Seeking, like the rest of the world’s airlines, to navigate its way out of serious economic turbulence, Air Jamaica yesterday staked its survival on chopping up to US$50 million, or 10 per cent, from its annual costs and vowed to take necessary tough decisions to achieve the goal.

“No matter what it takes, we are going to take the decisions that will ensure that Air Jamaica survives in this most difficult environment,” the airline’s deputy chairman and CEO, Chris Zacca, told journalists at a briefing.

However, even as the airline moves to tighten its belt, it will have to go to its creditors for about US$15 million for working capital, which it hopes will be rolled into its existing US$100-million debt that it will seek to stretch out over a longer term and lower rates.

But barring a major shift in positions, any attempt to push through these reductions over the next financial year will likely place Air Jamaica on a collision course with the airline’s pilots who, the management says, represent about eight per cent of the workforce of about 3,000 but account for about US$105 million.

Air Jamaica and its flyers, who the company says earn more than their counterparts at most major US carriers, have been in testy negotiations for more than a year-and-a-half on productivity gains and other give-backs, but have made little headway in that time.

Zacca made clear that nothing was off limits in a new business plan being developed by Air Jamaica with the help of the US aviation industry consultants, Sabre Holdings, but stressed that a substantial chunk of the savings will have to come from wage cuts and productivity gains.

“We are looking at $15 million in salary give-backs, based on our benchmarking,” he said. “The great majority of that would have to come from the pilots.”

Wages account for about 21 per cent of Air Jamaica’s costs.

Last night, Keith White, the president of the Jamaica Airline Pilots Association (JALPA), which represents the Air Jamaica pilots, acknowledged that the airline was in “a dire financial situation” and agreed that “there may be need for concessions” from his members.

But White suggested that it was management’s failure to produce, up to now, credible business plans and a general high-handedness on the part of executives that have stymied efforts to reach an agreement.

“Most definitely, there is an emergency,” White agreed in an interview. “But if the Air Jamaica pilots fly free, the airline will still be losing money. There is, however, an attempt in the press to portray the pilots as a greedy bunch. That is not so.”

Air Jamaica’s latest drive to rein in its costs comes against the backdrop of the carrier’s own loss of US$83 million in 2002, its yet unquantified deficit in 2003 and new forecasts that the world’s aviation industry will lose about US$5 billion this year – with the bulk of the red ink flowing in the United States.

In the turmoil that has hit the world’s airline industry since September 2001, when terrorists used planes as missiles to bring down New York’s World Trade Centre twin towers, several carriers have been forced to seek bankruptcy protection. Hundreds of thousands of jobs have been slashed in the sector and staff, particularly pilots, have been forced into salary give-backs. The problems ignited by terrorist fears have been exacerbated recently by rising fuel prices.

The latest of the carriers to seek protection from creditors, or who are close to the brink, are US Airways and Air Jamaica’s code-sharing partner, Delta Airlines.

Late last week, US Airways reached an agreement with its pilots that will mean an average salary cut of 18 per cent, saving the airline about US$300 million a year. The concession by US Airways’ more than 3,000 pilots was estimated to represent about a third of the cuts the carrier projected it needed to remain afloat.

At Delta, which has lost US$5.6 billion in the last three-and-half years, the salaries of non-unionised staff will be trimmed by 10 per cent from January, and pilots agreed to relax work rules. But the management is still seeking to save about

US$1 billion a year in pilots’ pay, or about half of the value of their contract. Unions say the concessions they have tabled value about $700 million a year.

In this kind of environment, what Air Jamaica is seeking to do is not unique, Zacca stressed yesterday.

“What we are facing is what everybody is facing and we find ourselves in a very difficult position at this time,” Zacca said.

For instance, Air Jamaica, for this year, had projected its fuel bill, which accounts for about 15 per cent of its operating costs, at US$73 million. It is likely to reach US$102 million – 40 per cent higher.

On the other hand, with soft markets and competitive pressures, it, like other major airlines, cannot push up fares. Recent fare hikes rolled back because competitors didn’t hold theirs.

The bottom line, therefore, according to Zacca, is to aggressively, but surgically cut costs.

“We are targeting cuts in expenditure of between US$45 million and US$50 million,” he said. “. Everything is on the table and we are looking to start from zero up. Nothing is sacred.” The savings, the Air Jamaica CEO said, would be in addition to US$30 million in cost cuts achieved since 9/11.

Air Jamaica has costs of about US$500 million and revenues of about US$440 million.

Among the things Air Jamaica will achieve are better terms on its aircraft lease, a rationalisation of routes, which could mean fewer planes, more competitive airport charges, reduced spending on advertising, lowering financing costs – now at US$15 million annually – and, of course, reduced staff costs.

“It is a matter of the very survival of the airline that we get our costs down,” Zacca said. “.There is no alternative.”

Although Zacca stressed that he would need the support of “all constituents” for the programme to work, the most ticklish group will remain the pilots, who insist that their salaries, about which they are now in a dispute at the labour ministry, are overstated.

“Air Jamaica’s crew cost is seven per cent of its operating costs, while the industry’s average is 11 per cent,” said White.

Last year, pilots voted down concessions negotiated by their executive with the help of US consultants, in what White claimed was “an all or nothing position” by the management.

The union went to the labour ministry when Air Jamaica failed to implement a five per cent pay hike this year.

“Air Jamaica has acted unilaterally,” White said. “We are saying that is not in the interest of industrial relations in Jamaica.”

The airline has argued that it cannot afford the hike, and Zacca said that since pilots voted down the last set of concessions “they have put nothing back on the table”.

“The industry has changed (since 9/11),” Zacca said. “If you want to be a pilot in the airline industry at this time, you have to take some pain.”

But the adjustments, he said, need not all come in the specific dollar amount in pay packets. “We would rather get productivity gains than wage cuts,” he said.

For example, on average Air Jamaica pilots have rest periods of 11 hours and 15 minutes between some foreign flights, while for US regulated pilots the average is nine hours. The difference costs the airlines in crews and other upkeep expenses.

Air Jamaica would have to negotiate changes with its pilots and the Jamaica Civil Aviation Authority.