AFTER A long delay in raising crucial financing for national carrier Air Jamaica and a US$20 million rise in fuel costs, the airline is expected to rack up US$40 million in losses this year, according to president and chief executive Chris Zacca on Monday.
Mr. Zacca said the airline, which was scheduled to make a US$25 million loss would make closer to a US$40 million deficit but had still performed positively in a number of areas. He said the trend was in the right direction but unexpected costs such as the hike in world oil prices had affected a good operational performance, which saw revenues jumping substantially over last year.
The airline should have raised US$45 million in June to repay a US$33 million short-term loan in July, but that was put off and it had to draw on its own cash flow to repay US$22 million of the debt.
Mr. Zacca was speaking a few days after The Gleaner revealed that the national carrier was summoned to the Tax Court for arrears of $184 million for travel tax in addition to a penalty of $60 million.
"Nobody feels worse about the travel tax than us. This is not the way we do business," he said.
He added: "We had to find the US$22 million from somewhere, on top of that we had expected to lose about US$25 million but we'll end up at about US$40 million, which is a lot better than the previous year at US$49m.
"What has happened to us is fuel, which cost us US$20 million more, much higher than we had budgeted and secondly, September, October, November have been much worse than we thought. What we've seen is a definite dampening of market size and market demand to and out of Jamaica. There's been less demand. We've brought the tourists but it's been at the cost of discounting, just like the hotels. How much of that is the Jamaican economy and crime and how much of it is US factors, their slowdown in their economy and the US election, it's difficult to tell. But it's a combination of all of those factors," he said.
Much of the remainder of the US$45 million would have gone to repay outstanding statutory duties and taxes. He estimated that the airline had paid about $500 million of the $900 million in taxes due.
The Customs Department filed the summons against Air Jamaica on November 30 this year after Air Jamaica failed to pay over the amounts collected for travel tax, the bulk after the delay in fresh financing in June.
Mr. Zacca said the company had paid the bulk of its taxes, in excess of $900 million and was working towards a situation, where it could meet all its obligations in a timely fashion.
The airline boss said the national carrier paid $30 million into court last Tuesday and had promised to pay $60 million before the end of the year as long as the new funding came through as expected.
Mr. Zacca said the US$45 million loan was to be provided by the Belgian bank that supplied funding for the sugar industry, lead bank KBC. The loan would be repaid out of receipts from US travel agents, which would be first passed to the bank, with the remaining funds remitted to Air Jamaica. A "back- stop" government guarantee was agreed in July, which will only be used if the receipts fail to materialise.
Mr. Zacca remained upbeat despite the fact that the US$45 million deal now had to go before the finance committee of the bank again as a result of the unexpected court action by the Government. He expected the financing to be provided by the end of the year.
"This is a dramatic improvement in the way we used to raise money, which was to borrow it directly from the Government, or they guarantee it and we borrow it without any input from us. This is 99 per cent us, on our own and the last one per cent is being carried by the Government guarantee."
The current financial woes is an embarrassment for the airline and the Government, which in July guaranteed the US$45 million loan to Air Jamaica. At the same time as providing the guarantee, Finance Minister Dr. Omar Davies announced that Government would increase its stake in the national carrier, privatised in 1994, from 25 to 45 per cent after pumping in more than US$133 million.
Air Jamaica is chaired by hotel mogul Gordon Butch Stewart, its largest private investor, and has a number of Government nominee directors on the board. Dr. Davies's close advisor Keith Senior is chairman of the airline's finance committee, with two other Government nominees, Bank of Jamaica governor Derick Latibeaudiere and Urban Development Corporation boss Dr. Vin Lawrence.
Resident Magistrate Owen Parkin has set the case for mention on January 3.
The summons disclosed that the arrears owed by Air Jamaica as at April 30, 1999 amounted to $21,226,500.
The arrears on the summons for this year are $3,761,000 for the month of May; $29,027,000 for June; $50,535,000 for August and $28,955,250 for September, totalling $184,744, 750.
The one-third penalty arrears total $60,698,325.
