By Al Edwards, Business Co-ordinator
Chief executive officer of Air Jamaica, Chris Zacca (left), listens as chairman Gordon Stewart outlines the airline's strategy at a press conference at Appliance Traders Limited in St. Andrew last week. - Winston Sill/Freelance Photographer
WITH THE world's commercial airline industry in the doldrums and many operations in retraction mode, Air Jamaica has decided to employ a number of marketing strategies to increase its passenger count.
Not least of these is a 25 per cent discount on all fares and a 50 per cent mark-down on excess baggage fees for a limited period.
Air Jamaica's chairman Gordon "Butch" Stewart, who announced the strategies at a press conference at Appliance Traders Limited (ATL) in St. Andrew last Friday, said the 25 per cent discount will be applicable to tickets purchased between April 16 and 29 for travel up to the end of June. As of Monday this week, Air Jamaica would also be offering a 50 per cent discount on excess baggage fees for a period of six weeks. It would also be offering an extensive local menu on all flights.
'TELEVISED CAMPAIGN'
"In tune with the war in Iraq winding down, we are cranking up our show," Mr. Stewart said. "We plan to start a limited television campaign overseas. We want people who watch CNN to know what we are all about. For the first time, we are carving out a portion of our marketing budget and dedicating it to television. We will be escalating our marketing and sales activities."
Air Jamaica is estimated to be carrying losses of about US$95 million, according to the airline and the Government, and is now looking to access bridge financing of US$30 million.
Deputy chairman and chief executive officer of Air Jamaica, Chris Zacca, said the airline would raise that sum locally and was in the process of doing so. Mr. Stewart said the Government would be increasing its stake in the airline from 25 per cent to 45 per cent but it would be preferable if Air Jamaica was not Government controlled. He said, however, that the Government has been a very good partner and since the events of September 11, 2001 has pledged its help if and when the airline needs it.
OBLIGATIONS
Of late, Air Jamaica has come under increased scrutiny, giving rise to the question, why does a private company funded in the main by the Government not reveal its books to the public? Furthermore, hasn't the public a right to know just what are the obligations of the national carrier?
Only last Friday, Earl Richards, chairman of the Airports Authority of Jamaica (AAJ), responding to comments made by Mr. Stewart that the management of the national airports "is the most incompetent" anywhere in Jamaica, said that Air Jamaica was constantly looking to the Government for funding and indeed owes the AAJ some $800 million. He added that the failure of Air Jamaica to make good on its obligations was inhibiting the operations of the AAJ.
Over the weekend, an unsubstantiated media report claimed that Air Jamaica had accumulated losses of US$500 million and that under Mr. Stewart's control
it has received $10 billion in loans and guarantees and owes the Government US$120 million. What is patently clear is that if Air Jamaica is to get those loans of US$30 million it will need Government guarantees to underwrite them.
A senior Government minister, speaking on condition of anonymity said: "Air Jamaica has continued to call on the Government for bailouts and technically, we could in effect exercise our preference shares, but I think that the Government running the national airline is the wrong way to go and could lead to all sorts of problems. We are now considering changing the members of the board in an effort to change Air Jamaica's fortunes."
BREAKING EVEN
Turning to the local hotel industry, Mr. Stewart said it was breaking even at best. "The limited yields this year are getting lower and lower with occupancy now at 58 per cent, which means you have an industry that is unprofitable," he said. "To become profitable, some radical things have to be done. Our biggest competitors are cruise ships, which contributes six or seven per cent to the tourism dollar. It is the land-based accommodation that contributes 93 per cent of tourism's revenue. I don't know why the cruise ship sector is allowed to operate tax-free while the hotels have to be paying these multitude of taxes, starting with land tax, room tax, food tax, wine tax, the list goes on and on."
Mr. Stewart called for local hotels to operate tax-free to effectively compete with the cruise ships. He said his hotel chain, Sandals, was conducting research to show that a tax-free hotel would stimulate employment and development and jump-start every other sector in the economy. The Sandals chairman also pointed out that most hotels in the country needed modernising and refurbishing and there was a need for additional development and funding for more hotels.
DAMNING REPORTS
Commenting on damning reports from Bear Stearns and Credit Sights on the Jamaican economy, Mr. Stewart said that when an economy experienced negative growth it also meant airlines and tourism would begin to lose money.
"With the travel sector that we have, and the tourism product that is Jamaica, we have every opportunity to turn it around and make it run better," said the tourism mogul. "Ten years ago, Jamaica was viewed in the international travel community with a lot more appetite," he said.
According to Mr. Stewart, "as our competitors have become stronger and taken tourism as a business and placed an emphasis on product development, we have slipped behind in the pecking order of tourism. Fifteen years ago, Dom. Rep. had less hotel rooms than we had. Now they have 60,000 and we are still at 17,000. Yet we have the better product. If we don't step back and take the business decisions we have to take, 10 years from now we will have 22,000 hotel rooms and Dom. Rep. will have 100,000 because their base cost is lower."
