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Committee to probe Air J debts
BALFORD HENRY, Observer writer
Thursday, July 07, 2005
GOVERNMENT has agreed to the appointment of a joint select committee of Parliament to enquire into the problems which have led, over time, to Air Jamaica's mounting debts.
The decision paved the way for Tuesday's approval of government guarantees to secure loans totalling US$335 million (J$20.4 billion) to assist in the financial and operational restructuring of the airline.
Minister of Finance and Planning Dr Omar Davies announced the decision just minutes before the House decided on the motion.
The opposition, which had originally objected to additional government support for the airline without an agreement to probe its financial losses, accepted the compromise.
Davies said the government and the opposition would work together in defining the precise terms of reference for the committee, which will comprise members of both houses.
Davies also promised to table the Sabre Report, as well as a draft business plan for the airline, after he has taken the documents to Cabinet.
"It is imperative that transparency prevails. We have nothing to hide," he said.
Refinancing is "absolutely necessary," said Davies, if Air Jamaica is to attract the kind of management that it needs to revive its fortunes.
Davies' concessions followed a caustic attack on the airline's performance by opposition spokesman on finance Audley Shaw.
Shaw likened the losses to the financial sector meltdown in the 1990s which led to the creation of the Financial Sector Adjustment Company, better known as Finsac, and its debt portfolio of some $140 billion.
"There are more questions than answers and we don't know if the new management is doing anything about it," Shaw said, adding that the ministry paper tabled last week in the House by Davies was deficient and the opposition needed assurance that the problems of the past would not continue.
Air Jamaica returned to full government ownership in December after the Gordon 'Butch' Stewart-led group pulled out.
Under private ownership, Air Jamaica lost an average US$60 million per year. The airline lost that much in the first half of this year, prompting renewed calls for government to come clean on the true costs of operating the carrier.
Opposition leader Bruce Golding also pointed to the absence of the detailed forecasting that the opposition was led, in December, to expect.
He, however, accepted the finance minister's indication that the task, which has been assigned to the airline's board and which he had expected would have been finished within six months, was incomplete and that he needed an additional three months to obtain the information.
"I would like to indicate to the minister that within the additional time that he has indicated, of three months, it is going to be absolutely necessary for the country to know what it can expect and how much is going to be required to shoulder, to keep the airline alive - if it is feasible to keep it alive," said Golding.
"I don't think that we can go beyond the next three months unless we have a clear picture."
The guarantees cover a US $200 million long term fixed rate private placement by Bear Stearns among institutional investors in the United States and Europe to, in part, refinance some of the short term debt of the ailing airline at 9.375 per cent interest; a US$125 million bond issue by RBTT Merchant Bank at 5.50% interes; and, a US$10 million National Commercial Bank(NCB) revolving bank facility at 4.7% interest.
Committee to probe Air J debts
BALFORD HENRY, Observer writer
Thursday, July 07, 2005
GOVERNMENT has agreed to the appointment of a joint select committee of Parliament to enquire into the problems which have led, over time, to Air Jamaica's mounting debts.
The decision paved the way for Tuesday's approval of government guarantees to secure loans totalling US$335 million (J$20.4 billion) to assist in the financial and operational restructuring of the airline.
Minister of Finance and Planning Dr Omar Davies announced the decision just minutes before the House decided on the motion.
The opposition, which had originally objected to additional government support for the airline without an agreement to probe its financial losses, accepted the compromise.
Davies said the government and the opposition would work together in defining the precise terms of reference for the committee, which will comprise members of both houses.
Davies also promised to table the Sabre Report, as well as a draft business plan for the airline, after he has taken the documents to Cabinet.
"It is imperative that transparency prevails. We have nothing to hide," he said.
Refinancing is "absolutely necessary," said Davies, if Air Jamaica is to attract the kind of management that it needs to revive its fortunes.
Davies' concessions followed a caustic attack on the airline's performance by opposition spokesman on finance Audley Shaw.
Shaw likened the losses to the financial sector meltdown in the 1990s which led to the creation of the Financial Sector Adjustment Company, better known as Finsac, and its debt portfolio of some $140 billion.
"There are more questions than answers and we don't know if the new management is doing anything about it," Shaw said, adding that the ministry paper tabled last week in the House by Davies was deficient and the opposition needed assurance that the problems of the past would not continue.
Air Jamaica returned to full government ownership in December after the Gordon 'Butch' Stewart-led group pulled out.
Under private ownership, Air Jamaica lost an average US$60 million per year. The airline lost that much in the first half of this year, prompting renewed calls for government to come clean on the true costs of operating the carrier.
Opposition leader Bruce Golding also pointed to the absence of the detailed forecasting that the opposition was led, in December, to expect.
He, however, accepted the finance minister's indication that the task, which has been assigned to the airline's board and which he had expected would have been finished within six months, was incomplete and that he needed an additional three months to obtain the information.
"I would like to indicate to the minister that within the additional time that he has indicated, of three months, it is going to be absolutely necessary for the country to know what it can expect and how much is going to be required to shoulder, to keep the airline alive - if it is feasible to keep it alive," said Golding.
"I don't think that we can go beyond the next three months unless we have a clear picture."
The guarantees cover a US $200 million long term fixed rate private placement by Bear Stearns among institutional investors in the United States and Europe to, in part, refinance some of the short term debt of the ailing airline at 9.375 per cent interest; a US$125 million bond issue by RBTT Merchant Bank at 5.50% interes; and, a US$10 million National Commercial Bank(NCB) revolving bank facility at 4.7% interest.
Committee to probe Air J debts