by Passin Thru
Sometimes our assumptions about a situation or problem blind us to simple answers that are right in front of us.
Could it be that the apparent increasing incompetence by senior LIAT management and a rapidly deteriorating cash flow are actually part of a plan to push the airline over a financial cliff as soon as possible, so that it can be reformed without debt and with limited political fallout?
LIAT’s biggest asset is its routes. Nothing else really matters. The aircraft are leased, and LIAT’s facilities are also mostly rented. The airline owns little of any real value that couldn’t be bought at fire-sale prices after a bankruptcy.
So let’s here from those who know about airlines and LIAT in particular… Is it possible that LIAT’s shareholders are deliberately destroying the airline?
Case in point: RedJet
If Caribbean people can’t travel, they can’t do business, can’t have holidays, can’t spend money – can’t spread wealth. Aviation, or the lack thereof, is holding the Caribbean back.
And what is the result of governments owning airlines? They protect their own. Therefore, we have almost zero competition on intra-Caribbean air routes; between LIAT and CAL/AJ, they’ve got it all sewn up: you go here; me there. And never the twain shall compete.
Case in point: RedJet. What a fiasco – or travesty, more like it. Here was a bold new entrant to the Caribbean aviation scene, the region’s first genuine low-cost carrier. A project developed by a bona fide Caribbean investor; putting (lots of) his own money where his mouth was. How long did RedJet last – six months? And why did it meet such a sad and untimely demise? Of course, no real reasons are given by the perpetrators; one can only surmise…
… from an excellent article by S. Brian Samuel: Crashlanding in Toxic Taxation
“Real competition is brutal and the wolves are sensing and circling the wounded LIAT prey.”
“Idle threats” from LIAT’s chairman do more harm than good
by Robert MacLellan
The board of LIAT airline is clearly feeling the pressure of mounting ongoing criticism of its consistent inability to achieve a stable business model and to provide a vital intra regional air service in the Eastern Caribbean on a reliable basis.
Unfortunately, the announcements of 6th March from the LIAT chairman, Jean Holder, strongly suggest a strategy still devoid of any coherent business sense. Take on huge investment in multiple new aircraft but then shrink the airline’s network? “Passing strange” and “wondrous pitiful”, to quote Shakespeare. If, instead, this is Dr Holder’s idle threat, designed to panic other regional governments in to investing in an airline with such a tarnished reputation, then that also is a strategy likely to fail.
Investors seek companies with proven management expertise. Yet, in his 100 day strategy announcement last week, Dr Holder stated that the current directors and senior management have invited “some experts” to undertake route analysis of the LIAT network. Outside consultants are needed for a basic management task – even after 57 years of LIAT operations? No wonder there are accusations of amateurism in LIAT management and no wonder years of persuasion by Dr Holder have failed to elicit much new investment in the airline from other governments in the region. Continue reading
“The ATR is an airplane that is built for fuel economy. Given that fuel is one of the 3 largest portions of an airlines annual operating budget this is a big deal.”
After reading BFP’s “What’s with LIAT’s choice for new aircraft?”, I have to conclude that Adrian Loveridge might be a tourism expert – but he is no aviation expert and that is certain. Let me give you some enlightenment on the aircraft choice here in question.
For one the Caribbean market is a small and fragmented. Experience has shown that the 50 seat size is about the largest size of aircraft that is sustainable on inter-regional routes. Even so there are many routes which will struggle to fill 50 seats. This is why for years LIAT continued to operate 3 Dash 8-100s. With 37 seats they could provide route frequency on certain lower density routes and still maintain high load factors. Any time you are flying around with empty seats its bad for business and flying around below your breakeven load factor just means that segment is losing money and being subsidised by other routes.
Herein lies the inherent problem with the Q400. It is a 70 seat aircraft.
Additionally it is also a turbo-prop designed as a light jet replacement what that means is that yes, while it is fast it achieves this speed by giving up fuel efficiency. The break even for an industry standard Q400 on the high density low cost Indian and European markets is approximately 57 – 60% It is estimated that in the higher cost operating environment in the Caribbean the breakeven load factor for the Q400 would be in the range of 66 – 70% which means you would need to fill 45 – 47 seats approximately on average just to break even. This would prove difficult in the current travel climate in the Caribbean.
The other problem with the Q400 is airfield limitations. Some airfields in the LIAT network would require the aircraft to be weight limited for departure due to the field length or the proximity of terrain and obstacles or tailwinds. St. Vincent is not the only consideration. This means possibly cutting some services (Nevis for example) and that you would be limited as to how many passengers and bags you can carry out of some places.
For this trade off what does the Q400 bring to the table? Effectively nothing. Continue reading