Originally BY INGRID BROWN Sunday Observer staff reporter browni@jamaicaobserver.com
Sunday, September 16, 2007
The sale of Air Jamaica’s Kingston/London route to British carrier Virgin Atlantic under a code share agreement reached in May this year is one of the priority items on new Transport Minister Mike Henry’s ‘to do’ list, as he has made it clear that his government is dissatisfied with the deal.
In fact, Henry told the Sunday Observer that his scrutiny of the agreement will begin tomorrow when he is scheduled to meet with Air Jamaica chairman O K Melhado.
“I think everyone knows my feelings that the sale of the London slot, if it is sold, reduces the value of Air Jamaica for the purposes that I would have wanted to exploit,” Henry said.
“Correspondingly, what we have done is, the prime minister has asked Air Jamaica to hold everything until we have looked at the situation from behind the desk,” he told the Sunday Observer shortly after leaving his new office on Friday.
This move comes amidst the new Government’s decision to relieve itself of the financial burden of the national carrier, sparking speculation as to who will be the takers.
However, Virgin Atlantic says it will be keeping a keen eye on the developments.
“If the new Government chooses to privatise the airline we will be watching developments closely,” director of communications at Virgin Atlantic Paul Charles said from his London office.
He, however, expressed confidence that the current code share agreement would not be impacted by the change of government.
“There is no timetable on that, and privatisation takes time to carry out. Next year is the earliest before it would be done and so it wouldn’t have any impact on the code share or staffing on the Kingston/London route,” said Charles.
Last May, Air Jamaica disclosed that it would discontinue its service to London, effective October 28, and enter into a code share agreement with Virgin Atlantic, in which the Air Jamaica code will be placed on all Virgin Atlantic flights between Jamaica and London Gatwick.
The sale of the national carrier’s lucrative landing and gate slots at Heathrow airport in London to Virgin Atlantic also formed part of the deal which sparked controversy.
On June 1, then finance minister Dr Omar Davies announced that Jamaica had earned £5.1 million (US$10.2 million) from the sale, but said that the deal was still being negotiated.
Davies, responding to criticism that the sale was carried out without public consultation, said that negotiations with private interests could not be conducted in public, and market sensitive information cannot be fully aired.
“It is very important that the country recognize that in terms of commercial agreements, one cannot have these discussions at the National Arena, in which everyone can have a say. These are commercial discussions,” Davies said.
“I wish to indicate that the decision to discontinue the London route was arrived at after careful and extensive deliberations. The route has been a significant drag on profitability, with little or no prospects for a reversal of the trend. It is our expectation that the action taken by Air Jamaica, coupled with other initiatives, will put the company on a path to commercial success in the future,” he added.
Davies said that Air Jamaica lost US$27 million on the London route in 2006, and that projections were that the figure would have exceeded US$30 million in 2007.
The Jamaica Labour Party, in its election manifesto, said it would seek “an equity partnership with a suitable international airline to revitalise Air Jamaica and to integrate it within a wider network of destinations and connections”.
The party, which now forms the Government after the September 3 general elections, also said it would “retain part ownership in Air Jamaica, which would retain its name and. continue to serve the routes that are significant to local travellers, tourism and the Jamaican Diaspora”.
On Friday, when the Sunday Observer asked Virgin Atlantic’s Charles whether the carrier would be interested in buying a stake in Air Jamaica, he said it was too early to say.
“It is way too early to speculate on whether we will take a stake in Air Jamaica,” he said. “But what we will say is we would like to hear more details from the Government about it, and when Sir Richard gets to Jamaica at the end of October for our launch we will hopefully meet the prime minister and Government to talk more about it.”
Henry, for his part, said that the administration has not entered into any discussions with Virgin, but suggested that the Government was open to negotiations from all takers. However, it should not involve the sale of the London route.
“We are not happy with that negotiation (to sell the route) at this stage and I would like to look at the agreement and read all the fine print to see if the position is in keeping with our policy and approach for the future of Air Jamaica,” Henry said.
Henry, however, could not say if the code share agreement could be adjusted at this point. “This is precisely the answer I can’t give you,” he told the Sunday Observer.