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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.

3 Responses to Pay up or lose LIAT service, Cobham advises

  1. Alex Alleyne July 20, 2016 at 6:35 am

    Cutting routes is not as easy as it sounds . This is the Caribbean and LIAT must continue to move people from point “A” to point “B”. What LIAT need , is company form outside of the Caribbean running its affairs. Move some of its operations from ANTIGUA into other Islands where is seen.

  2. BimJim July 20, 2016 at 7:56 am

    Many of my fellow Bajans seem never to have left the juvenile state. Why does everything have to be completely one thing or another?

    Does LIAT not get revenue from passengers into and out of the non-shareholder countries? Is anyone blackmailing LIAT for service? LIAT’s revenue side (passengers) is already HALF of what is was four years ago, are we now to be led to believe that the ONLY way forward for LIAT is to chop off another quarter? Are we preparing for the airline’s complete closure?

    Get this: Nobody – NOBODY – with an ounce of common sense will invest in LIAT or seek a Joint Venture, the company is just too riddled with incompetence, inefficiency, political appointees and patronage. And when I say NOBODY I include those SENSIBLE Prime Ministers who see LIAT as it is – a bottomless hole in the ground into which a number of governments now pour their money.

    In the last four days I sent an email to all of the shareholder Prime Ministers suggesting a solution… remove all of the politics and political appointees from LIAT, starting at the top (shareholders) and proceeding through the Board and executive management, set a few broad mandates, and enter a semi-privatised state where a qualified turn-around management team have a free hand to make the airline viable again as long as they satisfy the mandates.

    On the so-called “social routes”, could LIAT not require AA-like agreements with those governments that a minimum load factor be guaranteed? Over and under the load factor could be evened out over a billing period of a month, and an overage even carried forward to the next month.

    Is this not ONE solution? If so, I have just proven that alternatives to the “in or out” argument are 100% viable.

    LIAT requires CHANGE, something neither the shareholder Chairman Gonsalves nor any of his HOG colleagues seem to have any appetite for. Until LIAT experiences removal of the cancerous tumour of crippling politics and has change thrust upon it, the airline will continue its fall all the way to the inevitable closure.

    • BimJim July 20, 2016 at 9:08 am

      Quick ps: WinAir was a money-losing politically-interfered-with airline serving “social routes” (just like LIAT) until a few short years ago when it was semi-privatised and given competent management.

      Last week the WinAir Board announced a US$3 million profit for 2015 – operating just FOUR leased Twin Otters and taking a commercial approach to the business. And yes, they are still serving those “social routes”.

      Is it not way past time we in the EC also took Marxism, socialism, politics, stupidity and incompetence out of LIAT?


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