Gordon Butch Stewart (left) and Finance Minister Omar Davies, shake hands at yesterday's press conference where Davies annouced that the Government has taken full control of Air Jamaica after Stewart's group pulled out. (Photo: Bryan Cummings)

Gordon "Butch" Stewart exited Air Jamaica yesterday declaring "mission accomplished" in building a world-class carrier and economic linchpin for Jamaica, despite the financial turbulence in which the airline has flown.

And he offered a bit of advice for the new managers: in any restructuring to cut costs, they had to be extremely careful in retreating from the routes and markets that Air Jamaica has created over the past decade.

"Be careful how you give up routes," Stewart said at a press conference. ". I would encourage Air Jamaica to be courageous, to open new routes and to be pushing forward."

At the same time, Vin Lawrence, given the task of squeezing costs and restructuring the loss-making airline, warned "stakeholders" that he will be coming to them for "sacrifices", suggesting that among the demands will be give-backs from staff, an issue over which the former management and the airline's pilots, who represent the major chunk of Air Jamaica's paybill, have long been at loggerheads.

Lawrence. restructuring will be in tandem with new management arrangements

Air Jamaica's pilots are among the best paid in the industry. They account for about eight per cent of the airline's staff and about 35 per cent of its wage bill of US$100 million.

Lawrence will have as his blueprint for restructuring, a study prepared by the US consulting group, Sabre Airline Solutions, suggesting that up to US$32 million in expenses can be slashed from the airline in 2005, in an effort to bring expenses more in line with income.

Sabre identified the priority areas as:

. Fuel conservation;

. Maintenance and engineering;

. Aircraft leasing;

. Crew and staff packages; and

. Route/Network rationalisation.

"Financial restructuring is therefore fundamental to the future viability of the airline," Lawrence, who has been named the airline's executive chairman, told reporters.

"Consequently, all stakeholders and the Government will have to make significant sacrifices and adjustments as we seek to bring viability and competitive market arrangements to the airline."

Lawrence had been a government-member of the Air Jamaica board for eight years, during which the Stewart-controlled Air Jamaica Acquisition Group (AJAG) had been majority shareholder of the airline that was privatised in 1994.

He was elevated to the executive chairman's post after AJAG yesterday formally turned over the 78 per cent stake in the airline to the Jamaica Government for $1, returning the carrier to full state control.

At the same time, Stewart agreed to inject US$20 million to help cover losses and working capital and yesterday handed over the first 20 per cent of that amount to the Government. The remainder will be paid by the end of March.

Last night, as questions were raised about Stewart's capital injection, Leo Lambert, the corporate communications director for the ATL Group, said: "The fact is that irrespective of the reasons, Air Jamaica has been losing money. To the extent that AJAG were the managers, they have a moral responsibility to do all they can to secure the airline's future."

Lambert said that in view of the airline's critical need for working capital, he thought it was honourable of AJAG to have committed itself to this level of support. "Show me another investor who would have done it, and I'll show you a patriot," Lambert said.

Air Jamaica has, over the past decade, racked up losses of US$682 million and debts of US$560 million, nearly half of which is owed to Government in taxes and airport landing fees.

Initially, the idea was to convert the Government's debts into equity and have Air Jamaica remain as a privately-owned company, with AJAG owning 55 per cent of the company and the Government 45 per cent.

In the end, however, Stewart decided to pull out, leaving the Government to restructure the airline and eventually find new partners. In the final analysis, Stewart said, the financial demands of Air Jamaica, in the context of the difficult environment for the world aviation industry, would have been too much for his organisation.

"It is a national project," he said in a candid assessment of the situation. "It is not something for an individual or a few people."

Added Stewart: "We leave Air Jamaica happily. I feel as though a burden has come off of our shoulders that we could not afford."

But with Air Jamaica flying 51 per cent of all airline passengers to Jamaica and, by Stewart's estimate, directly and indirectly contributing over US$1 billion a year to the island's economy, it has become "the most important economic weapon" in Jamaica's economic arsenal.
It was Air Jamaica's opening of new routes and its provision of airlift that had encouraged other carriers to follow suit and had helped catalyse new tourism investment in Jamaica.

"Do not retreat," Stewart said. "If you retreat, they (competing airlines) will retreat and your (tourism) industry will quail."

Davies agreed that Air Jamaica, under Stewart, had been established as a "world class operation, which has opened up new gateways, stimulating increased visitor traffic to Jamaica".

"Mr Stewart has personally dedicated a great deal of time and energy in marketing the airline as a national asset," Davies said.

Davies said that the interim board, which includes former National Commercial Bank CEO Aubyn Hill, who will oversee the day-to-day restructuring efforts, has been appointed for six months, although he appreciated that it could take longer than that to find new partners.

". I wish to repeat the Government's position that this Administration has no desire to retain permanent ownership and control of Air Jamaica," the finance minister said. "Our objective is to restructure the entity, such that it will be able to attract adequate capital from private investors. Our action at this time has been taken in the interest of the national economy."

As part of this plan, the Government will guarantee up to US$25 million in new loans to the airline as well as formalise about US$30 million in support to the airline annually - roughly about the annual amount in unpaid taxes and other fees.

Lawrence said that the restructuring will be in tandem with new management arrangements at the airline and stressed that the airline will continue to fly during the period.
Added Davies: "The transition will be seamless."

The new Air Jamaica board

Derick Latibeaudiere
Keith Senior
Paul Pennicook
Millicent Hughes
Aubyn Hill
O K Melhado
Noel Sloley
Noel Hylton

The fear factor

Feeding the multitude

DANGEROUS PETS