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The US$100m problem - Air J boss projects US$80m improvement to bottom line
published: Sunday | February 4, 2007
Michael Conway, chief executive officer of Air Jamaica.
Meikle, Business Reporter <SMALL>
President and CEO of Air Jamaica, Mike Con-way, says that replacing the Airbus fleet with Boeing aircraft will cut costs to the airline by more than US$38 million within two years.
At the same time, Conway is also banking on new business from South America to boost revenues under plans to position Jamaica, by year-end, as an alternative to Miami for air traffic emanating from countries like Venezuela and Brazil into the United States.
Cabinet last week agreed to US$120 million of financial support for the airline, a quarter of which will finance the fleet switch from Airbus to Boeing while US$90 million will go towards operating losses over the transition period.
With the injection of new capital, Air Jamaica is now projecting a US$40 million boost in earnings from new markets, building out its business-class service with the addition of new seats, and flying fewer seats on specific routes to balance its carrying capacity for passengers and cargo and to manage its big ticket cost for jet fuel.
Better suited
On Friday, the airline president again told Sunday Business that Boeing planes were better suited to the airline's plans, denying earlier claims by a line technician who appeared before the Special Select Committee Meeting of Parliament that Airbus was more cost-efficient.
The airline plans to lease nine 737-300 and six 757-200 Boeing aircraft but, in their report to the committee, the technicians argued that the new fleet was unable to fly beyond 1,400 nautical miles and not as fuel-efficient as the Airbus, which has a longer range.
"That's not true," said Conway on Friday. "The airplane has a range of over 2,000 nautical miles [and] has the range to fly any route we fly with the exception of London and Los Angeles."
According to the airline executive, the 757 has substantially more range and 30 per cent more payload capacity than the A320.
"That (payload capacity) is what is critical throughout the Caribbean [where] people don't just fly, they move with the amount of luggage which they have."
Conway said that on full Airbus A320 flights from the North-east United States to Grenada and Jamaica, it was not unusual for Air Jamaica to leave up to 100 pieces of luggage behind.
"But we don't intend to fill the 757 with 220 seats - that's a bit cramped. We intend to carry 190 seats [which] will allow us to carry even more luggage. It will burn about five per cent more fuel than its counterpart - but in our view that is more than made up for the range and payload," added Conway.
Savings
By his estimates, the current reorganisation of the airline's fleet, which is estimated to cost about US$30 million over the next two years, will save about US$22.5 million in maintenance costs and another US$16 million in ownership cost.
Conway estimates that through the improvement in reliability and on-time performance, the airline will improve its turnover by 10 per cent in a year or two.
"The fleet transition cost is half of the solution to the US$100 million annual loss of the airline," noted Conway, who says that the current business plan - recently approved by Cabinet - aims to make Air
published: Sunday | February 4, 2007
Michael Conway, chief executive officer of Air Jamaica.
Meikle, Business Reporter <SMALL>
President and CEO of Air Jamaica, Mike Con-way, says that replacing the Airbus fleet with Boeing aircraft will cut costs to the airline by more than US$38 million within two years.
At the same time, Conway is also banking on new business from South America to boost revenues under plans to position Jamaica, by year-end, as an alternative to Miami for air traffic emanating from countries like Venezuela and Brazil into the United States.
Cabinet last week agreed to US$120 million of financial support for the airline, a quarter of which will finance the fleet switch from Airbus to Boeing while US$90 million will go towards operating losses over the transition period.
With the injection of new capital, Air Jamaica is now projecting a US$40 million boost in earnings from new markets, building out its business-class service with the addition of new seats, and flying fewer seats on specific routes to balance its carrying capacity for passengers and cargo and to manage its big ticket cost for jet fuel.
Better suited
On Friday, the airline president again told Sunday Business that Boeing planes were better suited to the airline's plans, denying earlier claims by a line technician who appeared before the Special Select Committee Meeting of Parliament that Airbus was more cost-efficient.
The airline plans to lease nine 737-300 and six 757-200 Boeing aircraft but, in their report to the committee, the technicians argued that the new fleet was unable to fly beyond 1,400 nautical miles and not as fuel-efficient as the Airbus, which has a longer range.
"That's not true," said Conway on Friday. "The airplane has a range of over 2,000 nautical miles [and] has the range to fly any route we fly with the exception of London and Los Angeles."
According to the airline executive, the 757 has substantially more range and 30 per cent more payload capacity than the A320.
"That (payload capacity) is what is critical throughout the Caribbean [where] people don't just fly, they move with the amount of luggage which they have."
Conway said that on full Airbus A320 flights from the North-east United States to Grenada and Jamaica, it was not unusual for Air Jamaica to leave up to 100 pieces of luggage behind.
"But we don't intend to fill the 757 with 220 seats - that's a bit cramped. We intend to carry 190 seats [which] will allow us to carry even more luggage. It will burn about five per cent more fuel than its counterpart - but in our view that is more than made up for the range and payload," added Conway.
Savings
By his estimates, the current reorganisation of the airline's fleet, which is estimated to cost about US$30 million over the next two years, will save about US$22.5 million in maintenance costs and another US$16 million in ownership cost.
Conway estimates that through the improvement in reliability and on-time performance, the airline will improve its turnover by 10 per cent in a year or two.
"The fleet transition cost is half of the solution to the US$100 million annual loss of the airline," noted Conway, who says that the current business plan - recently approved by Cabinet - aims to make Air