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New twist in the Air Jamaica deal

Published:Friday | March 5, 2010 | 12:00 AM
Air Jamaica on tarmac
A photo of a Caribbean Airlines aircraft as depicted on the carrier's website, www.caribbean-airlines.com.

R. Anne Shirley, Business Writer

Air Jamaica
staff and their unions have been in discussion with the management of Air Jamaica about their termination and redundancy payments in the run-up to the closing of a deal with Caribbean Airlines.

The parties have set March 31 as the deadline to sign a binding sale agreement, and the Jamaican carrier's staff will be laid off on or around April 12.

At the same time, contrary to the explicit statement made February in the House of Representatives by Prime Minister Bruce Golding that the Air Jamaica brand is not for sale and is the property of the people of Jamaica, it now appears that Caribbean Airlines will have control of the brand, at least temporarily.

Negotiations are far advanced for Air Jamaica to continue flying for the next six to 12 months "under contract" to Caribbean Airlines, informed parties tell the
Financial Gleaner

At the urging of the Jamaican members of the negotiating team, Caribbean Airlines will be taking over the Air Jamaica carrier, which it will operate using the existing operational certificateunder the open skies bilateral arrangement with the United States, under which Air Jamaica is the 'designated national carrier' for Jamaica.

Apparently, under the open skies agreement both parties have to give each other six months' notice before changing the 'designated national carrier' from one airline to another.

Sale agreement

Caribbean Airlines had also indicated that it wanted to acquire the JM IATA code. However, sources close to the negotiation have suggested that there might be some problems in this regard.

In essence, Caribbean Airlines will take over financial and operational responsibility for Air Jamaica and will fly on Air Jamaica routes using the existing Air Jamaica operational certificate and fleet of planes, the Air Jamaica logo and colours, while the parties seek to finalise and execute the "sale agreement".

This will allow Caribbean Airlines to build its presence in the Jamaican market - both at home and in the diaspora -by trying to do a gradual shift over to its own brand in a year's time.

It is understood that the Air Jamaica negotiating team has been told by the Jamaican Government that the 'exclusive national carrier' status is no longer on the table, and instead Caribbean Airlines is now being offered 'designated national carrier' status.

Emails have been circulating among Air Jamaica staff members suggesting that Dr Shafeek Sultan-Kahn, a director of Caribbean Airlines, is currently in the island to direct the transition process.

Sultan-Khan is a highly respected Trinidadian consultant who is currently the chairman of Trinidad & Tobago Water and Sewerage Authority, as well as for CL Financial Group, which was rescued by the Trinidad government in January 2009, and its Jamaican subsidiary Lascelles deMercado and Company, whose annual general meeting was held Thursday.

He was also the point man for the Arthur Lok Jack-led task force on BWIA that handled the transition from BWIA to Caribbean Airlines in late 2006, when Trinidad recapitalised and rebranded the carrier.

In the BWIA/CAL transition, BWIA ceased operations on December 31, 2006, with its 1,800 staff jobs being made redundant, and Caribbean Airlines started operations on January 1, 2007 at a cost of TT$1.5 billion.

Sources have told the
Financial Gleaner
that Caribbean Airlines has now changed its position on a provision in the non-binding agreement signed with the GOJ and Air Jamaica on January 22, 2010 that every effort be made to ensure that under the laws of Jamaica, Caribbean Airlines should not be considered in any way the successor to Air Jamaica.

Strong opposition

Instead, the Trinidad carrier now wants to piggyback on the Air Jamaica brand to build customer loyalty and to establish a firmer base in the Jamaican marketplace.

This change is being seen as one way of thwarting the efforts of the Air Jamaica staff to acquire the Air Jamaica brand in the future.

The deal also faces blow-back in Trinidad and Tobago, where reports have emerged that opposition groups are planning to seek an injunction in the Trinidad courts barring the takeover.

In recent weeks there has been mounting opposition to the impending deal in the twin-island republic where taxpayers, for the past two years, are already footing the bill for annual subsidies to Caribbean Airlines in the form of 'fuel hedges'.

Trinidad has reportedly poured more than TT$500 million into the operations of the airline over the past two years, and concerns have been raised about the potential cost of acquiring the loss-making Air Jamaica carrier.

Persons close to the negotiations are adamant that Caribbean Airlines is still interested in expanding its international route network to Jamaica, and has every intention to eventually closing down the Air Jamaica brand.

There are also indications that as they do further due diligence, they are reviewing assumptions about the value of some routes that were initially targeted for closure, including a relook at the Cuban gateway.

It is understood that, starting this week, Air Jamaica staff will be subject to psychometric tests as the process gets under way to decide who will be re-employed under the 'contracted Air Jamaica'.