Lacking In Any Transparency
I AM NOT GOING to join the chorus of those trumpeting that corny, derivative fake-complimentary “letter” to LIAT which made the rounds of cyberspace last week, with possibly a considerable push from Virgin’s Sir Richard Branson.
If the old boys from the Former Empire want to beat up on the old boys from the Former Colonies, go right ahead, but, as Shania Twain would say, “That don’t impress me much.”
Given Virgin’s track record (literally) with Virgin Trains and his problems with Virgin Atlantic’s service, as well as other airlines with which his company was connected in Europe, Australia (Virgin Blue) and the United States (Virgin America), Sir Richard should know a thing or two about poor service and therefore should be the last to talk. Or gloat.
The letter itself reads like the glib, polished work of a professional copywriter, which may be the profession of the frustrated traveller who allegedly wrote it. I don’t know and I really couldn’t care less about the specifics of that case.
So without using it as an opportunity to bash LIAT, I do want to use it to raise a question or two about the huge lack of transparency as to what is going on within that airline, in which we, the taxpayers of Barbados, hold a controlling interest but seem to know very little about.
Except that it is probably broke, or, at least, massively cash-flow challenged. Last I heard (a week or two ago) the pilots’ union was complaining about a letter its members had received from management saying their pay cheques would be delayed.
There was speculation that LIAT was having a cash flow problem (no, really?) in having to pay towards those new aircraft it is buying and so will be paying its pilots a couple of weeks late this month.
Oh, yes, those planes. We are getting all these Press releases about this and that inaugural flight, rollout, and so forth of the new LIAT fleet. But I find it difficult to embrace the hoopla.
I can tell you, however (as if you didn’t know), that in mid-June “the first of a total of eight ATRs (four 68-seat ATR 72-600 and four 48-seat ATR 42-600s)” was delivered to LIAT.
I can also tell you that “LIAT’s fleet is being leased from the lessor GECAS (GE Capital Aviation Services)”.
And that “the introduction of these brand new ATR -600s in LIAT’s current fleet of 14 aircraft is a part of the airline’s restructuring plans aiming at fleet modernization and network improvements”. Those are direct quotes from LIAT Press releases.
According to Wikipedia, ATR stands for (in Italian) Aerei da Trasporto Regionale or (in French) Avions de Transport Régional. It is a French-Italian aircraft manufacturer headquartered in France, and was formed in 1981 by Aérospatiale of France (now EADS) and Aeritalia (now Alenia Aermacchi) of Italy. Its primary products are the ATR 42 and ATR 72 aircraft.
But you know what I can’t tell you?
How much they are going to cost LIAT. Right now. And over the next five or ten years. I can’t tell you how a broke airline proposes to finance them, except maybe out of its already problematic cash flow, or if the shareholders put up more money.
When last was a comprehensive financial statement, or even an annual report, on LIAT issued?
See, this is how it works. LIAT is almost majority-owned by Barbados (49 per cent), and therefore repaying the lion’s share of the loan from the Caribbean Development Bank (CDB) for that huge capitalization undertaken by the Owen Arthur administration in 2007-08.
Since then, how much have we heard about LIAT?
The most useful financial information I have seen on LIAT came from a speech by chief executive officer Ian Brunton, who said in January this year that LIAT had lost a total of over EC$60 million for the two years 2010-11. It had indeed made nearly EC$9 million in profit in 2009, but resumed its losses in 2010 due to “high fuel costs and lower passenger traffic”.
Said Mr Brunton: “For the year ending December 31, 2010, LIAT recorded losses of EC$20.2 million. Further losses . . . amounted to EC$43 million in 2011.”
He gave no figure for 2012, but I am sure he would have had there been a return to profits.
Remember that in 2007 or 2008 the Arthur administration helped spearhead an application to the CDB for a loan of US$60 million to help the airline retire old debt and buy out Caribbean Star.
Lately, LIAT has been asking shareholder governments, of which we are the largest with 49 per cent, to put up another US$30 million more in share capital. Have we put up any money? Maybe I missed the Press release. I hope not.
Presumably we are still paying back our portion of that US$60 million loan from CDB to buy out Stanford’s already-by-then bankrupt Caribbean Star.
I am very mindful of all the points raised recently by my friend Jean Holder, who has been LIAT’s chairman since forever and soldiered on even when he wanted to go some years back. But why should Barbados have to be the big dog at LIAT when it exercises such little effective control over the airline? I guess that is CARICOM at work.
But clearly the model is not working, unless we agree that LIAT must be run at a massive loss – both in operations and shareholder value – because otherwise there would be no regional airlift except the short legs undertaken by international carriers when it suits them, as in Barbados to Antigua, then on to London, and vice versa.
Perhaps in better economic times we could continue to fund this model, but the harsh reality is that Barbados itself is now almost broke, and we have huge commitments that are still not even on the books or on the national debt yet, like CLICO, BAICO, the Barack settlement, the Four Seasons guarantee, and perhaps a few more.
To this we must add, as the largest shareholder in LIAT, responsibility for the largest financial burden if LIAT’s loans are ever called.
And still, how much does the taxpayer in Barbados know about our collective financial responsibility for LIAT?
About as much as we know as to when its planes will arrive or depart on any given day.
And to end this, may I apologize for offering my new translation of the now-famously parodied LIAT acronym, as shown in the headline.