LIAT leave itself

This was a proposal that was dead on arrival, but an issue that has remained very much alive through lively and animated debate.

This was a plot hatched in St. John's but with repercussions here and across the Caribbean, a plan which the Antiguan prime minister, Gaston Browne, in a polemical tirade, slammed as treasonous.

This is a plan - constructed on messianic expectations and seen as apostasy by Antigua - that was designed by the intra-regional carrier, LIAT, to "collapse" LIAT in preference for a Barbadian carrier.

"…the proposal to cannibalize LIAT is certainly an act of treason against LIAT and obviously an act of hostility against the government and people of Antigua and Barbuda," Browne said on local radio in St. John's.

The proposal, a copy of which was obtained by The Sun, calls for the establishment of a Barbados airline to replace "the majority of existing LIAT services" while developing new routes. The seven-page document, which carries LIAT's logo, along with the initials DE – presumably David Evans, the LIAT CEO – makes "a strong case" for Barbados to establish its own carrier.

One person familiar with the recommendation has confirmed to The Sun that it came from LIAT and that it was presented as a way forward for the struggling airline. However, the document appears to be an emotional appeal to Barbados to break away from "THE Caribbean Airline", of which it is the largest shareholder, leading to the fall of LIAT.

"The level of service provided by LIAT in particular is poor both in terms of quality and quantity, and the financial burden placed on Barbados via its shareholding in LIAT is unlikely to reduce in the short or medium term… This paper proposes the replacement of LIAT with a new entity based in Barbados, and unencumbered by the costs and legacy characteristics of LIAT," it says.

The paper proposes that a Barbados Air Carrier (with Newco as a working title) be established with its own Air Operator's Certificate (AOC) and route licensing authorisation. It anticipates a fleet of 10 aircraft – five owned by Newco and five leased – and that Barbados trade its shares in LIAT for the ATR planes. The new airline would employ no more than 350 people and outsource many of the services.

"The strategic approach to the structure of Newco would be based on moving a number of historic fixed airline costs to a variable cost basis via outsourcing. Areas earmarked for outsourcing would include base maintenance, ground handling, call centre and revenue accounts, all of which are nowadays typically outsourced in many small to medium sized airlines and in almost all low cost carriers. These activities currently employ over 300 staff in LIAT. As a consequence it is envisaged that Newco could operate a fleet of 10 aircraft with just 300-350 permanent staff ," the proposal envisages.

It projects nine months from incorporation of Newco to its launch with anticipated funding of US$29 million. According to the proposal, the airline will turn a net profit of US$9.9 million by the end of its first year.

Several attempts to reach the aviation minister, Ian Pinnard, for comment were unsuccessful. However, Dominica is one of 18 destinations that the proposed new airline would serve in its first year, with at least a dozen others, including Bogota, Colombia, Fort Lauderdale and Washington in the US, Kingston, Jamaica, Panama City, Panama and Havana, Cuba, by the third year.

"Market sizes in years one and two of the network development plan dictate 50-70 seat turboprop capacity with an interim fleet in year one of 10 aircraft of both wholly owned and wetlease variants. Year two sees growth in a single type ATR fleet to 12 aircraft, whilst year three adds jet capacity probably in the shape of two class A320-200s," the proposal states.

The author argues that the region's two leading carriers, LIAT and Caribbean Airlines, continue to lose money with little prospect of improvement; are " highly unlikely" to attract private investment; and that the travelling public remain dissatisfied with the service they provide.

"A slow, painful, and costly collapse or a fresh start appear to be the only logical options available," he insists, adding that it could cost US$111 million (EC$300 million) to close LIAT. In the proposed scenario, the paper contends, total liabilities would be half this cost.

The proposal, dated 9 February 2015, was rejected by the board of directors at a recent meeting, leading to its death on arrival. However, the ensuring lively debate means the issue is far from dead.