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Is Air Jamaica really a loss making airline?

01/29/10

Permalink 03:04:48 pm, by Skillachi
Categories: Politics, Business, Commentary

Is Air Jamaica really a loss making airline?

So its 2:45 in the morning and I'm driving home from the first night of the Jamaica Jazz and Blues festival and I was having a conversation with a friend of mine and as usual we start to speak about, well, everything.  The topic of Air Jamaica came up and I was asked the question... do you really think Air Jamaica isn't making a profit. At first I was more than willing to say of course they aren't, if they weren't then there wouldn't be all this news spreading over the past 2 decades about how much losses air Jamaica has suffered and how much debt they are in, it doesn't take a rocket scientist to figure that out. So I said yes they aren't making a profit.

He laughed and then he said to me, you fly Air Jamaica pretty regularly dont you? I said yes. Then he asked a question which I wont forget, "When last have you travelled on Air Jamaica and seen an empty flight?" I thought really long and hard about it and realized, I could probably count the amount of times on one hand that I've been on an Air Jamaica flight and seen the plane more or less empty and that is with all the years of travelling I have done. I really could not pinpoint the last time I saw an empty Air Jamaica flight. Of course the logical conclusion to that is... if the flights are always full, how could they be losing money... a Paradox if there ever was any.

My friend who also knows a pilot who flies for Air Jamaica also notified me of another interesting fact... the last time that there was a publicly available audit done for Air Jamaica was in the 1970's... thats 40 years ago. Nobody (well... the public at least) has known where the money is coming out of or where it is going into Air Jamaica for 40 years. All of a sudden I'm starting to smell the distinct scent of trout, because obviously something fishy is going on here.

bad smell

Route changes

In recent times, a cost cutting measure we have seen being employed time and time again is cutting so called "bad" routes. These are essentially the routes that make little or no money whatsoever and basically turn out unprofitable for the airline. This of course makes alot of sense because if you cut the object thats sucking your profits away, you get more profits to spread around. With this in mind Air Jamaica has cut flights to London, Atlanta, and Miami (3 places with STRONG Jamaican communities) and other caribbean countries. But I've realized something interesting about these "bad" routes. Every single time a route is dropped, it is instantaneously snatched up by another airline.

Dont believe me? Currently we have 2 carriers serving the Jamaica -> England route in Virgin Atlantic and British Airways, and they serve the route on an almost every day basis. When Air Jamaica was running that route, it only had flights 2 or 3 times a week but it essentially had no major competition due to agreements with British Airways and the fact that Virgin Atlantic did not actually have such a route, suddenly that has changed. The same goes for Atlanta, the second Air Jamaica dropped that route Delta Airlines picked up that ball and ran with it and still continue to run with it, American Airlines has also taken up the Miami route that once existed under Air Jamaica's name. Yet again simple logic would tell you that there must be a reason why these major airlines have decided to snatch up what Air Jamaica has left behind, and I guarantee you its not because they were bored and wanted something to do... all of these moves are to make a profit. So how come these routes were "bad" and how come Air Jamaica was making no profit?

Mismanagement

Yes I said it and I'm not afraid to say it, the simple cause for all of this is mismanagement by the government. What else do you think it is? I have already stated that it seems that everything should be A-OK for Air Jamaica, but there has been one thing that has been consistent throughout the entire lifetime of Air Jamaica, and that is the inclusion of the government in its running. Its bad enough that the Jamaican government is so corrupt that people can see it a mile away, but the fact of the matter is anybody who has ever studied any business or economics to any level can tell you, government businesses are highly inefficient, simply because their goals are different. The goal of a private run firm is to make money, no matter what the cost so it requires efficiency, the goal of a government run firm is to keep people employed and give them money so that they can have money to spend and stimulate the economy, knowing that, efficiency isn't exactly what the government is looking for, just people who can do the job. With both these factors combined, it isn't surprising to me that Air Jamaica keeps reporting losses for so many years despite all the measures they have taken... oh and then there is the whole no audit thing.

observer cartoon**Taken from Jamaica Observer website

The Sale

Now there is the whole question of the current sale/divestment thats being done to Air Jamaica. As I spoke about in a previous write-up, the government is trying to sell Air Jamaica to Caribbean Airlines in order to get a loan from the IMF. Why does it seem however that the government is trying not to accept the bid from the JALPA (Jamaica Airline Pilots Association) and the unions, despite all they are doing. Is it out of a fear that the truth will come out and fingers will be pointed? Seems so, or is it that somebody stands to make money from this sale? Also highly plausible. Or is it that they are completely ignoring the fact that over 2000 people will directly lose their jobs is this sale goes through (not including the numbers of people who will lose their jobs indirectly)?

Seems like a bit of all three, but still... something stinks.

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