We think it pertinent to remind the Jamaican Government of two facts. First, this administration claims to embrace the philosophy of the free market and to have a clear grasp of the principles and workings of globalisation. Indeed, it was the People's National Party (PNP) administration, that in the early 1990s, accelerated the liberalisation of the Jamaican market, opening the country to competition and leading the retreat of the state from the marketplace. It conceded that the state would hardly ever be a better allocator of resources than the market, no matter how skilled a hand ministers and their bureaucrats believe they can play.

The second point, which entrepreneurs instinctively understand, is that there is no, or very little, room in business for sentiment. That is when you begin to lose your shirt. Most people would agree that US$30 million or nearly J$2 billion a year is paying for a lot of sentiment, which is the amount that the Jamaican Government says it is willing to provide annually as a subsidy for Air Jamaica, as the Cabinet reminded the airline's management last week.

In the context of Jamaica, where taxpayers are deprived of many services, this is more than a fair bit of money. So the Air Jamaica board has been told to go back and re-craft their business plan to take this fact into mind.

From this, we can only assume that the model for restructuring, recently presented to the Cabinet projected losses substantially above the benchmark for subsidies that was set by Finance Minister Omar Davies, when the Government resumed full ownership of the airline at the end of 2004. Apparently, Mr O.K. Melhado, a bright and successful businessman, who is chairman of the Air Jamaica board, and Mr. Michael Conway, an experienced aviation executive who is the CEO, saw no prospect of containing the airline's losses within the US$30 million ceiling.

What this highlights is the difficulty, in a harsh environment, for the aviation industry, to run a small airline profitably, with the absence of economies of scale. This has been apparent for a long time. Indeed, during its decade of ostensible privatisation, Air Jamaica wracked up near US$1 billion in losses, or about what the country spent for on-budget capital projected over the period. By year-end, in the two years of renewed government ownership, Air Jamaica will have lost another US$300 million. For the Jamaican taxpayer, who has to embrace this bill, this is money that could have been spent on education, health, roads, water and social services.

There is, of course, the argument that Air Jamaica is a strategic asset, vital to the island's tourism industry; that it transports about a third of all stop-over tourists and half of all passengers. However, there has never been a serious cost-benefit analysis of Air Jamaica's contribution against what the Government insists that we pay for the right to have a little piece of Jamaica that flies. Neither have we been presented with any full and deep argument why in a globalised environment, other carriers, with the benefits of economies of scale, in the absence of Air Jamaica, should not take advantage of the business opportunity offered by this market. We have, instead, been fed on sentiment.

Mr. Melhado knows that that is no way to run a business. Do Mr. Davies and Mrs. Simpson Miller?

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.