LIAT: The road to survival
EDITOR: The Covid-19 Pandemic has brought the entire aviation community around the world to its knees and in many places to a virtual standstill. Prior to the pandemic, LIAT was on life-support and two of the shareholder governments with combined majority shareholding were already making plans to pull the plug and liquidate the airline.
That did not materialize, as the Antigua and Barbuda government with just over 30 percent shareholding put forward a plan for the re-organization of the company. The plan included purchasing the shares of the two shareholder governments that supported the liquidation of the company for $1 each, while accepting the liabilities. The plan was agreed and since then the Antigua and Barbuda government selected an administrator and he was indeed appointed and received court protection against all creditors for 120 days, during which time a credible plan has to be completed for the sustainable continuation of the company or failing which he will be obliged to liquidate the company.
The liquidation plans for LIAT as perceived by the two government shareholders were predicated on the ability of Caribbean Airlines, One Caribbean, Inter Caribbean Airlines, Air Antilles and other carriers filling the void that would have been left by LIAT; and, although the combined efforts of the various carriers might have been able to fill the void, a number of issues have arisen. For example, Caribbean Airlines application for route rights into Puerto Rico has received fierce objection from Cape Air airline. As an aside this development should be an eye-opener to those governments in the region that are espousing “open skies”. It is difficult for carriers to obtain route rights into the US territories and some governments in the region are ready to allow US carriers to operate between the islands. Imagine what would happen to some ‘indigenous’ carriers if for example American Airlines flights to Barbados were allowed to be extended to St. Vincent, St. Lucia or Grenada. The region must stand firmly united to develop what we own (airlines with majority CARICOM shareholding) and what we will be able to depend upon in good times and bad.
Another observation is that two carriers (Caribbean Airlines and Inter Caribbean Airlines) in their strategy to fill the LIAT void have set up an aircraft and crew base in Barbados and Inter Caribbean Airways in their quest to dominate filed a very aggressive flight schedule. There are now three carriers, Caribbean Airlines (BW), Inter Caribbean Airlines (JY) and Air Antilles (3S) offering scheduled flights on the Barbados/St. Lucia route and fiercely competing in a ‘shrunken’ market. The situation has resulted in the regular cancellation of scheduled flights due to ‘poor loads’ and many persons are already voicing their frustration, disgust and disappointment. The precipitous drop in air travel demand because of Covid-19 will no doubt result in the ‘retreat’ of one of the three carriers in short order.
The administrator is going to have a tough job saving LIAT and he doesn’t have a lot of time left to get the job done. Apart from seeking debt forgiveness or deferrals from the creditors, which include aircraft lessors, trade creditors and the various unions representing the staff, as well as attracting investment, he will be obliged to craft a plan with the assistance of ‘experts’ that is not only supported by all stakeholders; but a plan that the court will sanction. The restructuring three-year or five-year plan is a major project, as it may have to be a plan that have to bring LIAT into profitability without the idea of subsidy from various governments for the provision of flights. The stakeholders will no doubt want to see a plan that has ‘light’ at the end of the tunnel.
The restructured LIAT will undoubtedly have to be a ‘smaller’ LIAT, as certain routes will have to be eliminated. The design of an operating plan has to be quite different from what it was pre-covid and the scale down of the operation may also necessitate a completely new reduced salary structure throughout the entire organization.
Aviation in the Caribbean provides an essential service in connecting our peoples and for supporting our social and economic development in the region and this may be a once in a generation opportunity for regional Governments to reset, rethink and recognize that Governments need to be involved and fully supportive of air services in the region.
Leaving it up to private investors and/or non-CARICOM-owned carriers is risking the development of the region. LIAT and Caribbean Airlines are both needed for the region and collaboration is critical for both carriers. Competing against each other will end up being a massive financial loss as well as a loss of technical talent in the region as pilots and engineers now have nowhere to go.
The LIAT fleet is grounded and all commercial operation has basically ceased. In normal times it would be almost impossible to ‘pause’ LIAT’s operation for months and save the airline from liquidation; however, in this Covid-19 era which has crippled the industry, there may be a glimmer of hope for LIAT to return to the skies.