Shareholders all focused on restructuring plan
A proposal that Barbados set up its own airline with 10 planes and up to 350 permanent staff to replace cash-strapped LIAT is being dismissed as a distraction by chairman of the Antigua-based carrier Dr Jean Holder.
The document which reportedly originated from the Antigua-headquartered LIAT, a copy of which Barbados TODAY obtained, pushes for the establishment of a Barbadian carrier unencumbered by LIAT’s financial and other baggage as a “fresh start” as opposed to waiting for the “slow, painful and costly collapse” of the island hopper – the only two options the proposal envisions.
“As one of the major economic and tourism centres of the Eastern Caribbean, there is a strong case for Barbados to possess its own airline in order to serve existing markets, and develop new ones that meet the specific trade, investment, and tourism needs of the country,” the document states.
It proposes a Barbados Air Carrier (Newco) be established with its own Air Operator’s Certificate (AOC) and route licensing authorization, effectively replacing the majority of existing LIAT services throughout the region and seeking to develop new markets.
Antigua and Barbuda’s Prime Minister Gaston Browne has already described the move as “treason” and an act of hostility against his country.
Efforts today to reach Minister of Tourism and International Transport Richard Sealy were unsuccessful. But in an interview with Barbados TODAY, Dr Holder said he was focused only on carrying out the mandate of the shareholder governments – Barbados, Antigua and Barbuda, St Vincent and the Grenadines and Dominica – that all agreed on a restructuring plan for the airline when they met in Bridgetown on February 13.
“These are the only proposals that are engaging my attention. I had a meeting of the board on March 26, which is last Thursday, in Antigua. It was attended by all the directors, including three directors from Antigua and Barbuda, and those three directors included two ministers who, as far as I know, sit in the Cabinet of the government of Antigua,” he stressed.
“I certainly as chairman of LIAT reemphasized our obligation to implement the mandate that was given to us here in Barbados on February 13 and all of the directors there, including the Antiguans, agreed with that approach and that is what I am very intensely engaged in at the present moment.”
“I am not going to be distracted by rumours here and rumours there about what I or the board or the shareholders are doing,” Dr Holder added.
The LIAT chairman acknowledged that the agreed restructuring proposal would be painful and even though the overhaul meant sending home staff it had to be done.
“It is not something that one likes to do, but it is something which we agreed to do and I have no choice but to do it. I see the matter that was ratified on February 13 as the solution to stabilizing LIAT. I think we all agreed at that meeting that that’s the way we ought to go. Everybody that came to that meeting agreed that was the way to go,” he insisted.
Browne, in a radio interview in Antigua, said he planned to meet with LIAT’s chief executive officer David Evans to find out where the proposal for a Barbados airline originated and if he discovered that the carrier’s boss “hatched” the new plan he would be demanding his resignation.
The proposal not only outlines the approach, methodology and structure for a new Barbadian airline, but even projects a net profit of US$9.9 million in its first year of operation.
On a projected timescale of nine months from incorporation of Newco to launch, the total anticipated funding requirements would be US$29 million.
“The strategic approach to the structure of Newco would be based on moving a number of historic fixed airline costs to a variable cost basis via outsourcing. This has the benefit of reducing high staff front line and overhead costs and gives the airline the flexibility to select service providers on the basis of cost and service quality without being tied to long term and ever increasing fixed staff costs,” it states.
Areas earmarked for outsourcing include base maintenance, ground handling, call centre and revenue accounts, all of which are typically outsourced in many small to medium sized airlines and in almost all low cost carriers. These activities currently employ over 300 staff in LIAT.
“As a consequence, it is envisaged that Newco could operate a fleet of 10 aircraft with just 300-350 permanent staff. Retained activities would include crew and operations, finance, commercial, HR [human resources] and legal,” the document states.
It further forecasts a three-year network development plan that would see the airline capitalizing on Barbados’ growing importance as the key hub and transfer point in the Eastern Caribbean with additional gateways in Antigua, Port of Spain, and Ogle, with some of the smaller capacity markets in the north being served through a franchise partner.