In the first month of 2014 Caribbean regional media reported that LIAT has had to choose between paying employee salaries and paying aircraft lease charges in order to maintain flight operations. Even before the news of LIAT’s latest financial crisis, the flight chaos of last summer was nearly repeated in December 2013, at the start of the Caribbean’s tourism high season, and was only averted through last minute decision changes by LIAT’s board of directors and its temporary CEO.
The LIAT fleet was reportedly due to reduce to only nine aircraft last December. At the same time, aircraft conversion training for flight deck crew was planned to be ongoing and flight deck crew annual vacations were scheduled to peak that month. With a similar mix of factors to those which caused LIAT’s summer meltdown, the potential for major disruption to flights appeared to be equally great for this winter. Unbelievably, the LIAT board and senior management had authorised this disastrous scenario to coincide with the Christmas holidays and the start of the international tourism high season in the Caribbean.
Having just avoided that mismanagement disaster in December, LIAT executives have been faced in mid January with the imminent grounding of six company planes by the aircraft leasing company. Lease payments are reportedly tens of millions of dollars in arrears and a collapse in flight operations has only been avoided by delaying payroll for LIAT’s long suffering employees.
The hotel and tourism industry in the Eastern Caribbean is extremely concerned about the ongoing disarray at LIAT, as most hotels are still suffering from low room rates and poor occupancy levels. This is the result of the significant drop in regional travelers and British visitors in recent years, as well as from the negative publicity, related to the Harlequin Resorts collapse and the demise of the former Almond Resorts. Some European tour operators are threatening not to sell packages which include LIAT flights, as a result of this past summer’s delays and missed flight connections. This is understandable, as it is their European Union tour operator guarantee bonds that are at risk for passengers’ associated costs, which are not recoverable from LIAT.
While LIAT faces yet another serious and immediate crisis, the airline’s overall financial future appears to be as precarious as ever. The former CEO’s business plan for LIAT collapsed in tatters by September last year, with missed summer revenue targets and massive additional costs linked to the service disruption and stranded passengers. As a burden on the airline going forward, the additional debt and increased aircraft leasing charges, associated with the new fleet, are likely to outweigh the higher maintenance and fuel costs of the old fleet. The company’s poor marketing efforts could not adequately fill the previous 36 seat and 50 seat fleet but nothing of substance has changed in LIAT’s marketing management to drive increased levels of business for the new larger 46 seat and 64 seat aircraft.
In the meantime, Caribbean Airlines – also loss making, but the beneficiary of ongoing Trinidad & Tobago government subsidies – continues to cannibalize LIAT’s southern routes and now new competition has appeared on LIAT’s northern route network. JetBlue is currently flying modern 110 seat jets between San Juan and four northern islands, while that company evaluates potential routes to more destinations further south. Seabourn has added inexpensive 34 seat turbo prop aircraft to its existing fleet and has expanded its route network south from Puerto Rico and the Virgin Islands to St Kitts and Dominica. All this now presents a competitive “perfect storm” for LIAT and its expensive new aircraft.
Led by a chairman, who has reportedly resigned twice in recent years, LIAT board members are a dim shadow of the airline’s founders and the current directors urgently need to be replaced by people with greater business acumen. LIAT is more over-staffed than ever, employee relations are at an all time low and the board and acting CEO appear to have no coherent strategy in coping with a looming financial disaster in the shape of high levels of company debt and growing competition. Few banks or governments in the region currently have the resources to provide ongoing financial support to LIAT and even fewer have any confidence in the airline’s management abilities.
The only sustainable solution for LIAT is to find a private sector joint venture partner which can provide a viable long term financial structure, along with the professional management and marketing expertise necessary to survive. For LIAT, it is now a case of pick a partner or go out of business. Some experienced Caribbean business minds seem to favour the latter outcome. However, regional air services are vital to the social cohesion and commercial activity of the Eastern Caribbean islands and a joint venture “soft landing” for LIAT would be preferable.
What is Barbados as the lead shareholder doing?
Short answer:Nothing.Reason?short answer:They have a banana farmer on the LIAT board since 2008.Trust the foolish Dems to mess up evermore.Meanwhile incompetent Goerge Hutson sat on his ass and allowed Redjet to perish,aided and abetted by Mr Know All Barney Lynch.The airline industry is a specialized one.It requires special skills,special people to do the job.
Even if Stuart wanted to address the matter he has his hands full on the domestic front. Barbadians were warned the difficulty to manage with a 2-seat margin. It has come to pass.
And in a related matter, we have PM Baldwin Spencer boasting that Antigua will not be sending home pubic workers like Barbados has YET Barbados as the majority shareholder continues to pour money into the LIAT operations. Time to bell the cat whoever you are.
Heard yesterday on the radio news that 1)Antigua Government saying they had to find the millions to stave of repossession of LIAT leased aircraft because failing which they would have lost their member on the Board of Diectors and 2)they did not do like Barbados and gave Sandals any or all special concessions to establish a hotel there.Speak of insult that last one is a big insult to Barbadians compliments of this foolish insipid administration led by Fumble,the pastor from Marchfield.
Why would CDB agree to lead USD65 million to LIAT with a flawed payback plan?
David | February 8, 2014 at 6:59 AM |
What is Barbados as the lead shareholder doing?
Waiting for PM Gonsalves to take the lead.
What about the LIAT drain on funds?
By Rufus J. Letang
| Wed, February 12, 2014 – 12:00 AM
p>My attention has been drawn to a posting of Saturday, February 8, 2014 on a popular Barbados blog by regular contributor Robert Mac Lellan, under the headline: LIAT Leadership Asleep At The Wheel Again.
p>In the post, Mr Mac Lellan highlighted the parlous state of LIAT’s finances which have resulted in the build-up of alarmingly large payable balances including huge arrears to aircraft lessors and late payment of employee salaries. The stark reality is that LIAT cannot pay its bills and suppliers have been left holding the bag.
p>It is an open secret that LIAT is bleeding cash at a rate of EC$40 million per year. This is equivalent to about BDS$30 million. This loss of cash equates to BDS$3 200 per hour.
p>As a 49 per cent shareholder, Barbados’ share of those cash losses amounts to BDS$1 600 per hour.
p>There is no credible prospect of a turnaround at LIAT [anytime soon]. In fact, with regional travellers shunning LIAT because of repeated service failings and increased competition as eloquently detailed by Mr Mac Lellan, LIAT’s financial performance is likely to deteriorate further. Barbados will be forced to provide annual subsidies to LIAT in the form of transfers from the Treasury or loan guarantees at a rate that would pay the salaries of 500 public servants for a year.
p>Has the Barbados Government given any thought to this? At this time when civil servants are losing their jobs, is it Government’s priority to perpetuate . . . LIAT’s non-performing super structure? Or, will this failed board and executive management be forced to join the ranks of the unemployed like the 3 000 hapless public servants?
p>Barbadians should raise their voices in protest against this flagrant injustice.