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Commentary: One scapegoat does not fix LIAT or Caribbean Airlines
Published on September 23, 2013 Email To Friend    Print Version

By Robert MacLellan

Some might believe that, for the second time in only three years, Captain Ian Brunton has been made a scapegoat by the board of directors of a Caribbean airline company – fired as CEO of Caribbean Airlines Limited in late 2010 and, last week, he resigned as CEO of LIAT. Indisputably, the overall operation of LIAT has continued to be disastrous during the last four months but so has the marketing / PR / communications function and yet the senior management there appears unchanged going forward. More importantly, the chairman, Jean Holder, and the LIAT board -- which has authorised the strategy, business plan, operating budget and bank loans underlying the recent chaos and financial uncertainty – also appear unchanged going forward.

robert_maclellan.jpg
Robert MacLellan is managing director of MacLellan & Associates, the region’s leading hospitality consultancy since 1997. He is a Fellow of the Institute of Hospitality, a Member of the International Society of Hospitality Consultants and has a Masters Degree in International Hotel Management. MacLellan previously held board level management positions at major UK companies in the hospitality, cruise line and property sectors.
While Captain Brunton has resigned, Mr Holder is reportedly on vacation in the midst of the crisis. The chairman has been in position since 2004 and submitted his own resignation two years ago, although this was not accepted by the LIAT government ownership group at that time.

Plus ca change, plus c’est la meme chose

When Mark Darby, an undoubted airline industry expert, was fired from the LIAT CEO position in 2009 (and subsequently sued successfully for unfair dismissal), regional media carried excerpts from his interview concerning LIAT in Flight Global, a leading airline industry website.

Darby pointed to “the lack of focus of the shareholder governments and the board of management as major stumbling blocks to the regional airline moving to higher heights”. He spoke of the complexity of three governments owning the airline, which involved conflicting agendas. Darby commented that this problem was compounded by weak corporate governance, with a board where few directors had held senior roles in major companies. “Instead, it operated more like a government department”, he said. Darby continued, “Board members got themselves involved in operational areas. This is one of the company’s greatest weaknesses”.

In evaluating these comments, clearly, Darby was unhappy about the circumstances of his departure from LIAT. However, the Irishman before him was also short-lived as CEO at LIAT and Brian Challenger resigned last year as acting CEO -- all of which confirms a serious problem at board level. This is where the real change is self evidently required, if the airline is ever to achieve operational and financial stability. In the face of LIAT’s biggest ever operational crisis and with greatly increased debt related to the new fleet, now is the crucial time for that change.

There are cries for other Caribbean governments to invest in LIAT – arguably, if they had any confidence in LIAT’s board, they might do so – but it appears they do not! If that is the case, then the failed board, the business model and the ownership structure has to change.

Many airlines around the world, previously government owned, have been privatised successfully in recent years, but for LIAT this raises issues as to the airline’s vital role in the socio-economic cohesion of the islands and concerns about the viability of some low volume LIAT routes. Economies of scale, more effective marketing, code sharing on low volume routes and a “low cost airline” style of operation could combine to achieve a sustainable business model -- but it appears extremely doubtful that LIAT, as presently constituted, can attain that goal on its own.

However, an initial merger of loss-making LIAT with loss-making Caribbean Airlines Limited -- if they then enter together in to a new public / private sector company on a 50 / 50 joint venture basis -- might create an airline ownership structure that successfully addresses all issues, combining social responsibility with profitability and professionalism. A deal like this would best be evaluated and negotiated by a specialist airline industry management consultancy – Lufthansa Consulting is but one example.

Which are the potential private sector joint venture airline partners for such a deal? Jet Blue has a successful low cost airline business model, flies to an ever increasing number of Caribbean islands from the USA and has already taken over five of the former American Eagle inter island routes out of San Juan. Southwest Airlines / AirTran is another successful US based low cost airline and is continuing its expansion of Caribbean routes. Insel Air, based in Curacao, is profitable and operates a mixed jet and turbo prop fleet on routes to the Dutch islands, Dominican Republic, Haiti, Venezuela, Colombia, Miami and Charlotte. Seaborne Airlines -- based in the US Virgin Islands -- is profitable and is expanding its inter Caribbean route network with larger 34-seat Saab 340 turboprop aircraft, but still operates 19-seat Twin Otter aircraft on low volume routes.

There has never been a more appropriate time to end LIAT’s vicious cycle of operational and financial instability and to reconfigure an airline that can serve the Eastern Caribbean’s vital needs on a sustainable basis. The damage inflicted has been immense, the financial outlook is grim, the time for change has arrived and the need is urgent.
 
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Comments:

Peter Binose:

The problem is that LIAT is a tax collector for the governments, 50 or 60% of every ticket goes to governments as taxes and tariffs.

You have pig ignorant politicians putting their noses in, people who are fiscal dunces and cannot run a mauby shop, people who have destroyed the credit rating of their own countries, know all - know nothing puffed up pratts who want to be the great 'I AM'.

From my records I give you the following

October 2012, Frigate Bay, St Kitts: In an article posted by Digital Guardian, October 17th 2012, entitled '35% of LIAT’s flights subsidised' Captain Ian Brunton says thirty-five per cent of 112 daily flights by LIAT are described by the airline’s new chief executive officer Captain Ian Brunton as “social (uneconomic) routes.”
“LIAT cannot continue to meet the cost of these social routes,” Brunton told the state of the industry conference of the Caribbean Tourism Organisation in St Kitts last week.
He described how the high prices were caused by government tax's and tariffs, LIATS portion of a ticket was small.
http://www.guardian.co.tt/business-guardian/2012-10-17/capt-ian-brunton-35-liat%E2%80%99s-flights-subsidised

Brunton tells us a lot, he confirms that LIAT is subsidised, so what is the crap coming from Gonsalves about CAL being subsidised, remember that rubbish, nose in the garbish bin again.

He also tells us that LIAT cannot work with the governments taking excess taxes.

He tells us we must cut back on destinations and routes.

He tells us a lot in that article, I recommend you all read it for yourselves.

No wonder he took off, no one can work under political interference.

Having said all that I think that the purchase of the ATR aircraft happened to quickly, from my records Brunton fell out with CAL because of purchasing ATR's, he was fired.

a little more from my historical records

November 2010: Caribbean Airlines Ltd, orders nine new ATR aircraft and signs contract.

November 26th 2010, Trinidad and Tobago: Ian Brunton dismissed from his position with CA, the new board did not agree with the purchase of the new ATR aircraft.
The acquisition had been approved by the government, the board had wanted to buy Bombardier aircraft. [Its not sure if Brunton negotiated the ATR deal and in doing so advised the government accordingly].
In a November 1 letter to the fired CEO’s attorneys, the Board described as “unjustified and wrong” claims that Brunton, 64, was terminated as a result of a unilateral decision of chairman of the board, George Nicholas III. They also denied that he was fired “because of any perceived or actual retaliation from a disagreement with the line minister over the purchase of a new fleet of aircraft.” In fact, they chided Brunton for making “wild allegations” about the board, based on “unsubstantiated reports.” According to the attorneys, the entire CAL board unanimously decided that the interests of the airline would be better served by a new CEO “with different skill sets to those of Captain Brunton.”


Peter Binose
Self appointed keeper of the whistle.


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