LIAT to move fleet base to Barbados to improve earnings
Some 180 workers at regional carrier LIAT are headed for the breadline as the airline struggles to cope with high overhead costs and a projected loss of $29.6 million.
Shareholder governments today endorsed the staff cuts –– to be introduced on a voluntary basis in the initial stage –– as well as a plan to shift LIAT’s fleet base to Barbados in a bid to rake in more revenue by targeting the southern Caribbean.
The announcements were made following two meetings at the Hilton Barbados that involved Barbados’ Prime Minister Freundel Stuart, St Vincent and the Grenadines’ Dr Ralph Gonsalves, Dominica’s Roosevelt Skerrit and Antigua and Barbuda’s Minister of Public Utilities, Civil Aviation and Transportation Robin Yearwood.
“In reducing the number of persons . . . we want to bring them down from 800 to about 620, which should save us about EC$13 million (BDS$9.6 million) per year. Of course, we’ll have to pay the severance cost of about EC$22 million (BDS$16.2 million),” Gonsalves, the chairman of the shareholder governments, told the media following the talks.
With LIAT spending an estimated 27 per cent of its revenue on staffing, chief executive officer David Evans said the airline had no choice but to trim its workforce.
“We will embark on a process of cost reduction right across the airline but that will also include a reduction in the number of people that we employ in the business. We will embark upon that process in full consultation with our staff themselves, and also their representatives. We would wish to achieve these reductions, where possible, on a voluntary basis and that will be our aim,” Evans explained.
“We hope to come out of this process at the end of the year, leaner, fitter, more responsive to the market and, most importantly, more responsive to our customers.”
Meantime, Gonsalves said the airline was also in need of an immediate cash injection to help stabilize its finances, and had approached the Caribbean Development Bank, which is already providing a US$65 million to modernize LIAT’s fleet, for more assistance.
“We have to provide some working capital immediately in addition to these cost recoveries. The shareholder governments . . . have to find, in our proportion of the shares, EC$5 million (BDS$3.7 million). We had a meeting earlier this morning with the Caribbean Development Bank to . . . finalize some matters which will be returned to us,” he said.
LIAT’s inability to dispose of its retiring seven Dash 8 aircraft is also costing it about $22.2 million annually.
Chairman Dr Jean Holder blamed the situation on a “weakening market” for the planes and the loss of the relevant documentation in a major fire several years ago.
Those planes are being replaced by ATRs, eight of which have already been acquired. Another will be added to the LIAT fleet sometime this year, with an additional aircraft coming on board next year.
“The management has assured us that the remaining seven Dash 8s which we have, by the end of June we should have effected their disposal which will provide some monies and, more importantly than providing cash, would help us from losing money,” Holder said.
Prime Minister Freundel Stuart publicly endorsed the arrangement.
“The change in strategic direction is welcomed by Barbados. We expect to see a turnaround in LIAT’s fortunes, more responsiveness to market messages and, of course, once the whole issue of fleet renewal is complete and the disposal of the seven remaining Dash 8 planes and the reduction in the head count is complete we think that LIAT will be on a much more viable and sustainable footing,” he said.
A technical team is expected to be set up to help chart the way for the year forward for the airline.
Meantime, while announcing that Barbados would become the fleet base for the regional carrier, officials steered clear of any suggestion that LIAT’s headquarters would be relocated.
Four of the airline’s new ATR aircraft will be stationed at the Grantley Adams International Airport, while Antigua where LIAT is headquartered will have two. The remaining two aircraft will be based in Trinidad.
Gonsalves said Barbados had become one of the main gateways for the carrier, and would be key to strengthening LIAT’s push into the southern Caribbean market which is showing strong growth.
“We have to be careful that we don’t play one country against the other to say your base is shifting from here or there. You look at the performance and you see where you’re putting more planes for the movement or more persons. But it is one network and you don’t need to be a rocket scientist. The place where most people pass through in the LIAT network is Barbados; that is the reality,” he said.
Barbados is also the top-performing destination as far as revenue and passengers are concerned, followed by St Vincent, Trinidad, Antigua and Dominica.
Additionally, Barbados proved to be one of the most in-demand hubs, particularly the Barbados to St Vincent route.