Michael Conway CEO of Air Jamaica was given the job in 2005 to turn around the carrier. - file

Despite confirmation that Air Jamaica's London route bleeds as much as US$25 million a year, the airline's managers appear reluctant to erase the United Kingdom capital from its flight schedule.

London represents a substantial 35 per cent of operating losses.

Those losses, booked ahead of debt financing and government aid, amounted to US$72.6 million in 2005 (2004: US$71.5 million).

"London is being assessed," said Air J president Michael Conway. But so is the entire route structure.

Conway was equally evasive about which of Air Jamaica's routes were most profitable, saying that releasing that type of information could hurt the carrier's market competitiveness.

Air Jamaica now flies an Airbus A340 to London but once the current lease contract runs out, he said, the airline would not renew its arrangement with the European plane maker, raising the odds of the route being chopped.

Conway said however that the new Boeing planes it is acquiring can service London, a nine-hour run from Jamaica, and other long-haul flights.

Air Jamaica plans to lease nine 737-300 aircraft from Boeing, a craft with a payload of 72,360 pounds and 126 passenger capacity, and six 757-200Ws whose payload is 130,840 pounds capable of flying 200 passengers.

The 757's range is 3,867 nautical miles, and capable of flying London and other long-haul routes, said Conway.

But load factor would be key. A diagram of range comparisons for Boeing indicates that London is just outside the 757-200W's range on a flight out of Kingston, but can handle further distances by flying with some seats empty.

With zero passengers, the plane's range is 4,774 nautical miles.

Air Jamaica is exploring a series of alliances with other airlines and new markets under a route rationalisation plan within its new five-prong business model that targets savings of US$80 million in over two years and breakeven by 2009.

In 2005, the airline spent US$141 million to fly its fleet. Its fuel and oil bill was US$100.5 million (US$95.7 million in 2004).

A one cent increase in the cost of jet fuel results in $500,000 of additional expenses for the airline, Conway said, explaining the impact of volatile world oil prices on Air Jamaica's deteriorating bottom line.

In the past ten years, Air Jamaica's jet fuel costs have increased from US$0.67 on average to US$2.31 per gallon in 2006.

With the one-year-old PetroCaribe agreement, however, Air Jamaica is already saving about US$20 million per year on its fuel bill. The airlines pays the cost of the fuel to Petrojam, the agent for the PetroCaribe oil, but receives monthly reflows that currently amount to some US$1.7 million, said Conway, which are treated as cash flows to finance ongoing operations.

The funds are repayable under the same long term, concessionary terms as the broader Venezuelan sponsored oil agreement.

Conway says the new business plan explores strategies to fly Air Jamaica's fleet for longer hours to boost its average 8-hour utilisation rate more in line with the industry's 11-13 hour average and with bigger loads to boost efficiencies and revenues per flight.

Currently, Air Jamaica's load factor is less than 60 per cent for two-thirds of the year, said Conway, meaning that there is a potential 40 per cent more in passenger revenue that the airline is not tapping into.

London's flying distance alone would put the route ahead of AirJ's average utilisation rate, suggesting that the losses may be linked more to poor load factors.

Conway, however, would not comment.

The airline's 2006 financials are not yet available Ñ its fiscal year runs from January to December Ñbut in 2005, the airline bled US$120 million and US$99 million in 2004, according to its last audited accounts.

business@gleanerjm.com