June 2009 Set As New Date For Completion Of Air Jamaica Privatization

The negotiations for privatization of Air Jamaica are progressing well and the entire process is expected to be completed within another three months – that is, by end of June, 2009.  This is according to Sen. Don Wehby – Minister (without portfolio) in the Ministry of Finance, who has responsibility for Air Jamaica – who said today that, while the projected March 31 timeline for the privatization will not be met, “significant progress has been made in the privatization effort.”

In fact, the Minister has a meeting scheduled for Mid-April with an international airline group from which the Privatization Committee has already received an indicative offer for Air Jamaica.  “We anticipate that we will be able to advance the negotiating process quite substantially at that meeting,” he said.

Soon after its decision last year to privatize the national airline, the Government of Jamaica (GoJ) appointed International Finance Corporation (IFC) – the private sector arm of the World Bank Group – to serve as lead advisors on the project, having considered their wealth of experience in airline transactions. Shortly thereafter, the GoJ appointed a Privatization Committee, chaired by the Hon. Dennis Lalor, to work with the IFC, advise the GoJ on the privatization and, ultimately, to make a recommendation on a way forward.

The suitable strategic investor which the Privatization Committee is seeking to identify is one which would:

§  Be financially stable and able to capitalize the airline adequately.
§  Have extensive industry knowledge and expertise to turn around the airline and make it financially viable.
§  Control and manage the company effectively – ensuring a positive return on the investment being made and reducing the cost on the fiscal accounts.
§  Ensure continuation of an airline system as part of the support for the country’s tourism infrastructure and business relationships – that is, provide reliable airlift service on certain key routes from and to Jamaica.
§  Be willing to maintain the airline’s Jamaican identity.

The prospective investors have been identified through the pre-qualification process, conducted by the International Finance Corporation (IFC) as serious and capable bidders.   Senator Wehby has noted that, given the economic environment within which the Air Jamaica Privatization project is being undertaken, the Privatization Committee “has done very well” to bring the negotiations to this point in such a short space of time.  “And while we know that many persons have been anxious to receive an update on the progress of the negotiations, it should be noted that the negotiating team has signed legally-binding non-disclosure agreements which prevent us from disclosing certain details about the project and the prospective investors,” the Minister added.

He reiterated that a major imperative of the privatization effort is to ease the burden on the national budget of the over US$150 million (J$13.2 billion) per annum that the airline was losing and which will ultimately be the responsibility of the GoJ.  Air Jamaica currently has loans outstanding of over US$600million/J$52.8 billion.

“The Air Jamaica Privatization team remains committed to its task of completing Air Jamaica’s privatization and is working in a focused manner on concluding the transaction,” Minister Wehby today assured the nation.

He also took the opportunity to applaud the successes which are already being experienced from the current restructuring which is taking place at the airline, and which is part of the Business Plan for the cash-strapped Air Jamaica.  “The airline’s management, employees and their unions, as well as customers and other stakeholders are fully aware of the need to put the airline in a better financial position and we are appreciative of their understanding and support.  I fully endorse all efforts to make the restructuring and the privatization as painless as possible in these difficult economic times – given our common interest in seeing an improvement in the airline’s balance sheet,” Senator Wehby added.