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JALPA makes case to take over Air J
BY KIMONE THOMPSON Features editor - Sunday thompsonk@jamaicaobserver.com
Sunday, February 21, 2010
UNDER the Jamaican Airline Pilots Association (JALPA), Air Jamaica's former Miami route would have earned a profit of $1.5 million in a single year, instead of racking up losses in excess of $2.5 million.
So says Captain John Eyre, a member of the JALPA Acquisition Team that is seeking to take the national airline off Government's hands, but which Prime Minister Bruce Golding and Finance Minister Audley Shaw say does not have the capital so to do.
EYRE... we need to look at the cost of maintaining the aircraft and our passenger handling costs
[Hide Description] EYRE... we need to look at the cost of maintaining the aircraft and our passenger handling costs
[Restore Description]
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However, Eyre insists that studies the pilots commissioned show that Air Jamaica, under JALPA's leadership, "can break even within the first year and would start to make a profit by the second year".
"When Air Jamaica was cutting back some of the routes last year, including Miami, we ran the numbers and found that if we right-size the fleet, the turnaround would have gone from a $2.5-million loss to a $1.5-million profit," he said.
Right-sizing the fleet, Eyre said, would mean using smaller planes that more closely match the load factors (the number of passengers on a given flight) on particular routes. He noted that the "small profit" made in 2009 by the Havana route, for example, which had a load factor of 55 per cent, could skyrocket if the 150-seater aircraft now used were changed to a 98-seater Embrear 190. As such, Eyre said the group would bring in three 98-seaters within the first six months of taking over Air Jamaica.
"Assuming the revenue remains the same, reducing operating cost by using the right size aircraft changes the equation completely, for the better," he told the Sunday Observer after addressing a Rotary club meeting at the Liguanea Club Thursday.
"Airlines operating the Embrear 190 have found it significantly easier to service secondary routes and start up new destinations, something that a properly capitalised Air Jamaica would have to do to be competitive," he added.
But right-sizing is only one of the strategies Eyre said JALPA is including in an updated proposal it intends to deliver to Government by tomorrow. Other key ones are developing Montego Bay as a hub for connecting flights, outsourcing some services and possibly forming an airport services company.
"We intend to develop strategic partnerships with airlines in the key markets and with those strategic partners, develop Montego Bay as a hub so that within five years, 30 per cent of the traffic that gets on Air Jamaica, will not originate in or be destined for Jamaica," he said. "So a passenger boarding in New York might come to Montego Bay and connect to somewhere else and a passenger boarding in Curacao would see that Air Jamaica is the best option for him to get to Fort Lauderdale or to Denver or to Chicago."
Eyre stressed that such a move would reduce risk, especially in the event of natural disasters or other unforeseen circumstances that could negatively affect passenger arrivals to the island.
"We also believe that we have to outsource certain functions because we just don't have the economies of scale to make them viable at Air Jamaica. We need to look at the cost of maintaining the aircraft and our passenger handling costs. Our first priority will be to bring our overheads down by minimising our aircraft lease costs, ensuring that we keep the number of facilities to a minimum by using the virtual office concept.
"One option we're looking at is to create a maintenance repair organisation (MRO), which would make its business maintaining not only Air Jamaica's aircraft, but aircraft from other airlines as well. The MRO would contract with Air Jamaica to provide maintenance at market rates and they can afford to do so because the organisation is productive as a result of the additional business created," he said.
Another area that can be looked at, Eyre added, is to create an airport services company as another subsidiary to offer airport handling services not only to Jamaica but to other airlines as well.
One thing Eyre said the pilots wouldn't change however, is the type of scheduling that has come on stream in the past year in which aircraft utilisation has increased to as much as 12 hours per day in some cases.
BY KIMONE THOMPSON Features editor - Sunday thompsonk@jamaicaobserver.com
Sunday, February 21, 2010
UNDER the Jamaican Airline Pilots Association (JALPA), Air Jamaica's former Miami route would have earned a profit of $1.5 million in a single year, instead of racking up losses in excess of $2.5 million.
So says Captain John Eyre, a member of the JALPA Acquisition Team that is seeking to take the national airline off Government's hands, but which Prime Minister Bruce Golding and Finance Minister Audley Shaw say does not have the capital so to do.
EYRE... we need to look at the cost of maintaining the aircraft and our passenger handling costs
[Hide Description] EYRE... we need to look at the cost of maintaining the aircraft and our passenger handling costs
[Restore Description]
1/1
However, Eyre insists that studies the pilots commissioned show that Air Jamaica, under JALPA's leadership, "can break even within the first year and would start to make a profit by the second year".
"When Air Jamaica was cutting back some of the routes last year, including Miami, we ran the numbers and found that if we right-size the fleet, the turnaround would have gone from a $2.5-million loss to a $1.5-million profit," he said.
Right-sizing the fleet, Eyre said, would mean using smaller planes that more closely match the load factors (the number of passengers on a given flight) on particular routes. He noted that the "small profit" made in 2009 by the Havana route, for example, which had a load factor of 55 per cent, could skyrocket if the 150-seater aircraft now used were changed to a 98-seater Embrear 190. As such, Eyre said the group would bring in three 98-seaters within the first six months of taking over Air Jamaica.
"Assuming the revenue remains the same, reducing operating cost by using the right size aircraft changes the equation completely, for the better," he told the Sunday Observer after addressing a Rotary club meeting at the Liguanea Club Thursday.
"Airlines operating the Embrear 190 have found it significantly easier to service secondary routes and start up new destinations, something that a properly capitalised Air Jamaica would have to do to be competitive," he added.
But right-sizing is only one of the strategies Eyre said JALPA is including in an updated proposal it intends to deliver to Government by tomorrow. Other key ones are developing Montego Bay as a hub for connecting flights, outsourcing some services and possibly forming an airport services company.
"We intend to develop strategic partnerships with airlines in the key markets and with those strategic partners, develop Montego Bay as a hub so that within five years, 30 per cent of the traffic that gets on Air Jamaica, will not originate in or be destined for Jamaica," he said. "So a passenger boarding in New York might come to Montego Bay and connect to somewhere else and a passenger boarding in Curacao would see that Air Jamaica is the best option for him to get to Fort Lauderdale or to Denver or to Chicago."
Eyre stressed that such a move would reduce risk, especially in the event of natural disasters or other unforeseen circumstances that could negatively affect passenger arrivals to the island.
"We also believe that we have to outsource certain functions because we just don't have the economies of scale to make them viable at Air Jamaica. We need to look at the cost of maintaining the aircraft and our passenger handling costs. Our first priority will be to bring our overheads down by minimising our aircraft lease costs, ensuring that we keep the number of facilities to a minimum by using the virtual office concept.
"One option we're looking at is to create a maintenance repair organisation (MRO), which would make its business maintaining not only Air Jamaica's aircraft, but aircraft from other airlines as well. The MRO would contract with Air Jamaica to provide maintenance at market rates and they can afford to do so because the organisation is productive as a result of the additional business created," he said.
Another area that can be looked at, Eyre added, is to create an airport services company as another subsidiary to offer airport handling services not only to Jamaica but to other airlines as well.
One thing Eyre said the pilots wouldn't change however, is the type of scheduling that has come on stream in the past year in which aircraft utilisation has increased to as much as 12 hours per day in some cases.
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