Wilberne Persaud, Financial Gleaner Columnist

"In the case of Air Jamaica, from its very inception, the notion of externalities was central. It was seen as a means to improve the tourist industry, to provide employment opportunities in a highly skilled area for Jamaicans and, of course, it was seen as an instrument of national prestige".

These words come from a study of the airline that I did in 1985. They were quoted in a column: 'Justifying Air J's public soaring' on November 24, 2006.

Externalities are benefits or costs not derived directly from an entity's internal operations, for instance, a beekeeper and orange orchard.

They provide positive external benefits to each other. If the citrus farmer uses pesticides that then kill foraging bees, that creates a negative externality.

Net positive benefit

Viewed in this way, we concluded 23 years ago that "Air Jamaica represented a net positive benefit to the people of Jamaica."

Distribution of that benefit, however, was seen as uneven, perhaps unsustainable politically. Specifically, in the area of provision of and savings of foreign exchange, it was established that although these cannot be Air Jamaica's primary objectives, the airline did garner foreign exchange and balance of payments support below the ruling exchange rates for the period.

As it was put then, Air Jamaica contributes vital services to the Jamaican economy. The list ranges from foreign exchange earnings and balance of payments support, provision of employment and technical skills, an indispensable link in the maintenance and development of tourism and other qualitative benefits.

Maximise efficiency

The study noted that it was "imperative that Air Jamaica maximise efficiency, minimise losses and in general, endeavour to reduce the costs of the benefits it provides to the society. This imperative remains urgent, vital."

It was not clear then that we would return to the issue of Air Jamaica so quickly. The central questions are the same. Should Air Jamaica be abandoned, closed and forgotten? If not, should government continue to own and control it, and ask taxpayers to stand its losses? Should Air Jamaica be making such huge losses and are the current outcomes of losses unavoidable? Is there room for partnership of any sort?

The minister in charge of the airline has requested the board to resign. News reports suggest one action of the current chairperson, Shirley Williams, was the straw that broke the camel's back, ordering the return to the gates of a flight which had already done its taxi for takeoff. Fuel use is at its maximum at take-off.

Other claims suggest there is sexism. Perhaps yet others will emerge. Whether these claims have merit may not be of much consequence unless they reflect patterns of behaviour associated with bad management and decisions. Regardless of these speculations, however, reported losses of US$170 million last year and projected US$200 million this year are unsustainable.

Expose to scrutiny

In arriving at the optimal decision about the airline, however, these losses have to be exposed to scrutiny. How does the airline do on the operational side? What are interest and financing costs? What expenditures derive from decisions hoisted on the airline by government policy from other areas covering different portfolios of interest? How are routes serviced by Air Jamaica determined? Is the airline still undercapitalised as it has been from inception? There are many other questions that must be answered before we can conclude that a truly sensible decision has been arrived at for our national airline.

I know that national pride cannot support current, or for that matter past fuel cost surges, but there are certain benefits taxpayers are willing, it seems, to have their contributions support.

If Air Jamaica can have a set of goals and objectives transparently determined and publicly known against which performance should be judged, then Jamaicans may well agree on reasonable support levels.

Air Jamaica could for several years have been an internally profitable operation if it were properly capitalised and if its board and management were able to take decisions purely in the interest of the airline as if it were a private entity. This was never the way in which the national airline operated.