After 3 years of losses, LIAT hopes for profit in 2013
January 8, 2013

After 3 years of losses, LIAT hopes for profit in 2013

Regional airline LIAT, bogged down by three years of losses since 2008, has devised a business plan it hopes will fly it into the black in 2013.

And this should be good news for owners of the airline, including Vincentians, whose government invested EC$3.8 million towards fleet renewal in 2012.{{more}}

But the EC$7 million in profit that the airline is expected to record in 2013, is dwarfed by the EC$66 million in losses since 2008 — including a projected EC$43 million loss in 2012 alone.

Opposition lawmakers in Kingstown have often spoken out against the government’s continued investment in LIAT, and many citizens have expressed similar sentiments, especially during these years of slim economic resources, when many of the nation’s roads and other infrastructure could use EC$3.8 million worth of attention.

And even the Vincentian government, a shareholder administration, whose head, Prime Minister Dr Ralph Gonsalves, is CARICOM’s spokesperson on regional air transportation, has often decried the failure of other members of the regional bloc to invest in LIAT, notwithstanding its obvious and important contribution to their respective, and the regional economies.

Dominica, on December 28, 2012, attended its first meeting of the shareholders of the regional airline, after making an initial investment of EC$3 million, joining the shareholding governments of Antigua and Barbuda, St Vincent and the Grenadines and Barbados.

Many Vincentians are also understandably displeased with Kingstown’s continued investment in LIAT. But the airline’s managers told Caribbean journalists last month that there are reasons to be optimistic.

This optimism, LIAT’s management suggested, should come not only from the projected 9 per cent profit — EC$40 million — that the airline is expected to record annually by 2017, building on the projected climb out of the red, expected to commence this year.

The chair of the airline’s board of directors, Dr Jean Holder, has noted LIAT’s survival of brutal competition since its birth 56 years ago.

During those five decades, LIAT has survived 30 Caribbean airlines, some of which, Holder said, “began operations with a business plan, based on the demise of LIAT”.

He further noted at a press briefing in Antigua on November 30, 2012, that American Eagle, a stalwart of the region, will cease to operate in March 2013 and British Airways, which began services into San Juan two years ago, will also cease to operate there after the first quarter of 2013.

Holder, noting annual losses reported globally, further said operating any airline service is challenging.

“Providing a Caribbean intra-regional air service is fraught with difficulty, given many aspects of its peculiar financial and operating environment. LIAT, however, faces these challenges every day, providing network services to 21 countries, English, Dutch, French, Spanish and American…” he said.

But among the problems with LIAT is the fact that these “challenges” are not confined to and resolved in its boardroom.

Notwithstanding LIAT’s excellent safety record, these other challenges present themselves at check-in counters and luggage carousels, where passengers are often forced to endure poor customer service and missing luggage.

One Vincentian said on social media recently that on November 25, 2012, he flew on LIAT from St Vincent to Barbados in transit to Jamaica.

“[I] never saw any luggage in Barbados and the empty promise of forwarding to me in Jamaica never materialized,” he said, adding that he picked up his luggage in St Vincent, almost a month later — on December 20, 2012.

“… no apologies from the staff in SVG either!” he further said.

The challenges also manifest themselves in the number of hours it takes to fly to destinations that are geographically close to one another.

These flights sometimes include wayward routing that at times includes overflying one’s destination.

For instance, LIAT took five hours — after an initial 90-minute delay — to fly Vincentian journalists to Kingstown from the press conference in St John’s.

LIAT’s CEO Ian Brunton, in response to a journalist’s question, said routing is in keeping with demand.

And while he added that some passengers choose to island-hop to reduce the cost of their ticket, it was the airline’s staff that booked the flight, which saw the Vincentian journalists flying from Antigua to Castries, then to Port-of-Spain, and then to St Georges, before reaching E.T. Joshua shortly after midnight, on a flight that should have landed at 9:45 p.m. — and which still had on board passengers bound for Bridgetown.

Some observers have argued that competition would cause LIAT to rectify its inefficiencies and would lead to lower fares, generally. After all, this was indeed the case when commuters across the region also had the option of flying on Caribbean Star, Caribbean Sun, and, later, Redjet.

But Holder said this argument “is hardly surprising”.

“The people who argue in this manner, seem to take away no lessons from the fact that they [Caribbean Star, Caribbean Sun, and Redjet] went bankrupt and ceased to operate and the investors lost their money.

“Currently, the operations of all Caribbean carriers offering fares not covered by their commercial costs, are subsidized on an annual basis by their governments. So are all commuter airlines in the USA,” Holder, however, countered.

It is widely known that it is cheaper for some Caribbean nationals to fly from their home country to North America than to fly to another Caribbean destination.

Government taxes, LIAT chief executive Ian Brunton said, contribute largely to this.

“… high taxes and high airport fees in this part of the world [are] not because the governments and the airports are inefficient or want to gouge you or are trying to make revenue off you — off the customers,” he said.

“It is purely because the throughput in these airports is not enough to be able to pay for all the facilities. It is a very, very expensive business to be able to run an aviation sector, to run an airport,” he further stated, mentioning also the increased cost of security after the September 2001 terror attacks in the United States.

And with St Vincent and the Grenadines scheduled to get its first international airport by the end of this year, Vincentians, notwithstanding their dissatisfaction with LIAT, might be happy to know that they can count the airline — of which they own 11 per cent — among the carriers likely to land there.

“A casual glance at most departure and arrival boards at airports in the Eastern Caribbean will reveal that LIAT’s services comprise the vast majority of operations. These services are essential, meaning that without them, there would be a high level of paralysis of air travel in the region,” Holder said.

On the topic, Brunton said: “I challenge you to stand in Grenada or even Antigua or Barbados in the middle of the day; the only thing that is moving is LIAT…”

But even in the face of their explanations regarding the challenges LIAT faces, the airline’s managers seem to agree with the taxpaying owners that things must change.

“We must look at our operating model to make sure we have a model that can satisfy the requirements to at least break even, even if not making a profit,” the airline’s CEO said.

“We cannot continue to be a drain on our government treasuries. It is not fair. Eventually, the taxpayers have to pay it. There is absolutely no reason, if we run this airline efficiently, we can’t give a very good service, give value for money, and at the same time are not a drain on our shareholders and the taxpayer,” he further told Caribbean journalists. (