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Air Jamaica board should face the tough reality
Wignall's World
Mark Wignall
Sunday, April 13, 2008
Against a background of continued inefficiency and mismanagement, which seemed to have escalated during the time when Vin Lawrence headed the board and which has not become any better under the chairmanship of Shirley Williams, the new JLP government is still asking taxpayers to continue propping up Air Jamaica.
In 2007 Air Jamaica lost US$170 million and in 2008 the loss is not only expected to continue but projected to reach US$200 million. Go and explain this to minimum-wage households being faced with huge increases in counter flour, cornmeal and bread and grocery items.
Proclaim it to the nurses, teachers, policemen and other lower-middle-class households being asked to pay more for petrol, cooking gas and most food staples while their pay packets remain stuck behind the starting blocks.
As chairman of the board of Air Jamaica, Shirley Williams' connection to the JLP as a long-standing loyalist must be separated from her role as head of a company whose management seems dead awake to certain realities.
What are these realities? In one view Air Jamaica seems to have evolved over time into an airline designed to provide first-class living for its pilots and management who are paid more than their counterparts in the United States and Europe. The airline's management seems hopelessly out of touch with the trend in the last decade towards leaner, meaner and more efficient service and if the truth be told, a trip on Air Jamaica is priced way over the head of the ordinary person.
Will the management admit that Air Jamaica is overstaffed? It basically employs three people for a job where other comparable airlines employ one person. Flights have become routinely delayed or cancelled. Air Jamaica has racked up accumulated losses of US$1.2 billion and it is time for the board to realise that in a year where every Jamaica is going to asked to tighten his and her belt, it has to be seen that those at the top are prepared to lead off in this effort.
Can the new JLP government afford to continue this expensive cruise down nostalgia lane by holding on to Air Jamaica, when what ought to obtain is a realistic tug driven by the need to apply hard and unpleasant economic pragmatism? It has been a feature of the JLP government to make a mockery of the last PNP administration, especially where many of these executive agencies were seen to be safe havens which were described as just more 'jobs for the boys'.
Why is the present government not trying to hasten its move to divest Air Jamaica? Before this can be done the chairperson of the Air Jamaica board, Shirley Williams, must first divest herself of the foolish notion that the market is saturated. If this is so, why are airlines like Virgin, AA, West Jet, Zoom, and Spirit all increasing their service to Jamaica?
If, as she has intimated, the market is static, what must we make of the extra 10,000 hotel beds in our main tourist resort areas? How does Ms Williams square this with the huge outlays in expenditure to increase the capacity of our airports and the projection by experts that Jamaica can achieve 10% growth per year, all things being equal, for the next 10 years?
Even worse, in a scenario where the government is trying to divest Air Jamaica, what sort of message is she sending to potential investors who will want to implement a vision and a management structure radically different from what exists at the present time?
FOOLISH MOVE TO DENY ENTRY OF LOW-COST AIRLINE
In December of 2007, a three-month old JLP government rejected the entry of a low-cost airline to the airline roster. The reason given for the rejection was a predictable one and, to the curious onlooker, it seemed like a sound decision to take.
According to the government, with divestment being sought for Air Jamaica, a decision was taken not to increase the probability of a reduced price for the national airline.
That assumed, of course, that the existence of another airline in Jamaica would make Air Jamaica less attractive to an investor, thus trending down the price. Is that a sound position to hold?
One industry expert who spoke with me last week Thursday thought that, "It seems to me that that rejection sends a signal that this government has not carried over much business savvy from the long time it had to learn from the mistakes of the PNP. It should not be a policy of this government or any other to offer any private company a monopoly of our skies, no matter what the time frame, and deny another Caribbean Airline the ability to compete for the sake of the consumer and the economy. This is protectionism of the worst order - allowing private individuals the potential to earn huge profits at a loss to the consumer.
"It can only lead to continued market distortion which will result in high fares, bad service and limited access for Jamaica."
It was Butch Stewart who said recently, "All of these social-minded governments that are going to do business, and take the business out of the hands of the entrepreneurs, are going to lose and fail because their job is to regulate."
When I heard that from Stewart, even though he spoke in the present tense, my immediate take was to believe that he was making reference to the last PNP government, the 'social-IST- minded' government which botched up the financial sector in the 1990s. No one could say that Butch Stewart could be accusing the Golding led JLP of being 'socialist'.
THE JLP GOVERNMENT MUST DECLARE ITS BUSINESS-FRIENDLY HAND
The Golding-led JLP government cannot have it both ways. When Golding declared one year ago,' Jobs, jobs, jobs. That has to be our central focus,' he was by no means making reference to the jobs in Air Jamaica and the attendant inefficiencies, mismanagement and a pricing policy of a product that was way outside the reach of the typical Jamaican.
His 'jobs, jobs, jobs,' rallying cry had to have more 'inclusiveness' and less 'exclusiveness'.
Last Tuesday, I spoke with an individual who has extensive knowledge of the airline industry and the buzz about a new low-cost airline seeking space in the Jamaican skies. "A company like Airone would be a no-frills airline and it will open up the travelling space like a thousand Air Jamaicas could not do."
He likened the entry of a low-cost airline to the entry of Digicel in the Jamaican market. Many of us can remember the days when the possession of a telephone in one's home was seen as a luxury and a status symbol. Then came the opening of the telecoms market, mobile phones and Digicel, and now everyone, including the street-side vendor, the man hustling for scrap iron at Riverton and the rich socialite on the uptown cocktail circuit all have phones, if not at home, then certainly mobiles.
Apart from a projection of 220 new jobs for Jamaicans and two per cent added to the GDP in five years, the low-cost airline would be a* "...* no-frills airline, offering everyone a chance to fly to their destinations non-stop with cheap fares.
"It would also be a "low-fare airline operating the latest aeroplanes to ensure that passengers arrived safely and on time. Unlike traditional high-cost airlines, expensive meals and beverages would not be included in the ticket price. Instead persons would be able to purchase a range of quality drinks and food on board the flight. Likewise, baggage costs would not be included in the ticket price and one would only pay for what one brought on board."
The government cannot stick us up in broad daylight on this issue. Any advice coming from the Air Jamaica board must take into consideration that with the best will and intentions, the Air Jamaica chairperson knows nothing about the airline business.
One knows that it is always a balancing act, this alternate glancing at the consumers' best interest and that of the corporate interest. In an ideal world, they would come together, but 'ideal' does best in a story book. In this instance the government must be guided by plain good sense, not the nostalgic sentiments of the Air Jamaica board chairman and the need to keep the ravenous national airline in the continuing phase of raiding the taxpayers' pockets. Air Jamaica is in its hand and it can make a decision.
A sensible decision which will put the consumers' interest before the need to protect a myth that must no longer be perpetuated.
Wignall's World
Mark Wignall
Sunday, April 13, 2008
Against a background of continued inefficiency and mismanagement, which seemed to have escalated during the time when Vin Lawrence headed the board and which has not become any better under the chairmanship of Shirley Williams, the new JLP government is still asking taxpayers to continue propping up Air Jamaica.
In 2007 Air Jamaica lost US$170 million and in 2008 the loss is not only expected to continue but projected to reach US$200 million. Go and explain this to minimum-wage households being faced with huge increases in counter flour, cornmeal and bread and grocery items.
Proclaim it to the nurses, teachers, policemen and other lower-middle-class households being asked to pay more for petrol, cooking gas and most food staples while their pay packets remain stuck behind the starting blocks.
As chairman of the board of Air Jamaica, Shirley Williams' connection to the JLP as a long-standing loyalist must be separated from her role as head of a company whose management seems dead awake to certain realities.
What are these realities? In one view Air Jamaica seems to have evolved over time into an airline designed to provide first-class living for its pilots and management who are paid more than their counterparts in the United States and Europe. The airline's management seems hopelessly out of touch with the trend in the last decade towards leaner, meaner and more efficient service and if the truth be told, a trip on Air Jamaica is priced way over the head of the ordinary person.
Will the management admit that Air Jamaica is overstaffed? It basically employs three people for a job where other comparable airlines employ one person. Flights have become routinely delayed or cancelled. Air Jamaica has racked up accumulated losses of US$1.2 billion and it is time for the board to realise that in a year where every Jamaica is going to asked to tighten his and her belt, it has to be seen that those at the top are prepared to lead off in this effort.
Can the new JLP government afford to continue this expensive cruise down nostalgia lane by holding on to Air Jamaica, when what ought to obtain is a realistic tug driven by the need to apply hard and unpleasant economic pragmatism? It has been a feature of the JLP government to make a mockery of the last PNP administration, especially where many of these executive agencies were seen to be safe havens which were described as just more 'jobs for the boys'.
Why is the present government not trying to hasten its move to divest Air Jamaica? Before this can be done the chairperson of the Air Jamaica board, Shirley Williams, must first divest herself of the foolish notion that the market is saturated. If this is so, why are airlines like Virgin, AA, West Jet, Zoom, and Spirit all increasing their service to Jamaica?
If, as she has intimated, the market is static, what must we make of the extra 10,000 hotel beds in our main tourist resort areas? How does Ms Williams square this with the huge outlays in expenditure to increase the capacity of our airports and the projection by experts that Jamaica can achieve 10% growth per year, all things being equal, for the next 10 years?
Even worse, in a scenario where the government is trying to divest Air Jamaica, what sort of message is she sending to potential investors who will want to implement a vision and a management structure radically different from what exists at the present time?
FOOLISH MOVE TO DENY ENTRY OF LOW-COST AIRLINE
In December of 2007, a three-month old JLP government rejected the entry of a low-cost airline to the airline roster. The reason given for the rejection was a predictable one and, to the curious onlooker, it seemed like a sound decision to take.
According to the government, with divestment being sought for Air Jamaica, a decision was taken not to increase the probability of a reduced price for the national airline.
That assumed, of course, that the existence of another airline in Jamaica would make Air Jamaica less attractive to an investor, thus trending down the price. Is that a sound position to hold?
One industry expert who spoke with me last week Thursday thought that, "It seems to me that that rejection sends a signal that this government has not carried over much business savvy from the long time it had to learn from the mistakes of the PNP. It should not be a policy of this government or any other to offer any private company a monopoly of our skies, no matter what the time frame, and deny another Caribbean Airline the ability to compete for the sake of the consumer and the economy. This is protectionism of the worst order - allowing private individuals the potential to earn huge profits at a loss to the consumer.
"It can only lead to continued market distortion which will result in high fares, bad service and limited access for Jamaica."
It was Butch Stewart who said recently, "All of these social-minded governments that are going to do business, and take the business out of the hands of the entrepreneurs, are going to lose and fail because their job is to regulate."
When I heard that from Stewart, even though he spoke in the present tense, my immediate take was to believe that he was making reference to the last PNP government, the 'social-IST- minded' government which botched up the financial sector in the 1990s. No one could say that Butch Stewart could be accusing the Golding led JLP of being 'socialist'.
THE JLP GOVERNMENT MUST DECLARE ITS BUSINESS-FRIENDLY HAND
The Golding-led JLP government cannot have it both ways. When Golding declared one year ago,' Jobs, jobs, jobs. That has to be our central focus,' he was by no means making reference to the jobs in Air Jamaica and the attendant inefficiencies, mismanagement and a pricing policy of a product that was way outside the reach of the typical Jamaican.
His 'jobs, jobs, jobs,' rallying cry had to have more 'inclusiveness' and less 'exclusiveness'.
Last Tuesday, I spoke with an individual who has extensive knowledge of the airline industry and the buzz about a new low-cost airline seeking space in the Jamaican skies. "A company like Airone would be a no-frills airline and it will open up the travelling space like a thousand Air Jamaicas could not do."
He likened the entry of a low-cost airline to the entry of Digicel in the Jamaican market. Many of us can remember the days when the possession of a telephone in one's home was seen as a luxury and a status symbol. Then came the opening of the telecoms market, mobile phones and Digicel, and now everyone, including the street-side vendor, the man hustling for scrap iron at Riverton and the rich socialite on the uptown cocktail circuit all have phones, if not at home, then certainly mobiles.
Apart from a projection of 220 new jobs for Jamaicans and two per cent added to the GDP in five years, the low-cost airline would be a* "...* no-frills airline, offering everyone a chance to fly to their destinations non-stop with cheap fares.
"It would also be a "low-fare airline operating the latest aeroplanes to ensure that passengers arrived safely and on time. Unlike traditional high-cost airlines, expensive meals and beverages would not be included in the ticket price. Instead persons would be able to purchase a range of quality drinks and food on board the flight. Likewise, baggage costs would not be included in the ticket price and one would only pay for what one brought on board."
The government cannot stick us up in broad daylight on this issue. Any advice coming from the Air Jamaica board must take into consideration that with the best will and intentions, the Air Jamaica chairperson knows nothing about the airline business.
One knows that it is always a balancing act, this alternate glancing at the consumers' best interest and that of the corporate interest. In an ideal world, they would come together, but 'ideal' does best in a story book. In this instance the government must be guided by plain good sense, not the nostalgic sentiments of the Air Jamaica board chairman and the need to keep the ravenous national airline in the continuing phase of raiding the taxpayers' pockets. Air Jamaica is in its hand and it can make a decision.
A sensible decision which will put the consumers' interest before the need to protect a myth that must no longer be perpetuated.
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