The Adrian Loveridge Column – LIAT Restructure or Not!

Writing about LIAT at this time seems almost like a lesson in futility, especially when you consider it’s now some 45 years since the formation of LIAT (1974) Ltd, by the present owners and 63 years since the initial formation of the airline.

My first involvement with the airline dates back to the days of Court Line and flying some of my first groups as a tour operator on their pastel pink, yellow and violet Lockheed 1011 Tri-Stars out of Luton airport.

Court Line Aviation acquired LIAT in 1972 as part of its long haul strategy, supplying them with BAC 111 series 500 jets, ironically the only non-turbo propeller aircraft the Caribbean airline was ever to operate.

Court Line ceased trading on 15th August 1974, with the parent company together with its subsidiaries, Clarkson’s Travel Group and Horizon Travel, owing over GB Pounds 7 million, to more than 100,000 holidaymakers.

LIAT (Leeward Airlines Air Transport) escaped the bankruptcy, but the BAC 111’s were reclaimed and 11 Caribbean territories stepped-in to save the carrier, replacing the jets initially with de Havilland DHC-6 Twin Otters. Later, Dash 8-100’s with increased passenger capacity were introduced.

Of course, this is only history and here we are nearly five decades later trying to figure out, if or how, a reliable sustainable regional carrier can survive and flourish, without vast amounts of taxpayer’s monies propping it up, or endlessly queuing at an ATM cash-flow lifesaver.

Let us for a moment look at it from a slightly different perspective.

According to Statista, described by Wikipedia, as one of the most successful statistic databases in the world, hotel occupancy across the Caribbean averaged just 63.7 per cent in 2018, the lowest level for the last 7 years. There are naturally mitigating circumstances, like the devastating knock-on effects of a series of hurricanes and tropical storms, putting a vast supply of rooms out of use.

But conversely, it appears that those visitors destined for damaged resorts and destinations, were seemingly not converted in large numbers, to other non-affected territories within the Caribbean.

Frank Comito, the CEO of the Caribbean Hotel and Tourism Association recently quoted there are ’80,000 vacant hotel rooms every night’ across the region and ‘filling just 10 percent of those rooms would inject nearly US$2 billion into the Caribbean economy’.

Another area maybe that we have not yet fully appraised, is the impact of a increasing secondary lodging sector, which includes Airbnb and Where-to-Stay type alternatives to traditional hotel accommodation.

Our Government has yet to report on how successful the registration, and licensing of these properties has been, together with exactly how much has been raised through the newly imposed ‘shared accommodation levy’, which could now finally help support the marketing of Barbados.

To a certain extent our climatic conditions largely determine demand in most of our major markets, producing two distinct seasons.

If we wish to fill more of those empty rooms outside a few summer festivals, then a strong, affordable and reliable regional air carrier is not an option, it is a necessity.

Let us hope the recent announcement by the Prime Minister and proposed reduction of Barbados taxpayer’s shareholding in LIAT, leads to a commercially viable restructuring of the airline, but many will remain highly skeptical especially when you consider where the majority of passengers join or transit.

39 comments

  • Vincent Codrington

    What is a commercially viable regional airline? If the airline industry was easily commercially viable would not the private sector get involved? Do not the GoB give subsidies direct and indirectly to airlines into and out of Barbados? World wide do we not witness the perennial closing and amalgamation of airlines? Obviously it is not an easy business to manage.

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  • Is my Maths wrong??? Quoting from your article: “Frank Comito, the CEO of the Caribbean Hotel and Tourism Association recently quoted there are ’80,000 vacant hotel rooms every night’ across the region and ‘filling just 10 percent of those rooms would inject nearly US$2 billion into the Caribbean economy’.”

    So…. 2000,000,000/8,000 = 250,000 per room per year or 250,000/52 = $4,807 per room per day.

    Does the average visitor really spend that much per day to stay in the Caribbean???

    Note that “room” includes all costs of the visitor.

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  • peterlawrencethompson

    @ks
    … $2,000,000,000/8,000 = $250,000 per room per year or $250,000/365 = $685 per room per day…

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  • ….my bad….$4,807 per room per WEEK

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  • LIAT: Leave Incorporation Any Time
    OPINION BY Patrick Hoyos June 10, 2019


    Long ago and far away, possibly in a distant galaxy, times were much simpler. With little a-doin’ in our island paradise, we would sit around and try to come up with ways to “burn” the region’s airlines for their lousy service.

    BWIA, among many other new “names”, stood for Better Walk If Able,” and LIAT stood for “Leave Island Any Time”.

    I could sit around here today trying to remember some of the others, but they were all equally corny.

    Today, we could re-dub Liat “Leave Incorporation Any Time”, which is what I hope Barbados will do sooner rather than later. Why hold on to ten percent when we couldn’t change the airline’s direction with 52 or 49?

    I could never understand why Owen Arthur hastily assembled the leaders of a few other islands back in 2003 to announce that Barbados and their governments were borrowing money from the Caribbean Development bank to give Liat this whole new lease on life, with Barbados of course taking the lion’s share of the investment.

    We all knew that as long as Liat was headquartered in Antigua, it would be business as usual. Jobs for Antiguans, paid for by Barbadians.

    That is why it is nice sometimes to be under an IMF programme. You know, we would love to continue on this journey into the abyss with you, but, well, the IMF just won’t allow it. I mean, were it left to us, we would be there for you, Antigua and Barbuda.

    In her statement to Parliament last week, Prime Minister Mottley alluded to the huge gap between Barbados and the rest of the shareholder governments. The Cabinet, she said, had agreed to negotiate the transfer of most of its shares in Liat (1974) Ltd. to Antigua & Barbuda, thus giving up its role as the largest shareholder in the regional airline.

    She noted that Barbados had moved from being a minor shareholder prior to 2003, with just over eight percent of the company to today’s stake of just over 49 percent, and at one time in 2013 holding a majority stake of just over 52 percent. We had more than shouldered our share of Liat’s burdens over the years, she said, which of course no one can deny.

    In her statement, which was actually a masterclass in diplomatic-speak, Ms. Mottley (I am paraphrasing) said that as the largest single shareholder there was only “so much” that Barbados could do at this time given its precarious finances, so given the inability of Barbados to do for Liat in the next five to ten years what it did in the same period previously, the Cabinet had decided it was time for Barbados to “step back” and allow other governments to give their proposals a chance.

    You could just imagine the emotion of that moment at Cabinet, with not a dry eye in the room, as the ministers regretfully decided it was time to stop trying to save Liat.

    Now it appears that a white knight may be saddling up his worthy steed to come to the rescue of the airline. Ladies and gentlemen, I give you – Sir Richard Branson! (drum roll, please).

    In early May the Antigua Observer reported that Lionel Hurst, Gaston Browne’s chief of staff, said discussions had been held with Sir Richard to enlarge Liat’s fleet to include jet aircraft.

    Hurst said Sir Richard had proposed investing “several million dollars” and would lease jets to fly from Fort Lauderdale to Jamaica, Haiti, Antigua and Barbados. The whole idea was to enlarge LIAT, rather than shrink it, by flying to destinations outside of the region, as there were not enough passengers to make LIAT profitable within the Caribbean.

    But as they say, there’s more!

    At the end of May the Antigua Observer reported that Prime Minister Browne had said his government was making provisions for the expansion of LIAT through the leasing of the old VC Bird terminal building at Antigua’s airport, which should help to reduce the broke airline’s operational costs.

    And you thought the Liat carcass had no meat left on its bones.

    He told the newspaper he believed that “we can revamp LIAT in such a way and to restructure it in such a way, for it to become profitable,” or to reduce its losses significantly.

    Now, I for one just hate it when reality rears its head and just spoils a lot of lovely daydreaming. Ms. Mottley told Parliament on Tuesday that the Barbados government did not believe Liat could do what was needed under its current structure. The airline’s continued losses had made it difficult for the airline to keep its head above water, and studies had shown that the company needed significant restructuring in terms of new models for its governance, operations and finances.

    And in language headed straight for the diplomatic hall of fame, the prime minister said that while Barbados had been “persuaded” by those studies, other shareholders believed there were “better and different ways to secure the viability of the airline,” and the Barbados government accepted that “there is no unanimity on this issue.”

    So the government accepted that if other shareholders wanted to try different models for making the airline viable they should be given the chance.

    Personally I would have no problem with getting out of Liat completely, if only to provide justification for my new and clever name for the airline.

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  • World Bank praises Flow, LIAT and Massy Group praised for risk mitigation strategies
    June 9, 2019

    During the recent Caribbean Risk Conference at the Errol Barrow Centre for Creative Imagination, telecoms provider Flow, regional airline LIAT and the Massy Group were all given credit for their hurricane preparedness. \

    Ming Zhang, Practice Manager at the World Bank, told representatives of the companies during a panel discussion that the bank was confident that businesses were treating disaster preparedness as a priority.

    “There’s a lot of sophistication in what you are doing, and I think other sectors and companies can learn a lot from you,” said Zhang.

    In 2017, the Atlantic hurricane season became the costliest ever recorded with damage totalling over US$299 billion.

    And while high-intensity storms will continue to pose a threat to economic output in the Caribbean, more and more companies are building redundancies into their daily operations, he noted. Mr. Zhang facilitated a panel discussion that included Jenson Sylvester, Country Manager of Flow Barbados, Julie Reifer-Jones, LIAT’s Chief Executive Officer, and Brian Reid, Manager of Health, Safety and Environment at Massy (Barbados) Limited.

    Mr. Sylvester, said “Risk mitigation is one of the pillars of our business, so we’ve consciously built our data centres outside of the hurricane belt in countries such as Curacao, Colombia, Panama and Miami.”

    He said Flow had built and tested an effective disaster recovery plan since the ability to communicate would allow countries to recover quickly after a disaster.

    Ms. Reifer-Jones said LIAT, which serves the eastern Caribbean, always monitored the progress of storms in order to ensure the safety of its aircraft, staff and passengers. She also said the airline was in the process of further bolstering its data systems.

    “The last time we had to significantly reroute aircraft our data systems, including our passenger information systems, did not fully work as there were gaps and breaks. The building of redundancy, however, requires resources, and that is one of our challenges at LIAT,” she said.

    Mr. Reid said the Massy Group, one of the Caribbean’s largest conglomerates with businesses across the region, had organised its logistics and distribution channels to be resilient.

    “When there is an impact to our supply chain, we look to see what products we can maintain and where we can source products from different locations. This is something we are always looking at,” he said.

    CAPTION:

    Flow’s country manager Jenson Sylvester makes a point during the World Bank’s recent ‘Understanding Risk Conference’ at the Errol Barrow Centre for Creative Imagination.

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  • Piece the Legend

    @ Mr Loveridge

    You said and I quote

    “…If we wish to fill more of those empty rooms outside a few summer festivals, then a strong, affordable and reliable regional air carrier is not an option, it is a necessity…”

    Noticeably absent from your commentary is

    (1) the necessity for a cleaner destination

    (2) the necessity for more affordable rooms (such as those AirBNB are providing

    And most importantly

    (3) the critical need for less crime ridden environments where they are stabbing guests

    As usual it is easy to blame the otherness of an Airline as being thd source of the problem as opposed to focusing on the real issues.

    Do you remember when, as part of a package to a guest, you used to sell tickets to the islands for $98 ! RETURN FOR DAY TIME EXCURSIONS?

    I do! Commissions were fantastic.

    Fact is, there are several elements to this problem of a flailing tourism product, some of which we are just victims of, and others which we are perpetrators of the crimes

    But it serves our agenda to point our fingers at others since, if you do so long enough, none will point them at us.

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  • Piece the Legend

    @ the Honourable Blogmaster your assistance please with an item here thank you

    Liked by 1 person

  • Although Antigua & Barbuda currently own 34% shareholding in LIAT, it seems as if successive Antiguan political administrations are of the opinion A&B owns the airline.

    One of PM Gaston Browne’s election promises was for A&B to secure the majority shareholdings in LIAT. Perhaps that’s why he has continued to reject every proposal so far, to restructure the airline.

    It’s also obvious he seems to be more concerned with securing the employment of those 700 people working at LIAT in Antigua….. at the expense of the other shareholder territories taxpayers.

    I’m happy the Mottley administration accepted the offer from PM Browne for A&B to take up most of Barbados’ 49.4% stake in LIAT…………. thereby transferring the airline’s debt burden from the backs of Barbadian taxpayers to Antiguan taxpayers.

    LIAT’s current operating structure and financial difficulties do not make it an attractive investment option. As such, I would have preferred if Mottley had given up the entire shareholding to A&B and adopt an attitude similar to that of her St. Lucian and Kittitian counterparts, PM Chastanet and PM Harris……..

    ……… to insist there has to be a significant restructuring of LIAT and the airline subsequently demonstrates some level of financial viability before investing in it.

    Liked by 1 person

  • @Artax

    The 10% is probably meant to demonstrate committent to the Caricom project.

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  • There has been a shooting on one of the island’s pleasure crafts.

    http://www.nationnews.com/nationnews/news/240198/shooting-boat

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  • Piece the Legend

    @ Brother Hants

    What de ole man do you?

    I he’s talk bout de crime issue that is mysteriously missing from this one track blog AND JUST SO YOUCOME AND PLOP DOWN A CRIME & SHOOTING?

    People here are blished to believe that the 9 of us are talking to each other offline AND SHARING WHAT OUR STRATEGY OF DIGITAL HIGH TREASON SHOULD BE!!!

    Cause you do know that us talking about all these shoutings, EVEN HISTORICALLY, is considered to be consorting with “THE ENEMY “ of Barbados

    And that is destabilization and sedition AND IS A LOCKUP WITH NO BAIL CRIME!!!

    De grandson promise de ole man a new machine about a month ago BUT HE WAS BUSY so I ent get it yet

    But as soon as I get it, I going start wid some more Biopics & Stoopid Cartoons to assist with the Agard Unjust 10 year Incarceration SNAFU

    So just give me a few.

    He tells me it is a firewall Beast with HyperVirtualizations up de Kazoo so I he’s waiting.

    Den We On!!!

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  • After court line left LIAT continued to operate the Avro 748 fifty seater. The dash 8 replaced the Avro around the late 80’s early 90’s.

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  • PUDRYR

    After reading your June 10, 2019 1:35 PM and June 11, 2019 6:19 AM contributions, I’m curious as to what are your intensions or what you’re attempting to achieve by pursuing this line of argument?

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  • In light of the Mia’s promise to build a string of new hotels stretching from Hastings to Bridgetown, there are more than a few lessons for Barbados (some of which we are already learning the hard way) in this documentary:

    Thailand and the Fallout From Mass Tourism:

    Ten years ago there were 20 million fewer tourists. Today’s mass tourism has both social and ecological consequences. Most of the Thailand’s popular tourist resorts discharge untreated sewage into the sea, and plastic waste ends up in the water. This is killing off the fragile coral reefs along the coast. The countless hotels and restaurants mainly serve fresh fish, so fishing boats are using giant trawl nets, which are also destroying the coral. The internationally renowned marine ecologist Thon Thamrongnawasawa from the University of Bangkok says 77 percent of Thailand’s coral reefs have been severely damaged. Meanwhile, the locals in popular tourist resorts hardly benefit from the huge numbers of holidaymakers at all. They work for the minimum wage and are often pushed out by guest workers from neighboring Myanmar, who are willing to work for even less money. Small local restaurants lose out when the big tour operators take their guests on all-inclusive excursions. The filmmakers first visited Thailand a few years ago, shooting enchanting footage of the still intact underwater world in many places. Now they are back there again to look at the consequences of unrestricted tourism – both above and below the waterline.

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  • @Green Monkey

    There is the example of Spain.

    Mia also made an interesting announcement in England, a Rihanna museum is coming?

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  • How can any one takes Mia words in all seriousness
    She has yet to deliver on those gloriuos campagain promises
    Furthermore barbados does not have an adequate sewer systems to accommodate the large quantities of sewage from additional hotels
    Furthermore her words ring hallow in a country burden with debt whose first commitment is to paying off its debt
    Mia is a blow hard blow gad out her backside

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  • Why LIAT will always only attract customers who don’t have no other choice ie: a monopoly situation….. check out this ticket breakdown from Bdos to Grenada (return):

    Departing Flight:BGI – GND (Web Saver)
    1 Adult$ 65.00 USD
    Taxes and Fees: $ 120.74 USD

    Returning Flight:GND – BGI (Web Saver)
    1 Adult$ 65.00 USD
    Taxes and Fees: $ 81.06 USD
    Total
    $ 331.80 US

    LIAT collect $ 130 USD

    Greedy Governments collect $ 201 USD

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  • What gross incompetence on the part of the Barbados government. Even the Antiguan government is telling them to bugger off. Auction the shares to anyone. What is the problem, apart from incompetence? Never underestimate incompetence in Barbados. It is a public health hazard. BERT will fail. It will end in tears. The president is out of her depth.
    Barbados is a failed state.

    Prime Minister Gaston Browne says Antigua and Barbuda is prepared to acquire further shares in the cash-strapped regional airline, but is unwilling to pay an estimated $88 million (US$44million) being asked by Barbados for the sale of its shares in the airline.
    The two countries have been holding discussions on the acquisition of the shares and last week Browne told the Caribbean Media Corporation (CMC) that the talks were still ongoing despite media reports in Bridgetown that they had broken down.
    Speaking on a radio programme here, Prime Minister Browne said if St. John’s had to settle at the asking price of $88 million “that would be a steal for Barbados.
    “We are not in the process of giving away money. We are in the process of creating value and to get fair value for the people of Antigua and Barbuda, so as far as I am concerned, and I have said this to the Prime Minister of Barbados [Mia Mottley], so she knows my thinking, telling her that discussions cannot start at US$44 million.
    “So she knows the position and she has since come down,” Browne said, adding that he was looking to an amicable settlement of the negotiations and in the event that does not occur, his administration is prepared to invest directly in the airline.
    “And my colleagues will tell you that it was always my first option. The issue about buying Barbados’ shares came about as a result of an impasse in which Barbados said it could not go any further, sell the planes, we said, look we cannot be a successful shrinking LIAT.
    “We do not accept that and that’s the case, lets negotiate and we will buy all or some of the shares and they said they will sell up to 90 per cent of the shares. If we are unable to come to a satisfactory compromise then we will just put in our money and buy those shares and we can still get a majority position which is not necessarily what we are fighting for,” he said.
    Antigua and Barbuda currently holds 34 per cent of the shares and if it succeeds in convincing Bridgetown to part with its LIAT shares, would have 81 per cent of the airline that employs over 600 people and operates 491 flights weekly across 15 destinations.
    St John’s said it would seek to acquire the LIAT shares owned by Barbados, through a take-over of the liability of Barbados to the Caribbean Development Bank (CDB).
    During the radio programme, Prime Minister acknowledged that there’s a back-and-forth situation over a particular matter.
    ‘What we are saying here, we oppose the sale of the planes to pay off the debt so rather than selling the planes to a third party, Antigua and Barbuda says it would step in and assume Barbados’ shares associated with the acquisition of the planes.
    “That’s a simple matter I understand okay. Unfortunately my (negotiating) team got involved in some kind of sophisticated negotiations which would have resulted in a settlement of 44 million. I don’t understand that kind of maths.”
    He said what occurred initially is that the negotiation team “based on initial discussions had agreed on a proposal that was put forward. Barbados Government had put forward a proposal for settlement at US$44million and I am told that initially that our negotiating team agreed.”
    He said he was disappointed that the negotiating team would have contemplated agreeing to the US$44 million.
    “I understand mathematics, I understand percentages and I also understand value for money and I know if we were to settle at US$44 million that would

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  • For certain Browne not going let Mia do to Antiguians what she did to the Dominicans in the same order and manner of stealing Ross University

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  • @ Mariposa

    The president is out of her league, and those she is depending on are not as smart as she believes they are, or they try to convince her they are. If you have X shares and want to sell them, and there is a buyer who wants to by, then you negotiate and r each a compromise.
    If the company is listed, the value of your shares is determined by the market value Y number of shares X by z price per chare =???
    If the firm is not listed, then auction the shares collectively. LIAT is not worth US$44m, farless 49 per cent of the company.

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  • How do know what LIAT is worth?

    Are you at the negotiating table to know the issues challenging the discussions?

    Are there legal conditions the parties have to observe given the indebtedness to CDB?

    Tell us!

    >

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  • Idiot, we have had this discussion before. I will explain it in simple terms so that even you could understand, but mainly the readers, whatever the theory.
    If a listed firm is being sold, then its market value is the price of a share X the number of shares (some buyers overpay for all kinds of reasons).
    If it is a private company, then the buyer makes an offer and the seller accepts or refuses. If the seller accepts, then the value of the company is the agreed price. No more, no less.
    Sellers can ask for whatever price they think they can get away with; and buyers can offer what they think the company is worth. We had this discussion a few months/years ago and you came out with the same nonsense. Keep out of things you do not understand.

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  • And how do you know the process that is on the way will not lead to an outcome?

    Maybe you are relying on the blustering of PM Browne being shouted over the Caribbean Sea from your oversized retirement chair in the UK?

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  • @ David BU

    Oh please. Lord in Heaven. This guy cannot be that silly. There is no need for process, unless the seller is asking too much, or the buyer wants a discount.
    What normally happens in the sale of a company is an agreement in principle. Once that is agreed, then the books are made available to the buyer’s advisers under a confidentialiity agreement: key staff are locked in on contracts, since it does not make sense buying a business one day and the next all staff resign. I have been locked in on such a contract.
    The buyer’s advisers then check the books from legal ownership, income statements, cash flow statements, balance sheet, changes in equity, return on equity, net profit margin, Ebitda, return on assets, return on capital employed, gearing, an analysis of the business model, synergy, etc. I can go on, but these are details that follow the agreement in principle.
    You do not have to have silly meetings to agree if there is going to be a sale. If you put up a ‘for sale’ sign, would-be buyers come and ask the sale price; if it is attractive they then put in a firm offer.
    If you are buying a property, after agreeing in principle you get your advisers in – lawyers, surveyors, etc. Once satisfied, then you confirm the offer and exchange contracts. Done deal.
    The mess around the sale of the 49 per cent shareholding in LAT is caused by incompetence. If Barbados is selling and LIAT is valued at X, then 49 per cent of X is X-49. If Antigua does not want to meet the asking price, then stop the talks and auction the shares with a reserved price. Simple.

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  • HAL AUSTIN

    PLEASE! YOU CAN NO LONGER SAY THINGS LIKE Lord in Heaven. ON THE BU PROJECT SIR

    RE This guy cannot be that silly.

    PLEASE KINDLY NOTE THAT IT IS NECESSARY TO STATE THE OBVIOUS ON THE BU PROJECT SIR

    THANK YOU FOR YOUR KIND ATTENTION IN THESE MATTERS, SIR

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  • UN-NECESSARY

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  • Winston Anthony Jackman

    The buyer’s advisers then check the books from legal ownership, income statements, cash flow statements, balance sheet, changes in equity, return on equity, net profit margin, Ebitda, return on assets, return on capital employed, gearing, an analysis of the business model, synergy, etc. I can go on, but these are details that follow the agreement in principle.

    I could understand the process outlined if applied to Company A wanting to acquire shareholdings in Company B….. but Barbados and Antigua & Barbuda are both shareholders in LIAT at 49.4% and 34% respectively.

    How would this process apply in this situation, and is it really necessary, when Antigua & Barbuda has a shareholding in LIAT, and as a shareholder, they would be privy to all that information?

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  • What is being reported out of the mouth of PM Browne is that he has the option to buy new shares in LIAT (1974) to achieve greater shareholding in that company.

    Go figure.

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  • Presumably both the Barbados Gov’t and the Antiguan Gov’t have access to LIAT’s books and have affixed a value to its shares. ( I say presumably because one can never be sure) and we know what the Antiguan Gov’t is not prepared to pay but perhaps the two sides can take the Bajan asking price and the Antiguan offer and meet in the middle thus saving the back and forth in the media. I believe that is a fair and equitable solution and both sides can claim to save face plus the Antiguan Gov’t has an ace up its sleeve it can always call on its “white knight” – Branson to pony up the difference so it can embark on its proposed expansion of serving the wider Caribbean as far as Miami and leave the Bajans green with envy as the puddle jumpers assume new status.

    BTW Bajan Gov’ts have struck out twice when it comes to regional Airlines first Barrow went to back for Bwee on its London routes and look where it got us – not even a bowl of warm over fish soup- and now LIAT where Brown has his Antiguan wild burros ready to kick Barbados butt, enuff is enuff.

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  • @ Winston,

    That is the kind of question you get at some business schools. In the real world, the process is the same. I am selling, you want to buy, this is what my shares are worth. I want the full value, or, I will offer a discount of x amount. Are you buying, yes or no.
    The other way round is for Antigua to buy (or get the support) of the other 51 per cent owners and, thus, control of the company and isolate Barbados. As a minority shareholder Barbados will have to make an investment decision.
    What may help is the Barbados government not interfering with the investment decisions of the NIS

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  • Kudos to Browne for giving heads up on barbados sale of its shares in Liat
    Not one fond of Browne but when it comes to transparency he leaves no stone unturned
    In any event a struggling airline bogged down in debt now flying on a wing and pray
    Shareholder investment would not be attractive enough to be asking an absorbent price
    Most likely any investor looking at the books would turn a blind ear to an asking price which would incur more debt for self and airline

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  • Winston Anthony Jackman

    I am selling, you want to buy, this is what my shares are worth. I want the full value, or, I will offer a discount of x amount. Are you buying, yes or no.

    I understand what you’re saying. Let’s put this aside and focus on what you mentioned as it relates to legal ownership, income statements, etc.

    You mentioned legal ownership. Isn’t this already known among the shareholders?

    The shareholders would receive information pertaining to income statements, cash flow statements, balance sheet, changes in equity, return on equity, net profit margin, Ebitda, return on assets, return on capital employed and gearing, collectively in the form of monthly and annual financial statements.

    An analysis of the business model, synergy, etc is an ongoing process, as suggested by the several different initiatives implemented. One of the reasons why Gaston Browne wants majority shareholdings was to improve or change LIAT’s current business model.

    My query is whether or not the PROCESS you outlined is NECESSARY, since Barbados and Antigua are both shareholders in LIAT and would obviously be privy to information you mentioned?

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  • NorthernObserver

    “Shareholder investment would not be attractive enough to be asking an absorbent price”
    No wonder you like Physical deficit Ince so much. Angela ‘absorbent’ Skeete. The daily dose of comedy

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  • @ Winston,

    When buying a new asset you cannot presume you know the legal structure. It must be verified. So too with externally audited and internally audited figures. You want all information to be verified by YOUR advisers, so too the business model, intangible assets, potential intangible assets and synergies. You make the point yourself: one reason why Antigua wants to own the airline is to change its business model.
    I will give you an hypothetical example: you are the CEO of banks, which is not making an acceptable return on investments. You have to think on your feet. Apart from the firm’s factory, you have a cricket field right the centre of a high class area.
    If I were a potential buyer, I would make an offer based on the cash flow and tangible assets. If my offer was accepted, After a couple years, or however long was agreed, I would put the playing field on the market for residential development at many times the value of the company; would start producing beer in Brazil, still under the brand, and use Barbados as a distribution site only. That si called modern business.
    The process, as you call it, is necessary, if not you may buy a pig in a poke. I refer you to two relatively recent examples: the first, Air Jamaica, is now taught at UK business schools as an example of how not to do things; the second, is the demutualisation of The Mutual. I sincerely believe that members of the Mutual were robbed because we politicised a process which should have been based on the financial economics. Whatever happened to the legacy assets of the Mutual?
    As Warren Buffet said: “Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.”

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  • Winston Anthony Jackman

    When buying a new asset you cannot presume you know the legal structure. It must be verified. So too with externally audited and internally audited figures. You want all information to be verified by YOUR advisers, so too the business model, intangible assets, potential intangible assets and synergies.

    Are you not mixing up two different scenarios….. where (1) a major shareholder attempting to BUY OUT another major shareholder….. and since you said “buying a NEW asset,” (2) a case where a NEW INVESTOR is seeking to BUY shares in a company?

    As I said before, I understand what you’re saying would apply to when Company A is seeking to acquire shares in Company B.

    Or for example, if St. Lucia or St. Kitts & Nevis, both of whom are not shareholders in LIAT, decides to buy shares, then I can understand why Allen Chastanet, Timothy Harris and their advisers would want that necessary information.

    LIAT is NOT a NEW ASSET Antigua & Barbuda is are seeking to a acquire shareholding. A&B is already a MAJOR SHAREHOLDER and a part of the decision making process of LIAT and they want to take over Barbados’ shareholdings.

    Therefore, am I being unreasonable to assume that, as a shareholder, A&B would have already VERIFIED LIAT’s legal structure and as well as the financial status of the airline, because as shareholders, they would receive monthly and annual financial statements, which would have information on all categories of assets, liabilities, equity, managerial accounting reports, and at the shareholders’ meetings, the externally audited financial statements, which are all scrutinized by the legal and accounting officials of each shareholder island?

    I am just trying to understand, you are the expert in this field.

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  • @ Winston

    First, I am not an expert nor is there any confusion. If you are buying a new asset you do the valuation, if you are already a minority shareholder you do not have to, unless you are buying a controlling interest.. In any case, the board will not allow you to look at its books. Stock marketing is different: you go on the stock market and buy shares.
    But buying out a fellow minority shareholder the process is the same. If you are keener on buying out the other shareholder than they are to sell, then you make a higher bid; if they are cash-strapped and want money, then they offer a discount.
    You are right, as shareholders they would have known the basic valuation and business model, but if taking over the entire company, they must still carry out further due process. Governments do not work; they spend taxpayers’ money and so have a duty of care to taxpayers.
    Forget about receiving monthly financial statements etc. If you are buying the firm, or a controlling interest, you should carry out a comprehensive independent scrutiny of the business. DON’T JUST ACCEPT FGURES AS GIVEN BY THE FIRM.
    Do not buy a pig in a poke, not even a LIAT pig.

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  • The obvious question is whether a government should be involved in a commercial enterprise in the first place.

    Usually, the answer is a resounding no. The exception is cases where the investment is of a critical nature to the economic or infrastructure of a country and private enterprise is unwilling to support due to either significant hurdles in achieving the outcome or lack of economic viability.

    One would think that a private enterprise would be more than willing to run the airline. The ability to ruin one is a forgone conclusion, any half capable business group can run an airline, if the economic viability is there. However, the government fees and taxes on interisland travel, included in the tickets, need to be significantly reduced to make the enterprise viable for a private enterprise.

    I do suspect however, that some level of holding on to the past and protecting lucrative jobs is part of the current decision making process.

    That approach may be a hindrance to a good decision.

    A key may be that Trinidad, even with the oil revenue supporting the economy, eventually had to shutter BWIA, what does that tell you?

    The short answer is that Caribbean governments need to get their finger out of pies and be facilitators and not investors. Real facilitators at that. Not the red tape makers.

    Real facilitation and red tape removal also (should) reduce corruption as part of the process changes i.e. by removing certain decision points, the opportunity for individual gain is removed.

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  • Regional transportation is deemed a good in the context of Caricom. Our ailing economies have forced countries to revisit this position. The other thing to consider is the airspace in the region carved in many spaces and the hopping from island to island. What is the opportunity for a regional airline to be viable.

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