Air Jamaica CEO confident losses will end by 2009

KINGSTON, Jamaica – Chief Executive Officer (CEO) of Air Jamaica, Mike Conway is confident that the national carrier’s 38-year loss cycle will be broken by 2009.

This, he says, is achievable under the airline’s current fleet and route rationalization program.

The CEO tells JIS News in an exclusive interview that the exercise involves using more reliable aircraft and focusing on more profitable new destinations and services. This strategy, he expects, will eliminate the long trend in operating losses and achieve a break-even position by 2009 and profitability on a consistent basis thereafter.

Mr. Conway notes that for the first six months of the current financial year, the national airline has seen improvements in operations with an increase of 41,400 passengers over the previous year and an 8.4 per cent increase in passenger revenues.

Mike Conway

Additionally, the airline’s recent decision to discontinue the London route is expected to result in a further improvement in annual operating performance by eliminating an estimated US$30 million in annual losses on that route – the single largest loss component in the company’s operations.

Results of a study by a group of professors at the renowned Massachusetts Institute of Technology (MIT), regarding Air Jamaica’s contribution to the economy, indicate that between 1994 and 2004 the economic benefit of the airline to the overall economy of Jamaica was US$5.5 billion. Of this amount, US$1.8 billion was a direct incremental contribution to the economy and US$3.7 billion was the corresponding indirect incremental contribution.

Mr. Conway is in agreement with the conclusions of the MIT study. “A lot has been written and discussed about Air Jamaica’s contribution to the economy, or lack thereof. The views have been quite diverse.

Regrettably, far too many centre on Air Jamaica as a burden to the economy. The MIT study represented an objective view by people who concluded that there should be a national carrier, and they are joined by the various Government administrations that have supported the airline since its inception,” he says.

“Critical in this assessment is that travel and tourism is the largest component of the economy, and Air Jamaica is the single largest contributor and provider of air transportation to and from the country. Given that impact, the continuance of Air Jamaica, while a subject that is certainly worthy of the highest consideration, should not be assessed with sweeping generalizations and over-simplifications,” Mr. Conway reasons.

The CEO describes the airline’s new business plan as arguably the most comprehensive in the company’s history by virtue of the magnitude of the core changes that have been identified.
“The key strategic changes that are already in process involve route and fleet rationalization.

Here, I must make the point that rationalization does not necessarily mean downsizing; it means right-sizing, which can involve expansion or contraction, depending on the circumstances,” he elaborates.

He points out that cutting the unprofitable London route was one such decision involving route rationalization.

“Replacing our A321 aircraft with Boeing 757s is another with respect to fleet rationalization. The A321 aircraft have some unique drawbacks in so far as range and payload are concerned. It’s not unusual on a full A321 flight for 100 bags to be left behind due to payload restrictions – meaning, there’s room for the bags, but the payload performance threshold is not high enough for the weight,” the CEO says.

“The comparably sized Boeing 757 aircraft has 30 per cent more payload capability and will solve most of our baggage challenges out of New York and Toronto to Jamaica and the Eastern Caribbean.

With its extended range, the 757 will also provide us with the opportunity to serve any major city in South America on a non-stop basis from Jamaica,” he points out.

Mr. Conway notes that fleet rationalization also includes ensuring that the equipment utilized is what is best suited for the existing route system and the needs of the customers and is readily adaptable to new market opportunities.

“This includes putting in place an efficient cross-island service in Jamaica, unlike what existed under the former Air Jamaica Express service, which used small turbo-prop aircraft between Montego Bay and Tinson Pen – not Norman Manley. The express service constituted an airline within an airline that did not properly connect the country’s two largest population centres from the two key arrival points,” the CEO states.

“All of our flights into Jamaica arrive at either Montego Bay or Norman Manley International Airport and have a unique passenger makeup – tourists destined for the north coast resorts, and Jamaicans or visiting friends and relatives whose predominant destination is Kingston. As a result, each of our arrivals in Jamaica requires a further movement of passengers to the other major city on a 20-minute flight. It’s not very efficient to fly large aircraft on such a short segment,” he argues.

Explaining further Mr. Conway says that maintenance of an aircraft is not just tied to hours of use, but also to the number of take-offs and landings. By utilizing a smaller jet aircraft, such as an A319 with approximately 125 seats, operating 5-6 roundtrips per day on a reliable basis between Montego Bay and Norman Manley, Air Jamaica can eliminate all of the expensive cross island flying being done today by the larger aircraft. This will also enable the larger aircraft to be immediately deployed on a return long-haul routing, he says.

The development of new markets is critical to the success of Air Jamaica’s efforts to end its 38-year loss cycle. Mr. Conway believes Air Jamaica can tap into the Central and South American travel markets by taking advantage of Jamaica’s centralized geographic position in the heart of the Caribbean and developing Jamaica’s potential as an alternative gateway to Miami for traffic between North and South America. Air Jamaica is now poised to make an even greater contribution to the economy and will shortly be able to do so on a financially self-reliant basis.

“While most people applaud the influx of investment of new resort properties in Jamaica, few have recognized that the committed air transportation provided by the national carrier was one of the key factors that gave Jamaica a competitive edge in attracting the investments,” the CEO points out.

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