NOTE: The responses provided to the questions asked by Mr Mike Henry represent the situation at the time the questions were asked (November 30, 2004). Since then significant changes have occurred.
Q1. Who are the present Government Directors on the Board of Air Jamaica and who appoints them?
A. The Government Directors on the Board are appointed by the Cabinet and are as follows:
- Dr. the Hon. Vincent Lawrence O.J.
- Hon. Derick Latibeaudiere O.J.
- Mr. Keith Senior
Q2 What are the responsibilities of these Directors?
A The Directors’ responsibilities are as defined in the Companies Act, and the Articles of Association.
Q3 What are their years of service?
- Dr. the Hon. Vincent Lawrence O.J. - 8 ½ Years since June 25, 1996
- Mr. Keith Senior - 8 ½ Years since June 25, 1996
- Hon. Derick Latibeaudiere O.J. - 7 ½ Years since Feb 27, 1997
Q4 How frequently do the Directors report to the Minister of Finance?
A The Minister is provided with minutes of the Board’s meetings and he meets with the Directors as the need arises.
Q5 Do any of these Directors serve on the Finance Committee?
Q6 If the answer is in the affirmative:
(i) In what capacity do they serve? And what is the role of this Committee?
(ii) Does the Finance Committee advise the Board?
A (i) Mr Keith Senior is the Chairman of the Finance Committee. Dr Lawrence and Governor Latibeaudiere are members.
The Committee reviews the financial reports submitted by management. These include primarily Financial Statements and Treasury Management Report.
(ii) Yes. The Finance Committee advises the Board.
Q7 What is the present ownership of Air Jamaica, both in Ordinary and Preference Shares?
A Approximate Ordinary Shareholding (Air Jamaica Holdings):
- AJAG – 75%; GOJ – 25%
- Preference Shares have not been issued but approximately US$12m has been earmarked but not actually used.
Q8 What is Government’s position on shareholding by these stakeholders:
(b) Other employees?
A (a) Pilots: 5 % of total shares were reserved from AJAG’s allocation
(b) Other Employees: 5 % was available under an ESOP Programme
Q9 Were shares offered to these entities?
A A formal offer was made to the pilots.
No formal offer was made to the other employees.
Q10 If the answer is in the affirmative, what was the response?
A The offer to the pilots was not taken up.
Q11 What was the actual cash injection into Air Jamaica by the Government?
A Cash injection: US$394 million between 1997 and 2004
(Direct loans – US$126m;
Bank Debts assumed – US$114m;
Advances on Privatisation – US$24m; Statutory debts $130m)
Q12 What was the true cost of Category II to Air Jamaica?
A Based on estimate submitted to Govt by Air Jamaica and verified by Deloitte and Touche, the true cost of Category II was US$14 million.
Q13 What is the true cost of the present oil bill and the projected future cost over the next five years?
A The oil bill for 2004 was approximately US$95 million. Beginning in 2005 and for the next four years the oil bill is estimated to be $85 million per annum.
Q14 What is the total value of cash and guarantees made by:
- Cash US$394 million
- Guarantees US$ 134 million
( Bank Debts US$125m; Leases US$9m)
(b) Private Sector?
- Cash - US$ 2 million
Q15 What is the Government’s response to the Sabre Report and its recommendations?
A The Sabre Report was delivered to the Company. The review which is being undertaken by the Company involves the Government appointed Directors on the Board. It should be noted however, that no formal report was made to the Government.
Q16 What is the status of the present discussion with Air Jamaica?
A A draft Shareholders’ agreement has been prepared for discussion with AJAG
Q17 Are there any immediate plans for Recapitalization?
Q18 If the answer is in the affirmative, what are the details and what is the amount?
A (i)The draft Shareholders’ Agreement proposes that AJAG would transfer ordinary shares of 168,890,592 to GOJ for consideration of J$100.00 and GOJ would utilise a portion of Loans and Advances in order to increase shareholding to 45%.
(ii) The balance of Loans and Advances of US$394 million are to be converted to Preference Shares.
Q19 If the answer is in the negative, what are the immediate plans?
Q 20 Are there any plans for:
A a. Based on results of initial review, No. However, the Airline is always open to discussion.
b. Based on results of initial review, No. However, the Airline is always open to discussion.
Q21 What is the Government’s assessment of the impact on the economy by:
a. Air Jamaica in its present form?
b. The impact of the closure of Air Jamaica?
a. The airline increases the number of airlifts into Jamaica. As such it provides critical support to the tourism sector and by extension, contributes to the country’s Balance of Payments. Additionally, in light of the situation which transpired previously, there is no surety that other airlines would provide the service if Air Jamaica were to cease operations.
b. Closure of the airline would reduce the number of airlifts into the country, which would have an adverse impact on the tourism sector. In addition, there would be some loss in relation to the intangible assets, the value of which has been built-up over the years.
Q22 Is there any assessment by the Government of the impact that low cost economy airlines will have on:
a. The tourist industry?
b. The viability of Air Jamaica?
A a. No formal assessment has been done.
b. No formal assessment has been done.
Q23 Is the Government pursuing a real long-term plan in respect of Air Jamaica?
A Yes. The Government is being guided by the Sabre Report.
Q24 Will the Government make available to the Opposition all the reports and plans so that we can make positive recommendations?
TABLED IN GORDON HOUSE
TUESDAY 15TH FEBRUARY 2005
BY DR. OMAR DAVIES
MINISTER OF FINANCE & PLANNING