By Lennox Weston
In the lofty days when Regional integration dominated the thinking of Caribbean governments, when the ideal of one Caribbean Nation was deemed essential for the survival of Caribbean countries, LIAT was seen as an essential component of connecting the region. L i a t mandate was simple, provide a bus service connecting all the countries of the Caribbean region, with subsidies provided by Caribbean shareholder governments to cover the financial losses of providing the regional service.
Most Caribbean Governments had shares in LIAT based on their national financial capacity. Trinidad and Tobago with its oil dollars, the Godfather of the Caribbean at that time carried the load. It was always understood from the very beginning Caribbean Air transport connectivity was not a commercially viable business, and financial subsidies were required to ensure an adequate level of connectivity.
With the weakening of commitment to the regional integration movement by member states and the rapid deterioration of macro-fiscal economic conditions of most countries in the region their commitments and capacity to finance a subsidized Regional connectivity air service project declined to leave three major shareholder Governments namely Barbados Antigua Barbuda and St Vincent to carry the costs of providing Regional Air connectivity.
The covid crisis and the abrupt disruption, and cessation of international and regional travel for nearly two years, resulted in the three major shareholder governments of LIAT agreeing to liquidate the company. The added complication was the fact that the net assets of a liquidated LIAT 74 limited company would not be adequate to satisfy all outstanding obligations of its employees, former employees, and private Government tax collection agencies. While the losses suffered by unemployed workers have been the highlight of regional commentary and lobbying and negotiations between shareholder governments, it is noteworthy to recognize that several other entities suffered from LIAT collapse.
Commentators and Government officials have surprisingly sought to place blame for the demise of LIAT on workers, some on management, some on Workers’ Unions, some on the Directors, some on shareholder Governments, some on public sector ownership of what they view as a private sector enterprise, and some on even the importance of having a government-owned Airline company.
These criticisms, while mainly promoting vested interest, all miss the fundamental fact that adequately connecting all Caribbean countries is fundamentally not a profitable enterprise.
The short distances between islands, the frequency of Landing and take off, the high cost of maintenance, the frequent replacement of expensive aircraft parts, the small population, limited disposable income, the frequency of disruptive natural disasters from hurricanes to high winds the floods the earthquakes minimal inter Caribbean trade and small numbers of Pan Caribbean businesses and the high taxes imposed by Regional Governments all combined to make unprofitable adequate Regional Air transport connectivity.
It is true that having 11 unions representing 600 workers and inefficient workers contracts complicate the management of the airline; it is also true that missteps by management increase the level of losses; it is also true that the number of flights required by governments to adequately provide connectivity and the poor productivity work culture of LIAT workers also all served to increase the losses suffered by the airline; exasperated for many years by the frequency and disruption of hurricanes floods, earthquakes, and volcanoes.
It is equally true that Caribbean governments because of deteriorating macro-fiscal conditions have been forced to apply large taxes on Regional travel to provide tax revenues to service debts associated with the construction of the various national airport’s seaports and also to meet National fiscal targets, many times set by an IMF program or IMF inspired homegrown fiscal adjustment programs.
Many of these are legacy issues that can be corrected in the formation of a new airline such as Liat 2020 Airline as proposed by the Antiguan and Barbudan governments. The fundamental fact is that providing adequate Regional Caribbean connectivity requires some level of subsidy to ensure that those routes which are not profitable can benefit from Regional connectivity will persist. Financing of these subsidies will have to be done either through a general financing mechanism supported by all governments or by Direct pay-to-fly financing agreements by countries whose routes and whose numbers of flights required are not financially viable.
The number of commercial airlines that have had startups and closed down in the region ought to be well known, although some officials and commentators might choose to have selective memories or simply for convenience choose to forget that over 50 Airlines would have started up and closed down in the English, Dutch, French and Spanish Caribbean region over the last several decades.
Major National Airlines including LIAT have had their ownership privatized and handed over to private owners and then after experiencing massive losses these Airlines would have been quietly passed back to ownership by governments socializing the losses suffered by private capital.
It is also well known that only small Airlines cherry-picking a few commercially profitable roots have been able to survive albeit for short periods and to make a profit. Regional Airlines that survived for long periods, including LIAT for over 60 years, had all been subsidized by their governments.
After 60 years of LIAT and Regional aviation history to inform Caribbean governments, it is mind-boggling THAT there are still many governments who are of the view that adequate Regional Airline connectivity in the Caribbean can be provided by an amalgamation of small private sector Airlines seeking to maximize individual company profits and without subsidies from National governments.
Some of these governments also believe that this can be done with the continuation of the high level of taxes on Regional travel and by closing their airports at 10:00 pm at night and without owning their own Regional Airline.
History teaches us this is not possible and those countries with unprofitable routes especially the smaller countries in the North will be forced to pay for their connectivity when the commercial operators are dissatisfied with their level of financial return And if as has happened in the past, private sector operators at any time decide that even with subsidies the returns are not adequate for their continuation of service to the region, as has occurred with maddening frequency over the last 40 years; Caribbean governments will once again be at the meeting table wringing their hands seeking to re-establish connectivity among themselves.
The formula for providing sustainable and adequate connectivity to Caribbean countries is well known. What the region needs is a new LIAT 2020 without the debilitating Legacy issues, managed using modern management principles, including productivity-based contracts, a single Union environment and a modern computer-based operating environment and continuation of the superb maintenance and safety regime and record, adequately capitalize and most critically a network that is profit driven. Countries with unprofitable routes and or with the demand for higher frequencies of flights that are not financially profitable should be asked to pay up front for the service.
Caribbean governments can improve the profitability of regional transport by removing the high taxes and fees imposed on Regional travel and opening their airports on the 24-hour cycle.
International Community can assist by providing debt relief and the sources of cheap capital to assist in the repayment of debts associated with the infrastructure developed for air and sea connectivity in the region. I
nternational multilateral financing agencies can also assist in improving the macroeconomic framework of countries by offering long-term accessible low-cost development funds to support infrastructure social an environmental development of the region and therefore facilitating increase development of trade and travel among Caribbean people.
A new Regional LIAT can be quickly established with 60 million US dollars. IF finance by six shareholder governments, each government would require 10 million US dollars and if Finance by international multilateral financial agencies or by CDB over a 10 years or 20 years at 3% per annum the cost to each individual country would be insignificant.
Caribbean governments whose leaders should be well schooled in politics of Marcus Garvey, in History of English mercantile law during slavery and colonialism, whose leaders are brought up chanting Bob Marley redemption songs at least on this occasion should make Black Stalin proud; at least in this instance stop the talk and move decisively demonstrating the capacity to make decisions in their own self-interest control by themselves for the benefits of the region and their own people.
Sometimes it might take one spark to get the project up and running the Antiguan govt having spent over 20mecd to maintain the three airplanes and move over 80k regional passengers through out the region flying a single plane at a time and keeping over 150 LIAT WORKERS at work has providing more than a spark and its fair share of heavy lifting.
The OECS countries and Barbados and Guyana should quickly come to the table and put regional air transport on solid sustainable footing. The previous generation of leaders did it for over 60 years. It is now time for action or degenerate into capitalistic survival of fittest mode, all countries acting independently, each trying to outdo the other. All Countries failing.