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Columns
James Moss-Solomon  
February 13, 2010

Transportation, Tribalism and Trade

It would be totally unfair to say that the staff of Air Jamaica is responsible for the state of affairs in that company. Over the years, and largely due to the performance of the staff, we have come to expect first-class pilots and aircrew, as well as competent and efficient ground staff. The confident feeling that we are safe in the air has been gained over four decades, and for every Jamaican at home or abroad, the sight of this airline, wherever in the world we may be, brings a sense of nostalgia and pride.

Pride is sometimes transcended by the basic need to run a profitable venture. We often hide by pretending not to understand the figures involved, so let me attempt to simplify. If the staff were to buy the airline inclusive of debt, then each of the 1,300 members of staff would have to subscribe capital of J$1 billion each. If every citizen of Jamaica were to participate equally in purchasing the debt, every man, woman and child living here would have to find approximately J$500,000 each. If we include the estimated Diaspora, then we would all have to subscribe around J$250,000 each. However, it seems that the plan to sell the airline does not include the debt, and if that is the case, from a strictly equitable point of view, the staff proposal could be given equal consideration. The deciding factor, therefore, would be which business plan offers the most residual benefit to Jamaica.

Our prime minister informed Parliament that the brand will be retained in any sale as well as certain North American air routes. If the brand is so valuable, what is the dollar value to be assigned to that goodwill, and how much more would be added to the sale value by including the brand? If that does not constitute a part of the sale price, then the Jamaica Airline Pilots’ Association would be better served by simply negotiating new leases of newer and more efficient planes, and applying for a new service, just as Jet Blue and others have done.

This is not the first time that the rationalisation of air transportation within the Caribbean has come up for discussion. It has been the subject of countless studies and recommendations, with several presentations made to the Caricom Heads of Government. As they continue to give this discussion lip service, our governments have persistently borrowed money to fund studies which have essentially given the same solution.

The answer has always been that Air Jamaica, Caribbean Airways (BWIA), and LIAT need to be merged. This potential solution has not been pursued because of tribalism, expressed by politicians as “sovereignty”. This clichéd word hides the fact that although they espouse togetherness, they are really interested in being petty despots in small, impoverished countries. It does not supersede corruption or mendicancy.

There is a great synergy to be found in a merger of the three carriers. In the first instance, it would allow for appropriately sized aircrafts to provide better and less costly services to travellers within the Caribbean. In terms of the hub-and-spoke concept with Trinidad, Barbados and/or Antigua, and Jamaica, we could provide more direct services between the major destinations using larger aircraft, and more frequent and profitable spoke routes using small turboprop aircraft. That, however, would be too simple a solution to satisfy our need to be seen as “sovereign”.

The very simple step of rationalising/consolidating airline baggage-handling systems in order to allow for the automatic transfer of luggage for in-transit passengers seems to infuriate our political leaders. Caribbean Airways and Air Jamaica are compatible in this regard, but LIAT is not compatible with Air Jamaica. The unfortunate passengers coming from OECS countries who have to connect to Air Jamaica in Barbados and Antigua, have to add at least two hours to their travel itinerary, as they have to clear immigration and customs, leave the sterile area, go outside to the public area to recheck their luggage and go through all the security checks, which include searching bags manually, X-raying hand luggage (where working), and passengers taking off accessories, shoes, etc to go through another scanning process.

These procedures alone constitute a major security risk which could be avoided if the passengers, whose bags have already been screened, were not made to leave the sterile areas. This could significantly decrease airport operational costs. We did this for Cricket World Cup (largely for the convenience of visitors), but cannot do it for our own citizens who now have “Caricom passports”. So much for respect for citizens from our “sovereign” governments.

In flying across our region, we pass through four or five flight control jurisdictions, and therefore have to pay four or five separate fees, which translate into higher operating costs and higher fares. By comparison, Europe with its many countries has only one flight control, which is based in Brussels. They have a working European Union, while we have only a theoretical Caricom.

In 2002, I wrote and spoke about how air transportation can be used as a trade barrier. The regrettable terrorist attack on the United States on September 11, 2001 gave rise to a whole new set of rules designed for “homeland security”. However, as I warned, this was strategically extended to curtail our own regional access. The truth is that we are generally unable to go to Central and South America, Puerto Rico, Haiti and the Dominican Republic, without going through Miami. This excludes regional travellers who do not have a US visa, and we therefore find that for those of us fortunate enough to have US visas, the cost of regional travel is high. The trade agreements we have negotiated with the DR, Costa Rica, Venezuela, Mexico and Colombia are “virtual agreements”, and there is no evidence of increasing exports in spite of these agreements.

The sale/merger of Air Jamaica needs to be evaluated to see what new trading routes can be opened. A few questions need to be answered truthfully. Firstly, can we increase our trade with our neighbours in Central America and South America? Secondly, can we attract tourists and investors to our region who may not have US visas? How much efficiency can be gained by the triple merger, and what should we expect in terms of future earnings for our tourism, and our investment-starved economies?

So in the end, it goes back to where I started. In countries which retain only a small percentage of their tourism earnings, can we be dependent on traffic from North America only and restrict our marketing operations to eliminate any South/South tourism opportunities? The sale of Air Jamaica cannot be based on emotion only, with citizens engaging in a “sovereignty argument” which brings no remedy.

The question is not about whether or not airlines carry boxes. Many people earn a living from importing the goods in those boxes for resale. This is a use of foreign exchange which may in fact hinder some persons who would like to manufacture locally. A strategy should also include turning those imports into exports and earning foreign exchange.

These Informal Commercial Importers (ICIs) are among the most savvy business people, and rather than have them squabbling to import consumer goods, let us find a way of transforming them into strategic exporters. The ICIs developed a major trade with Curacao and Panama long before our major companies envisaged a free zone development connected to a major trans-shipment port facility. These persons who had little exposure to formal training now number among the Jamaicans who speak both Spanish and Chinese, so let us not disqualify their talent. This was only made possible by direct routes which avoided the USA’s strategy of containment.

I hope that it is plain to everyone that I too love “the little piece of Jamaica that flies”. However, as an investor I would love to be a part of an entity which makes a profitable return on my investment. It cannot continue to be a little part of Jamaica that fails. This government and the previous governments have by their inattention allowed Air Jamaica to become a bankrupt entity.

There seems to be no suitor who will absorb all the accumulated losses and therefore, any decision that is made must produce better and more cost-effective services across the region and serve the markets where trade opportunities exist. If this does not favour the staff initiative, then the plain reasons for any choice must be explained within the context of greater benefits which are sustainable and measurable.

Air Jamaica was put in place to provide growth and prosperity opportunities for all citizens. It has become a tax burden, and at this point our people can face no further tax burdens. Transportation and trade strategies must triumph over tribalism.

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