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Caribbean Airlines to be Jamaica's exclusive national carrier

Published:Friday | February 12, 2010 | 12:00 AM

R. Anne Shirley, Business Writer

The Government has agreed to ensure that Caribbean Airlines is designated the exclusive national carrier of Jamaica under the air services agreements between itself and other states.

This was stated in the non-binding letter of intent signed on January 22 by the Government, Air Jamaica Limited, Air Jamaica Holdings Limited and Caribbean Airlines, a company owned by the Government of Trinidad and Tobago.

Under this agreement, the parties are committed to making best efforts to sign legally binding agreements by March 31. In this regard, the GOJ and Air Jamaica will take all necessary steps to effect the cessation of operations of Air Jamaica on or before July 1, and as soon there-after close Air Jamaica.

Caribbean Airlines will commence its Jamaican operations on or before July 1 upon the cessation of operations of Air Jamaica. Effective as of the consummation of the closing, the Government has agreed that "Caribbean Airlines shall be the exclusive national carrier of Jamaica and, in this regard, will not request designation of national carrier status for any other air carrier for as long as the Jamaican operations maintain a minimum level of service and meet certain other criteria, which in each case will be set forth in the definitive agreements".

Prior to the cessation of operations, Air Jamaica will "implement revenue management and communication measures as determined by Caribbean Airlines and reasonably acceptable to the Government of Jamaica in order to actively manage market share, enhance passenger loyalty to the national carrier, and help preserve the competitiveness of the launch of the Jamaican operations (of Caribbean Airlines)".

Air Jamaica currently flies to five destinations on 13 routes. The destinations are the United States, Canada, Cuba, The Bahamas and Curaçao. Last year, the airline carried 1.1 million passengers on these routes.

In Appendix I, attached to the letter of intent, Caribbean Airlines stated it would start up its Jamaican operations by adding a network of routes to its international network.

Caribbean Airlines will also operate a Kingston, Port-of-Spain, Georgetown (Guyana) route one flight/seven days per week, but this route will not form part of the Jamaican operations.

In addition, Caribbean Airlines has indicated that possible intra-island flight between Kingston and Montego Bay is "to be considered". So the advantage that Air Jamaica passengers had to connect between Kingston and Montego Bay will likely be lost.

For the initial Jamaican operations, it is estimated that the routes will be operated with "five to seven aircraft with an estimated number of cockpit and crew, respectively, of 70 to 90 and 140 to 160".

The agreement expects that there will be "synergies and rationalisation in many areas including ground handling (flight and passenger) and distribution".

The Air Jamaica Frequent Flyer Programme will be integrated and rationalised into the Caribbean Airlines programme. In terms of the management and personnel to be employed to man the Jamaican operations, Caribbean Airlines shall have "absolute discretion in the selection and recruitment of any Air Jamaica employees on new contractual arrangements".

Airline tickets to be honoured

Also, the fuel hedge now enjoyed by Caribbean Airlines will be extended to the Jamaica operations.

Caribbean Airlines will honour airline tickets bought on Air Jamaica on routes which will comprise the Jamaican operation and have not yet flown at the time of the closing of Air Jamaica. On or before the closing, "the Government of Jamaica will pay to Caribbean Airlines an amount equal to 93 per cent of the passenger fare value of the Air Jamaica ticket fares".

In consideration for all of the above, the agreement shall contain an anti-dilution provision "to insure that Government of Jamaica retains no less than a 10 per cent equity interest in Caribbean Airlines after closing, giving effect to any equity funding post-closing needed to meet the requisite cash threshold. Such securities shall be of the same class of securities held by the Government of Trinidad and Tobago and there shall be no securities senior to it".

The Government of Jamaica will also appoint one director to the board of Caribbean Airlines.