Virgin pull-out creates market opportunity for Air J/CAL
Published:Wednesday | June 29, 2011 | 12:00 AM
Air Jamaica plans to enter the United Kingdom as early as next year following the planned withdrawal of Virgin Atlantic from Kingston.
The airline wants slots in London Heathrow which would entitle it to scheduled arrivals and departures. It sold similar slots in mid-2007 to Virgin Atlantic.
"We see the period 2012-2103 as a possibility and London Heathrow remains the preferred airport. We need to ensure that enough time is allocated to position the airline with the relevant external stakeholders," said Laura Asbjornsen, head of corporate communications at the airline, which is now majority owned by Caribbean Airlines Limited (CAL).
The merger of the two airlines was completed in May after a year, and on Monday CAL announced that all Air J and CAL flights would now bear the code 'BW'. CAL is itself the product of the restructured BWIA.
"We continue to pursue our philosophy of 'one airline, two brands' since we officially signed the Shareholders' Agreement on 26 May 2011," said Caribbean Airlines Acting Chief Executive Officer Robert Corbie.
"This will mark a milestone in the streamlining and merging of operations and routes."
Virgin Atlantic will exit the London to Kingston route in April 2012, timed months before the London 2012 Olympic Games, but will continue flying out of that gateway to Montego Bay.
This month, Tourism Minister Edmund Bartlett said he would meet with officials from Virgin Atlantic Airways during a trip to London in the coming weeks aimed at examining steps to mitigate any fallout from the United Kingdom.
Air Jamaica views the UK as an important step in achieving its medium term viability. However, flying to the UK would cost millions of pounds based on aircraft leases and landing slot costs.
"A lot of work is going on in the background in preparation for meeting these objectives. Especially in light of Virgin Atlantic announcing this month that it would stop flying to Kingston Jamaica from the UK," Asbjornsen told Wednesday Business.
Jamaica sold Air Jamaica's London slot for £5.1 million (US$10.2 million) in a heavily criticised deal that the former administration was forced to publicly defend, but which remains a stain on its record. Jamaica's procurement watchdog, the contractor general, rapped then Finance Minister Omar Davies for 'usurping' the authority of the Cabinet, accounting officers and the Air Jamaica board and unlawfully binding Jamaica to the deal.
Trinidad it emerged in March is also probing the sale of its London Heathrow slots.
The Patrick Manning government disposed of the BWIA slots at Heathrow for TT$60 million (US$10 million) in 2006 as part of a negotiation for Caribbean Airlines to use British Airways for its London route under a code-share agreement.
Air Jamaica recorded a 40 per cent drop in revenues to US$154 million (J$13.2 billion) in 2010 while operating with less passenger seats filled than year earlier levels, according to the Economic and Social Survey published by the Planning Institute of Jamaica. Expenses were not disclosed, however it was the third consecutive year of revenue declines for the airline.
Air Jamaica executives think they can avoid the losses made on the London route in the past.
"It will take time to rebuild the market share on this route and to build ourselves to a profitable position," said Asbjornsen.
"There is a sizeable Caribbean Diaspora and unlimited potential in the leisure market that has numerous benefits for the Caribbean. Positioning in the United Kingdom gives us the opportunity to market further into the European continent from the UK. It is an exciting time in Caribbean aviation," she said.
The London/Jamaica route made losses for the airline and its discontinuation was projected to save US$25 million per annum.
Asbjornsen said that the airline is finalising re-entry costs, including leasing aircraft.
The twin engine wide-body Boeing 777 is a possibility based on the airline's in-progress switch to an all Boeing fleet aimed reportedly at cutting maintenance costs by half. Air Jamaica presently operates three Boeing 737, one A-320 and one A-319.
"There are many wide body options available on the market although the actual date of delivery is some time away for some of the options. We are exploring all possibilities to ensure that we have the correct aircraft to suit our needs," she said.