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THE HOYOS FILE: LIAT secret plan – the agony and the irony


THE HOYOS FILE: LIAT secret plan – the agony and the irony

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When a company is run almost purely on political rhetoric ­– say, for example, LIAT – it is hard for reality to take hold.

It takes a long time because those who naturally would want the status quo to be maintained – say, for example, Antigua and Barbuda – try their best to stop reality, like sunshine, from flooding in.

We don’t know yet who wrote the proposal, dubbed “the plan to collapse LIAT” by that disinterested observer Prime Minister Gaston Browne of Antigua and Barbuda, but it would certainly alter the configuration of LIAT as we know it, should all of its purported elements be implemented. It would make Barbados the headquarters of a new airline, dubbed “Newco”, while leaving the rest of LIAT to other shareholders.

Antigua’s Daily Observer newspaper said it had obtained a seven-page document in which a proposal was made to have Barbados obtain ART planes in exchange for its 51 per cent shareholding in the airline. it said the document was dated February 9 and bore the company’s letterhead and the initials DE. But it also quoted LIAT’s chief executive officer (CEO) David Evans as saying he was not aware of the proposal.

The irony is that the decision would have to be taken by the LIAT board of directors, which is controlled by majority shareholder Barbados, whose government is being run by the Dolittle administration, famous for its erudition, deep thinking and lack of action.

LIAT’s failure to perform despite receiving over US$160 million in new assets over the past seven years, suggests to me that there is no hope for it in its present configuration, as Antiguan political exigencies control every corporate action or inaction.

In 2007, after years of being propped up by shareholder-backed loans, LIAT found itself in a fight for its life with Allen Stanford’s Caribbean Star airline. In a panic, its shareholders borrowed a US$60 million loan from the Caribbean Development Bank (CDB) – just over half of it now being repaid by Barbados – to buy out the Stanford airline’s assets. LIAT’s then CEO Mark Darby, said bringing Caribbean Star and LIAT together “will allow us to become more efficient”. I wonder how that worked out.

Part of the answer came from the airline’s next CEO Ian Brunton, who said in January 2013 that LIAT had lost a total of over EC$60 million for the two years 2010-2011. 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”. If a profit had been made since then, I am sure we would have heard.

Fall off in inter-island travel

With no competition, LIAT put fares above what most people could afford and caused a significant fall off in inter-island travel, with the add-on negative effects on tourism. But the excuse given for failing to justify that US$60 million cost was that the planes were just too old. So the ever-compliant CDB coughed up another US$65 million in 2013 as part of the US$100 million cost of a dozen ATR aircraft from France.

Of this amount, Barbados is responsible for another US$33 million, which has to be repaid starting this year, plus our portion of the remaining US$40 million of the total purchase price. So we put up perhaps US$50 million or so for those new planes.

In February, the shareholders were being asked for more money, this time for working capital, and it was revealed that the Dash-8s were not selling, costing the airline US$11 million per year in leases. But this time there was a plan in fact, two plans. Plan A was the one we heard about in February and Plan B is the one we’re hearing about now. Under Plan A, about 180 LIAT employees would be made redundant, almost all of them from LIAT’s Antigua headquarters. Plus, four of the new ATRs would be relocated to a new hub in Barbados, leaving only two in Antigua and two in Trinidad.

According to the Antillean Media Group, chairman of the LIAT shareholders, St Vincent and the Grenadines Prime Minister, Dr Ralph Gonsalves, couched moving the four ATRs to Barbados im diplomatic tones:

“We have to be careful that we don’t play one country against the other to say your base is shifting from here or there, [but] the place where most people pass through in the LIAT network is Barbados; that is the reality.”

Ah, reality, like sunshine, begins to filter in. All the new prime minister of Antigua and Barbuda could do was write a letter pleading for a stay of execution under Plan A. Plan B has now come to light. So, if this secret plan does exist, and is dated February 9, that means it was probably written around the same time as Plan A.

If Barbados, after the new hub here is established, were to make such a proposal to LIAT’s board, it could presumably get approval. That would allow it to set up its own regional airline free of the encumbrances of the other shareholders, who could continue to operate a smaller airline, perhaps servicing the northern part of LIAT’s current geographic area.

Now, if only we could find an administration capable of giving LIAT’s “Newco” (as it has been dubbed in the proposal) a shot at soaring to new and profitable heights.