BASSETERRE, St Kitts – Following a meeting of LIAT’s shareholders in Barbados on Wednesday morning, St Vincent and the Grenadines Prime Minister Dr Ralph Gonsalves and chair of LIAT’s shareholder governments said that they “yielded some progress.”
“I think that everyone is buying into an amended restructuring plan where there is burden sharing and the employees are prepared to bear some burdens. The extent of what is to be borne we will know in a couple of days’ time when we talk to their members but we had a very positive response,” he said.
Further, based on LIAT’s request for emergency funding of US$5.4 million:
• Antigua and Barbuda, which has 69 departures, will contribute US$960,310
• Barbados with 116 departures per week, US$1.614 million
• St Vincent and the Grenadines with 52 departures per week will contribute US$723,711
• Grenada has 35 LIAT departures per week is being asked to contribute US$487,113.
• Dominica, is being asked to contribute US$347,938 towards 25 flights weekly
• Guyana has been asked to contribute US$292,680
• St Kitts and Nevis US$389,691; and
• Saint Lucia US$584,536.
LIAT’s latest financial crisis tabled at last month’s Caribbean Community (CARICOM) inter-sessional summit in St Kitts and Nevis, though uncomfortable, is not new to regional governments and the principal shareholder governments.
Nevertheless, Gonsalves lamented that “it was unhelpful that some participants at the conference could not resist the temptation on leaving the conference to alarm the public with declarations such as ‘LIAT will run out of cash to operate in ten days’.”
“The farcical outbursts had a predictably damaging effect on LIAT in terms of reputational damage, uncertainty among the large travelling public across the region and a rush by LIAT’s creditors for monies owed before the supposedly imminent arrival of doomsday,” he said.
Gonsalves continued: “It is precisely because of … the likely adverse impact of unfiltered, unnecessarily alarmist or even wrong pronouncements, that I had urged restraint in public utterances for the time being on this most vital matter.
“Such pronouncements even prompted inquiries to LIAT’s management from the Federal Aviation Authority of the United States about LIAT’s capacity to service its routes to Puerto Rico and the US Virgin Islands.”
While regional government are discussing several proposals and establishing special committees that would analyse the best way to move forward, Winair has since increased flights between ABC islands, Dominican Republic and Haiti, and commencing April 15, will increase flights to and between Aruba, Curacao and Bonaire, with additional services to Santo Domingo and Haiti from Curacao.
Winair will offer three direct flights from Curacao to Santo Domingo and two direct flights to Haiti per week, permitting convenient connection to these destinations for Aruba and Bonaire as well.
LIAT’s previous reforms included re-fleeting ten new ATR aircraft, reducing the workforce and systemic management changes, and funding requirement for five years of approximately US$151.6 million.
The current proposal by the Caribbean Development Bank (CDB) calls for US$152 million:
• Conversion of debt to equity US$66.8 million
• Additional cash investments US$39 million
• Subsidy by the major shareholders for 2018, US$13 million,
• Subsidy for 2019 to 2023, US$32.8 million dollars.
LIAT’s situation is unsustainable and unattractive to investments, especially when the majority shareholder, Barbados, is currently undergoing an International Monetary Fund (IMF) four-year Extended Fund Facility (EFF), to help restore its own debt sustainability.
Addressing St Vincent and the Grenadines parliament on Monday, Gonsalves said, further to the actions initiated at CARICOM meeting in St Kitts and Nevis, “some CARICOM government’s refusal to help finance LIAT, pilots’ contracts, sub-optimal technology and high-ticket taxes have resulted in LIAT running at a loss.”
“The ongoing operational financial challenges and the resources required for the restructuring exercise are at the heart of LIAT’s current predicament in a context where most of the governments of the countries served by LIAT are prepared metaphorically to drink the milk but unwilling to help in maintaining the cow.”
“Accordingly, the shareholders have agreed to amend the original restructuring option to ensure LIAT’s survival and continuance. The issue of converting the CDB debt to equity is a work in progress but the governments of Barbados, Antigua and Barbuda, St Vincent and the Grenadines are in any case servicing their share of that debt.
“This amended restructuring option calls for a burden-sharing approach including all stakeholders, labour, lesser of seven of the aircraft, suppliers, and financiers. It involves too the introduction of a Minimum Revenue Guarantee model from all countries served by LIAT to made effective from April 2019.
“If there are unfavourable responses from the various territories served by LIAT and from the unions in respect to certain proposals the shareholders may consider further options including reducing the number of aircraft or even starting a new company. LIAT is prepared also to expand its code sharing with other airlines in particular routes shared by it,” he said.
The need for air transport throughout the regional is paramount to mobility and interconnectivity, the tourism industry, continued development and investment environment in the region, including citizenship by investment (CBI) programs, on which regional governments heavily depend.
The Caribbean has a vested interest to find a sensible solution beyond the scope of unproductive cabinet meetings, disruptive heads of government meetings and high-level advisory committees that operate the cash strapped regional airline.