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Commentary: LIAT's 2012 strategy plan now badly damaged in 2013
Published on September 7, 2013 Email To Friend    Print Version

By Robert MacLellan

On 28 August, LIAT’s CEO, Ian Brunton, talked to Caribbean media and finally acknowledged in public some of the real facts behind the airline’s chaotic operations over the last three months. He also described LIAT’s worrying current financial position, in the same month that the airline has taken on a US$65 million loan from the Caribbean Development Bank to fund new aircraft.

robert_maclellan.jpg
Robert MacLellan is CEO of MacLellan & Associates, the largest hospitality, tourism and leisure consultancy based in the Caribbean. He has nineteen years experience in the hospitality industry in the Caribbean and was a cruise ship hotel officer and vice president, hotel services, of a cruise line earlier in his career.
However, it was reported that Mr Brunton has refused to have an investigation to hold people accountable for the recent chaos at LIAT. Instead, he said he will organise a “post mortem” (an unfortunate phrase) on what went wrong and use this to reward staff who have performed well during the crisis. Those who “dropped the ball” would be identified for “counseling or better training”.

This statement represents an unbelievable level of arrogance on the part of LIAT senior management and conveys gross disrespect for its customers! Ignore the widespread calls across the Eastern Caribbean for senior management resignations or dismissals at the airline. Instead, LIAT institutes some counseling and better training – presumably, for middle level and operative staff only? No personal responsibility accepted or culpability acknowledged on the part of LIAT’s Chairman, the CEO or the Director of Commercial and Customer Experience – all of whom have presided over three months of disastrous operations across the Eastern Caribbean and an equally disastrous public relations / communications exercise.

Ignore the huge inconvenience and, in some cases, trauma caused to a high percentage of LIAT’s customers consistently over three months. Ignore the great damage done by LIAT’s management to the general economy of the Eastern Caribbean and to prospects for future inward investment. Ignore the negative impact on the region’s reputation as an international tourism destination. Ignore the damage done to LIAT’s management / staff relations. Ignore the potentially fatal damage to LIAT’s own future viability.

Most people agree that the Eastern Caribbean desperately needs LIAT but, going forward, LIAT desperately needs directors and senior management who will take responsibility and who can drive a “low cost airline” strategy that will truly serve the region and not stagger from one financial crisis to another. Success at LIAT is not just about new larger aircraft, future success is about running a marketing led business, with higher passenger volumes and an efficient cost structure.

The latest LIAT management focus appears to be on better future complaints handling, rather than on more useful market research as to what LIAT’s current customers, and potential customers, need and how much they are prepared to pay. With that data, LIAT can strategise how to deliver the right service at the right price to their larger market that existed several years ago. This may involve the airline reverting to code sharing some routes with other Caribbean carriers because the LIAT route network, as currently operated, is not viable without a substantial increase in overall traffic. Across much of the world, airline passenger numbers are rising strongly but at LIAT they have dropped.

In the 2013/14 financial year, LIAT is increasing its already substantial debt by at least US$65 million and yet Mr Brunton reported a 10% (US$30 million) decline in 2012/13 revenue against 2011/12 results. He further stated that company expenses, related to stranded passengers during LIAT’s recent busiest summer months, will have wiped out profits for that period this year. Clearly, this will have a harsh negative impact on LIAT’s 2013/14 results and will likely necessitate a significant early re-write of last year’s strategy plan and the related medium term financial projections for the airline.

The point is LIAT’S problems are not over yet. A continuation of the current LIAT management style will not increase revenue, will not attract new equity investors and is not going to achieve the positive financial results necessary to cover the airline’s future higher levels of debt service, associated with funding the new aircraft. That vicious circle in LIAT’s historical business model needs to be broken now and, as recent events so clearly prove, this can only be achieved with fresh new expertise at board director and senior management level.
 
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Comments:

Aet Johnny:

Another LIAT bashing exercise! - What LIAT needs is to be supported by the Caribbean nations it serves, not just the few like Antigua and Barbuda, Barbados, St Vincent and Grenadines and Dominica. LIAT needs investments to renew its fleet, this can't be done without serious funding, however, at the moment it would appear that the easiest thing to do is to sit on the fence and snipe because LIAT's old planes can't provide the service expected by Caribbean nations. Most people agree that LIAT is much needed airline in the Caribbean but those nations are not willing to provide burden sharing finance to make LIAT a better airline, some even subside other airlines into the Caribbean to the detrement of their own airline, LIAT pays out on landing fees to Caribbean nations who do not lift a finger to help it and then the peoples of those nations are the first to bash LIAT without providing a credible solution. The solution is for all the nations of the Caribbean who sees LIAT as an essential service helps to shoulder the burden of the investment needed in the airline, don't cripple it with landing fees demands and recognise it as an essential utility accross the Caribbean and things would improve. Bashing LIAT is not a solution if your government and people does nothing to help!

Ian MacDonald:

If the nations of the Caribbean are going to give financial support then they should expect a significant piece of the ownership of LIAT including control of the board of directors. The unreliable, expensive service LIAT now offers is hurting commerce in all he Caribbean. It is easy to sit back and criticize the current control. The company is obviously underfunded and it is only when each nation has "skin in the game" that they will be forced to be part of the solution. The other solution is to form a new airline owned by the Caribbean nations but that would take much longer to set up.


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