TURBULENT TIMES FOR LIAT

By Michael L Jarvis,
UK Correspondent

Reports that British businessman Richard Branson could be on the verge of rescuing the eastern Caribbean government-owned airline LIAT from almost certain financial demise, have set off a wave of speculation about the future of the beleaguered carrier.

LIAT (Leeward Islands Air Transport 1974 Ltd) has, over the sixty-three years of its existence, become synonymous with air travel in the eastern Caribbean.

Love or loathe it, label it ‘Leave Island Any Time’ or ‘Luggage In Another Terminal’, one way or another almost everyone who has travelled between the islands has at some point flown on LIAT - or have otherwise had a LIAT experience.

The airline has created its own space in the psyche of the islands. LIAT has become an institution.

Is that now about to change?

LIAT has weathered many storms since it was set up and based in Montserrat in 1956, by the St Kitt’s-born aviator Frank Delisle. It no longer flies to the island.

Over the years it has seen involvement by the then BWIA (British West Indies Airways) - from 1957 to 1971,followed by a brief courtship with another British carrier, Courtline until that venture folded in 1974 when Courtline went bankrupt.

It was then that eleven Caribbean governments from Jamaica to Guyana stepped in, the result being LIAT (1974 Ltd).

It took another decade before it realised a profit but since then, despite several cash injections, restructurings, and a virtual management revolving doors, LIAT has been struggling to stay airborne financially.

There were always wrangles over the level of service and whether the investing governments were getting value for their money in their own country’s interest.

National priorities and preferences slowly eroded the concept of regional integration with some governments, especially the larger shareholding countries, placing more emphasis on domestic flag carriers.

LIAT is now battling headwinds again, this time possibly its most challenging, which could lead to the vital regional carrier being grounded due to dire financial straits.

The suggestion that it might take a maverick of the global airline industry to rescue LIAT from possibly its most turbulent period in its sixty-three years history, will come as a relief to flyers but most probably a reality check for the current shareholding governments.

Details are not clear of the touted Richard Branson involvement, but a statement from the Office of the Prime Minister of Antigua & Barbuda quotes a senior government official as saying that an option might be to expanding LIAT rather than scaling it down.

LIAT is hardly in a position to negotiate.

A statement on its website quotes current CEO Julie Reifer-Jones, its first female boss, confirming that “despite the challenges facing the airline, it continues operating its daily flight schedule.”

She also noted that “there are ongoing discussions with Governments across the LIAT network about the need for all the territories served by LIAT to contribute through a Minimum Revenue Guarantee Model."

But Reifer-Jones, the most recent in a string of CEOs to have attempted to set LIAT on a more profitable financial flight path, admits that “the pace of these discussions has been slower than anticipated but the company remains optimistic that the discussions will be concluded shortly.”

That was dated April 29th. The Branson arrived on the scene a few days later.

In recent months there have been repeated calls from the airline for cash injections by the current shareholder governments to keep LIAT flying.

At one stage when it was feared that it would be grounded, pilots took a pay cut.

LIAT’s dire financial circumstances are said to be based on a stifling debt of $US 60 million and there’s a demand by management for an urgent $US 5 million injection to keep it flying.

In the global scheme of things that level of debt for a regional airline should be manageable.

But LIAT seems to have exhausted almost all of its funding options and is now looking to its shareholder governments for a bailout.

That’s where the fractures begin to show.

Barbados which currently owns practically half of the airline with 49 per cent of the shares, has warned that it “does not intend to be LIAT’s atm” (automatic teller machine).

It has been reported that Barbados has been having private talks with what have been called “European interests” concerning air transportation. Speculation is rife as to where that could be headed.

Just a few days ago, an Antigua and Barbuda government minister has confirmed that his government would buy Barbados’s shares in LIAT if that country wanted to divest them.

If that were to go through it would put Antigua in an even more dominant position in LIAT than Barbados currently is, with or without a Branson injection, as it would control over 60% of the shares.

Antigua and Barbuda would also be the biggest player and have the most significant voice in decisions regarding air travel in the eastern Caribbean.

It currently holds 12 per cent of LIAT’s shares.

Dominica which holds around nine per cent has warned that while it’s prepared to help out, it does not have a “largesse of funds”.

Non-shareholders Grenada and St Kitts & Nevis have offered to put in some money, although act amounts and terms have not been disclosed.

But St Lucia, another non-shareholder which even under several previous administrations has been one of LIAT’s biggest critics, maintains that it will not make any funds available without a guarantee of major changes to the airline’s structure.

A suggestion from the government of St Vincent and the Grenadines, an 11 per cent shareholder, is for the Caribbean Development Bank(CDB) to sell the three of the LIAT planes it holds as security for a loan it made to LIAT.

LIAT currently operates a fleet of 10 aircraft, down from 18 previously, serving its 15 regional destinations. In the past few years it had cut back on some of its routes and flights.

The CDB, the region’s top lending and economics advisory institution, is concerned that LIAT’s demise could have a serious knock-on effect for regional economies.

The airline provides a crucial travel link and airlift for business travel, family and cultural ties, but most importantly tourism which underpins the economy of most of the islands.

The Richard Branson option looks like LIAT’s last chance, but will it fly?