Davies. some drastic actions will have to be taken, but Gov't committed to maintaining national airline

Finance Minister Dr Omar Davies yesterday said that the Government was committed to keeping Air Jamaica flying with a maximum subsidy of US$30 million per annum, even as he admitted that the airline had already lost US$30 million in the first three months of this year.

"I wish to assure the country that, although some drastic actions will have to be taken, the Administration remains fully committed to maintaining our national airline within the context of the maximum subsidy of US$30 million per annum," Davies told the lower House as he closed the 2005/2006 budget debate.

Responding to issues raised by Opposition spokesman on finance Audley Shaw earlier in the debate, Davies made a number of clarifications.

He said that in terms of the total losses incurred by the airline during the period of privatisation, there had been references to figures of US$830 million, US$675 million and even US$1 billion.

He said that research carried out on the actual losses incurred by the airline during the period of privatisation showed a total loss of approximately US$675 million, including an unaudited figure of US$98 million for 2004.

He said that while he had no idea where the US$1 billion came from, he felt that the US$830 million was as a result of the fact that at the beginning of privatisation there was an accumulated deficit of US$157 million. He said he suspected that the new owners thought that they could carry forward those losses and they would be written off. But, that did not occur.

"The US$830-million came from adding the US$675-million, which was accumulated during the period of privatisation, plus the $157-million carried forward," Davies suggested.

The Government resumed full ownership of Air Jamaica in the last week of 2004 after holding a 25 per cent stake in the carrier for a decade when the Gordon "Butch" Stewart-led AJAG team held majority shares.

At the time of the Government takeover, the bulk of the airline's debt was owed to the Government in airport landing fees and unpaid taxes.

Stewart's group had invested approximately US$30 million at the time of its acquisition of Air Jamaica, and as part of its exit pact agreed to pump US$20 million for working capital into the airline.

In Early March, the new Air Jamaica chairman, Dr Vin Lawrence, had stated that the airline had accumulated losses of US$847 million. Last November, Information Minister Burchell Whiteman told the Senate that the accumulated loss figure was US$682 million. However, the balance sheet for Air Jamaica Holdings, the vehicle used by AJAG to control the airline, showed an accumulated deficit of approximately US$601 million. The Opposition had suggested that it could be as high as US$830 million.

Yesterday, Davies said that factors which contributed to the US$30-million loss since January were: accelerated safety checks, as a result of the ruling of the Civil Aviation Authority of Jamaica; the fact that fuel prices were significantly above the budgeted cost; and the additional cost for the use of charters, as well as paying for interrupted trips, as a result of the cutback in the peak time.

He said that the interim board had specific instructions that Cabinet should be presented with a business plan which would require a maximum annual subsidy to the airline equivalent of US$30 million. The board has been hard at work and has taken several definitive steps, he said.

"The executive chairman has indicated to me that the board has obtained advice from persons with technical expertise in the airline industry, and this new business plan will be presented within the timeframe given to them. As soon as it is available, and has been assessed by Cabinet, it will be presented publicly," the minister said.

But Shaw, who has insisted that Government neglect was primarily responsible for the airline's decline, said yesterday that he found the minister's assurance of a business plan to be tabled soon in Parliament totally unacceptable.

Mothers can't father

Trousers in Denim

Cream of the 'Crop'