Building a Better Jamaica

Jamaica earns US$150-m from airlift pact with AA
BY VERNON DAVIDSON Executive Editor -- Publications davidsonv@jamaicaobserver.com
Monday, March 01, 2010 

THE revenue guarantee airlift agreement that Jamaica signed with American Airlines in 2008 has earned the country just over US$150 million and further opened up the destination to increased visitor traffic at a time when other countries in the Caribbean were recording declines, tourism officials confirmed at the weekend. 

The agreement, which stirred controversy among the political Opposition and was probed by the contractor-general, came to an end in November last year. 

FORSTMAYR... it was the beginning of a trend that opened Jamaica up to a lot of new airlift
LYNCH... the investment has paid off 

The Government had essentially guaranteed American Airlines US$3 million to keep flying to Jamaica from Dallas, Miami and Chicago, three gateways that provided just about 81,000 passengers combined. 

"Bearing in mind that these aren't very ethnic gateways, the aggregate number of tourists was 71,500," Director of Tourism and Jamaica Tourist Board Chairman John Lynch argued in an interview. 

"Working that out at an average six-night stay at US$151 a night, the industry earned approximately US$152 million," he said, adding that even the Tourism Enhancement Fund (TEF) earned an impressive US$750,000 because of the arrangement.

"The estimated cost of these flights to us is US$2.8 million; that's what we'll be required to pay," said Lynch, sounding upbeat as he revealed further that the positive performance had resulted in American maintaining all flights to Jamaica from the three gateways and adding New York, which it will service at least three times a week. 

"The investment has paid off," said Lynch, who explained that the decision to approach American was based on the carrier's long history of service to the Caribbean, plus the fact that the airline moves 30 million passengers a year through Dallas, 19 million annually through Chicago and just under 20 million through Miami. 

"That gives you an opportunity at 60 million people a year having a shot at coming to Jamaica," Lynch said, adding that the arrangement also resulted in other carriers, such as Delta -- with its Atlanta hub through which 40 million passengers travel -- stepping up and increasing flights to Jamaica.

Opposition to the deal was mostly centred on the guarantee of payment to American, at the time said to be US$4.5 million using money from the TEF. 

Opposition spokesman on tourism, Dr Wykeham McNeill, had blasted the deal as a misuse of the TEF. Other critics had said that Jamaica was "hoodwinked" by American Airlines. 

But at the weekend, Lynch explained that when he was appointed JTB chairman, he realised that the global recession had become evident in the USA and that American took a decision to severely slash service from the US to its Caribbean hub in Puerto Rico by 40 per cent. The carrier, he said, was also planning to cut Dallas, reduce flights out of Miami to one or two and cut Chicago. That spelled bad news for Jamaica's tourism. 

"Jamaica had an additional 4,000 rooms, bringing the total count to just under 30,000 without the requisite air service to give us the occupancy," Lynch argued. 

That was incentive enough for the country's tourism officials to approach American with the guarantee in order to ensure there was adequate airlift.

That point was emphasised yesterday by Josef Forstmayr, a former president of the Jamaica Hotel and Tourist Association and managing director of the upscale Round Hill Hotel and Villas just outside Montego Bay. 

"There are two things in tourism that you must have. One is the hotel product for people to sleep in and the other is transportation, for people to get to you. The most beautiful place without access is no good, and it's one of those basic truths which we sometimes tend to forget," he told the Observer.

"When we designed the deal, the world was falling apart," he said. "It was the summer of 2008 when the business was going downhill already. Remember also that American Airlines had just started to cut about 40 per cent of all their rotations to Puerto Rico... that's when Jamaica jumped in and said 'wait a minute, why don't you look at us and replace some of that lift that you had into Puerto Rico and put it into Jamaica and we'll give you a little guarantee', and I think it was brilliant. 

"It was the beginning of a trend that opened Jamaica up to a lot of new airlift. It certainly was a departure from the old and tried...We had to try something new and different," said Forstmayr who added that his hotel had been experiencing a good winter season so far.

Yesterday, the deal was also praised by Paul Zar, senior vice president, Travel Impressions, a division of American Express.

"This arrangement worked exceedingly well in a difficult time," said Zar. "When air capacity was being cut elsewhere, Jamaica emerged as the best destination with air seats. 

"I would say it was largely responsible for Jamaica's success in 2009. It was the critical factor," he said, adding that his company, which sells vacations to Jamaica across the US, did as well in 2009 as they did in 2008. "In fact, we were up slightly in 2009," he said. "We did better to Jamaica than to any other destination in 2009. It (the guarantee) defied gravity. All other destinations were down double-digit."

According to JTB data, the island welcomed just under two million visitors last year, while revenue between January and October totalled US$1.533 billion

Peter W. Jones