Air J cuts 25 execs
AIR Jamaica yesterday chopped 25 senior executive and management positions, as well as four non-managerial posts in a cost-cutting measure the national carrier says was triggered by a deepening crisis in the world airline industry and the impending Gulf war.
“The positions of two vice-presidents, seven departmental directors, two senior managers, 14 other management staff and for non-management staff have been eliminated with immediate effect,” Air Jamaica said in a statement yesterday.
The cuts, it said, were made as the airline reorganises its structure to deal more effectively with the fall-out in the travel industry.
“…In light of the pending war and the deteriorating conditions in the industry, there was no other choice,” Air Jamaica CEO Chris Zacca said yesterday.
“I know that most of us had hoped that by this time we would have experienced a turnaround in the industry,” Zacca said in a letter to the airline’s staff.
“Unfortunately, it is just the opposite, and the crisis will no doubt intensify before we see any improvements. Should war break out, airlines will lose billions of dollars more, will be forced to cut additional jobs and many may even face bankruptcy,” he said, and expressed his regret at losing “valuable staff who have made invaluable contributions to the airline”.
Zacca was reiterating Tuesday’s warning by the Air Transport Association (ATA), the umbrella body for US airlines, that a Persian Gulf war would deepen the crisis in the airline industry and could likely force the American Government to nationalise firms in the face of “chaotic bankruptcies”.
According to the ATA, since the September 11, 2001 terrorist attacks when hijacked commercial aircraft were used to destroy the World Trade Centre in New York and damage the Pentagon building in Washington, D C, airlines have lost $18 billion.
The industry, which has been struggling to recover since then, has projected losses of $6.7 billion for this year. That projection does not include the expected fall-out from a US-led war with Iraq.
According to the ATA, airline cash reserves are nearly exhausted and the ability to borrow is virtually non-existent.
The report added that a major contributing factor to the present economic state of the airlines is the vast increase in government-imposed costs, as, since 9/11, taxes, fees and unfunded mandates have added $4 billion annually to the industry.
“The economic risks go far beyond the airline industry,” said ATA President and CEO James May. “The stakes for the entire US economy are extremely high. Airlines have supported decisions taken by the US Government in the past, and we do so now. Yet, we know from the first Gulf War that there will be serious economic consequences for the airline industry.”
May warned that “without government action, the outlook for the airline industry is bleak”.
In fact, the crisis could be so severe, the report said, that it could spell “bankruptcies and liquidations”.
“The prospect of a forced nationalisation of the industry is not unrealistic,” it added.
The scenario painted by the ATA raised new concerns for Air Jamaica which lost US$80 million in 2002 as Americans, edgy about terrorism, avoided air travel.
“In the face of the crisis, all bets are off,” Zacca told the Observer Wednesday. “We have to take measures to further cut costs even as we drive revenues. The environment is very difficult.”
In addition to yesterday’s staff cuts, Air Jamaica said those measures include salary give-backs, renegotiating aircraft lease rates and modified operating schedules.
“Staff members have been asked to give back between three and 10 per cent of their salary for three months, starting with the April pay period,” Air Jamaica said.
“The CEO and vice-presidents have volunteered to take a 10 per cent cut and directors and general managers a six per cent cut.”
The airline also said that it has reduced its capacity to lower operational costs and rationalise the number of flights in line with reduced demand. It did not specify which flights it had cut or the routes affected.
“The measures should yield annual savings of J$130 million from the combination of staff cuts and salary give-backs, and savings of J$750 million in operational and aircraft lease costs,” the airline said.
“These measures are the first in a series to help guarantee the viability of the airline,” said Zacca, who emphasised that the “short-term goal of the airline is no longer profit but mere survival in a hostile travel environment”.
Since the September 11 attacks, Air Jamaica has resisted cutting staff, even as other airlines shaved more than 120,000 jobs to stay in business.
Yesterday, Zacca said that if the war materialised and the state of the industry worsened, additional restructuring would be necessary to ensure Air Jamaica’s long-term viability.