Facing LIAT’s challenges
The region’s longest serving airline LIAT is facing several challenges as it celebrates its 55th anniversary today.
From recording a reduction in passenger numbers and the high cost of fuel that could lead to another year of losses, to stiff competition from the newest entrant to the market, REDjet, the Antiguan-based airline is fighting to survive the economic downturn. It has also faced increased criticism about its fares.
In this week’s Big Interview, NATION Associate Editor Dawne Parris spoke with LIAT’s chief executive officer Brian Challenger on these issues following a Press conference in Antigua last Friday.
How do you feel about the support regional governments have given or not given LIAT over the past 55 years?
Challenger: Well, I don’t think we could have survived without the support the regional governments have given us over the past 55 years. Even now, although we have three primary shareholders [Barbados, Antigua and Barbuda, and St Vincent and the Grenadines], we do in fact still have most of the CARICOM governments that are minority shareholders within the company.
Every now and again you hear expressions of interest in their increasing that shareholding, most recently Grenada. In the case of Grenada, what really was the wake-up call was that they crunched the numbers and realized that LIAT brought more passengers to Grenada than any other airline.
The government of Antigua and Barbuda has for many, many years supported LIAT, in many instances without requiring an increase in its shares. Quite possibly LIAT would not be here today if it wasn’t for the leadership that was shown by Prime Minister [Dr Ralph] Gonsalves [of St Vincent and the Grenadines] a few years ago, at a time when the company was really struggling.
Has REDjet affected LIAT’s bottom line?
Challenger: So far, no.
The main area where we’re competing with them at present is on the Georgetown-Barbados route. Guyana is actually one of the few economies in the region that is really expanding and I think that in itself has been a boost for airlines that operate into Georgetown.
This summer was a good summer for us out of Georgetown, and although I obviously can’t speak to their numbers, I believe it was a good summer for REDjet as well. Again, it’s a competitive market. We’ve competed there with CAL [Caribbean Airlines] for years and there is a new entrant. We will face them and see how best we can cope with that situation.
Are you at all worried about REDjet, or at least interested in how it is they are able to offer those lower fares?
Challenger: We’re curious. There’re lots of rumours that there are hidden benefactors; we certainly don’t have any hidden benefactors.
We recognize that while you can say you have a low-fare airline, whether you can have a low-cost airline, we really don’t know.
In the Caribbean we compete in a global market and training and equipment and fuel are not cheap. So we’re curious as to the REDjet model and we will see how the model evolves over time.
After REDjet entered the scene, we saw LIAT releasing several specials and the public’s response was, why is it that you can now offer lower fares when, before you had that competition, you said you couldn’t?
Challenger: Because we are determined to remain in the marketplace.
We recognize we may have to take a beating in some instances. We believe REDjet must also be taking a beating in some instances. It’s competition and there’s no doubt that competition works to the benefit of the consumer; it’s an established economic principle.
We’re not out to gouge anyone. We recognize that we operate in a very price sensitive market, particularly at a time where the economies are slow and people are facing unemployment, and people are facing escalating prices in the supermarkets and everywhere else. We recognize that within that context we have to do what we have to do to survive and stay alive.
So, it’s not just a ploy to counter REDjet, but certainly we recognize that it’s a very dynamic business and in order to remain in the business, you have to be flexible and fleet-footed and that is what we are seeking to do.
When REDjet first announced US$9.99 fares you were sceptical. What do you think now?
Challenger: A $9.99 fare is obviously only applying to a few seats in a plane. We do something similar; it’s a central component of what you call revenue management and REDjet is no different.
Let’s face it, every seat on that plane does not cost $9.99. So it’s in many ways a marketing gimmick. As I said before, we’re very keen to see how the model evolves.
Would you say that LIAT’s regular fares can’t get any lower in the current environment?
Challenger: No, I’m not saying that because we are going to have to lower our fares. I recognize that.
The cost of running an airline is just astronomical but we are really trying to see what we can do. We’re looking at it from both a revenue enhancement perspective as well as from the cost reduction perspective.
The aim is to provide the Caribbean traveller with the means to move as affordably as possible between our islands.
We’d love to have the type of fuel subsidy that CAL has and maybe that’s something that Madam Kamla [Persad-Bissessar, prime minister of Trinidad and Tobago] can think about in the true spirit of regional cooperation.
What is LIAT projecting its bottom line will be this year? Are you expecting a profit or a loss again?
Challenger: We struggled at the end of last year. We did pretty well up until September and then a combination of factors really came together to really hit us a severe blow. It has not been much better this year, intensified by the economic downturn, continuing high prices and stronger competition particularly from REDjet.
We’ve put together what we call a recovery plan which we hope will at least bring us to a break even. We’re placing a lot of hope on our cargo to, if not carry us over the hill, at least certainly improve on what was done last year and we are seeing that. Another area where we’re putting a lot of emphasis on – this will not change dramatically the numbers but every bit counts – is our Quikpak product.
This is something we have not placed enough attention on over the years and it’s something that we intend to revitalize. We’re hoping to bring on a new Quikpak manager very shortly to really get that product to become a more viable and valuable part of the LIAT total package.
Where does Barbados, the largest shareholder in LIAT, stand in terms of the strength of the airline’s markets?
Challenger: Barbados is one of our core markets. We have more flights out of Barbados, moving more numbers, than any other destination. Barbados is very important to us and we feel very comfortable with the relationship with the Government and the people of Barbados who’ve loyally supported LIAT through many, many years through various administrations.
So is Dr Holder continuing at LIAT?
Challenger: So far, so good.
Has he officially withdrawn his resignation?
Challenger: He hasn’t necessarily withdrawn but he’s with us, for the time being at least, and we hope that he will stay with us a little while longer.
What is your response to the call for a single Caribbean airline?
Challenger: LIAT has always been foremost in the call for a single Caribbean airline and the reason for that is very simple: we are the weakest link in that chain. Financially, strategically, we have the least resources so we’ve always sought to partner with our larger colleagues and with our regional colleagues.
We retain a commitment to a single Caribbean airline but the important factor being the form that takes. You have to recognize the importance of LIAT to our region, the critical roles which it provides, and once the structures in place recognize that, then there are huge possibilities.