The Prime Ministers of Barbados, Antigua and St Vincent, the countries that are the three largest shareholders of the regional airline LIAT, met in Barbados to discuss the way forward for the regional carrier. The meeting, which was billed as one of the regular quarterly meetings of the company and its three major shareholders, brought together the airline's board of directors and its management.
This meeting comes at a serious crossroad for LIAT. It was held just weeks after the much delayed launch of service out of Trinidad by the Irish-owned REDjet, which appears to be in direct competition with LIAT, especially on the lucrative Trinidad to Barbados route. In going head-to-head against LIAT, some will argue that REDjet comes with some distinct advantages. The foreign-owned airline has branded itself as a low-cost carrier and its business model of leasing its aircraft frames and engines separately ensures that its cost structure starts off being significantly lower than LIAT.
While LIAT is weighed down and boxed in by an aggressive trade union, REDjet has had the freedom to hire pilots from across the region and within the hemisphere. REDjet has structured its operations so that it minimises the crews overnighting outside of Barbados, its home base, while LIAT has been required to maintain some onerous and expensive arrangements. At Tuesday's meeting, LIAT chairman, veteran regional technocrat Jean Holder, highlighted the carrier's economic importance to its shareholders and to the region. He noted that for 2010 LIAT had transported almost 100,000 passengers to Antigua, almost 170,000 to Barbados and almost 95,000 to St Vincent. The chairman noted that LIAT's taxes and other direct commercial payments from the airline for 2010 to its principal shareholders was nearly EC$7 million in Antigua and almost BDS$20 million in the case of Barbados. While Dr Holder was no doubt accurate in his presentation-and in his contention that those payments represent only a part of the economic contribution of the carrier-it is clear that he was making a case for LIAT's shareholders to continue subsidising the airline.
While the economic benefits of the airline to its main shareholders are one part of the equation, the enormous cost of operating a regional airline at a time of sky-high fuel prices and stagnant economies throughout the region should also be weighed. LIAT does not have the benefit of a shareholder with pockets deep enough to provide an aviation fuel subsidy to its aircraft-as does Caribbean Airlines-and therefore LIAT was forced to introduce a fuel surcharge on tickets based on mileage, effective August 15. That decision added as much as US$20 for a one-way trip above 300 miles to the cost of someone flying on LIAT and was introduced at a time of falling world oil prices. LIAT's main shareholders, Barbados, Antigua and St Vincent, need to take a clinical decision as to whether it makes economic sense to continue providing support to LIAT-which they have a major stake in-or whether they should explore some other arrangement for the thousands of passengers throughout the region who depend on the regional carrier.
Some of options that the main country-shareholders face would be to close down the airline and allow REDjet to fill the breach or enter into discussions with Caribbean Airlines about the possibility of a merger.
What's clear is that LIAT cannot continue to operate in the future in the way it has operated in the past, given the external and internal pressures that it faces.