BY JULIAN RICHARDSON Assistant Business Co-orinator email@example.com
JAMAICA Air Shuttle has closed its airline operations, after failing to bring investors on board to purchase its grounded planes.
The carrier in February announced that it was temporarily suspending operations after an overseas-based partner and owner of the aircraft pulled out of the business. At the time, the company had planned to put together a consortium of investors to purchase the two 12-seater Beech 99 aircraft they were forced to ground, and resume business.
But that did not materialise, Christopher Read, the airline's managing director told the Business Observer yesterday.
"It was a particularly difficult period to be reaching out to investors," said Read.
"Right after our temporary closure was the International Monetary Fund (IMF) debacle and then the National Debt Exchange (NDX) sucked another whole set of liquidity out of the country," he said, noting that a number of persons the company had lined up as investors were significantly impacted by the debt exchange.
"People had virtually committed, but found that they were $300 million poorer," Read advised.
Jamaica Air Shuttle, which offered domestic and regional flights, employed around 35 persons, including flight crews and ground handlers. The staff members were all made redundant.
The airline entered the air travel market on December 7, 2009, running three scheduled flights per day between the Tinson Pen Aerodrome in Kingston and Sangster International Airport in Montego Bay on weekdays, and two scheduled flights between the two locations on weekends. It also offered flights to Cuba and Haiti.
However, the company was negatively impacted by difficult market conditions and a confluence of shocks -- including the first debt exchange, the general election and the Tivoli incursion -- that caused it to miss some of its early targets.
"There were a number of contributing factors, not the least of which is our authorities here, which have adopted an approach towards aviation that is regrettably self-destructive," Read argued. "It wasn't helped at all by the IMF, the sliding dollar, the rising fuel prices etc, but those were side shows."
It is against this background that the the overseas-based partner lost confidence in the local market and informed the company of his decision to exit the business, Read said. The foreign investor cancelled the insurance on the aircraft but offered his partners an opportunity to purchase the planes -- a 12-seater Beech 99 aircraft can cost anywhere from US$500,000 ($50 million) to US$700,000.
"The temporary closure was not of our own choosing. It was simply a case that the foreign investor I had on board had become very uncomfortable with the IMF situation because he had already been burnt in Spain with the haircut there," Read told the newspaper.
However, despite the initial challenges, Jamaica Air Shuttle had a positive outlook. The company was running an average load factor of 70 per cent, with business people and politicians representing a solid portion of its client base, when it halted operations in February. Furthermore, the company was realising a steady increase in the Haitian and Cuban markets.
"The market had just seemed to have turned the corner and was going positive, but then the IMF situation came," Read said.
The 40-year aviation veteran, however, remains confident about the viability of the sector in Jamaica, saying that it is integral to economic recovery.
"I have every confidence that connectivity to our neighbouring islands and the outside world is at the core of any recovery," he said.
"Our objective was to connect Jamaican business people to an additional 25-plus million consumers in our immediate vicinity."