In exchange for the $1.3 million pumped into LIAT to prevent it from collapse, Grenada has been named the fifth main shareholder to the regional airline; joining countries like Antigua, Barbados, St. Vincent and the Grenadines and Dominica.
This was announced by Minister of Trade Industry, Cooperatives and CARICOM Affairs, Hon Oliver Joseph at the weekly held Post Cabinet Briefing at the Ministerial Complex Conference Room on Tuesday.
The CARICOM Affairs Minister was unable to disclose the percentage of shares Grenada now holds in LIAT, but said the amount that was paid was in the region of $1.3 million.
“When we paid, we said we need shares – don’t just ask us to give you money. We bought shares…the values of what we paid is around $1.3 million,” he stated.
He said that with this new development, Grenada will now have a deeper say in the operations of the airline.
“Grenada will have a deeper say as a main shareholder. Previously we were not, and only the four countries were the main shareholders – Antigua, Barbados, St. Vincent and the Grenadines and Dominica – these were the four countries that were keeping LIAT going, so Grenada has now joined and it is the hope that other countries will come on board to assist LIAT in the restructuring, the way it operates,” he remarked.
According to Minister Joseph, Cabinet has decided to continue to give support to LIAT and has advised, as did other shareholder countries on the need to restructure the airline.
“LIAT should operate as a business and should be restructured and so as a shareholder, we would make our voices heard at the board meeting so that we can see value for money from LIAT. The committee has been established that would look at the restructuring of LIAT and very soon we will get a report on the restructuring point of view,” he said.
As the talks of LIAT impending closure circulated, there have been reports that Virgin Atlantic Boss, Sir Richard Branson, has made a proposal of $7 million as investment into the airline.
Although the minister said he was unaware of such, he said, with the intention to restructure, this would be an opportunity that LIAT can consider.
He said, “I am not aware that Virgin has expressed any interest in LIAT, but as I said they are looking at various models. So, if Virgin express interest, that is something that LIAT board will consider because government maintains that they have to restructure LIAT, so if you get a partner, I’m sure that the board will consider it favourable.”
Minister of Tourism and Civil Aviation, Dr. Clarice Modeste-Curwen, who represented Grenada at a meeting with LIAT in Antigua recently, said the hope is that political interference can be removed from the management of LIAT in order to ensure it can operate as a business.
“We are hoping that progressively political interference would be removed from the management of LIAT because we expect LIAT, and the mandate LIAT was given on Tuesday when I went to a meeting in Antigua was that they must begin operations as a business but operation as a business means that the flights that are not viable, the routes they say that are not viable, not given the kind of yield of passengers that could make a profit or even a breakeven could potentially be taken out and only the lucrative flights like Grenada, Barbados routes and so on would be left….”, the minister told a sitting of the House of Representatives at Parliament Building, Mt. Wheldale, St. George last Friday.
“…LIAT understands the importance of servicing the non-lucrative flights as well because let’s say for example, Grenada/St. Vincent is not yielding the amount but somebody wants to go to St. Vincent from Grenada or a Vincy wants to come to Grenada, what happens to these people – they are important within the CARICOM mix and therefore, while the yield may not be satisfactory, the demand is still there,” she said.
In this regard, Modeste-Curwen disclosed that LIAT came up with a formula called the Minimum Revenue Guarantee (MRG) to offset cost of non-lucrative flights.
“It means that every LIAT flight that takes off must expect breakeven revenue. It also means that flights that have less than that are at risk at not going at all. So, maybe the ferry that we have been talking about, we have to start conversations on that, but that formula recommends that the flights that do not yield a certain amount and what they have done is calculate the routes and what is the breakeven number of seats that must be occupied and sometimes you go on a LIAT and the plane is full, pretty full, sometimes you go and you can count the number of heads on the LIAT flight and so we have to ask ourselves – how can LIAT survive with the ups and the downs?
“…So, imagine for LIAT, where the demand may not be so high, how they can compete with other airlines – not compete in terms of where they travel to the routes, but compete in terms of generating income.
And so that formula was presented to us that when above a certain threshold, governments do not have to pay anything, but below that, if they do not reach breakeven, governments have to contribute, and therefore, we have been looking at that.
“The team of us who met with them did not like the formula and we asked them to revisit the formula, but we are aware that it’s a business and for LIAT to continue to run, to service 100,000 people per year, that they must take a business-like approach but we have also said to them, knowing full well that some routes are very good for Grenada.
According to Dr. Modeste-Curwen, LIAT accounted for 91,537 persons arriving in Grenada “between arrivals and departure” for the year 2018.
“…When you look at 91 thousand persons, 1.3 million dollars is well justified”, she said.