Outgoing CEO of Air Jamaica predicts major improvements at airline

JIS – Outgoing Executive Chairman and Chief Executive Officer (CEO) of Air Jamaica, Dr. Vincent Lawrence has said that major improvements were envisioned for the national airline towards the end of the financial year, although the airline recorded a loss of US$79 million for the first eight months of the year.

“Our costs are now more in line with our revenues and by next year we should see the fruits of our current cost containment efforts,” he said. Dr. Lawrence noted that nearly $30 million of the loss amount was due to a mandatory maintenance program undertaken by the entity.

The Chairman, who was speaking at a press briefing at the airline’s offices in downtown Kingston today (October 6), said that “Air Jamaica is far healthier financially and operationally than the Air Jamaica we took control of in December 2004. A new business sense is evolving within the airline”.

However, he noted that “the issues facing the airline (could not) be fixed overnight and it still had a far way to go over the next three years”.

“The only way the airline can effectively survive and become viable in the highly price sensitive and volatile market, will be to continue to improve its cost structure and optimize its operational efficiencies,” the CEO said.

Dr. Lawrence said that based on careful analysis of the risks facing the airline and the industry in the short to medium term, the Board was confident that to achieve sustained financial viability, the airline should be modeled as a niche carrier, capitalizing on the strength of the Jamaican market locally and internationally and the North Eastern America tourist market as a base.

The way forward, he said, would be marked by reliable, consistent, efficient and on time service on all routes and a warm Jamaican hospitality from check-in to the final destination.

He informed that a business plan reflecting net profit projections for the airline and its ability to meet commitments and service its debts over the forecast period was now complete and was with the Minister of Finance.

Highlighting the performance in the six areas initially identified for restructuring, Dr. Lawrence said although the nine-month restructuring period was a challenging one, many of the goals set had been accomplished.

He pointed out that efforts aimed at financial restructuring had been met with success, with US$325 million being raised at competitive interest rates over the period. Of this amount, US$160 million was used to restructure, over a 10-year repayment period, existing bank loans which at the time had a weighted average maturity of seven months. In addition, steps were taken to significantly reduce the high debt servicing cost and provide a platform for basic financial security.

Dr. Lawrence said the bulk of the remaining $165 million was being used to bring significant trade credit balances in line with industry standards. He pointed out that this has enabled the airline to negotiate better terms and prices with trading partners.

“After many years, we are now able to fix some of the problems that have been outstanding for a very long time, such as the upgrading of our IT systems and increasing the level of critical aircraft spares to acceptable standards. We will continue our negotiations for debt forgiveness, more manageable payment schedules and better terms with our creditors,” he told journalists.

On network and route rationalization, Dr. Lawrence said reconfiguration to remove unprofitable routes and reduce the frequency of flights on marginal ones was already bearing fruit. He noted that despite disruptions in service, passenger figures were improving, peaking in May and showing some 80 per cent of seating capacity being filled in July, the highest load factor for any single month in five years. In addition, 77 per cent of seating capacity was filled in August.

He said while September has not been as positive for the Caribbean travel industry, it was still expected that the airline would achieve reasonable load factor numbers.

In the meantime, he said the required crew and staff restructuring which was ongoing, was been effected with the aid of consultants, with success being experienced with the efforts to streamline and restructure staff remuneration. Meanwhile, redundancy payments totaling $17.5 million were being made to former employees, well within the one-year period the entity had promised.

The Chairman pointed out that operational upgrade and maintenance activities, including the expansion of the airline’s spare parts inventory, were well underway with negotiations for better aircraft maintenance contracts being advanced.

Dr. Lawrence indicated that the airline was preparing to “hedge its future fuel prices as soon as market conditions allowed”, pointing out that this would assist in giving some stability and certainty to pricing arrangements and operational costs. He also informed that operational costs were kept within manageable limits, despite the current high fuel prices, through various conservation practices.

He further informed that measures were being put in place to ensure that the tickets issued were done electronically in a bid to cut the high cost of producing paper tickets. “Those who wish to have paper tickets will have to pay for them,” he added, while pointing out that at present 75 per cent of tickets were issued electronically.

Dr. Lawrence explained that interline electronic ticketing, commencing with American Airlines, British Airways and Delta, would be implemented during the first quarter of 2006. This, he said, would allow the airline to sell electronic tickets for trips with flight legs involving Air Jamaica and those carriers.

Dr. Lawrence was appointed Executive Chairman of Air Jamaica following its return to Government ownership on December 23, 2004. Over the last nine months, he has led the financial and operational restructuring of the national airline.

The appointment of a new CEO and Chief Financial Officer is to be announced soon.

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