Wed, Mar 16, 2005
Workers Fired, Half The Fleet Grounded
Air Jamaica, an airline known for
good times and good service to the Caribbean is now being run by
the government in Kingston, with a smaller staff and only half its
planes in the air.
The takeover comes as Air Jamaica was locked in a dispute with
the FAA over safety issues. The airline pulled ten of its 20
aircraft out of service after an FAA safety audit last month and
canceled several flights to both the US and the UK. One issue
appeared to be the interval between safety inspections. Air Jamaica
had been conducting major maintenance on its aircraft every 18
months. The FAA demanded that interval be shortened to 15 months.
Failure to comply would mean Air Jamaica risking its flight status
in the US.
Air Jamaica chief Vin Lawrence wasn't specific when describing
the maintenance issues that led to the FAA request -- except to say
it involved "routine" issues like waste bins with broken lids and
labels that had become worn.
Nor was Lawrence specific when he
said the grounded aircraft were costing him millions of dollars a
month.
The Jamaican government took over the airline in December,
finding it mired in debt -- much of it owed to the government
itself. Since then, the new board of directors has undertaken a
major restructuring plan, laying off some 170 workers. Its eventual
goal is to reduce the workforce by about ten percent.
Dealing with the airline's debt may be even more difficult. "The
fact is that the airline has been virtually insolvent for a number
of years and has had to rely heavily on government’s
financial support through direct loans, credit facility guarantees
and periodic debt to equity conversions," Lawrence said in a
statement posted on the airline's web site. "Consequently,
discussions have been in train for sometime on the most effective
and efficient methodology to apply to ensure the operation of the
airline, without the continued heavy reliance on government, and by
extension, additional cost to the taxpayer. Cost cuts were
identified and several successfully implemented, but important
areas such as employee cost savings, for example, salaries and
related costs, were not achieved."
Air Jamaica owes US$890 million to its creditors. Given that,
the Jamaican government says it may retain control of the airline
until 2010 -- or beyond.
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