BASSETERRE, St Kitts (CUOPM) -- LIAT’s newly-appointed chief executive officer, Captain Ian Brunton, has described 35 percent of the airline’s 112 daily flights 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.
The airline operates the intra-regional routes in the Caribbean going as far north as Puerto Rico and the Dominican Republic and Guyana and Trinidad and Tobago in the south, also flying into the US and British Virgin Islands and the French Caribbean, Guadeloupe and Martinique.
Ian Bertrand, former CEO of BWIA from 1979-1993, in his presentation at the conference, expressed shock that such a large percentage of flights are subsidised.
“This is madness. I don’t know of any business which can survive in such circumstances,” Bertrand said.
What is more, the airline is owned by only three of the 11 CARICOM governments -- Barbados, St. Vincent and the Grenadines and Antigua and Barbuda -- and seven non-CARICOM territories benefit from the service LIAT provides. Those non-CARICOM territories are: United States Virgin Islands, the Dominican Republic, Puerto Rico, Curacao, Aruba, Guadeloupe and Martinique.
Without saying which markets are uneconomical, Brunton says the routes are in and out of eight countries.
“We intend to approach those markets to provide support on the uneconomic routes,” says the former CEO of Caribbean Airlines.
“If the support is not given, we shall have to wean out the flights,” Brunton told ministers and directors of tourism from the Caribbean at the CTO discussion on the Challenge of Regional Transportation: Where are the Solutions?
Bearing the costs of uneconomic social routes is not the only problem faced by LIAT. High operating costs, fees and taxes on the industry, stifling regulations and security challenges, competition and a steady fall-off (20 percent) in intra-regional travel over the last five years as a result of the international recession that goes back to 2008, are significant elements of LIAT’s problems.
So, too, are thin and fragmented markets, limited economies of scale, high employee costs, coupled with aggressive trade union activity.
In addition, Brunton says “finding the capital to replace an aging fleet, even if the 30-year old planes are still working well,” is also a major challenge.
The LIAT CEO wants “to expel the myth that LIAT is gouging customers”.
The cost of a ticket, he says, is made high by factors outside of the control of the airline. Airport fees and other forms of taxation (66 in all) account for between 30 and 50 percent of the fare, says the airline’s CEO.
The LIAT base fare, insists Brunton, is competitive with other international airlines on the basis of miles travelled to a destination.
He admits, though, to delays and at times less-than-required efficiency in customer service.
The CEO says 34 percent of the delays in September 2012 were caused by industrial action on the part of the representative unions and 39 percent due to technical problems.
Brunton, who came into the job in August 2012, projects a turnaround of the airline’s fortunes in 12 months. The basis for the turnaround is hinged on a number of factors.
One is for “Caribbean governments to find innovative ways to increase the volume of passengers rather than imposing high fees and charges,” says Brunton.