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THE JAMAICAN Government could be called on to pay more than J$133 million to American Airlines as part of a revenue-guarantee airlift agreement signed last November.
American Airlines inked the deal with Jamaican authorities to service the Miami, Dallas and Chicago routes to Montego Bay.
As part of the accord, the United States carrier would transport thousands of passengers to Jamaica.
However, there was a decline in bookings and the airline recorded a shortfall of US$1.5 million up to July 31 this year.
This was confirmed by Lionel Reid, executive director of Jamaica Vacations Limited (JAMVAC), at a meeting of Parliament's Public Administration and Appropriations Committee (PAAC) on Wednesday.
"It can be called (on)," he told committee members. The Tourism En-hancement Fund had provided letters of credit to secure the agreement with the US carrier on behalf of JAMVAC. The total guarantee was set at US$3 million.
A document provided by the Ministry of Tourism highlighted a deficit of over US$1 million (more than J$94 million) for the Dallas operation while the financial out-turn for Miami showed a loss of just over US$570,000 (approximately J$51 million).
However, the airline had a surplus of US$181,107 (J$16.1 million) for its Chicago operation.
Chairman of the PAAC, Dr Wykeham McNeill, observing that the loss for Miami and Dallas occurred during the best of the tourism season, questioned whether the country could lose the entire US$3 million that was guaranteed.
Acknowledging that this was possible, Reid indicated that the country had "no choice" at the time it entered into this arrangement with American Airlines.
He told the committee that at the time the deal was signed, the airline was about to withdraw its services from Dallas. "They were also going to scale down significantly from Miami if we had not entered into these arrange-ments at that time," Reid explained.
The JAMVAC executive said a reduction in the number of flights would have had a negative impact on the sector, resulting in a sharp cut in room occupancy and declining revenues to the Government.
Pressed for further detail about the implications of the loss by the airline, director of the Jamaica Tourist Board, John Lynch, said the agreement would end early next month. He said at that time "a full accounting will take place".
He said American Airlines informed the minister recently that it would continue to service these routes "on its own" into the winter tourist season.
Lynch stressed that there would be no disruption in the service to Jamaica.
According to the JTB director, the agreement with American Airlines was "probably one of the best investments" the country made.
However, committee member Ronald Thwaites wanted Lynch to support his claim with figures. "I am Thomas, I need proof," he insisted.
McNeill also queried revenue guarantees in the sum of CAN$360,900 to Transat, an airline out of Canada. He questioned the need for this arrangement contending that Air Canada and Air Jamaica serviced routes out of that country.
Responding, the JAMVAC head said the support for Transat was for new markets. "They have gone into London, Ontario, taking flights out of Victoria, British Columbia, Calgary, Vancouver, Victoria; for the first time we'll have direct service from British Columbia. They have put in place an additional 18,000 seats for the winter season," he said.
Late last year, Tourism Minister Edmund Bartlett had said that despite putting up the money for the American Airline guarantee, the deal might not cost the country "one cent".
edmond.campbell@gleanerjm.com
http://www.jamaica-gleaner.com/glean...ead/lead1.html#
American Airlines inked the deal with Jamaican authorities to service the Miami, Dallas and Chicago routes to Montego Bay.
As part of the accord, the United States carrier would transport thousands of passengers to Jamaica.
However, there was a decline in bookings and the airline recorded a shortfall of US$1.5 million up to July 31 this year.
This was confirmed by Lionel Reid, executive director of Jamaica Vacations Limited (JAMVAC), at a meeting of Parliament's Public Administration and Appropriations Committee (PAAC) on Wednesday.
"It can be called (on)," he told committee members. The Tourism En-hancement Fund had provided letters of credit to secure the agreement with the US carrier on behalf of JAMVAC. The total guarantee was set at US$3 million.
A document provided by the Ministry of Tourism highlighted a deficit of over US$1 million (more than J$94 million) for the Dallas operation while the financial out-turn for Miami showed a loss of just over US$570,000 (approximately J$51 million).
However, the airline had a surplus of US$181,107 (J$16.1 million) for its Chicago operation.
Chairman of the PAAC, Dr Wykeham McNeill, observing that the loss for Miami and Dallas occurred during the best of the tourism season, questioned whether the country could lose the entire US$3 million that was guaranteed.
Acknowledging that this was possible, Reid indicated that the country had "no choice" at the time it entered into this arrangement with American Airlines.
He told the committee that at the time the deal was signed, the airline was about to withdraw its services from Dallas. "They were also going to scale down significantly from Miami if we had not entered into these arrange-ments at that time," Reid explained.
The JAMVAC executive said a reduction in the number of flights would have had a negative impact on the sector, resulting in a sharp cut in room occupancy and declining revenues to the Government.
Pressed for further detail about the implications of the loss by the airline, director of the Jamaica Tourist Board, John Lynch, said the agreement would end early next month. He said at that time "a full accounting will take place".
He said American Airlines informed the minister recently that it would continue to service these routes "on its own" into the winter tourist season.
Lynch stressed that there would be no disruption in the service to Jamaica.
According to the JTB director, the agreement with American Airlines was "probably one of the best investments" the country made.
However, committee member Ronald Thwaites wanted Lynch to support his claim with figures. "I am Thomas, I need proof," he insisted.
McNeill also queried revenue guarantees in the sum of CAN$360,900 to Transat, an airline out of Canada. He questioned the need for this arrangement contending that Air Canada and Air Jamaica serviced routes out of that country.
Responding, the JAMVAC head said the support for Transat was for new markets. "They have gone into London, Ontario, taking flights out of Victoria, British Columbia, Calgary, Vancouver, Victoria; for the first time we'll have direct service from British Columbia. They have put in place an additional 18,000 seats for the winter season," he said.
Late last year, Tourism Minister Edmund Bartlett had said that despite putting up the money for the American Airline guarantee, the deal might not cost the country "one cent".
edmond.campbell@gleanerjm.com
http://www.jamaica-gleaner.com/glean...ead/lead1.html#
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