“There has never been a more appropriate time to end LIAT’s vicious cycle of operational and financial instability and to reconfigure an airline which can serve the Eastern Caribbean’s vital needs on a sustainable basis.
The damage inflicted has been immense, the financial outlook is grim, the time for change has arrived and the need is urgent.”
Tourism expert Robert MacLellan tells some hard truths
by Robert MacLellan
Some might believe that for the second time in only three years Captain Ian Brunton has been made a scapegoat by the board of directors of a Caribbean airline company – fired as CEO of Caribbean Airlines Limited in late 2010 and, this week, he resigned as CEO of LIAT. Indisputably, the overall operation of LIAT has continued to be disastrous during the last four months but so has the marketing / P R / communications function and yet the senior management there appears unchanged going forward. More importantly, the chairman, Jean Holder, and the LIAT board – which has authorised the strategy, business plan, operating budget and bank loans underlying the recent chaos and financial uncertainty – also appear unchanged going forward.
While Captain Brunton has resigned, Mr Holder is reportedly on vacation in the midst of the crisis. The chairman has been in position since 2004 and submitted his own resignation two years ago, although this was not accepted by the LIAT government ownership group at that time.
“Plus ca change, plus c’est la meme chose.”
When Mark Darby, an undoubted airline industry expert, was fired from the LIAT CEO position in 2009 (and subsequently sued successfully for unfair dismissal) Caribbean 360 News carried excerpts from his interview concerning LIAT in Flight Global, a leading airline industry website. Darby pointed to “the lack of focus of the shareholder governments and the board of management as major stumbling blocks to the regional airline moving to higher heights”. He spoke of the complexity of three governments owning the airline, which involved conflicting agendas. Darby commented that this problem was compounded by weak corporate governance, with a board where few directors had held senior roles in major companies.
“Instead, LIAT operated more like a government department”, Darby said… “Board members got themselves involved in operational areas. This is one of the company’s greatest weaknesses”.
In evaluating these comments, clearly, Darby was unhappy about the circumstances of his departure from LIAT. However, the Irishman before him was also short lived as CEO at LIAT and Brian Challenger resigned last year as acting CEO – all of which confirms a serious problem at board level. This is where the real change is self evidently required if the airline is ever to achieve operational and financial stability. In the face of LIAT’s biggest ever operational crisis and with greatly increased debt related to the new fleet, now is the crucial time for that change.
There are cries for other Caribbean governments to invest in LIAT. Arguably, if they had any confidence in LIAT’s board, they might do so – but it appears they do not! If that is the case, then the failed board, the business model and the ownership structure has to change.
Many airlines around the world, previously government owned, have been privatised successfully in recent years, but for LIAT this raises issues as to the airline’s vital role in the socio-economic cohesion of the islands and concerns about the viability of some low volume LIAT routes. Economies of scale, more effective marketing, code sharing on low volume routes and a “low cost airline” style of operation could combine to achieve a sustainable business model – but it appears extremely doubtful that LIAT as presently constituted can attain that goal on its own.
However, an initial merger of loss-making LIAT with loss-making Caribbean Airlines Limited – if they then enter together in to a new public / private sector company on a 50 / 50 joint venture basis – might create an airline ownership structure that successfully addresses all issues, combining social responsibility with profitability and professionalism. A deal like this would best be evaluated and negotiated by a specialist airline industry management consultancy. Lufthansa Consulting is but one example.
Which are the potential private sector joint venture airline partners for such a deal? Jet Blue has a successful low cost airline business model, flies to an ever increasing number of Caribbean islands from the USA and has already taken over five of the former American Eagle inter island routes out of San Juan. Southwest Airlines / AirTran is another successful U S based low cost airline and is continuing its expansion of Caribbean routes. Insel Air, based in Curacao, is profitable and operates a mixed jet and turbo prop fleet on routes to the Dutch islands, Dominican Republic, Haiti, Venezuela, Colombia, Miami and Charlotte. Seabourne Airlines – based in the U S Virgin Islands -is profitable and is expanding its inter Caribbean route network with larger 34 seat Saab 340 turbo prop aircraft, but still operates 19 seat Twin Otter aircraft on low volume routes.
There has never been a more appropriate time to end LIAT’s vicious cycle of operational and financial instability and to reconfigure an airline which can serve the Eastern Caribbean’s vital needs on a sustainable basis. The damage inflicted has been immense, the financial outlook is grim, the time for change has arrived and the need is urgent.
Robert MacLellan
Barbados Free Press 
Liat would make me think twice, no 3 times about coming back to the Caribbean – such a shame.
Time to Privatize LIAT and remove the POLITICS
Are you guys forgetting the small Islands governments’ have history of screwing up things dating back to the late 1950s when the West Indies Federation, also known as the Federation of the West Indies, was a short-lived political union that existed from 3 January 1958 to 31 May 1962?
Common sense should tell any one if those corrupt idiots can screw up a political union in 4 years what do your expect they will do to a little air carrier plague with top heavy and over paid incompetent and dishonest management. I submit to you for LIAT to survive this on-going gross mismanagement, the Robert Crandall of American Airlines and the Frank Lorenzo of Continental Airlines doctrine must be implemented.
It seems clear that MacLellan has an idealistic view of what should be done with LIAT and does not really understand the politics involved with LIAT; too many governments involved and too many unprofitable route, inept hands-tied management, just to mention a few. For a start, If LIAT must be profitable, then unprofitable routes should be cut or frequency reduced The entire route structure would need to be revamped and the little guys who now complain would not be very happy.
Give LIAT to CAL and they are guaranteed to screw it up even worse; just look at CAL’s track record when taking over over routes and other airlines. CAL sole interest is T&T. Take a look at CAL’s route structure out of Barbados and Jamaica following removal of local national carriers. Does he seriously think that merging with a less efficient carrier that burns money like “free” fuel would solve the problem.
MacLellan need to step back and identify the real problems and look for realistic solutions. I have been involved with the airline industry and LIAT challenges and problems have changed little since to days of the island hopping BAC 111’s.
Mike, I could not add one point to you assessment, if only we could get some of these loon to think straight.
Mike,
I readily accept constructive comments but you offered little by way of solutions to the current disaster – a few half-measures and WHO is to deliver them?
I agree that a simple merger of LIAT and CAL would solve little but, as a first stage, the current stupid competition situation between these two needs to stop. Then, as the article suggests, a new public / private sector ownership entity is quickly established, with 50% private finance, to be managed by a successful commercial airline joint venture partner.
Why a “half-way” ownership structure? There is already some public resistance to an immediate move to full private ownership of these two airlines, which could delay a deal, and it is also very doubtful that any private finance source would back 100% commercial take-out, based on the two airlines’ track records.
LIAT’s current situation continues to destroy intra-regional travel volumes and international tourism prospects for many islands. Urgent deliverable change is needed and my suggestion is not idealistic, it represents an attempt at a solution that may be readily acceptable to the five prime ministers who ultimately control the airlines. I have worked with Caribbean governments and private sector developers for 17 years getting resorts built.
There has been at least a decade of theoretical “top-down public sector oriented” solutions – none of which went anywhere. Mine is a private sector style bottom-up proposal. It is how things are done in the real world of international business!
ELD, Robert Crandall yes. Frank Lorenzo NO! I would submit that the best management model would be Herb Kelleher of Southwest Airlines. Southwest has prospered, and up to now WestJet has prospered (on the Southwest model) because they have one aircraft type and focus on achieving maximum utilization of their resources (20 minute turn-around times are common at SWA).
LIAT should operate a single aircraft type. This will ensure fleet commonality resulting in reduced training costs and maintenance costs. I am not privy to the decision-making process, but why LIAT decided to buy ATRs, when the Dash 8 Q400 was available, is a mystery. I recently had a flight on a Q400 and it was quiet, fast, and comfortable, and seated 74 passengers. To my way of thinking, the Q400 would give LIAT operational flexibility at near-jet speeds.
It may not work at LIAT but requiring employees to buy shares in the company via payroll-deduction has worked well at SWA and WJ. Engaged employees, who have a stake in the financial well-being of their company, is a powerful motivator for operational excellence. Herb Kelleher always said, “Take care of the employees, and they will take care of the customers.” That way, employees will be motivated to serve the customers and not hide behind union membership to insulate them from wrong decisions.
Forget having bean-counters running the airline. Most successful airlines are run by experienced flight-operations types. You can not shrink your way to profitability in the airline business, as most bean-counters would have you believe. Cost-cutting eventually becomes counter-productive and a race to the bottom.
Above all, the shareholder governments in LIAT need to take their interfering political hands off the day-to-day operations of the airline and entrust the running of the airline to competent operations people, not to political cronies. What do Gonsalves and Stuart know about running an airline? All they care about is winning the next election: re-election is the prime constraint in politics.
LIAT has always had tremendous potential. When Frank Delisle and his proteges, Ferdie DeGannes, Joe Mahmood, and Teddy King, were running the airline, it was truly a good operation, albeit much smaller. It can be again but it will take some hard operational decisions, and a complete lack of government interference, among other things, to make this a reality.
You are right on the money with Herb Kelleher’s business model.
‘The charges resulted from an August 2012 incident when officers from Ontario Police Department
received an anonymous phone call that a cockfight was in progress,
‘ said Deputy District Attorney Debbie Ploghaus, who prosecuted the case.
Many of Carter’s clients were left drowning in debt. So far, no decision regarding an appeal has been made.