Flying Broke

So Caribbean governments have come up with yet another rescue plan for cash-strapped intra-regional carrier LIAT, the third one in three years. After five hours of discussions on the matter last week,, four Caribbean government heads decided to pump millions of taxpayers’ funds in another attempt to keep the Antigua-based airline flying. Of all the rescue packages that LIAT has already gone through, the Caribbean has never been able to know why the planned rescues have failed or what use the funds have been put to. LIAT has never said how all these grandiose plans have gone. It was just in March of this year that Prime Minister Ralph Gonsalves, chief lobbyist for the sputtering airline, insisted that LIAT needed (EC)$17 million to keep it flying until June 30 2004.

In early April, during talks with Antigua and Barbuda’s new Prime Minister Baldwin Spencer, Gonsalves said the airline was “in urgent need” of (EC)$27 million by mid-April if it was to remain flying. That deadline has come and gone and LIAT is still operating. Disbursement of these funds were outlined then, as follows:  $13 million towards servicing debt and the remaining $4 million as operating losses. Now, two weeks after that June 30 deadline, there is another call for funding to keep the airline afloat. The figure given this time around is (US)$9.4 million or EC $25.4 million and a further  (US)$9 million or EC$24.3 million to ensure the carrier maintains its viability. Exactly how far this latter figure is expected to go has not been disclosed. As a matter of fact, all that PM Gonsalves would say about the additional (US)$9 million was that the source “would come at a later date.” All this has to be added to the airline’s total debt, which in March stood at (EC)$225 million.

Gonsalves, who is the chief spokesman for air transport in the region, said after the talks Barbados, Antigua and Barbuda and his own country St Vincent & the Grenadines, had accepted proposals from LIAT for restructuring and that this should make the airline viable by the end of the year. Prime Minister Manning also told the meeting that the BWIA restructuring process should also be completed by year-end. In March of 2001 the LIAT shareholders adopted a three-year business plan, which outlined the goals for LIAT going forward and the challenges faced by the company in its quest to achieve profitability. That plan was also endorsed by the staff and the unions involved.

Even since then, BWIA, through its former CEO Conrad Aleong, pledged co-operation in ensuring that LIAT moved forward. There was also mention about the elusive merger with BWIA. At that time LIAT was one of the partners in Carib Sky Alliance. Also, in January 2001, following a management restructuring, LIAT’s CEO, Garry Cullen is on record as saying that the airline would pay its debts. Cullen said, “We will make every effort to be current from here forward and that is what we are doing to the greatest possible extent. I am not saying that it is 100 percent, but we are making every effort every month to be as current as possible in paying these debts.”

Cullen adds, “As the company shows an operational profit each month we are paying taxes as promptly as possible.”  But to date the airline owes various Caribbean governments millions of dollars. At last weekend’s discussions, Prime Minister Arthur Owen of Barbados said, “We have a vested interest in supporting viable intra-regional airlift capacity.” It is still not clear whether the “we” in that statement meant Barbados or the entire English-speaking bloc. If it refers to Barbados alone, it is understandable. If not then why is it that over the past three years or so, only four or five Caribbean governments have been at the forefront of the sundry rescue packages for LIAT ?.

Arthur, like Gonsalves, believes that liquidation of LIAT was not an option financially or operationally and added, “The cost of liquidating LIAT would be horrendous for Barbados’ economy and the region.” Maybe this is a well-founded conclusion. But for how much longer are Caribbean governments oing to keep pouring money into LIAT, without so much as a sign of turnaround? That is a question soon to be asked of the few governments, who continue to fund LIAT’s inefficiencies, by its tax-paying citizens.

Meanwhile, LIAT’s competitor in the region Caribbean Star, although also losing money, has been able to consistently gain market share and improve its efficiency and increase its fleet, something LIAT has been talking about for several years. Caribbean Star now operates seven Dash-8-300s each with a seating capacity of 50 passengers and three Dash-8-100 each carrying 37 passengers. Caribbean Star has a workforce of less than 300 employees for its 10-aircraft fleet. LIAT, although having a nine-plane fleet, is currently only operating six aircraft and still employs more people than Caribbean Star. LIAT had said in 2001 that if it were able to reduce the staff, it stood a good chance of becoming profitable. The staff has been cut in half, but viability is still up in the air.