Air Jamaica divestment costly
Published: Wednesday | August 26, 2009

Prime Minister Bruce Golding has disclosed that it will cost the Government close to US$200 million to divest the national airline.

The recommendations of the Dennis Lalor-led committee, set up to carry out the divestment process, has been before Cabinet since last month.

However, Golding, who was speaking at a Gleaner Editors' Forum yesterday, indicated that the current fiscal challenges facing the Government have had some impact on the process.

The prime minister also pointed to the cost as a major factor in the divestment process.

"Part of our concern is the cost of privatisation. There's a cost to not privatising and that cost is never really known because you don't know what the losses are going to be and how many times they're (Air Jamaica) going to come back to you for additional funds," he said.

Redundancy payments

Golding also said the divestment process would involve redundancy payments amounting to US$30 million, as well as outstanding bills owed by the airline.

"The question is whether that can be accommodated within the kind of fiscal realities of this fiscal year ... there are some expensive leases that it would be impossible to pass on as part of the transaction which would have to be terminated and therefore whatever are the penalties that we would pay, would have to be assumed," Golding explained.

Last year the Government appointed International Finance Corporation - the private sector arm of the World Bank Group - to serve as lead advisers on the divestment project.

It's understood that no local investors have expressed an interest in acquiring the airline.

The Government has said that one of the major aims of the privatisation effort is to ease the burden on the national Budget of the over US$150 million per annum in losses by the airline.

Over the past decade, Air Jamaica has lost over US$1 billion and the company is facing debts of more than US$500 million.

Meanwhile, Golding said the 2009 business plan for the cash-strapped carrier revealed an operational profit over the last two quarters, reversing its consistent losses.

The prime minister also disclosed that in another week, a privatisation team is to be appointed to manage the divestment of the Norman Manley International Airport.