With approximately 50 per cent of the total market share of travellers to and from the island and 70 per cent of the airfreight market between Jamaica and the rest of the world, Air Jamaica is considered a significant turnaround opportunity for an airline investor, according to airline consultancy GRA Inc. The consultants arrived at this position following the findings of a private-equity type due diligence conducted by the group, in preparation for the privatization of the national carrier by March 31, 2009.
GRA was hired to carry out the study by the airline privatization project’s lead advisors, International Finance Corporation (IFC) – the private sector arm of the World Bank which the Government of Jamaica contracted on March 31 last year to monitor the process.
In a progress report of activities over the 10-month period leading up to January 31, 2009, IFC reported that it has successfully implemented a number of major tasks aimed at making the airline attractive on the open market. The report, which was released by the Air Jamaica Privatization Committee, lists among IFC achievements the mobilization of US$1.6 million in donor funding in a record four weeks, which has allowed the government to contract the best possible team to assist in the project – inclusive of international airline consultancies SH&E and GRA Inc. and international legal consultants, Hughes, Hubbard & Reed.
IFC and the consultants also developed a 17-point action plan, aimed at improving Air Jamaica’s financial performance. However, implementation was delayed until a new management team was put in place at the airline. In addition, the IFC launched pre-marketing activities by contacting more than 100 potential investors to gauge their interest in the project.
The sale process which the consultants have been implementing has been designed to achieve transparency, fairness and flexibility. With this in mind a website – www.airjamaicatransaction.org – was established to allow public access to basic information about the Air Jamaica Privatization Project. In addition, a process of registration has been set in place which involves investors submitting information and the Privatization Committee reviewing such information and approving/declining the registration of investors.
Once approved, a registered investor and the Privatization Committee sign a confidentiality agreement by which the Privatization Committee agrees not to disclose the identity of the registered investor until such time that the investor agrees to waive such requirement. On the other hand, a registered investor agrees to protect the confidentiality of all information he receives.
On signing the confidentiality agreement, a registered investor receives access to an online 460 MB Data Room – set up in July, 2008 – and engages in discussions with the IFC, the consultants and the Privatization Committee.
The winning investor will be the one who submits the firm proposal that most closely meets the Government of Jamaica’s objectives as assessed by the Air Jamaica Privatization Committee, with the support of financial, legal and technical reviews from the IFC and the consultants.
The work of the IFC and the consultants is overseen by the Air Jamaica Privatization Committee – chaired by respected Jamaican businessman The Hon. Dennis Lalor, who is also Vice Chairman of the Air Jamaica Board. In turn, the Privatization Committee reports to Senator the Hon. Don Wehby, Minister without Portfolio in the Ministry of Finance & the Public Service, who is the Government Minister responsible for Air Jamaica.
FACT SHEET: The PRIVATIZATION PROCESS
OBJECTIVES AND PRINCIPLES OF THE PRIVATIZATION PROCESS
The sale process has been designed to achieve the objectives of transferring full or majority ownership and control of Air Jamaica to an experienced airline partner who will recapitalize the company and ensure its long term sustainability. The principles underpinning the privatization process comprise:
In support of this:
- A website (www.airjamaicatransaction.org) was established to allow everyone to receive basic information about the Air Jamaica Divestment Project – confirming the commitment to the transparency of the process.
- The Project was advertised in the Financial Times and the Economist in order to attract the attention of serious and qualified investors. The Government said it was willing to consider all investors who are strong financially and who have the strong airline experience needed to undertake the project – a signal of the commitment to fairness.
- A special subcommittee – the Privatization Committee – of the Board of Directors of Air Jamaica was established to deal with all matters pertaining to the divestment – reflecting the Government’s intention to implement a streamlined and flexible approach to privatizing the national carrier.
PRIVATIZATION PROCESS DETAILS
- A process of registration has been set in place which involves investors submitting information and the Privatization Committee reviewing that information and approving/declining the registration of investors.
- Once approved, a registered investor and the Privatization Committee sign a confidentiality agreement by which:
- The Privatization Committee agrees not to disclose the identity of the registered investor until the investor agrees to waive the requirement. This is an important prerequisite and is designed to allow the negotiations to proceed in a timely manner, in line with the Government of Jamaica’s March 2009 deadline.
- The registered investor agrees to protect the confidentiality of all information provided.
- Once the confidentiality agreement is signed, the registered investor receives access to the online Data Room and engages in discussions with the International Finance Corporation (IFC) – the private sector arm of the World Bank Group which is advising and supporting the Air Jamaica divestment process – the consultants and the Privatization Committee.
- Registered investors’ discussions with IFC, the consultants and the Divestment Committee are based on the Government of Jamaica (GoJ)-approved transaction structure – that is, the “approved package”. However, in honouring its pledge of flexibility, the privatization team will also consider alternative structures if they achieve the stated objectives of the Government of Jamaica.
- The winning investor will be the one who submits the firm proposal which most closely meets the GoJ’s objectives as assessed by the Privatization Committee, and with the support of financial, legal and technical reviews from the IFC and the consultants.