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Thomas Cook's offer is interesting as it would provide linkages into developing the European market and diversifying away from over-reliance on the US. They probably need to partner with an existing carrier to make a more credible bid however.
Caribbean Airlines and Thomas Cook make play for Air J
By Al Edwards
Friday, June 05, 2009
Trinidadian carrier Caribbean Airlines and British tour operator Thomas Cook have both expressed an interest in acquiring Jamaica's national carrier Air Jamaica, Caribbean Business Report has learnt.
"There are two solid offers on the table and both parties are reputable," an executive working on securing a deal told this newspaper on condition of anonymity. "The British tour operator Thomas Cook and Trinidad's Caribbean Airlines have placed serious bids for Air Jamaica and it is now a process of evaluation and negotiation. This deal is likely to be completed within the deadline."
The deadline for privatising Air Jamaica was recently extended to June 30.
Last month, Minister Without Portfolio in the Ministry of Finance Don Wehby, said two offers have been made for the cash-strapped airline but would not be drawn on the specifics of the bids. He did say that the Government was trying to "recapitalise Air Jamaica with a partner, and I think we are getting there".
If Caribbean Airlines' bid proves to be successful, it would make the Trinidadian carrier the largest indigenous Caribbean airline operator in the region.
Caribbean Airlines replaced BWIA as Trinidad and
Tobago's national carrier in 2007. It operates international services from the Caribbean to the United States, United Kingdom, Canada and South America. The airline, wholly owned by the Government of Trinidad and Tobago, began operating with a fleet of six Boeing 737-800 aircraft and one Airbus A340-313.
In November 2008, it increased its fleet to eight Boeing 737-800 with aircraft refitted to the standard 16/138 configuration. The airline has steadily increased its flights and routes and Trinidad's Piarco International Airport serves as its hub.
Caribbean Airlines CEO Phillip Saunders has vowed to turn a profit this year, just two years after the airline's formation. Caribbean Airlines has come under heavy criticism for being too heavily subsidised by the Trinidadian Government. In 2007, the Government spent US$250 million to wind up Caribbean Airlines' predecessor, BWIA, and then another US$100 million to set up Caribbean Airlines.
Saunders, who has set about cutting both unprofitable routes and staff costs, has placed great stock in better efficiencies and is determined to make the airline more service-oriented. To that end, Caribbean Airlines now enjoys an 87 per cent on-time service record and is 85 per cent automated. It has added Caracas, Venezuela to its routes and is now the national carrier for Guyana.
Speaking with the Trinidad Guardian last year, Saunders said: "Service is not something which is being sustained by our competitors. Air Jamaica has been challenged. Our job is to concentrate on Caribbean Airlines.
"We're re-engineering the way we do business. That's looking at every single element of our business. In terms of people, it is always important that we have the most efficient and effective cost base as possible while not compromising the customer experience. We will always look at what we do in the airline on a cost basis."
Saunders has managed to compartmentalise the airline into four separate business lines; namely, the airline business, retail services, cargo and the technics/maintenance business. He sees this as the route to sustainable profitability.
Caribbean Airlines is the envy of many regional carriers in that it now has the ability to provide airline maintenance service for both regional and international carriers. This comes under its technics department created in 2007.
"Saunders may well see some intrinsic value in Air Jamaica and will not pass up lightly the opportunity to make Caribbean Airlines a true regional carrier," a former BWIA executive told Caribbean Business Report from Trinidad. "Both Liat and Allen Sandford's Caribbean Star do not have the ability to truly link the region; Caribbean Airlines has. Its technics division is a big feather in its cap in that certain synergies can now be obtained.
The prospect of adding to its fleet and enjoying a bigger presence in the diaspora is exciting.
"On the other hand, Air Jamaica has not made a profit in over 40 years, despite huge injections of cash by the Government. In 2007, it made a loss of US$171 million and the year before that US$128 million. So why take on that headache? Well, if a regional carrier is truly to be viable, Air Jamaica must come into the mix somewhere and Saunders is fully aware of that. The question is, can he acquire it at the right price?"
The UK tour operator Thomas Cook has deeper pockets than Caribbean Airlines and on paper looks the better bet. In the UK, Thomas Cook conforms to the model of a "vertically integrated travel company" operating an airline, a retail arm and also a tour operator.
In 1999, Thomas Cook sold off its worldwide Foreign Exchange business to Travelex to concentrate only on tours and holidays. The events of September 11, 2001 brought on a depression in the travel industry which saw Thomas Cook disposing of some of its businesses in favour of a leaner operation that was asset-light with minimum capital tie-up. The main focus would be supplying Europe with package holidays.
Thomas Cook Airlines was born from the merger between Thomas Cook and MyTravel Group PLC to form Thomas Cook Group in 2007. The airline began operations in the summer of 2008 with a fleet of Airbus A320, A321 and A330 aircraft along with Boeing 757 aircraft. The airline operates worldwide charter flights to and from the UK for a number of tour operators. However, Thomas Cook Tour Operations is the main user of the airline.
Thomas Cook Airlines already enjoys a presence in the Caribbean and by acquiring Air Jamaica may well look to gain a further foothold in the region. In 2010, Thomas Cook expects to cover 22 trips in Caribbean countries including Cuba, the Dominican Republic and Mexico.
With the growth of the Spanish hotel chains in Jamaica it is generally expected that one of the world's largest tour operators, Tui, will step up their presence in the English-speaking Caribbean. Thomas Cook Airlines may well see the acquisition of Air Jamaica as a counter measure.
The Jamaican Government has made it clear that Air Jamaica, with losses of around US$150 million and outstanding loans of over US$600 million a year, is a burden on the public purse and must be divested as soon as possible. Entities hoping to acquire Air Jamaica have to undergo a prequalification exercise stipulated by the World Bank's International Finance Corporation (IFC) which is giving Minister Wehby technical advice on the sale of the national carrier.
But as the airline is being prepared for sale and is seen as an albatross around the state's neck, its CEO, Bruce Nobles, is reporting a number of improvements.
During the month of April, Air Jamaica completed 100 per cent of scheduled flights with no cancellations and sold 82 per cent of its available seats. Its on-time performance was 50 per cent better than April 2008. With an increase in its load factor, it is also putting on additional flights and is reporting record bookings for this summer.
Thomas Cook's offer is interesting as it would provide linkages into developing the European market and diversifying away from over-reliance on the US. They probably need to partner with an existing carrier to make a more credible bid however.
Caribbean Airlines and Thomas Cook make play for Air J
By Al Edwards
Friday, June 05, 2009
Trinidadian carrier Caribbean Airlines and British tour operator Thomas Cook have both expressed an interest in acquiring Jamaica's national carrier Air Jamaica, Caribbean Business Report has learnt.
"There are two solid offers on the table and both parties are reputable," an executive working on securing a deal told this newspaper on condition of anonymity. "The British tour operator Thomas Cook and Trinidad's Caribbean Airlines have placed serious bids for Air Jamaica and it is now a process of evaluation and negotiation. This deal is likely to be completed within the deadline."
The deadline for privatising Air Jamaica was recently extended to June 30.
Last month, Minister Without Portfolio in the Ministry of Finance Don Wehby, said two offers have been made for the cash-strapped airline but would not be drawn on the specifics of the bids. He did say that the Government was trying to "recapitalise Air Jamaica with a partner, and I think we are getting there".
If Caribbean Airlines' bid proves to be successful, it would make the Trinidadian carrier the largest indigenous Caribbean airline operator in the region.
Caribbean Airlines replaced BWIA as Trinidad and
Tobago's national carrier in 2007. It operates international services from the Caribbean to the United States, United Kingdom, Canada and South America. The airline, wholly owned by the Government of Trinidad and Tobago, began operating with a fleet of six Boeing 737-800 aircraft and one Airbus A340-313.
In November 2008, it increased its fleet to eight Boeing 737-800 with aircraft refitted to the standard 16/138 configuration. The airline has steadily increased its flights and routes and Trinidad's Piarco International Airport serves as its hub.
Caribbean Airlines CEO Phillip Saunders has vowed to turn a profit this year, just two years after the airline's formation. Caribbean Airlines has come under heavy criticism for being too heavily subsidised by the Trinidadian Government. In 2007, the Government spent US$250 million to wind up Caribbean Airlines' predecessor, BWIA, and then another US$100 million to set up Caribbean Airlines.
Saunders, who has set about cutting both unprofitable routes and staff costs, has placed great stock in better efficiencies and is determined to make the airline more service-oriented. To that end, Caribbean Airlines now enjoys an 87 per cent on-time service record and is 85 per cent automated. It has added Caracas, Venezuela to its routes and is now the national carrier for Guyana.
Speaking with the Trinidad Guardian last year, Saunders said: "Service is not something which is being sustained by our competitors. Air Jamaica has been challenged. Our job is to concentrate on Caribbean Airlines.
"We're re-engineering the way we do business. That's looking at every single element of our business. In terms of people, it is always important that we have the most efficient and effective cost base as possible while not compromising the customer experience. We will always look at what we do in the airline on a cost basis."
Saunders has managed to compartmentalise the airline into four separate business lines; namely, the airline business, retail services, cargo and the technics/maintenance business. He sees this as the route to sustainable profitability.
Caribbean Airlines is the envy of many regional carriers in that it now has the ability to provide airline maintenance service for both regional and international carriers. This comes under its technics department created in 2007.
"Saunders may well see some intrinsic value in Air Jamaica and will not pass up lightly the opportunity to make Caribbean Airlines a true regional carrier," a former BWIA executive told Caribbean Business Report from Trinidad. "Both Liat and Allen Sandford's Caribbean Star do not have the ability to truly link the region; Caribbean Airlines has. Its technics division is a big feather in its cap in that certain synergies can now be obtained.
The prospect of adding to its fleet and enjoying a bigger presence in the diaspora is exciting.
"On the other hand, Air Jamaica has not made a profit in over 40 years, despite huge injections of cash by the Government. In 2007, it made a loss of US$171 million and the year before that US$128 million. So why take on that headache? Well, if a regional carrier is truly to be viable, Air Jamaica must come into the mix somewhere and Saunders is fully aware of that. The question is, can he acquire it at the right price?"
The UK tour operator Thomas Cook has deeper pockets than Caribbean Airlines and on paper looks the better bet. In the UK, Thomas Cook conforms to the model of a "vertically integrated travel company" operating an airline, a retail arm and also a tour operator.
In 1999, Thomas Cook sold off its worldwide Foreign Exchange business to Travelex to concentrate only on tours and holidays. The events of September 11, 2001 brought on a depression in the travel industry which saw Thomas Cook disposing of some of its businesses in favour of a leaner operation that was asset-light with minimum capital tie-up. The main focus would be supplying Europe with package holidays.
Thomas Cook Airlines was born from the merger between Thomas Cook and MyTravel Group PLC to form Thomas Cook Group in 2007. The airline began operations in the summer of 2008 with a fleet of Airbus A320, A321 and A330 aircraft along with Boeing 757 aircraft. The airline operates worldwide charter flights to and from the UK for a number of tour operators. However, Thomas Cook Tour Operations is the main user of the airline.
Thomas Cook Airlines already enjoys a presence in the Caribbean and by acquiring Air Jamaica may well look to gain a further foothold in the region. In 2010, Thomas Cook expects to cover 22 trips in Caribbean countries including Cuba, the Dominican Republic and Mexico.
With the growth of the Spanish hotel chains in Jamaica it is generally expected that one of the world's largest tour operators, Tui, will step up their presence in the English-speaking Caribbean. Thomas Cook Airlines may well see the acquisition of Air Jamaica as a counter measure.
The Jamaican Government has made it clear that Air Jamaica, with losses of around US$150 million and outstanding loans of over US$600 million a year, is a burden on the public purse and must be divested as soon as possible. Entities hoping to acquire Air Jamaica have to undergo a prequalification exercise stipulated by the World Bank's International Finance Corporation (IFC) which is giving Minister Wehby technical advice on the sale of the national carrier.
But as the airline is being prepared for sale and is seen as an albatross around the state's neck, its CEO, Bruce Nobles, is reporting a number of improvements.
During the month of April, Air Jamaica completed 100 per cent of scheduled flights with no cancellations and sold 82 per cent of its available seats. Its on-time performance was 50 per cent better than April 2008. With an increase in its load factor, it is also putting on additional flights and is reporting record bookings for this summer.
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