
This process, he added, could be fast-tracked if the World Bank's offer of a grant becomes available in another month.
"It is a very attractive offer we are reviewing," he added when pressed to state the figure.
"We have not accepted the grant yet," said Wehby. "However, the offer letter says it is there to help in privatisation of the airline, which means we could determine if we want to use it to hire an investment banker."
He explained that the business of divestment and identifying a partner is very specialised, and requires persons with experience who can guide the process and assist in determining what is the best deal and the right partner.
"While we are having discussions with airlines and they have come directly to us, it is extremely important that we appoint someone who has experience in this business - an investment banker and aeronautics specialist - to really determine that we get the best deal possible," he said.
"There is a procedure that we have to go through with the National Contracts Committee to tender for the selection of the investment banker and aeronautics specialist," Wehby said. "That is the stage we are at, and we have a short-list of people we are looking at."
Wehby said that despite the debt held by Air Jamaica, the carrier, coupled with Jamaica's geographical location, the Montego Bay hub and the Norman Manley Airport all offer a lot of business opportunities that a well-capitalised airline can take advantage of.
"All that is a jewel of an asset for any person flying an aircraft because it opens the gateway not only to North America but to Central and South America," he said. "So there is a lot of value with Air Jamaica."
Asked what gains Air Jamaica has so far made from the code share agreement signed with Virgin Atlantic Airways and which became effective last November, Wehby said he was not yet able to say.
"The management and board will review and send the report on the code share by the end of this month when I have my regular meeting with the board chairman," he said.
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