LIAT Leadership Asleep At The Wheel Again

by Robert MacLellan

by Robert MacLellan

In the first month of 2014 Caribbean regional media reported that LIAT has had to choose between paying employee salaries and paying aircraft lease charges in order to maintain flight operations. Even before the news of LIAT’s latest financial crisis, the flight chaos of last summer was nearly repeated in December 2013, at the start of the Caribbean’s tourism high season, and was only averted through last minute decision changes by LIAT’s board of directors and its temporary CEO.

The LIAT fleet was reportedly due to reduce to only nine aircraft last December. At the same time, aircraft conversion training for flight deck crew was planned to be ongoing and flight deck crew annual vacations were scheduled to peak that month. With a similar mix of factors to those which caused LIAT’s summer meltdown, the potential for major disruption to flights appeared to be equally great for this winter. Unbelievably, the LIAT board and senior management had authorised this disastrous scenario to coincide with the Christmas holidays and the start of the international tourism high season in the Caribbean.

Having just avoided that mismanagement disaster in December, LIAT executives have been faced in mid January with the imminent grounding of six company planes by the aircraft leasing company.  Lease payments are reportedly tens of millions of dollars in arrears and a collapse in flight operations has only been avoided by delaying payroll for LIAT’s long suffering employees.

Ongoing disarray at LIAT    

The hotel and tourism industry in the Eastern Caribbean is extremely concerned about the ongoing disarray at LIAT, as most hotels are still suffering from low room rates and poor occupancy levels. This is the result of the significant drop in regional travelers and British visitors in recent years, as well as from the negative publicity, related to the Harlequin Resorts collapse and the demise of the former Almond Resorts. Some European tour operators are threatening not to sell packages which include LIAT flights, as a result of this past summer’s delays and missed flight connections. This is understandable, as it is their European Union tour operator guarantee bonds that are at risk for passengers’ associated costs, which are not recoverable from LIAT.

While LIAT faces yet another serious and immediate crisis, the airline’s overall financial future appears to be as precarious as ever. The former CEO’s business plan for LIAT collapsed in tatters by September last year, with missed summer revenue targets and massive additional costs linked to the service disruption and stranded passengers. As a burden on the airline going forward, the additional debt and increased aircraft leasing charges, associated with the new fleet, are likely to outweigh the higher maintenance and fuel costs of the old fleet. The company’s poor marketing efforts could not adequately fill the previous 36 seat and 50 seat fleet but nothing of substance has changed in LIAT’s marketing management to drive increased levels of business for the new larger 46 seat and 64 seat aircraft.

In the meantime, Caribbean Airlines – also loss making, but the beneficiary of ongoing Trinidad & Tobago government subsidies – continues to cannibalize LIAT’s southern routes and now new competition has appeared on LIAT’s northern route network. JetBlue is currently flying modern 110 seat jets between San Juan and four northern islands, while that company evaluates potential routes to more destinations further south. Seabourn has added inexpensive 34 seat turbo prop aircraft to its existing fleet and has expanded its route network south from Puerto Rico and the Virgin Islands to St Kitts and Dominica. All this now presents a competitive “perfect storm” for LIAT and its expensive new aircraft.

Led by a chairman, who has reportedly resigned twice in recent years, LIAT board members are a dim shadow of the airline’s founders and the current directors urgently need to be replaced by people with greater business acumen. LIAT is more over-staffed than ever, employee relations are at an all time low and the board and acting CEO appear to have no coherent strategy in coping with a looming financial disaster in the shape of high levels of company debt and growing competition. Few banks or governments in the region currently have the resources to provide ongoing financial support to LIAT and even fewer have any confidence in the airline’s management abilities.

The only sustainable solution for LIAT is to find a private sector joint venture partner which can provide a viable long term financial structure, along with the professional management and marketing expertise necessary to survive. For LIAT, it is now a case of pick a partner or go out of business. Some experienced Caribbean business minds seem to favour the latter outcome. However, regional air services are vital to the social cohesion and commercial activity of the Eastern Caribbean islands and a joint venture “soft landing” for LIAT would be preferable.

Robert MacLellan

Robert MacLellan is Managing Director of MacLellan & Associates, the region’s leading hospitality consultancy since 1997. He is a Fellow of the Institute of Hospitality, a Member of the International Society of Hospitality Consultants and has a Masters Degree in International Hotel Management. This is his eleventh article published in Barbados Free Press.

8 Comments

Filed under Aviation, Barbados, Barbados Tourism

8 responses to “LIAT Leadership Asleep At The Wheel Again

  1. frustrated traveler

    Time to put LIAT out of its misery. It is an airline that we can’t afford to have in its current shambles. It used to work, what happened and when did it get so bad? It was a gradual thing over at least 15 years but now it has plunged off the charts as far a reliability and service are concerned.

  2. yatinkiteasy

    He refers to “Harlequin Resorts Collapse”, which has not happened..watch out for that legal action from Ames.

  3. Anonymous

    He is saying what we all know here, that Harlequin will never build all they proposed to build and negative PR will hit when the ripping off of thousands of Brits hits the headlines. Should allow an experienced airline operator to come in and run our regional airline, someone who knows how to run it at a profit. Liat has never been worse.

  4. Anonymous

    Cannot wait for the new SVG airport to open. Direct flights into SVG, restarting of building work to accommodate the influx of passengers. Happy days on the horizon.

  5. Party Animal

    Frustrated Traveler
    Take the Politicians out of LIAT and it will work.

  6. yatinkiteasy

    Harlisuccess is back!

  7. old_CT

    Seems to me that LIAT’s marketing bobs should spend more time out of their fancy air-con offices and out on the road drumming up business…..otherwise the already lame duck will die.

  8. bimjim

    Based on two numbers I found in a Barbados Government report on the internet – the cost of LIAT to Barbados for the two years 2011 and 2012 – and that percentage increase as an average, plus the percentage shareholdings of the various governments, here are my own interpolated calculations…

    – For the year 2014, in millions
    Shareholder “subventions”
    Total US$122 – EC$329 – BD$244
    Barbados US$62 – BD$124
    Antigua US$38 – EC$103
    St. Vincent US$14 – EC$38
    Dominica US$1 – EC$3

    – For 5 years 2014-2018, in millions
    Shareholder “subventions”
    Total US$686 – EC$1,853 – BD$1,373
    Barbados US$345 – BD$690
    Antigua US$211 – EC$570
    St. Vincent US$81 – EC$218
    Dominica US$7 – EC$19

    IN THE TOTAL ABSENCE OF ANY ACCOUNTS WHATSOEVER FOR THIS REGIONAL PUBLIC COMPANY OWNED BY TAXPAYERS my calculations suggest that in fact LIAT is bleeding all of us by an average of US$138 million a year over the next five years – or BD$268 million a year.

    As above, I also calculate that in the next five years (if there are no changes to the trend) we will all contribute some US$686 million – or BD$1.4 BILLION to keep LIAT flying. In the next six years LIAT’s total cost to the eastern Caribbean will approach a Billion US dollars.

    Remember, we are ALSO paying foreign carriers hundreds of millions of US dollars in guarantees for their seats.

    Allow me to point out that this is not in any way associated with improvement, additions, modifications or change. This is nothiong to do with LIAT’s recent fleeting, loans and screw-ups. This is JUST TO KEEP LIAT IN THE AIR.

    I have read the same article, and agree with everything Mr. MacLellan has said, and more. But there is a reason I made these calculations… I will reveal that on December 15 I made a LIAT Joint Venture proposal to Prime Minister Gonsalves (the “lead” PM on LIAT) , and to date have not even received an acknowledgement. I have sent him several emails since, with the same lack of response.

    A week later I sent all of the other Prime Minister shareholders the same proposal, and I heard from only two of them (both agreed there was merit in the proposal).

    My proposal was not to _BUY_ LIAT, but to take over the Board and management with the appropriate expertise, to inject a large amount of money, and turn it around without the political interference – but nobody seems to be interested.

    That was two months ago. In that time both the political and business patience has worn itself out, and now I can only consider that they are just being rude, because in our part of the world that is just plain bad manners.

    When does this madness stop? Is is when we are so heavily taxed that none of us can any longer afford food and clothing?