Revisiting the discussion on making Liat viable

Over the past month, the main shareholders of LIAT have expressed grave concern about the dire financial situation plaguing the airline’s operations. An emergency funding package to the tune of USD5 million is being sought to keep the airline in the air.

LIAT, created in 1956, is a venerable regional carrier that provides regular inter-island services connecting fifteen (15) destinations.

The airline has been experiencing financial and operational difficulties for a number of years, during which a number of reports have been produced to provide recommendations on resolving the issues it faces.

The main shareholders have adopted a number of the recommendations over time but have not been able to place LIAT on a solid footing. In 2018, the Caribbean Development Bank (CDB) produced a restructuring plan for the airline which has garnered the support of many of the main shareholders given the gravity of the financial situation.

In these circumstances, it would be prudent to revisit discussion on the survival and long-term viability of LIAT, placing the airline in the context of air transport arrangements for the Eastern Caribbean.

The Eastern Caribbean faces a grave problem of inadequate, costly, and time-consuming air transport arrangements that fail to serve the needs and wishes of the travelling public in a satisfactory manner.

This situation poses great challenges for the countries. Suitable air services would underpin the Economic Union of the Organisation of the Eastern Caribbean States (OECS) and facilitate the workings of the Caribbean Single Market and Economy in the wider Caribbean Community (CARICOM). They would have a positive impact on tourism and tourism earnings, and increase travel among the islands. They would also facilitate and enhance development and adjustment processes in the OECS and the Eastern Caribbean.

Given these critical development considerations, it would be prudent to establish an effective airline policy. Further, there is a greater need for suitable air transport services in the Eastern Caribbean given that the sub-region is not a collection of contiguous States but rather an archipelago, and – from a pragmatic standpoint- swimming to the other islands is not an option.

This airline policy would provide guidance for the airline’s stakeholders, and by extension the general public, to objectively discuss and evaluate the most efficacious means of providing air transport services in the Eastern Caribbean. It is noteworthy that no country has become developed without a proper air transport system.

Although trains propelled the industrial revolution in developed countries, it was the advent of air transport that allowed the economic growth and development of these countries to take off.
There are a number of crucial considerations for such a policy:

(1). Three (3) categories of airlines now service the region:

(a) Type 1
Airlines which operate jet aircraft, such as Caribbean Airlines (formerly BWIA);

(b) Type 2
Airlines which operate ATR 42 and ATR 72 turboprops with seating capacity of 48 to 68 passengers, for example LIAT and Caribbean Airlines; and

(c) Type 3
Very small carriers which fly charters and use various types of aircraft ranging in seating capacity from 9 to 19 seats for example SVG Air, and Mustique Airways

(2). The fundamental factors for the running of a successful airline company include:

(a) Safety

(b) Convenience

(c) Reliability

(d) Good Customer Service

(e) Affordability

(f) Good organisational structure and human resources in a supportive environment

(3). Routes deemed non-viable should be identified and accommodated under an essential air services programme, which would ensure that aviation operators in the type 3 category provide a certain number of daily or weekly trips to guarantee or improve countries’ access to the regional air transport system.

With regard to LIAT, these important considerations and the current operational and financial challenges the airline faces point to the need for a reconfigured entity that could efficiently and effectively fulfil its mandate to provide vital air transport linkages in the Eastern Caribbean to facilitate the sub-region’s development.

Therefore, conducting a wide-ranging and discreet evaluation and auto-analysis of the current arrangements and framework or policy would indeed provide clarity on how to place LIAT on a solid footing and ensure that it is viable in the long term.
In that connection, a phased approach could be adopted to fulfil this mandate in light of the constraints on:

(I). The ability of the relevant shareholders to raise adequate financial resources to properly capitalise the reconfigured entity; and

(II). The number and availability of key physical assets, i.e. the aircraft needed to service the routes.

With such a phased approach, the targeted service areas for LIAT could be, in the first instance, the Windward and Leeward Islands, together with Barbados, Guyana and Trinidad given the commercial and institutional importance of the latter two (2) countries.

After having stabilised and strengthened its operational and organisational performance, LIAT could then expand its route network.

LIAT is a venerable inter-and-intra-regional carrier providing the territories of the Eastern Caribbean with vital air transport linkages, which are needed to promote the socio-economic development of the island States. Thus, an enduring solution to the challenges of providing these regional aviation services should incorporate an airline policy rooted in a good organisational structure for the various categories of air operators, the fundamental factors for the running of a successful airline, and proper servicing of non-viable routes.

Kwame Venner
Economist

Tagged , . Bookmark the permalink.

Comments are closed.