Massive pay back

Jamaica earns US$50-m from airlift pact with AA

BY VERNON DAVIDSON Executive Editor -- Publications davidsonv@jamaicaobserver.com

Monday, March 01, 2010

THE revenue guarantee airlift agreement that Jamaica signed with American Airlines in 2008 has earned the country just about US$50 million and further opened up the destination to increased visitor traffic at a time when other countries in the Caribbean were recording declines, tourism officials confirmed at the weekend.

The agreement, which stirred controversy among the political Opposition and was probed by the contractor-general, came to an end in November last year.

The Government had essentially guaranteed American Airlines US$3 million to keep flying to Jamaica from Dallas, Miami and Chicago, three gateways that provided just about 81,000 passengers combined.

"Bearing in mind that these aren't very ethnic gateways, the aggregate number of tourists was 71,500," Director of Tourism and Jamaica Tourist Board Chairman John Lynch argued in an interview.

"Working that out at an average six-night stay at US$151 a night, the industry earned approximately US$50 million," he said, adding that even the Tourism Enhancement Fund (TEF) earned an impressive US$750,000 because of the arrangement.

"The estimated cost of these flights to us is US$2.8 million; that's what we'll be required to pay," said Lynch, sounding upbeat as he revealed further that the positive performance had resulted in American maintaining all flights to Jamaica from the three gateways and adding New York, which it will service at least three times a week.

"The investment has paid off," said Lynch, who explained that the decision to approach American was based on the carrier's long history of service to the Caribbean, plus the fact that the airline moves 30 million passengers a year through Dallas, 19 million annually through Chicago and just under 20 million through Miami.

"That gives you an opportunity at 60 million people a year having a shot at coming to Jamaica," Lynch said, adding that the arrangement also resulted in other carriers, such as Delta -- with its Atlanta hub through which 40 million passengers travel -- stepping up and increasing flights to Jamaica.

Opposition to the deal was mostly centred on the guarantee of payment to American, at the time said to be US$4.5 million using money from the TEF.

Opposition spokesman on tourism, Dr Wykeham McNeill, had blasted the deal as a misuse of the TEF. Other critics had said that Jamaica was "hoodwinked" by American Airlines.

But at the weekend, Lynch explained that when he was appointed JTB chairman, he realised that the global recession had become evident in the USA and that American took a decision to severely slash service from the US to its Caribbean hub in Puerto Rico by 40 per cent. The carrier, he said, was also planning to cut Dallas, reduce flights out of Miami to one or two and cut Chicago. That spelled bad news for Jamaica's tourism.

"Jamaica had an additional 4,000 rooms, bringing the total count to just under 30,000 without the requisite air service to give us the occupancy," Lynch argued.

That was incentive enough for the country's tourism officials to approach American with the guarantee in order to ensure there was adequate airlift.

That point was emphasised yesterday by Josef Forstmayr, a former president of the Jamaica Hotel and Tourist Association and managing director of the upscale Round Hill Hotel and Villas just outside Montego Bay.

"There are two things in tourism that you must have. One is the hotel product for people to sleep in and the other is transportation, for people to get to you. The most beautiful place without access is no good, and it's one of those basic truths which we sometimes tend to forget," he told the Observer.

"When we designed the deal, the world was falling apart," he said. "It was the summer of 2008 when the business was going downhill already. Remember also that American Airlines had just started to cut about 40 per cent of all their rotations to Puerto Rico... that's when Jamaica jumped in and said 'wait a minute, why don't you look at us and replace some of that lift that you had into Puerto Rico and put it into Jamaica and we'll give you a little guarantee', and I think it was brilliant.

"It was the beginning of a trend that opened Jamaica up to a lot of new airlift. It certainly was a departure from the old and tried...We had to try something new and different," said Forstmayr who added that his hotel had been experiencing a good winter season so far.

Yesterday, the deal was also praised by Paul Zar, senior vice president, Travel Impressions, a division of American Express.

"This arrangement worked exceedingly well in a difficult time," said Zar. "When air capacity was being cut elsewhere, Jamaica emerged as the best destination with air seats.

"I would say it was largely responsible for Jamaica's success in 2009. It was the critical factor," he said, adding that his company, which sells vacations to Jamaica across the US, did as well in 2009 as they did in 2008. "In fact, we were up slightly in 2009," he said. "We did better to Jamaica than to any other destination in 2009. It (the guarantee) defied gravity. All other destinations were down double-digit."

According to JTB data, the island welcomed just under two million visitors last year, while revenue between January and October totalled US$1.533 billion.

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COMMENTS (18)

Hero Carlito
3/1/2010

It is true that the Observer changed the figure. I saw US$152 million this morning when I first read the Observer. Maybe it was a honest mistake.

stephen Grant
3/1/2010

Mr.Lynch, Please do caculation for air jamaica

stephen Grant
3/1/2010

If America Air line bring so Earing why not Caculated air jamaica airline

John Smith
3/1/2010

The article is missing some important details:
1. How do you quantify the assertion (or assumption or presumption) that, if they couldn't get seats on American Airlines, they wouldn't fly in on an alternative carrier? Air Jamaica, perhaps? Air Canada? Were all these flights fully booked throughout the whole period?
2. Did any other Caribbean country do some sort of airlift agreement without success? The article isn't particularly clear whether or not this is the case, it just states that Jamaica stayed on top relative to the other destinations.
I would have preferred to see these issues addressed thus fully connecting all the dots - can't expect people to connect dots like that without all the facts, unless unno waan tek people tun fool!

owen lloyd
3/1/2010

At least it is not costing taxpayer money like AirJ.

Everald Gillings
3/1/2010

False assumptions, false figures Mr Lynch. Go and do the maths again, any fool can figure this out to see that this is not the case as stated.

Neville Balfour
3/1/2010

Gerry Pow
The aggregate number of tourists was 71,500," Director of Tourism and Jamaica Tourist Board Chairman John Lynch argued in an interview.
"Working that out at an average six-night stay at US$151 a night, the industry earned approximately US$152 million,"
The above was copied from the article.
The Observer has now changed the article to read US$ 50 Million

Gerry Pow
3/1/2010

Mr. Balfour,
you need to read the article again, maybe this time you should put on your reading glasses. Mr. Lynch estimated the earnings at US $50M. Maybe i'm blind but i don't see US $152M anywhere in the article.
Mr. Olivier,
Mr. Lynch did say that these were not "ethnic gateways" which limits the amount of J'cans you'd find travelling for holidays. Furthermore, the estimated earnings are about US $14M less than the figure you would get based on the calculations(see Mr. Balfour's comment) which allows for some amount of flexibility.

Dennis Johnson
3/1/2010

This analysis is flawed - what is the basis of the avg 6 nights stay?
"Bearing in mind that these aren't very ethnic gateways" - Miami is not an ethnic gateway, where does Mr lynch get this notion from. Remember when Air J use to fly from Miami and the Jamaicans who live in the Miami/Ft Laud area use to take those flights. Remember the American Airlines flight that crash in JA in December, where did the flight last stop and most of the passengers on were not tourists - they were Jamaicans returning for the holidays. It this garbage of analysis by the JTB and run with by the news organizations with out doing their own independent analysis.
Wheel and come again. I am not saying the deal was not profitable but this analysis does not support that conclusion.

Jan M
3/1/2010

Neville Balfour - Where in this article did you read about the industry earning US$152 million? I saw US$50 million.
"Working that out at an average six-night stay at US$151 a night, the industry earned approximately US$50 million," he said, adding that even the Tourism Enhancement Fund (TEF) earned an impressive US$750,000 because of the arrangement.

carlos king
3/1/2010

If this report is correct, then visionary leadership has been vindicated. Because leaders are elected to lead, managers are appointed to manager. This administration wasted two (2) years looking backwards casting blame on the previous one instead of looking to God and forward in order to inspire God's people. The time for anaemic performance is over- its time to "roll up the sleeve" and get to work. Because Jamaica is in big trouble- on the economic and social front but more so on the spiritual front. But there is still hope - "God never sleeps nor slum ber."
Regards,

Caryn Jones
3/1/2010

Errrrrr 71,500 visitors earn us $65M tops, so how did they arrive at 150m....no wonder we had 4 separate budgets tabled for the fiscal year!!!! What's worse, the journalist did not fact check the figures. Siggghhh

Earl Brown
3/1/2010

Those hotels that earned a big fat profits should give 33 to 50% to the Jamaican government to help pay American Airlines because they are benefiting very big from this arrangement and they pay their workers very low wages.

Richie L
3/1/2010

This was a good deal: spend a few millions to get a lot more millions. But many couldn't see the logic with this and instead looked at the money being spent up front.
.
This good deal with AA proves why Jamaica need not invite Caribbean Airlines in to be our national carrier. From North America other carriers would just take over the AJ routes. For the other routes (mainly to the Caribbean), I don't think CAL will take those on. And if they do, it would be because they see a good business opportunity.
.
So that begs the question: why designate Caribbean Airlines the national airline of Jamaica?

Neville Balfour
3/1/2010

The aggregate number of tourists was 71,500," Director of Tourism and Jamaica Tourist Board Chairman John Lynch argued in an interview.
"Working that out at an average six-night stay at US$151 a night, the industry earned approximately US$152 million,"
US$151 x 6 = US$ 906 x 71,500 = US$ 64,779,000, so how does John Lynch arrive at US$ 152,000,000?

Olivier Olivier
3/1/2010

That reasoning is rubbish. Assuming that the 71,500 persons mentioned were just the 'tourists' arriving on the flights (as opposed to jamaicans travelling for holidays), it is rubbish to "assume" that all visitors stayed for 6 nights and it is rubbish to "assume" that all of those persons stayed in hotels in the first place, as opposed to staying with family or friends.
Is this the kind of maths that Bartlett and Co. have been using to generate their numbers?

Bevan Earle
3/1/2010

Wow, wow US $1.533 billion so much money,how much passes through the hands of the mom and the pop that have their little Craft shop in the Montego Bay Harbour Street, Fort Street,Ocho Rios and the negril Craft market, how much end up in the Super.Super shopping centre control by the indians in Montego Bay Ocho Rios and Negril I would love to see an audit.
I am pleased with the figure but I am sure that nothing of significant nature goes to these people as they continue to struggle day by day to make ends meet, when will the government set up a system to say how many goes to hotels,car rentals tour operators and the neglected Craft vendors in the poor communities .
It's a dam shame to see how these people struggle to make ends meet and on a daily basis they take home pittance to feed and send their childen to school no one cares as they are not somebody, it's all about taking care of these Spanish business and the upper class, when you are black step back when you are white you are right and that's the problem we face,where is the contractor general to get out of his office and take a walk in these Craft market that these people operate in, Sun come burn" rather "bun" them rain come wet them it's a shame,it's time someone care stop count the money and make sure it is distributed right, equality now for all no matter where you come from. It's good when we can bring in so many tourist and so much money but where the money goes we as Jamaican need to know come on we need to know.
It is time the face of these Craft Market change and look like the new Rose Hall Shopping centre and Sony's Plaza in Ocho Rios is it that the place represent the kind of people that operate them we need to know, a man who have something to offer to society will protect it but if he don't have something to offer he will destroy it so let's work together to build a better Jamaica for our children future.

Jay Brown
3/1/2010

GOJ Vindicated,
Lets hear what Mr McNeil has to say, over to you sir, I am sure there is more that the GOJ is telling us.

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Massive pay back