I read with utter dismay The Gleaner's editorial of July 4, 'Air Jamaica moves do not go far enough'.

The editorial asserts that the best thing for Air Jamaica would have been to take it "out of its misery by shutting it down, thus saving taxpayers a big, fat wad of money. It would have been the best thing to shunt Shirley Williams aside".

We also learn that a March deadline, a matter of about 10 months, has been set for finding a partner.

This is a tall order. When a publicly known deadline is set for selling an entity owned by a government, a third- world government at that, and savvy capitalists surmise that the multilaterals' and others of importance - International Monetary Fund, World Bank, United States Agency for International Development - stand behind such a decision, the bargaining position of the seller is toast.

This is bad but worse is the fact that both policy and Gleaner editorial writers appear to be based entirely on the internal results of the company, without analysis of the causes of the haemorrhage, or the external benefits created by Air Jamaica's operations.

Private carriers

The rationale for decisions such as this is simple, perhaps simplistic: once demand for airlift exists, private carriers will step in to fill the need.

Well, this is not always the case.

Furthermore, in this environment of active US recession and rising fuel prices, such an outcome seems wishful thinking.

Our airline, the editorial tells us, "lost US$171 million in 2007, plus another US$86 million for the first five months of this year. Air Jamaica, frankly, has had a torrid time in a difficult environment".

This is all true. But where are these losses coming from? What is the operating loss of the airline? How undercapitalised is the airline? What have financing costs been over these 17 months, for instance?

What losses derive from bad decisions, contracts entered into that must be fulfilled whether they benefit the airline or not? Where is the cost benefit analysis of Air Jamaica's operations?

Sure, the Air Jamaica moves 'do not go far enough'. Really, I don't think they go anywhere at all.

For a country and region that needs airlift capacity for, perhaps, its most important economic activity, to enthusiastically put a national airline out of its misery might be a decision we shall come to regret. For once done, reversal is 10 times more difficult.

Old board or new board, Shirley Williams or David Banmiller: what's the difference? New board: not much really. Williams vs Banmiller: one is an airline executive by work experience and the other is not.

The real test here is the mandate given to the people overseeing the entity and whether or not they can deliver on that mandate. We have no access to financial data for the airline, but if the past is of any use to the present, the routes to Florida, New York, and Toronto have always been strong. Most of the other routes have been based on providing airlift for the tourism industry. The industry does not pay our Government for this service.

I am sure fat can be trimmed in the airline's operations which Banmiller or anyone with the mandate can do. The difference is Banmiller will come at tremendous cost. I would submit the focus of our inquiry is wrong. The solution to a problem usually requires that it first be identified-good diagnostics.

Searchlight

Shirley Williams, piloting Air Jamaica through turbulence. - File

If the searchlight is never put on the true problem spot, we shall forever be running around in the dark.

Finally, two more issues. Can we, Jamaica alone, or as the Caribbean region, afford loss of airlift? Second, are airline operations on the record of the last decade, really business operations for their own sake or have they become a financial enterprise, the rationale being free cash flow generation created by write-offs, depreciation costs, on tax and other benefits.

Airlines have cut costs, laid off and cut pay of their staff, abandoned pensions and much more but they stay in business despite continuing and substantial losses. Why, therefore, do investors and governments continue to guarantee debt and provide capital?

There are answers to these questions, I guess. We need to come to the Air Jamaica decision in as smart a way as possible.

I get the eerie feeling that having decided to "put Air Jamaica out of its misery", we have not contemplated the alternate misery of living without it.

wilbe65@yahoo.com

Wilberne Persaud, Financial Gleaner Columnist