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Cooking LIAT’s Goose

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LIAT, the small Caribbean airline that has been the workhorse of the region for several decades, is having its goose cooked. And the cooking is being done by a few of its pilots, two of the 10 unions representing its workers, and some Caribbean governments and Caribbean institutions which have failed to act positively.{{more}}

In the meantime, the airline is hemorrhaging money and, if it continues at this rate, it will be lucky to survive beyond the first few months of next year. For sure, LIAT lost money in 2010 and it will lose more money in 2011. Its shareholder governments in Antigua and Barbuda, Barbados and St Vincent and the Grenadines, already strapped for cash themselves, have no money to put into it. In this circumstance, LIAT will continue to lose money in 2012, unless all the partners are prepared to make concessions and introduce strategic changes that might call for sacrifices from all of them.

If LIAT does collapse, the biggest losers will be the LIAT workers, who will be hard-pressed to find alternative employment.

Also, a collapsed LIAT may find it difficult – if not impossible – to meet its obligations for pensions and other severance payments to those workers. This difficulty would be further complicated by the fact that a portion of LIAT’s pension contributions are already tied-up in CLICO, a company whose capacity to meet its own obligations is very doubtful. Fortunately, LIAT stopped paying CLICO when it appeared to be collapsing and, thus, it preserved a significant portion of the pension funds.

Despite this worrying scenario, there appears to be an unconsidered goal by some of the Unions representing LIAT’s workers to run to the precipice. The Christmas season is traditionally a period of high earnings for LIAT, as it moves Caribbean people and tourists to various destinations within the region. But, threats by the unions of strikes and other industrial action is causing potential passengers to look for alternative means of travel, and, where that cannot be achieved, cancel travel altogether. What this achieves is nothing more than to increase LIAT’s losses, making it even more difficult to meet demands by unions, particularly the Pilots’.

When the Pilots staged a sick-out in early December without giving the airline’s management any notice, it not only cost the airline an estimated US$750,000, it effectively stranded 5,000 people over two days across the network of LIAT’s Caribbean destinations. Their action did not win them any friends, but it proved that LIAT is essential to inter-Caribbean travel. Over the last four years LIAT has moved a million passengers around the region. No other airline has been able to provide flights to LIAT’s network of destinations, some of which remain very marginal to its earnings.

The stranded passengers were understandably angry, and at airports across the region, they lambasted the airline. But, to be fair to LIAT’s management, there was nothing they could do if the Pilots gave them no notice whatsoever of their intended action. Whatever the merits of the Pilots’ grievance, the lack of notice is contrary to all best industrial relations practice, which requires that unions give management some warning of the action they contemplate, so that at least some modicum of arrangements could be made to cushion the blow. Instead, what LIAT experienced was the equivalent in the airline industry of a cluster bomb explosion. It was sudden and devastating.

To add to LIAT’s woes, the Trinidad and Tobago airline, Caribbean Airlines (CAL), is planning to compete against LIAT by flying most of LIAT’s routes beginning early next year. CAL will be doing so on a most advantageous playing field; for, while CAL is paying only US$50 for a barrel of oil based on a huge subsidy from the Trinidad and Tobago government, LIAT is paying US$120 for the same barrel. LIAT’s fuel costs account for 30 percent of the airline’s costs. Even if CAL gives up the oil subsidy from January 1st, 2013, as its Chairman recently said it would do, LIAT would be hard pressed to continue competing with CAL throughout 2012. At no point has CAL’s Board under its current Chairman sought to explore a partnership or joint venture arrangement with LIAT.

But, LIAT’s woes, if it is pushed out of business by a combination of short-sighted unions and a gluttonous CAL, won’t be LIAT’s woes alone; those woes will be shared by its three shareholder governments and their economies. In turn, it will have a knock-on effect on the Eastern Caribbean Currency Union (ECCU) of which both Antigua and Barbuda and St Vincent and the Grenadines are a part. Ultimately, the capacity of the ECCU countries to buy the manufactured goods of Trinidad and Tobago, for which they are the largest single market, will be reduced, adversely affecting the Trinidad and Tobago economy as well.

From time to time, it has been suggested that other Caribbean governments, particularly those in the Organization of Eastern Caribbean States (OECS), are interested in participating in LIAT’s ownership and that they would invest capital and acquire shares. Given the state of the OECS economies and the level of debt in which many of them are mired, their participation in LIAT seems very unlikely, even though some of them now subsidize flights by foreign airlines into their countries. They will only come to the table if all other CARICOM governments, in particular Trinidad and Tobago, join the discussion as well.

Against this background, it has to be asked: why have Caribbean governments not convened a meeting at the highest level to address the urgent problem of regional airlines in a holistic way? And why has the CARICOM Secretariat not initiated a meeting and put forward well-studied proposals to address the problem?

As an alternative to regional reluctance to hold such a meeting, LIAT’s shareholder governments, its management and its Unions – in their own collective interest – should consider gathering quickly for a frank and realistic discussion of how to save the airline, meet obligations to workers and serve the Caribbean public.

Without such a meeting, LIAT’s goose will be cooked and few will enjoy the eating.

(The writer is a Consultant and former Caribbean diplomat)

Responses and previous commentaries at: www.sirronaldsanders.com

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