St Vincent PM says LIAT closure imminent: Barbados PM seeks EIB funding

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Prime Minister of Barbados Mia Mottley and Prime Minister of St Vincent and the Grenadines Dr Ralph Gonsalves

By Melanius Alphonse
Caribbean News Now associate managing editor
[email protected]

BRIDGETOWN, Barbados – Prime minister of St Vincent and the Grenadines, and chairman of LIAT’s shareholder government, Dr Ralph Gonsalves, said over the weekend, the regional airline closure is imminent. In the meantime, prime minister of Barbados, Mia Mottley in her dual capacity as head of government on the Caribbean Community (CARICOM) quasi cabinet with responsibility for the Single Market and Economy (CSME), met with senior vice president of the European Investment Bank (EIB) Alexander Stubb and “engaged in discussions with them on opportunities within the transport sector in particular and its role in the region.”

Barbados is LIAT’s main shareholder at 49.5 percent, currently undergoing an International Monetary Fund (IMF) four-year Extended Fund Facility (EFF). Antigua and Barbuda has 13 percent, St Vincent and the Grenadines 12 percent, Dominica with less than 10 percent, other Caribbean governments, private shareholders and employees 15.5 percent.

“The EIB doesn’t only lend to the government of Barbados on national projects,” Mottley said, “But also regional projects” underlining, “running a government means going where the policy takes us; where the data takes us, and where the information is.”

“The discussions with the EIB are preliminary, but by the same token, there are very few entities that the region as a whole can borrow from with respect to regional projects. The Europeans, in spite of everything else, have remained engaged with us, they understand the dynamics of a single market because they themselves have literally managed a single market and single economy for decades,” Mottley said.

LIAT services 15 destinations with approximately 600 employees, recently asked its pilots and other employees for additional pay cuts. However, facing a lack of financial input and emergency funding from shareholding countries, mandatory restructuring and simultaneous implementation plans, a 6 percent pay cut won’t be enough to help keep the regional airline flying.

“Regional governments have not been responding, so the shareholders are reaching a critical point now and if you ask me, what is likely to happen … there will be a transitional restructuring leading to a closure of LIAT. A new airline will then have to be the next option for the region if LIAT is closed. Grenada is the only government that acceded to LIAT’s emergency funding request for US$5.4 million, contributing approximately EC$1 million,” Gonsalves said on a current affairs programme in Grenada.

LIAT’s previous request for emergency funding was US$5.4 million:

• Antigua and Barbuda, which has 69 departures, will contribute US$960,310
• Barbados with 116 departures per week, US$1.614 million
• St Vincent and the Grenadines with 52 departures per week will contribute US$723,711
• Grenada, which has 35 LIAT departures per week is being asked to contribute US$487,113
• Dominica is being asked to contribute US$347,938 toward 25 flights weekly
• Guyana has been asked to contribute US$292,680
• St Kitts and Nevis US$389,691; and
• Saint Lucia US$584,536

LIAT’s decline amid financial difficulties, key takeaways, analysts noted, did not strike a balance between implementing reforms, controlling risks and structural efforts to control debt levels.

Stakeholder governments have been advised to keep pace with fiscal policy, implementation and support measures, and single market regulations on expectations to stabilise regional economies with or without a regional airline.

LIAT’s restructuring plans designed by the Caribbean Development Bank (CDB) a year ago, required:

• Reduction of the regional airline US$60 million debt burden
• Implementation of a minimum revenue guarantee payable annually (in particular, routes that are not viable)
• Reduction in management and pilot remuneration up to 10 percent and greater efficiency system-wide.

LIAT’s financial and operational measures will require a mix of capital, route guarantees, salary cuts and stakeholders taking a haircut. This includes a strong private sector operational and financial management executable program.

The current proposal by the CDB calls for US$152 million:

• Conversion of debt to equity US$66.8 million
• Additional cash investments US$39 million
• Subsidy by the major shareholders for 2018, US$13 million,
• Subsidy for 2019 to 2023, US$32.8 million

LIAT’s reforms also include re-fleeting ten new ATR aircraft, reducing the workforce and systemic management changes, and funding requirement for five years of approximately US$151.6 million.

“LIAT has a complement of ten aircraft, seven are leased, and three are owned by the Barbados-based CDB due to monies borrowed,” Gonsalves said. “We probably will have to ask the CDB to sell those three aircraft and operate seven of them and then get other smaller airline like One Caribbean to fly between Grenada and Saint Lucia, rather than get LIAT to fly on one of the routes which is going to Trinidad which is not economical to cut it,” Gonsalves explained.

“If you sell the three aircraft which are owned by the CDB” Gonsalves said, “Immediately, that’s 33 pilots who would have to go. Then other workers will have to go, flight attendants etc, because over US$7 million is required in some immediate savings, US$2.53 million is required from the workers but you ain’t getting the number near to that.”

“If you even close it down [LIAT] and I fear that is an option which is becoming more and more realistic, but if you close it, you have to manage in the transitional period, and we need to have resources. I don’t think the employees fully grasp what is at hand,” Gonsalves said.

“Lessors of seven LIAT’s planes in the United Arab Emirates (UAE) are prepared to give cuts of between 17 and 20 percent, and other stakeholders are prepared to do cuts in order to save the regional carrier,” he said.

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5 COMMENTS

  1. Blame Gonsalves he helped recommending a fleet of unsuitable aircraft and he has helped tax LIAT out of the air with silly airport taxes.

  2. How can a lender take this matter seriously when Gonsalves in the past admitted that LIAT will never make a profit?

  3. Shut it down, sooner the better, let’s get the private industry back and with it a profitable and reliable airline.

  4. Ralph Gonsalves once said this “I just [told] you that a regional airline like LIAT, which is going about here, don’t look for it to make any profit.”

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