- FileThe country's recovery was dependent upon Air Jamaica's and so it is important that the airline does not falter, says Gordon 'Butch' Stewart.
Al Edwards, Business Co-ordinator
IN THE aftermath of the terrorist attacks on the United States that took place on September 11, 2001, the commercial aviation industry has been severely tramautised with revenue shortfalls and a number of airlines having to contract their operations.
Air Jamaica has been no exception but the company's senior management team has put in place a number of initiatives that may well see the national airline carrier weather this storm and avoid the plight of a number of bigger operations that have gone under.
At a press briefing held on last Friday at the boardroom of Appliance Traders Limited, Air Jamaica's Chairman, Gordon "Butch" Stewart, updated senior journalists as to the status of the airline.
"Overall it would appear that our revenues are down in the order of 18 per cent but passenger numbers are only down by 15 per cent. We have cut down in terms of capacity in the short term by about 15 per cent. We took the decision not to lay off staff. I think laying off staff would be counter-productive at this time.
"Laying off staff would simply demoralise the organisation and the savings would not amount to much - it would be counter-productive. The United States flag carriers, in most cases, give two weeks notice of lay-offs. With us, it is 60 days so when you rationalise the whole thing it is costly," said Mr. Stewart.
Linked to tourism
Air Jamaica's fortunes are inextricably linked to the revival of the country's tourism product.
Of late, there is talk that there is some kind of recovery in the industry which is a vital earner of the country's foreign currency revenue, however no quantative figures have been released.
So where exactly is tourism now? According to Mr. Stewart there was a 20 per cent drop in arrivals in September. Figures recently released by the Jamaica Tourist Board (JTB) show the total stopover arrivals in September at 63,508, were down approximately 20 per cent on the arrivals in the same period in 2000.
Stopover visitors are those tourists that actually stay "overnight" in Jamaica, as oposed to the cruise passengers who actually spend only a few hours on the island.
Both Mr. Stewart, who is also the chairman of the Sandals group of hotels, and his once bitter rival John Issa, who runs the SuperClubs chain of all-inclusive hotels, have announced a joint initiative to stem the decline in the hotel industry but regardless of this welcome move, smaller hotel operators are calling for help to prevent them from going to the wall.
The chairman of Air Jamaica said that prior to the events of September 11, there was significant business on the books of both Air Jamaica and the Sandals Group.
What remains Mr. Stewart's priority now is to hold the business on the books and in effect wait for the tide to turn more favourably.
"For November and December we probably held most of the business we had bar 10 per cent. The difficulty really is the new bookings coming up and that is coming in at no more than 60 per cent that would be expected year over year. It is mostly coming in for January, Feburary, March rather than the winter period of November and December which we really need.
"While we are talking about the business coming back, the business has come back but it has done so at a much lower level than what it was before. Added to that you have a country in crisis- no ifs, buts, or maybes about it.
"I was in London last week and I read the papers where our Finince Minister was explaining there was a revenue crisis. If your tourism numbers are down, then all the various taxes from departure to visitor taxes are going to be down. It is interesting that the Govern-ment releases arrival figures but it does not release the lost of yield. Although our passenger numbers are only 15 per cent down, our yield has been significantly reduced largely as a result of discounting," said Mr. Stewart.
He stressed that motivation was a big factor in bringing back business and seeing that the country was the big winner.
He said the country's recovery was dependent upon Air Jamaica's and so it is important that the airline does not falter.
Therefore it is imperative that Air Jamaica is seen at this point in time to be delivering a quality and reliable air service.
The United States market is pivotal to its well-being. Out of the U.S. Air Jamaica accounts for 72 per cent of all seat capacity. It also has 60 per cent of the seat capacity from the United Kingdom.
Trouble at home
Although the attacks on both the World Trade Center towers and the Pentagon had a disastrous effect on the airline and proved to be a worldwide phenomenon, it must not be forgotten that the earlier downtown disturbances in July and the intolerable high crime rate has not helped Air Jamaica.
Indeed it may be said that the events of September 11 compounded its problems, a fact that has not escaped Mr. Stewart's attention.
"We do have an enormous overhang from the July problems and the inner-city uprisings that are affecting businesses in Jamaica. The insecurity affecting our people overseas who want to travel is as much a result of the July problems as the September 11 tragedy. Maybe not quite as much but it is a factor and we have an obligation to try and provide the confidence for them to return home," he said.
Mr. Stewart pointed out that Jamaica had an image abroad of a country of rampant crime and disorder with the Government incapable of containing it.
He said that was patently brought home to him on his trip to London last week when the British media seem to be waging a virulent campaign to depict Jamaica as a country where lawlessness reigned, an image that does Jamaica's tourism industry no favours.
"Our Japanese market has all but vanished as a result of the high crime rate in the country. The Japanese abhor crime, if we get a dozen Japanese on a flight a week that's a result - bad news goes out.
"The number one problem Jamaica has is crime. If we could bring our crime levels down to an acceptable state we could do two things - one, we could double the visitor traffic coming to Jamaica very quickly and two, we could probably get better yields by 30 to 40 per cent quickly. I can't tell you the benefit that would have on both the airline and the hotels. It is hard sending tourists to a place where they feel unsafe and they see pictures in the press of gunmen wielding heavy firepower everywhere - it's not the kind of advertisement Jamaica needs."
Mr. Stewart lauded the appointment of Dr. Peter Phillips as Minister of National Security.
He said that he was an extremely able and capable politician who did an extremely good job at the Ministry of Transportation and Works. He observed that Dr. Phillips was a man who got straight to the point and was quick to focus on the matter at hand.
"I must tell you, the announcement of Minister Peter Phillips going into National Security for me is one of the best things that could ever happen to Jamaica because he posesses massive ability. With him you are dealing with tremendous ability and intelligence and the knack to get to the point quickly and stop wasting time.
"I know it is probably make or break for him going into Security because I can't think of a tougher job in Jamaica right now but I want to wish him the best of luck and a lot of successes."
Revenue shortfall
How will Air J address its revenue shortfall?
With projected revenue down by 18 per cent for the second half of the year what are the airlines plans?
Air Jamaica's president, Christopher Zacca, said that before September 11, for the first half of this year, the airline was on course to meet its budget projections.
He said that the entire budgetary shortfall in revenue is due to (a) a perception of the country in terms of its crime rate and inner city problems and (b) the reduction in the world's tourism market coupled by a weak world wide economy.
"We have a plan to make it through these testing times. Clearly we will have to find short-term funding which we are in the process of doing to make up that shortfall. We have put in place a number of cost-saving measures namely salary reductions - voluntarily by all staff, mandatory for the executive and senior management team which should save us about US$500,000 for the three months of reductions through the end of the year.
"We are looking at breaks from our lessors of aircraft where they are reducing the payments that we have to make over the next three to six mon-ths. With our marketing efforts and cost-saving measures we feel pretty confident that we will regain our growth track and our path to near term profitability," said Mr. Zacca.
Mr. Ste-wart said that Air Jamaica has not run to the Government cap in hand for a bail out and that that it was trying as best as it can to solve its own problems.
"As our partners the Government in fairness to them have been very good. It has said look, we know what's happening and you need help so come and see if we can sit together and work it out. It knows if Air Jamaica hurts so to does the country."
Mr. Zacca said that the shortfall in revenue for the second half of the year amounted to US$35 million, with the company expected to attain an operational break even before interest cost.
"It must be borne in mind that the shortfall is a revenue one but we have had cost-savings so the net effect on the bottom line is still to be determined. It is not a US$35 million loss on the bottom, bottom line. We are doing everything to save costs, cutting schedules and so on."
Funding
The airline is now seeking funding from local institutions whose money supply comes from a mix of local and international sources.
Last year, Air Jamaica went to the international capital markets for a US$45 million package which was successfully raised and concluded over the last three months, with the airline taking up the full US$45 million.
Mr. Zacca told Sunday Business that the airline is now seeking a mix of both international and local funding.
Of 340 flights, Air Jamaica has had to trim 60, largely as a result of the September 11 terrorist acts, with the airline having to defer its route extensions, more notably to Washington DC.
The airline will be introducing a number of security measure including securing the pilots'cockpit cabin. It will also be adding more Airbus A340 four-engine aircraft to its fleet.
