Pay up or lose LIAT service, Cobham advises
A local banker who was instrumental in raising nearly BDS$50 million through a regional bond issue to ensure LIAT’s survival over a decade ago is advising shareholder governments to withdraw service from Caribbean countries that refuse to pump cash into the struggling airline.
“The easiest thing for LIAT or any airline company to do is to say, ‘I am cutting that route’. If you cut the route to Dominica, for example, what will happen?” former president of the Barbados Bankers Association Horace Cobham said.
At present, only Antigua and Barbuda, Barbados, Dominica and St Vincent and the Grenadines contribute financially to the cash-strapped carrier.
Some Caribbean leaders, including Dr Keith Mitchell of Grenada and Dr Timothy Harris of St Kitts and Nevis have made it clear they would not invest in LIAT.
The St Lucian prime minister Allen Chastanet recently joined that list, making it clear his country would not put a dollar into the regional airline.
Without making reference to any of these countries, Cobham told Barbados TODAY some tough decisions would have to be taken if LIAT were to be made into a viable entity.
Among those decisions, he said, was to stop serving the countries that did not contribute financially.
“Some routes aren’t commercially viable. So if you are saying at the political level we need LIAT to fly there, then you will have to pay for it and that is where the problem exists in LIAT. Because it is called a Caribbean airline, they feel that it has to fly there even if it has just ten people, and if you don’t fly there, the politicians will get up in arms,” he said.
Cobham made it clear LIAT was playing an important role in Caribbean aviation and was “not something you can get rid of”.
However, the former CIBC and Royal Bank executive told Barbados TODAY the airline needed to improve its internal operational structures and hold management accountable.
He believed the airline was doing well on the revenue side but needed to address its expenditure.
“LIAT should always be commercially viable. So once you start with that premise, then the other things will fall into line. Commercially viable does not mean you charge whatever you like and have all sorts of internal leakages that burn money.
“No. Force LIAT to have the right organizational structure, the right fleet structure [and] the right hub structure,” he advised.
One of the concerns Chastanet raised recently was the level of political interference in the carrier’s decision-making process.
Cobham also felt there was political meddling, pointing to the number of employees at LIAT’s headquarters in Antigua and Barbuda.
“Just because the politicians agree that the governments will fund it, is not a reason for it to be a free for all for everybody where all the politicians get to say employ this body and employ that body . . . it is too political and they need to move it out of the realm of politics and LIAT has to be made commercially viable.
“So why are they having 500 people in Antigua when you don’t need 500 people? Antigua should be whatever it needs to be. If Barbados is determined to be the appropriate hub, Barbados should be the appropriate hub. So you manage costs and reduce costs as the case may be,” Cobham said.
The former banker said he was proud to have raised US$23.5 million to help LIAT at a time when the airline was “on the verge of death”.
However, he advised against a similar measure today, saying it was not a good idea to fund losses on a continuous basis because it was not sustainable.