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Commentary by

Max Lambie

Whereas most of the commentary about the intent to cease operations of Air Jamaica has been motivated by nationalistic fervor, or sympathy for the employee’s rejected bid, my concerns are pragmatic. I accept the fact that the government needs to unload the US$1.2-billion indebted-albatross, even if there had not been the commitment in the IMF agreement.  I therefore understand  the  effort the Government has taken to soften the cost of the shutdown of the national carrier by seeking  the highest salvage payments that can be had for those few assets that may be worth anything seeing that so much else,  most of all the 5 best of its 7 planes, are under lease. Depending on the time remaining on the leases, of counter and landing slots at US airports may also not be worth much.

 What’s left are its reservations-system, ground-equipment, two older planes and  the ‘right’ to name a  single national carrier to fly to any  airport in the United States; without intermediate stops, in accordance with the bilateral agreement. Currently. AJ only flies to one major hub, in New York, and three second-tier eastern gateways at Philadelphia, Baltimore and Fort Lauderdale. It gave up long ago flying to major hubs such as Newark, Miami, Atlanta, Chicago and Los Angeles. Nor did it ever fly into the mega-hubs of the Midwest such at Dallas or Denver. It just didn’t have the resources to compete in a wide scale. An airline needs a minimum of forty 180-seat planes to do that. Air Jamaica did reach as much as 15 in about 2003 but could not generate the economies of scale to support even that number.

 AJ’s loyalty market is the outgoing Jamaican nationals and overseas nationals returning for visits. This provides 60 per cent of its 4-million annual boarding. Jamaica’s much vaunted tourism lifts, 41 percent of arrivals, are primarily discounted Package-Tours, (airfare and hotel included), and won at the suicidal expense of battling with low-ahead charter carriers. Or the low-overhead charters that fly tour-groups at fares one-third to half lower than regular economy class The a-la-carte self-booking tourist, on the other hand,  flies on one of the US’s high-recognition airlines such as American or United. 

If that were not enough, historically, any schedule (non-charter) airline flying one-hop between the Caribbean and the US, and not also having significant US domestic routes, cannot long survive. Just ask the impoverished former shareholders of PAN AM, Eastern, National, TWA and Air Florida, People, BWIA and Zoom In fact, American Airlines survival formula is to ensure that no more than 40 per cent of its operations are devoted to the vagaries of the medium haul overseas market and no more than 20 per cent of its seats are discounted for package tours.  Note that transatlantic carriers such as Singapore fly 87 percent full year around and, not only never discount, the average is business class which is just a notch below first-class. The average package tour tourist might be just a hairdresser or a taxi driver maxing out on their credit-card  

To compensate for the controlled discounts on its overseas routes, American, United and Continental maintains 60 per cent of their lift capacity for the higher-yielding domestic market. As further proof of the profitability of the domestic US market Southwest and JetBlue avoid the overseas market like the plague. In 2007 Delta got bold and exceeded the 40-percent overseas threshold by going to 60 per cent and found itself in bankruptcy protection.

Even on the previously dependable US to Hawaiian route, as soon as the discount-charters invaded in force Hawaiian Airlines and Japan Air Lines saw themselves filing for bankruptcy protection because of discounting to keep pace.

The bottom-line on airline services to tourism destinations is that there is so much oversupply of planes that have been prematurely retired that like the hydra-headed monster of yore, for every scheduled airline that goes bust, two charter carriers emerge to challenge the predatory market.

            With that precedent, what are the prospects of survival for the 7-plane   Caribbean Airlines, a two-year successor to the defunct BWIA, in staying the course as Air Jamaica’s successor? As much chance as a herring swimming amongst   a flotilla of tiger sharks. No wonder, then, the on-again, off-again negotiations with Caribbean Airlines is taking over a year to be concluded.

            The solution to the dilemma will be explored in a follow-up to this article.

 If that is the case why didn’t Mr. Bartlett administration did not give Air Jamaica another chance to see if running the profitable routes would take the airline out of the red? Why didn’t Mr. Bartlett give the Airline Pilot Association a chance to purchase the airline if he so believes in its future profitability?

 The truth of the matter is that Mr. Bartlett and his administration is trying to amass enough cash from the sale of Air Jamaica, possible sale of Vernamfield, possible sale of Kingston Wharves, and from the IMF deal to finance the next election. With all the corruption ad non-performance of his administration they stand no chance in hell of winning, fairly, the next election in Jamaica. Stop crying crocodiles tears Mr. Bartlett.

 Jamaica Prime Minister Bruce Golding argues that to hand over Dudus to the Americans is violating his constitutional rights.  Many Jamaicans do not buy that argument due to the fact that several other Jamaicans have been handed over to the US over the last few years for lesser-alleged crimes than what Dudus is accused of. This is coupled with the fact that Dudus is the ‘Don’ for the West Kinston communities of which Bruce Golding is the elected representative.

 I do not know anything of Christopher ‘Dudus’ Coke gun running and drug dealings other than what is implied in different news media and rumored on the street but the Bruce Golding government need to allow the Jamaican court deals with the accusation. The whole thing is looking real bad for the demonstration right now.