The importance of LIAT in regional air transportation

by Jean S. Holder Chairman LIAT (1974) Ltd.

As we celebrate 50 years of LIAT’s existence, we can only fully understand the role it has played in the Caribbean if we understand the reality of small island states. They are separated from each other and from the rest of the world, by vast expanses of water. They do not have the same options for transportation as large contiguous land masses. The absence of air transportation would render their inhabitants virtual prisoners in their places of residence, except for the option of sea transport which does not quite satisfy the needs of a world where time virtually is money.

The Caribbean, in particular, that region of the world which is four times more dependent on tourism than any other part of the globe, could not survive either economically or socially, without air transportation. Air transportation is what connects the region to the major tourist markets of the world and distributes business across and between the various island states of the community.{{more}}

Tourism is now the major productive sector of the region taken as a whole. There is no state where it is not important. For some, it is all important. The 33 Caribbean states which are members of the Caribbean Tourism Organization, enjoy gross foreign exchange earnings of some US$21 billion per year from tourism and the CARICOM sub-region earns some US$5.2 billion of the total. It is the major employer of the region and for many, the greatest source of government revenue.

But the most important statistic for the purposes of this article is that 90 per cent of that foreign exchange is spent by persons arriving to and /or traveling around the region, by air. Cruise tourism contributes the other 10 per cent.

But this is not the whole story. In a Community, comprised almost entirely of island member states, people need to travel for all kinds of purposes beside the pursuit of leisure. Air transportation is needed for mail and cargo, for engaging in trade and commerce, for reasons of health and education, for government and inter-governmental business, for moving sports teams and for a myriad of other purposes besides. In brief, people travel in pursuit of their legitimate purposes everyday. They travel because they must and mostly they wish to travel by air; 750,000 of them travel every year by LIAT.

Air transportation and the Single Market and Economy

The Caribbean Single Market and Economy, seen as the key to Caribbean Integration, has been like the Holy Grail, ever hovering beyond our reach, at the edge of the horizon. Finally it seems to be achievable. In January 2006 the Single Market was achieved in the CARICOM Community and hopefully, the region will meet its target date of 2008 for achieving the Single Economy.

The point being made here is, that all the strategies elaborated towards creating a successful CSME, will come to naught, unless the region has a reliable air transportation service, international and intra-Caribbean, to facilitate the movement of people, goods and services within and between the member states of the CSME. We need to be able to move our people freely and seamlessly by air transportation within our own region for socio-economic reasons. Intra-Caribbean tourism is already the major market for some Eastern Caribbean countries. We need to develop it a great deal more.

All this points, once again, to the need for a sound intra-regional transport service. It is part of the infrastructure, the foundation on which the CSME must be built, the bridge between the member states of the Community. The truth of all this will be dramatically demonstrated when the Cricket World Cup Tournament begins in the region in the Spring of 2007.

The regional carriers

As we reflect on all the above, we need to record that BWIA, LIAT and Air Jamaica have for 66, 50 and 37 years respectively, provided the services about which we have been speaking. Some will criticize us for taking pride in longevity, on the grounds that longevity is not a sufficient achievement. We know this, but it is a very foolish people who do not understand the qualities needed for survival against the odds and in the midst of fierce and sometimes unequal competition.

Air transportation is an expensive business. It has high fixed costs and small margins. It is extraordinarily capital intensive and whosoever owns it, needs to inject the necessary level of capital into the business. Without an adequate ratio of debt to equity in the first place, it is easy, even with good management, to accumulate massive debt, out of which it is almost impossible to trade. This unfortunately has been the story of regional carriers which have moved from public to private sector ownership and back again.

They are now the responsibility of our governments which have been supportive with the levels of finance which they can afford. The arguments for continued government support are strong. None however is stronger, than the fact that air transportation is the third leg of tourism, the other two being product and marketing. The Return on Investment in air transportation must therefore be measured in terms of the total return on investment in tourism seen in its triplicate form. All this not withstanding, the goal of these carriers has been to operate a sound commercial business and to make a profit, which has been elusive.



LIAT – truly the Caribbean Airline

LIAT is truly the Caribbean Airline, owned by Caribbean people and serving 20 Caribbean destinations every day, 7 days a week. It has been a fascinating story of defeats and victories, of near deaths and rebirths. Its longevity is something to celebrate in an environment in which many airlines have not survived. Along the way there have been many heroes and heroines serving at every level, on the airline’s staff, on its Board of Directors and in the offices of Prime Ministers who have come to its rescue when it was not popular to do so.

Many a competing carrier entered the arena, with a business plan which assumed that the first order of business would be the collapse of LIAT. They were defeated by the fierce loyalty of the people of the region to this airline which also confers an obligation on LIAT to provide the service they deserve. We greatly appreciate our faithful customers.

Of the 750,000 people we carry every year, some 75 per cent are resident in the region and for them the name LIAT is synonymous with intra-regional air transportation.

We are pledged at the level of the Board and Management to deliver a quality service, and we strive to ensure that every person who works for LIAT is committed to excellence, each in his or her area of competence and responsibility. The new management which took up its responsibilities in July 2006 under the leadership of Mark Darby, the CEO, has already demonstrated that change for the better is possible. In September and October 2006 LIAT has set new records for On-time service. Our Commercial operation recently established in Barbados is already visible and the voice of LIAT, long still and unheard, is once again being heard clearly above the din in the marketplace.

At the end of 2004 after many struggles to stay aloft, LIAT had taken a particularly bold step when it introduced a business plan which was a radical departure from how it had done business over the previous 48 years. It met a mixed reception and achieved mixed results.

In 2006, in LIAT’s 50th year, it came as a surprise to many that it agreed to negotiate a merger with its most fierce competitor, Caribbean Star. Those of us engaged in this enterprise have taken a realistic view of LIAT’s future. We are fully seized of its critical socio-economic importance and wish the region to retain some measure of ownership and direction of this essential service. The challenge is, how do we achieve this in an air transportation environment of almost suicidal competition, while relieving our countries of a financial burden that has become almost unbearable?

We are confident that both those objectives can be achieved through the kind of merger that we are seeking to negotiate, provided there is goodwill on all sides and a commitment to place the region’s welfare above any other.

There is nevertheless reason to celebrate. We thank God for the past 50 years and for the commitment, love, loyalty and accomplishments of the men and women who made LIAT a Caribbean icon. We hope for a bright future. But the future, whatever it is, cannot erase a glorious past.