President & CEO (Airports Authority of Jamaica)

Also contributed to the interview:
Mr. Alfred McDonald (Senior Director, Commercial Development & Planning)
and Lt. Cdr. John McFarlane (Senior Director Airport Operation)

Jamaica is working to promote foreign direct investment. What are the island’s competitive advantages compared to other countries in the region?

We have a slew of natural resources, including physical resources, which put us ahead of our regional competitors. We have in Kingston the world’s seventh largest natural harbour and we also have beaches in Jamaica that promote tourism naturally.  The range of our tourism product positions us in front when compared with our Caribbean neighbours.  We also have several rivers throughout the country and water (by the way) is the largest selling refreshment item on the globe and so we now have several brands of drinking water bottled here.

In terms of our tourism product, in the early stages in the 1950s and 60s, Jamaica was the destination of choice. As the world economy changed, Jamaica’s tourism offering also changed and we were known as a high-end destination.  In the 1970s the “hippy market” took over Negril, in western Jamaica, and we have since had a blend of tourism properties, all the way from the very exclusive rooms for USD$5,000-$6,000 per night, to the low end bed and breakfasts.

We now want to diversify from the sand, sun and sea tourism into culture, entertainment, health and sport. The bauxite industry had its ebbs and flows but I think it is about to take off again as a number of the plants are about to be reopened and “crank up” their production systems again. We are a people who believe in ourselves and who are approachable and positive.

As you know, President Obama just became the first US President to visit Jamaica in 33 years. How do you think Jamaica will benefit from his short yet historic visit?

There must be benefits of President Obama’s visit at this time. The fact is that there may be other political, regional and economic factors or issues surrounding his visit but, I’m not in the position to speak on them.  However, in terms of promoting Brand Jamaica, we are selling major national assets including airports.  When two US Air Force 1 aircraft came onto the tarmac with the other fleet of aircraft, we saw the opportunity to demonstrate to potential investors what the Norman Manley International Airport can do. Of significance also is the fact that the most powerful human on the globe today comes to your country and without announcing it takes time out to go to one of your musical icon’s place of residence (i.e. Bob Marley). That says a lot in terms of our benchmark products: our culture, our music and our sporting assets. President Obama mentioned in his presentation at the University of the West Indies that he was “sitting here in a room with the two fastest athletes in the world” and questioned what more could he ask for as President.

I want to add that, along with the President’s visit and the profile that it brings, as well as concerning your earlier question about our competitive advantages, it is to be noted that Brand Jamaica is huge worldwide. The President and his presence endorsed the strength of Brand Jamaica and the fact that anywhere you go in the world, if you mention Jamaica, you will hear Bob Marley and other attributes and icons that relate to the country.

Jamaica has the perception of widespread violence, which is to a very large degree perception rather than reality. The violence is contained within specific areas and within particular groups.  The more important thing, I believe, is that Jamaica has an established stable democracy. We have had elections every 4-6 years since 1944 and the changes of government have been smooth and effective and we believe that our political climate is an example to the rest of the world.

What is the present state of the aviation sector in Jamaica and what needs to be done to ensure the country can position itself as a logistics hub?

I think the aviation sector in Jamaica, like the political system, is well-equipped and matured compared to world standards.  In terms of its readiness to receive, cope and support the logistics hub concept, we are more than ready because of our preparedness and development over the decades. We are right now at a critical stage of moving from the public management of airports to public private partnership management, which will take it to another level of customer service and competitiveness.  We are very confident about what we have achieved with the privatisation agenda and believe it will also help to release the Airports Authority of Jamaica (AAJ) to expand its role as a driver and developer of the industry.

I’d like to add that we are also poised for growth. With additional capital investment in our runways, which we are looking at extending both here (NMIA) and at Sangster International Airport (SIA), there is huge potential to reach farther markets in Asia. A growth area, which is also one of the strategic objectives of the organisation, is to attract additional transit traffic through our airports such as passengers travelling from European nations on their way to South and Central America.

When people think of the logistics hub they usually think immediately of ports but air transportation plays a major role as well, doesn’t it?

We recognise that there is going to be a need for the movement of a host of people including short term, long term, transient passengers and visitors and we are talking about growing the airport so we can accept that increased volume of both aircraft and passengers.  We are seeking to deliver the capacity within our facility as well as the cargo aspect because that is an integral part of a logistics hub concept and the just-in-time movement of goods and people.  We recognise the overall value that this airport plays; we recognise also that what we have here is a ready facility that, with a little bit of tweaking and expansion of the runway, will give us the capability to accept full payloads on non-stop flights between Kingston and destinations in the Far East.  That’s what we are targeting and if that materialises, naturally the tourism potential will flow with it.

Another point I want to make is that there is a very clear recognition that airports and seaports are simply components of the logistics hub; there are also the special economic zones, the ground transportation links between them, and the communication between them, among other things.

We do have cargo capacity on airlines that are coming in and leaving the island. Many persons arriving at SIA are tourists who do not travel with much luggage and similarly we do have cargo capacity in Kingston that can be utilised. The nexus between sea and air is something that we are looking at more closely, and the idea is that when Post-Panamax vessels come into our shipping harbour and we do the transiting to the economic zones, then shorter haul aircraft will be able to take that cargo into South America and North America. So we are talking about being able to have airlift that compliments the Post-Panamax vessels coming in and wanting to be able to do regional transfers within the Caribbean and other areas. We have the capacity to facilitate cargo transit here at NMIA and at Sangster International Airport.

We are not just speaking about these as concepts. We put our resources where our mouths are and so both airports are about to embark on major capital investments to significantly extend their runway lengths and to achieve certain international requirements, mainly Runway End Safety Areas (RESA).

These major capital investments are no doubt costly. Is the private operator in charge of all of the funding or does it work with the Jamaican Government to raise the funds?

It’s a mixture of both. In the case of the Sangster International Airport in Montego Bay, which is already under private management, the government had established a fund called the Airport Improvement Fee (AIF), which is part of the revenue stream in place at the airport.  The AIF was dedicated solely for capital expansion and is applicable to both international airports.  In March of this year the Minister of Transport Works and Housing approved an extension of the AIF for SIA specifically for the expansion of the runway and airport footprint and so on.

The private operators are, however, also required to invest some of their own capital, and  so capital improvement is not limited to government funding, In this particular case, however, we are part of a thirty-year concession agreement that has been established. The capital expansion is a new addendum to it and so the government has taken the leadership to be able to provide the funding per se but SIA will also source the debt financing that the AIF flow will eventually pay out and they will manage the project and naturally there will be some risks. They are in fact partnering at a smaller scale than the previous program they did because this one is not automatically linked to immediate revenue increases for them, it takes time to develop that.

At Norman Manley International Airport (NMIA), we have now embarked on the privatisation process. We are at the stage where just recently five prospective bidders, from China, Europe and Central America, were pre-qualified based on their financial strength, airport operating experience and construction experience. Now we are going onto the RFP stage where, by the end of this year (2015), we could have a new successful operator named for NMIA and financial closing is scheduled for mid-2016. The US$150 million capital program that the operator will be undertaking includes the runway extension that we spoke about. Again in regards to financing, we have just completed airport aeronautical rate reviews for both major international airports.  Related to that is the provision for the capital works to be undertaken, we have paved the way for the new operator to grow traffic, generate the revenues using these rates and to use those revenues to facilitate expansion.

How important is foreign direct investment to Jamaica’s aviation industry and airports?

It is important to every single major development project. The truth is that our government, like most governments in the world, simply does not have the money to do the development that is necessary to address all the varied needs of the state, nor does the local private sector, and so foreign direct investment (FDI) is critical.  Also PPPs, which some would say are a fairly new concept; have taken off in a fairly big way and more aggressively in recent times. It is the way to go, and Jamaica launched into PPPs in the 1990s, beginning with the highway programs and then the airport followed. I’m sure that we will see many more of these in the country as we can demonstrate their successes. It is a big part of our plan going forward.

The Sangster International Airport was privatised in 2003. What benefits have come from this Airport having a private operator?

They started in 2003 with four shareholders and after a while they consolidated into two shareholders. Abertis just this Monday (June 2015) sold its stakeholding to another company in Mexico called GAP and that transaction was USD190 million. Without telling you what their actual investment was, I would say that this is significantly above their initial investment.

There are indications that Sangster International Airport was one of the highest earners within their portfolio. The CEO was reassigned from Montego Bay to take over 17 airports in Mexico, so that shows the degree of the success that we have had.

Given the Jamaican government is undertaking initiatives to attract foreign direct investment, increased traffic into the island can be expected in coming years. Is there a possibility of another international airport?

Norman Manley International Airport currently caters to approximately 1/3 of its capacity in terms of passengers and about the same or maybe even less in terms of aircraft capacity, so there is significant capacity to be filled. Similarly, Sangster International Airport has room for expanding traffic, so we want to start with an efficient, optimally used facility as opposed to starting a greenfield airport platform. The medium term is to see Norman Manley and Sangster fully maximised for passengers and cargo business. One of the concepts that we have been promoting is the “airtropolis” where people involved in logistics operations could in fact be resident in and around the airport or have their meetings and depart on same day flights.

You would have heard of the mid to long term possibilities as the logistics hub infrastructure speaks to the possible future development of a Maintenance, Repair and Operations (MRO) facility for repairing/servicing aircraft, as well as a new “cargo type” airport somewhere in the middle of the island. The thinking at this point in time is to optimise the airport capacity and undertake a gradual process of development where the third airport that you’re talking about would be realised in the medium to long-term plans.

Part of the strategic plan of the Ministry of Transport Works and Housing is also to build additional aerodromes across the island for the growth of inter-island transit. We do have the several aerodromes serving different parts of the island; Negril Aerodrome in the west, Ken Jones aerodrome in the north-east and Tinson Pen in Kingston city. The Boscobel Aerodrome which is now an international airport, named the Ian Fleming International Airport (“IFIA”). IFIA services quite a nice population within the tourism belt of the country. It’s a facility that we are seeking to have much more traffic coming in to which serves general aviation and some small commercial airlines as well.

Part of our strategic plan is to develop, in conjunction with the Port Authority, a cruise ship terminal at the end of our old runway at NMIA. This would allow for very easy movement between the airport and seaport and would provide the cruise ship passengers with a myriad of attractions that Kingston offers.

One thing that we have noticed is that it is not always easy to fly to Jamaica from overseas.

From a transit point of view, one benefit for Jamaica is that in South America and Europe it is alleged that there’s an avoidance of the North American visa requirements and most air service to Jamaica currently requires travel via North America.

Yes, on the tourism front, there are significant moves to look at visa waivers for a number of countries.  Also, where the logistics hub is concerned, there is a huge push factor for us to be “open to do business” which forms part of the strategic move that is being implemented. To go back to an earlier point, it’s important that we look at our route network and what is being done to significantly improve that. From the air policy perspective, where we talk about the freedoms and rights of airlines flying between different countries, we general have an “open skies” philosophy. Also from the airport operator level, we have a good collaboration with the Jamaica Tourist Board (JTB) in reaching different parts of the world with respect to tourist traffic and we are building our business portfolio and linkage with the diaspora to capitalise on this opportunity.  So you see a couple of things are working in tandem: runway development, reaching different markets and facilitating open sky agreements and air service agreements to these markets.

We have found that our adherence to and implementation of international agreements have been beyond the majority of the other Caribbean countries; we have been leaders in this and stood by the conventions.

Many of our readers would be considering investing in the Caribbean, not just Jamaica. What is being done to facilitate the access to Jamaica?

There is a definite need to cater to island hopping within the Caribbean. That is a now a challenge, but also an opportunity and we are in the process of facilitating such a venture. We had discussions with an airline three weeks ago that is seeking to capitalise on said opportunity. The airline is currently operating at NMIA and is getting additional aircraft to expand their service routes to other Caribbean Islands. We have had other such discussions, with, for example, a start-up airline. The potential has been seen because the need is great, and we actually know that there is suppressed demand within the region for travel, especially group travel for conferences, university students, etc.

Where do you see aviation sector in Jamaica in five years?

We are in the mode to move fully into the complete execution of the privatisation of Norman Manley International Airport as well as other aerodromes, which are currently being operated by AAJ. Having these operated under PPP structures leaves the AAJ as the driver of the airport system development and enables it to explore further air transportation development within the country. That said, we would also need to play our role with tourism stakeholders and the productive sectors of society to push for air transportation growth in whatever way and form that needs to be pushed. So rather than operating airports, we will be able to focus on driving air transportation development.

Part of the change that we have seen in the aviation industry is that 20-30 years ago, there were 20-30 privately owned general aviation (single and twin engine) aircraft whilst today most of those are replaced with privately-owned corporate jets with hangar facilities at the domestic airport and here at Norman Manley International Airport. We expect that to grow. In addition, we are aiming to expand our training facilities to capitalise on aviation training as there is a focus on the training of aviation-related skills because of the international need for aircraft maintenance personnel, pilots and other aviation-related industry skills; and we are seeking to find a way to capitalise on that.  The aviation industry here in Jamaica has the potential for growth and, if what we are seeking to achieve happens, among which is that the Ian Fleming International Airport becomes a very attractive destination for aviators/vacationers out of the eastern seaboard of the USA, which will stimulate and drive the industry here. So we see a positive image ahead of us in the next 5-10 years.

So along with the infrastructural development, we’re seeing growth, the hub established, increased passengers, increased routes and aircraft movement. The landscape we believe is very positive for that kind of development and so the work that we are doing now will facilitate that kind of growth and improvement in the next 5 years.

Harvard Business Review readers include many of the world’s most influential and powerful business and political leaders. What message would you like to send them about Jamaica and the AAJ?

Jamaica has a reputation of ‘no problem mon’ but we use this in a positive way as we have been rated one of the happiest countries in the world. When you put those things together you’re not talking about people who are nonchalant, carefree and non-productive, you’re talking about their attitude to life and how they use that attitude to be positive, creative and successful. As a country, we are open for business as well as new investment, talent and monies. We will accommodate new investors with new ideas and support them to be successful.

Also Jamaica and the AAJ have sought to maximise results. As a country, which is very committed to the use of the Internet, IT as business, teaching, entertainment and the use of communication tools, we believe that certainly within the region, Jamaica is equal to, if not better than, many other Caribbean countries in terms of investment opportunities.  We believe that we are fairly advanced in terms of our ICT fibre network and backbone. In addition to that we also have very talented individuals in the ICT field, which is attractive for people to come and do business here. Of course the most important factor is that we speak English, which is the international language of aviation and business.