The Editor, Sir:

The suggestion from the economics students of St Catherine High that the Government should offer Air Jamaica shares to Jamaicans does not address the airline's fundamental problem - mismanagement.

Air Jamaica's employees are accountable to politicians and bureaucrats and these individuals face no risk of job loss or financial loss because they have short-term and long-term job security and have no capital invested in the airline, hence they have no incentive to ensure its profitability. If the airline were owned by private individuals, they would have capital at risk of loss, thus incentivising them to maximise its profit.

The students are correct in suggesting an equity ownership structure because the other option, loans, is a risky method of financing a business. However, they must be mindful that when an initial public offering (IPO) is made, the securities will also be available to non-Jamaican investors. Therefore, there is no guarantee all the shares will be bought by Jamaicans.

Also, astute investors will only subscribe to this share issue if the airline's business plan indicates profitability, thereby increasing the demand for its finite supply of shares, resulting in capital gains. Air Jamaica has a history of losses and no investor who has performed fundamental analysis would buy these shares. I strongly disagree with their view that patriotism would be directly beneficial. Their is no point of pride in owning an unprofitable business.

The airline continues to sustain losses because its operations are subsidised by taxpayers' money. If it were a privately held business, the management would have already sold it or overhauled its operations. We cannot continue to sustain these losses because there is a large opportunity cost to these subsidies in the form of loss of financing for government programmes.

If the Government wants to maintain ownership of the airline, it should sell it when investor sentiment is positive to investors who can professionally manage it and maintain a minority interest, thereby sharing in its profitability and accruing this to the Jamaican taxpayers.

I am, etc.,

MARK JOHNSON

johnson.mark17@gmail.com

College Park

Georgia