LIAT in need of urgent cash injection to avoid collapse

LIAT, the Antigua based sub-regional air carrier, faces a period of uncertainty after it emerged that it urgently needed an immediate cash injection of at least US$5m to remain in operation. Although some reports indicated that if it cannot find the funds the airline might be grounded after mid-March, this has been denied by the airline’s management.

The airline’s problems revolve around its ability to take on new debt with the Caribbean Development Bank (CDB) or others. Although no specific figure has been identified publicly, LIAT is believed to need in excess of US$60m at a time when some of its shareholder governments, particularly Barbados, are in financial difficulties and in no position to take on additional liabilities.

To try to address this, several regional governments served by the airline but not presently providing financial support are now being urged to provide financial support either through a shareholding or commercial arrangements that would incentivise the airline to keep flying into their nation.

Speaking about the need for greater support for the airline, Gaston Browne, the Prime Minister of Antigua, called on the governments of St Kitts, St Lucia, Grenada and Guyana to purchase shares in LIAT.

“There is a need for us to have a model of shared burden, recognising that from time to time LIAT would need some level of support. We have recognised that LIAT is making a significant contribution, not only in terms of the connectivity of people within the region, but even the airport taxes, the landing charges and so on that are earned by the various governments,” Browne told a local radio station.

He suggested that the most expensive option would be to allow LIAT to collapse as the creation of any new entity would be more expensive than restructuring LIAT.

Although Antigua has said that it is prepared to assume US$16m of the airline’s debt the position of other shareholders is less clear.

The Grenada Government has said it would be making a cash contribution and going forward will pay LIAT additional funds based on load factors into the island, while Barbados’ Tourism Minister, Kerrie Symmonds, has said that as a major shareholder in LIAT, the island remained interested in keeping it flying but “won’t be the lone ATM machine” for the airline.

Also commenting, Trinidad’s Prime Minister, Dr Keith Rowley said that his Government would seek to help the airline by considering how it might enter into an agreement with its national carrier Caribbean Airlines (CAL). He, however, stressed that Trinidad would not be injecting new cash into the airline but, for security reasons related to inter-island travel, retained a 1% share in LIAT as a contribution to the Advanced Passenger Information System.

On a possible relationship with Caribbean Airlines, Rowley said CAL would discuss with LIAT the economic benefit for Trinidad as a passenger receiving country and a possible commercial arrangement with CAL for the maintenance of the LIAT fleet in Trinidad.

Commenting on the airline’s problems, LIAT’s Chief Executive Officer Julie Reifer-Jones said that the airline will continue to operate in a safe and efficient manner to provide connectivity and services to the Caribbean. She however warned that all stakeholders, whether labour, suppliers or financiers would be told that they will be called upon to make adjustments aimed at achieving a viable airline operation.

 This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.

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