Airlines don’t fly on sentiment
BUSINESSES, UNFORTUNATELY, can’t survive merely on sentiment. If they could, Air Jamaica would still be ‘the little piece of Jamaica that flies’. Few enterprises enjoyed such national romantic attachment.
Unfortunately, like most state-owned firms, Air Jamaica had a major, and ultimately terminal, failing. It failed to make money.
Up to the time it folded seven years ago, Air Jamaica had lost money 40 of its 42 years of existence, or for 95 per cent of its life. By 2010, its accumulated deficit was US$1.5 billion, around half of which was racked up during its decade in private hands. Its liabilities at the time were US$940 million.
Stated plainly, Air Jamaica was bankrupt. It could operate only because of the J$10 billion it received annually from the Jamaican Government in subsidies – money which was not available to be spent elsewhere.
As Audley Shaw, the finance minister, told Parliament at the time: “It simply could not continue – not if we wanted to support poor children being guaranteed at least one balanced meal per day and the needy getting lifesaving drugs they couldn’t afford.”
Jamaica’s fiscal circumstance has retreated from the precipice at which it teetered in 2010, and a good stretch afterwards – helped in part by tough, unsentimental decisions like the divestment of Air Jamaica to Trinidad and Tobago’s Caribbean Airlines (CAL), in which the Jamaica Government gained a 16 per cent stake.
NOT OUT OF THE WOODS
Nonetheless, Jamaica’s economy is not out of the woods. It will require a longer, sustained period of macroeconomic stability and robust growth before it is; and for the country to be in a position to afford high-cost, potentially risky ventures that are better left to the private sector. That is why – the sentimentality expressed at last week’s Diaspora Conference in Kingston notwithstanding – we are unlikely to see the relaunch of a state-owned Jamaican airline.
Indeed, the experienced Caribbean Airlines, the successor airline to BWIA, is indicative of the experience that the Jamaican Government should be happy to avoid. In six years to 2016, the Trinidad and Tobago government provided CAL with TT$3 billion (US$444.4 million) in subsidies. That translates to more than J$57 billion, or in the range of the J$10 billion a year that this country’s Government used to pump into Air Jamaica.
Such expenditures might not have been too much for Trinidad and Tobago during the heady period of high oil prices when its national coffers were bursting with reserves. These days, though, Port-of-Spain, though still in a better state than Kingston, has to be more circumspect with its largesse to state enterprises, as the finance minister, Colm Imbert, has warned Caribbean Airlines, which is in a business in which most players, especially those owned by governments, struggle for viability.
Judging from the boasts of the tourism minister, Ed Bartlett, the absence of Air Jamaica, or a replacement flag carrier, doesn’t appear to have been a drag on travel in and out of Jamaica, especially for tourism. In the first half of this year, there were 1.18 million stopover visitors – those who arrived by air – or 54 per cent of the total of this category for all of 2016. Mr Bartlett says records will be broken.
The liveries of the carriers, some with odd names, taking off and landing at the Donald Sangster Airport in Montego Bay may not be the prettiest in the sky. But it doesn’t cost Jamaican taxpayers to keep them in the air.