 |
By Felicia Persaud With Linda Hutchinson-Jafar |
New York, April 2003: he case for a one regional airline has now become stronger as top carriers, Air Jamaica and BWIA, and island-hopper LIAT, face tough economic challenges that have them running to their respective governments for help.
Management at the beleaguered BWIA were recently offered a US$18.5 million bailout from the Patrick Manning administration. But the Government was quite clear that it would not release a cent of the money unless and until a management review of the Aleong team is undertaken, among other things. To date the airline has been hedging on such a review.
Meanwhile the T&T administration is continuing its push for a merger between BWIA and regional carrier LIAT, which is owned by several Caribbean island governments. BWIA already owns 29 percent of LIAT and handles its customer service calls and other functions.
The Jamaican government may soon join the call, especially since Air Jamaica now wants the P.J. Patterson administration to step in and absorb the US$300 million debt the airline has racked up. Finance Minister Omar Davies recently admitted that the government is ready to take the airline up on its offer in exchange for another 20 percent stakes in the airline. The increase in shares, from 25 to 45 percent, will no doubt put the government in the driver's seat, especially if it also adds a number of convertible preference shares to that total. That could increase the government's claim on the carrier to 55 percent, a move that will see Air Jamaica's management changing hands back to its former owner. The airline was only privatized nine years ago.
Minister Davies has reiterated, "The deal will make government the owner of the airline." But talks between the airline's management and government is still ongoing and it is unclear whether Chairman Gordon 'Butch' Stewart, will accept the terms of the government's offer. Stewart refuses to plough more of his own money into the beleaguered carrier but seems bent on holding on to the helms. In a recent press statement, he was adamant that "although the government will increase its stake in Air Jamaica, it will not take over the operation..."
Attempts to first regionalize a carrier began in 1961, during the restructuring of BWIA, then a subsidiary of the British Overseas Airways Cooperation (BOAC). During the restructuring, an attempt was made to establish a West Indian air carrier involving majority ownership by the then Federal and Commonwealth Caribbean Governments and BOAC. This initiative failed and the T&T government acquired the shareholding of the entire airline.
At a July, 1969 meeting that year, Commonwealth Caribbean Ministers approved in principle a report by a working party established in 1967, which recommended formation of two multinational enterprises involving the assets of BWIA and LIAT, namely, a corporation established by treaty to operate on extra-regional routes and a company to operate on intra-regional route and agreed that a ministerial committee should be established to prepare a regional plan of action with a view implementing the recommendations. That initiative also failed.
In 1987, member governments supported an independent study that touted the feasibility of a multinational carrier involving private sector participation and the assets of BWIA, LIAT (1974) Ltd, Guyana Airways and CARICARGO, to serve the mid-Atlantic routes. Still they concluded that the study needed to be discussed further. Guyana Airways subsequently privatized and then later folded.
The issue of one carrier never came up again until 1990 at the Eleventh Meeting of the Conference. But members decided that BWIA and LIAT should be privatized either separately or jointly. Both were privatized in the early 90's.
Still the talk continued throughout the 90's, but never moved close to reality. Then following 9/11 and the recent war, talk about one airline has emerged as carriers battle increased costs, fewer passengers and a slump in global air travel.
Air Jamaica alone lost $90 million last year while new bookings for this year have fallen by 40 percent since the war, Allan Chastanet, vice president for sales and marketing, said. BWIA has lost 11 percent of its reservations since the war began and has had to slash fares to compete with Continental and American Airlines, spokesman Clint Williams said. Both airlines have also reduced flights. Jobs cuts have also been implemented along with a freeze on increases in wages with many employees, especially at Air Jamaica, opting for a pay cut instead of a pink slip.
Yet Air Jamaica's president Bruce Nobles and chair Gordon 'Butch' Stewart, say one regional airline will not work. "The idea that three or four companies that are losing money would merge into one company doesn't make much sense," Air Jamaica president Nobles said recently.
And last year in St Lucia Butch Stewart isaid, "To think of an Air Jamaica and a BWIA as one; it won't work . But there are many areas of costs, from maintenance to navigation, that we can co-operate and I am more than willing to do that."
But the view of regional leaders was echoed by Dr. Kenny Anthony of St. Lucia, "The conditions are ripe, the timing is good and overall, the prime ministers of the region generally recognize that we need to rationalize the airline industry."