Air J's London route sold for £5.1 million

[Karl]

Air J's London route sold for £5.1 million
BALFORD HENRY, Observer writer
Saturday, June 02, 2007

Finance Minister Omar Davies (left) answers a question about the sale of Air Jamaica's London route, at a press conference held at his ministry in Kingston yesterday. At right is the airline's chairman O K Melhado. (Photo: Joseph Wellington)
FINANCE Minister Dr Omar Davies announced yesterday that Air Jamaica's sale of its London (Heathrow) route to the British airline, Virgin Atlantic, was for £5.1 million (US$10.2 million).

Davies said, however, that the sale, which has ignited some controversy in the business sector, was still being negotiated. This, he said, including the cost of tickets already bought for travel on Air Jamaica between London and Kingston after October which will have to be handled by Virgin Atlantic.

In the meantime, Air Jamaica's CEO Michael Conway said that while much has been said about the sale of the route, there were other factors involved.

"We have passengers who have made reservations and paid for tickets and will be flying after October 28. Those passengers will be carried by Virgin, and part of the negotiations has to do with when Virgin provides the service, how much money can we give Virgin for those passengers who are already paid up?" Conway said. However, he said that he was not prepared to discuss what that cost would be.

"Another part of that has to do with what the pro-rated agreement is," he added. "We will continue to sell tickets to London, with our flight numbers and we have a certain number of seats that are allocated to us on very complex terms. We have locked those prices in and there is a spread between those prices and what we have to turn over to Virgin. But I am not prepared to discuss what those are either," Conway told reporters attending a press conference at the finance ministry in Kingston that was actually called to give details of the sale of the airline's London route, first reported by the British press.

The Air Jamaica CEO said, too, that there was also extensive negotiations on common gateways.

"There are several cities in the US that are served by both Virgin and Air Jamaica. For example, persons will be able to fly on Air Jamaica to Miami, Orlando, Newark, JFK, Chicago and even Los Angeles and connect to Virgin and go on to Heathrow at no extra cost," he said.

Davies, in response to a question on Conway's explanation, was defensive of the £5.1 million price, saying that the CEO was only explaining what he considered to be additional gains being negotiated with Virgin.

Air Jamaica's chairman O K Melhado said he felt that the price was a "fair market price", reflecting the competitive nature of the route.

Davies had insisted earlier that negotiations with private interests could not be conducted in public, and market sensitive information cannot be fully aired.

He said that the concerns raised about lack of public consultation reminded him of those raised about the negotiations between Mirant and Marubeni on the sale of their 80 per cent shares in the Jamaica Public Service Company Limited.

"It is very important that the country recognise that in terms of commercial agreements, one cannot have these discussions at the National Arena, in which everyone can have a say. These are commercial discussions," Davies said.

"I wish to indicate that the decision to discontinue the London route was arrived at after careful and extensive deliberations. The route has been a significant drag on profitability, with little or no prospects for a reversal of the trend.

"It is our expectation that the action taken by Air Jamaica, coupled with other initiatives, will put the company on path to commercial success in the future."

He said he will be making a statement to Parliament on Tuesday on the sale of the London route.

[Karl]

Air Jamaica: are the leaders to be blamed?
David Chen
Saturday, June 02, 2007


Over the years as an active and true supporter for "Brand Jamaica", I have realised that we are moving backwards instead of forward. Not just with the Air Jamaica situation, but overall with the idea of "Jamaicans working together to make it better".

I remember when I formed the organisation "Voicing For Jamaica" well over nine years ago, my overall aim and objective was, and always will be, for all Jamaicans and friends of Jamaica to "Work together to make it better" and overall, to change whatever "negative we have to positive".

Speaking from a marketing and PR perspective, with regard to Brand Jamaica - unfortunately our leaders and international government officials prefer to employ outside the Jamaican race and culture - it is now so embarrassing for me as a passionate Jamaican to put my tearful face in my hands and try to understand that we now own nothing! Air Jamaica could have lasted if the management team saw the interest to communicate with fellow Jamaicans who tried to support it positively and those who were culturally involved and active in the community. Remember, everyone wants something cheaper. Look at any China Town worldwide, what do you see (think about it)?

Air Jamaica, from a marketing and promotional perspective, did not seem to want to get involved with the promotion of cultural events, compared to people like Western Union and Virgin Atlantic. I approached Air Jamaica on numerous occasions with various ideas. The cost was very little - just to put the company's logo on one of my promotional events. Perhaps their UK marketing and PR company could have done more.

Leaders, locally and internationally, how do you feel? We had the most beautiful Love Bird in the sky, one that we as Jamaicans were proud of, regardless of the negative views. We still wanted to promote our national carrier. Without doubt, Virgin will offer a better service, will be more widely seen in the public's eyes and without doubt be visible in the community. I can also see where Virgin will be employing a team from Jamaica to manage the Jamaica route.

What is more upsetting than anything else right now, is that we have approached you, our leaders, many times to assist with the development of Brand Jamaica, but have been shunned on many occasions. I can recall when I have been called a "one man band", have been told to "stop dreaming", yet when there is anything to be promoted, we are being called upon by the government's disciples. The Jamaican Diaspora UK is a major example, and many Jamaicans who live in the UK will understand where I am coming from with regards to the diaspora. Regardless, we are all Jamaicans so we need to assist positively as much as possible.

Back in the early 90s before Air Jamaica started operating in the UK again, a number of business partners and I worked hard to promote an airline called "All Jamaica Limited" (AJL).

This was the first carrier that would offer the opportunity to fellow Jamaicans and those who had an interest in visiting the island to journey via Cuba. This was a brilliant idea, especially since we were offering travellers the opportunity to visit two islands for the price of one. Unfortunately, we lasted less than a year. We felt it was because the government did not have a major stake in the operation and the idea, so we were left out in the cold.

If the government had a forward-thinking sense, they would see the potential of what true and passionate Jamaicans and friends of Jamaica were trying to do. If AJL had lasted, we would have been the first carrier out of Jamaica to offer the opportunity for visitors to have a stop-off journey en route to Jamaica, via Cuba.

I tried hard to support Air Jamaica over the years - on a weekly basis through my TV programme and through my E-Commercing business for nothing, but how long can you work for nothing when others who do not know much about the culture are reaping the benefit? How fair is that?

The problem I see with most Jamaican-owned companies is that the majority of the heads of operations are not Jamaicans. I am not saying this is wrong. If the head of operations understands the culture of the island, the people, the infrastructure and, most important, the attitude and business sense overall, that's fine. However, it is most frustrating when you from the outside can see the difficulty and those who are paying for the service cannot, until when things have gone wrong!

Having been in the travel and tourism industry for over 17 years in the UK, a Jamaican travel specialist (approved by the Jamaica Tourist Board), and having visited not one, not two, but almost all the islands of the Caribbean, I know we can do a lot better to support the travel and tourism industry. Do like the Chinese - promote in the community - and let's work together to make it better. Only we can do better for ourselves.

David Chen is a freelance journalist, host of The BBS SHOW, and is the brainchild behind Voicing For Jamaica and The Caribbean Connection in the UK.
Chen241@aol.com

[Karl]

The big question on that Air Jamaica Heathrow deal
Diane Abbott
Sunday, June 03, 2007


Air Jamaica has now belatedly admitted that it has sold off its Kingston/London route to the British airline Virgin Atlantic. But this came well over a week after Virgin had proudly announced the news in London. And there are still questions to answer, in particular, where does Air Jamaica go from here?
Diane Abbott

The most striking thing about the whole episode was the apparent reluctance to come clean with the people of Jamaica. It is understandable that there had to be a measure of confidentiality when the "sell off" negotiations were actually going on. But on Tuesday, two weeks ago, Virgin Atlantic put out a press release stating "Virgin Atlantic. is to expand its services to Jamaica later this year with the launch of new flights between London Gatwick and Kingston. The move follows Air Jamaica's decision to cease operations between the UK and Jamaica so as to concentrate on its core routes."

Virgin could not have been clearer about what was really happening. But days later the chairman of the Jamaica Tourist Board would still only admit that the Government was "reviewing its options" in relation to Air Jamaica. And Air Jamaica itself was silent. Instead, Jamaican journalists were deliberately confused by talk of "code sharing".

Code sharing is an administrative procedure designed to allow Air Jamaica passengers to be booked onto Virgin flights with the minimum of complications. The real story was not the "code sharing", the real story was the sell-off. But Jamaicans might have been forgiven for believing that the phrase "code sharing" meant that Air Jamaica and Virgin were somehow to continue to run the route jointly.

Yet, Air Jamaica seemed happy for this misapprehension to linger. Once the deal was signed, why was there the delay in spelling out for the Jamaican people what was really going on?

The other unanswered questions are about the future for Air Jamaica. Business consultants are supposed to have advised the Jamaican Government to concentrate on Air Jamaica's regional operations. But where is the business plan for that? Competition in the region is fierce. Not just Caribbean Airlines, but American Airlines is increasingly in contention. And in its press release last week Virgin hinted that in the future it might be competing directly with Air Jamaica by using Jamaica as a hub for flights all over the Caribbean. It said, "In future, we will look to build up connecting traffic via Jamaica to other points in the Caribbean region".

So what plans has Air Jamaica got for staving off the competition? Air Jamaica was losing $2 million a month on the London/ Kingston route. But British Airways and Virgin are apparently able to run the same transatlantic route profitably. They obviously have economies of scale.
But their fares are no higher than Air Jamaica's (in Britain at least). Could it be that there are structural reasons why Air Jamaica loses so much money, which will not be solved just by jettisoning a particular route? And, if those structural problems are not being addressed, why should the Jamaican taxpayer be asked to continue pouring money down the drain supporting the airline?



Business consultants are supposed to have advised the Jamaican Government to concentrate on Air Jamaica's regional operations. But where is the business plan for that?

But perhaps the biggest unanswered questions are about the sale of Air Jamaica's take-off and landing slots at Heathrow. It cannot be stressed enough how valuable those landing rights are. Heathrow is the busiest airport in the world and is virtually full. The "Open Skies" agreement, which has opened up the United States market, has made those slots more valuable than ever. Some airlines that have these slots but no longer use them refuse to sell outright. Instead, they "lend" them out. Others run empty planes out of Heathrow, just to maintain their right to the slots.

Getting their hands on these take-off and landing rights at Heathrow would have been almost as important to Virgin as obtaining the Kingston/London route itself. Notably, Virgin will not be wasting these slots on flights to Jamaica. Instead, Jamaican flights will be relegated to the less popular Gatwick airport.

In 2004, the Australian airline Qantas reportedly paid US$40 million to buy just two pairs of such slots. At the end of last year, the Trinidad and Tobago Government sold seven such slots to British Airways for US$10 million. But local politicians claimed the slots were worth much more.

So how much did Virgin pay for the Heathrow landing rights? Divesting the London route probably made sense in terms of Air Jamaica's long-term future and the need to rationalise costs. But selling the take-off and landing rights at Heathrow was asset stripping pure and simple.

Presumably the Jamaican public will not have to wait long to find out how much was paid for them. The Trinidad and Tobago Government announced in Parliament how much they sold BWIA's Heathrow slots for. So what reason could there be for the Jamaican Government not to follow their lead?

[Karl]

Air Jamaica - now small a yard, small abroad

Wednesday, June 06, 2007


Dear Editor,
It is difficult for you to come to your own defence, but I am under no such constriction. The Observer was often criticised for carrying articles exposing the glaring weaknesses in the leadership at Air Jamaica. Now that it is becoming obvious to everyone that our national airline is being run into the ground - since the virtual giveaway of our London slots to Virgin Atlantic - don't expect your critics to come with an apology. The country might yet come to thank you.

It was not long ago that the pride was back and Air Jamaica was soaring. The flying chef offered the best food in the sky, signalling a new level of innovation and creative thinking; so did the idea of champagne flights aboard the newest planes in the sky. It seemed then that every day there were new flights coming from everywhere that Jamaicans wanted to go.

I still like the concept of the "on-time no-line" airline run by experts. It made Jamaica seem larger than life. Nothing described it better than their slogan "Big a yard, big abroad", trumpeted proudly on billboards.

Of course, the government had to get in the way with their incompetence that led to a debilitating Category 2 status. But no sooner was the airline fixed - at great cost - than the dreadful events of 9/11 occurred, devastating the travel industry. Regrettably, we will never know now the heights to which the airline might have flown were it not for 9/11. In any event, politics intervened at even greater cost, causing the real experts at Air Jamaica to bid the airline "see you later".

Mr Editor, what we are left with is a muddling bunch of ineffective managers who don't know where they are going, and can't sensibly tell the public what they've done or what they are going to do to save the airline. But if anything relates to what they've done, or what they say they're going to do with our now declining airline, God help us. It's all sweet talk and non-performance; small a yard, small abroad.

The government destroyed the airline once. It is unbelievable how quickly they are doing it again. But then we live in hope for the truth and in hope that our beloved national airline will one day soar again, even without the jewels which have been sold one after the other.

Thank you, Observer, for keeping us informed and for continuing to believe.
Jennifer Barnes
Falmouth
Trelawny

[Karl]

Decision needed on Air Jamaica's future - Golding

Decision needed on Air Jamaica's future - Golding
published: Wednesday | June 6, 2007


GOLDING


In the wake of losses totalling US$111 million (J$7.4 billion) last year, Opposition Leader Bruce Golding wants the Government to take a hard decision on the future of the national airline, contending that in its 36 years of existence Air Jamaica has only once made a profit, and that was in 1972.

He told his colleagues in Parliament yesterday, that he was disappointed that the committee set up to examine the operations of Air Jamaica did not take a "cold, hard, clinical look" at the airline and recommend serious options going forward.

Mr. Golding's comments came during debate on a motion requesting approval from the House of a US$125 million ($8.37 billion) loan guarantee to Air Jamaica. The motion was approved.

Said he: "This country cannot continue to sustain, to subsidise sacred cows, as much as those cows may be part of our national paraphernalia. We cannot continue to do that when there are critical pressing social problems."

Finance minister agrees
Finance and Planning Minister Dr. Omar Davies agreed with Mr. Golding that the country could not sustain an entity that was losing $100 million per annum.

However, he told the House that the Air Jamaica management team had presented him with a credible plan to reduce the airline's massive losses.
He said the projected savings in terms of reconfiguration was US$40 million, with another US$30 million to be saved from withdrawal from the London route, and additional earnings from expansion into other routes.
He said the first four months of this year had produced encouraging results when compared with the similar period last year.

"Let us look at their business plan, they have presented us with projections. Measure their performance against these projections," he said.

However, Mr. Golding remained sceptical about the airline's new business plan, noting that he had heard similar projections about the airline in the past that did not materialise, both under government and private ownership.
- E.C.

[Karl]

Decision needed on Air Jamaica's future - Golding
published: Wednesday | June 6, 2007


GOLDING


Mr. Golding remained sceptical about the airline's new business plan, noting that he had heard similar projections about the airline in the past that did not materialise, both under government and private ownership.
- E.C.

"...governmentS - PNP and JLP - and private ownership".

[Willi]

Stop try share blame here.

This is clearly a PJ/Vin Lawrence thing!
Dem mess it up, plain and simple.

As

[Willi]

Stop try share blame here.

This is clearly a PJ/Vin Lawrence thing!
Dem mess it up, plain and simple.

As to Melhado, after the sugar cockup, what him doing at AirJam??? Steeeuuuppps.

[GaryD]

I, of course, don't know what data/info you used to

arrive at your conclusion that this is a PJ/Vin Lawrence screw up. At the risk of sounding like an after the fact analyst who points at seemingly the obvious, I would say that if they were the ones who made the final decision to sell the Airline to Butch, while the gov't maintained a significant ownership position, then one needs no additional data to arrive at your conclusions. Oh wait...who else would have made the final decision? (sarcasm).

It was a bad mistake then and no this is not simply based on after the fact, S--- hitting the fan, but clearly there was an inherent conflict of interest to say the least in selling to Butch. Morever, the Canadian group, one of his competitors for buying the airline, had a better business plan.

So, it was a bad decision compounded by a bunch of people who enriched themselves, while we/taxpayers, represented by the gov't, continued to pump "free money" in an overstretched business. So I would add Butch/Zacca to the list; they too are culpable, but heck they are private business men not truly obligated to taxpayer so they were just maximing their interests.

That said, we cannot lose sight of the pressures in the airline industry and industries sensititivities to competitive price points.

Guidance

[Assasin]

Why did they sell it to Butch in the first place?

Air Ja was been grounded by the FAA as the Airline was not up to standard to continue on US routes and the govt had no other option but to make fire sale.

Is not like they sold a profitable entity to Butch.

After taking it back from Butch the govt of Ja should have made some tough hard decision and that is where PJ and Vin Lawerence come in, as Air J losses only got worst while they dilly dally.