Air Jamaica London Route was Uneconomical - Jamaica Finance Minister
Aim is to attract equity capital from private sector
Kingston, Jamaica -- June 5, 2007 --- Minister of Finance and Planning, Dr. Omar Davies has said that the decision by the board and management of Air Jamaica to discontinue the London route was arrived at after careful and extensive deliberations.
Speaking at a press conference on the status of Air Jamaica at the Ministry's National Heroes Circle offices on (June 1), Minister Davies noted that, "Over the past three years, substantial increases in fuel prices, along with the impact on fares due to additional competition from scheduled and charter flights have made the London route very uneconomical."
As a result, he explained that Air Jamaica experienced a negative contribution on the route of approximately US$27 million in 2006 and based on current projections, the figure would exceed US$30 million, or approximately US$2.5 million per month in 2007.
According to the Finance Minister, in order to maintain its presence on the route, Air Jamaica sought to enter into a code-sharing arrangement with a partner and both British Airways and Virgin Atlantic had presented very comprehensive proposals.
"The final decision to go with Virgin Atlantic was due to the fact that its proposal was superior on several counts including the cash payment for the Heathrow slots; the tenure of the agreement; passenger hand-off; and gateway links with North America," he outlined.
However, Dr. Davies emphasized, the decision to go with Virgin Atlantic as opposed to British Airways does not diminish the importance of British Airways to Jamaica, including its contributions to the economy.
Responding to comments that Air Jamaica's slot to London Heathrow should have been leased rather than sold, he pointed out that none of the proposals submitted offered to enter into a lease agreement.
"For both Virgin Atlantic and British Airways, the level of investment would require security of tenure, which could not be afforded in a lease agreement," he said.
Continuing Dr. Davies noted that, "The slots are granted on a 'use or lose' basis and if usage drops below 80 per cent the company automatically loses the rights to the slots. Therefore, the suggestion to hold the slot in case Air Jamaica decides to re-enter the UK market, was not an option."
optimism, the Minister reiterated the Government's commitment to the
national airline, as it was of definite value to the economy and the
"The medium to long term priority of the government is to restructure the airline, such that its operations will become profitable, and attract adequate equity capital from the private sector," he pointed out.
Meanwhile Minister Davis told the
journalists at the press conference that the Government was prohibited
from making premature statements relating to the agreement reached with
Virgin Atlantic until a number of issues were finalized.
"We should remember that Air Jamaica is a commercial entity, which operates in a highly competitive environment. We fully support the need for transparency, and also for appropriate consultation, however, negotiations with private interests cannot be conducted in public and market-sensitive information cannot be fully aired," he reiterated.
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