Business

Grounded, Jamaica Air Shuttle seeks partners

Investor, owner of aircraft, pulled out of ‘risky’ local market

BY JULIAN RICHARDSON Assistant Business Co-ordinator richardsonj@jamaicaobserver.com

Wednesday, February 20, 2013    

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OPERATORS of Jamaica Air Shuttle are putting together a consortium of investors to purchase two 12-seater Beech 99 aircraft they were forced to ground on Monday after the planes' owner pulled out of the business.

Jamaica Air Shuttle, which offers domestic and regional flights, will temporary suspend its operation until that transaction is completed, said the carrier's marketing manager, Deryck Dwyer.

"The overseas investor, who has been ongoing with us from the beginning, has become a bit disheartened with what has been happening in Jamaica and has looked at his investment as becoming too risky; and has decided to pull out of the deal," Dwyer told the Business Observer.

"He informed our managing director (Christopher Reid) two Fridays ago that he wished to take back his aircraft because he would like to sell them," he disclosed.

Dwyer noted that Reid owns the right of first refusal to acquire the planes and said that the company expects to resume operations in about two weeks.

Jamaica Air Shuttle entered the air travel market on December 7, 2009, running three scheduled flights per day between the Tinson Pen Aerodrome in Kingston and Sangster International Airport in Montego Bay on weekdays, and two schedule flights between the two locations on weekends. It also offered flights to Cuba and Haiti.

The company at the time entered a domestic air travel market that had been left void for five years following the exit of Air Jamaica Express. It was among the factors that contributed to lower-than-expected consumer traffic during the first year or so in business, the marketing manager said.

"We were returning service to a market that was absent for five years, so we took quite a while to get our volumes up in terms of getting the word out," Dwyer said, noting that travellers had become accustom to driving and taking the bus in the absence of regular domestic air travel service and significant improvements in the road network over the period.

Furthermore, he said a confluence of sporadic incidents, starting with the Tivoli incursion in May 2010, caused air traffic to fluctuate.

"For about a week or more we were crippled because of the incursion that was taking place. We had to stop flying for a couple of days because nobody would come to Tinson Pen," he said.

The first Jamaica Debt Exchange, that resulted in bond holders absorbing steep 'haircuts', and the elections also impacted consumers and as a result business travel, Dwyer added.

The airline's marketing manager said it is against this background that the company missed targets, and the Canadian-Barbadian partner lost confidence in the local market and informed the company of his decision to exit the business two weeks ago. Letters were sent to customers and the investor subsequently cancelled the insurance on the aircraft, effective Sunday night.

"We had no choice but to ground the aircraft (on Monday)," he said.

Despite the initial challenges, the domestic air travel market remains viable, Dwyer said, noting that Jamaica Air Shuttle currently runs an average load factor of 70 per cent, with business people and politicians representing a solid portion of its client base. What's more, the company has realised a steady increase in the Haiti and Cuba markets.

Dwyer noted that the carrier has a number of frequent fliers — flying with the airline two to three times a week — who have been with the company over the last three years and have become reliant on the services. Some clients, he said, had previously owned their own aircraft but dissolved ownership because they found it more cost effective to fly with the airline.

"Jamaican business people realise that air service is an invaluable contribution to the domestic economy. Time is money and we cannot afford to spend three to four hours on the road to go and conduct important business on the other side of the island," Dwyer said.

The company hopes to make the business 100 per cent Jamaican-owned and he believes that the entity presents an attractive value proposition for prospective investors, some of them having taken a hit by Government last week with another debt exchange.

"Those prospective investors, who have taken a hit on their investment, are going to say 'let me invest in a tangible asset'," he said, noting that the company's aircraft are now in high demand.

The 12-seater Beech 99 aircraft can cost anywhere from US$500,000 ($46 million) to US$700,000.

"Mr Reid is working assiduously at this point to pull together a local consortium of busness interest to purchase the aircraft," said the marketing manager.

Jamaica Air Shuttle employs 35 persons, including flight crews and ground handlers.

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