LIAT: Rising like a Phoenix

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By Caribbean News Global contributor

ST JOHNS, Antigua – Prime Minister of Antigua and Barbuda, Gaston Browne, on Saturday, during his Point FM radio programme, gave a synopsis of – Rising like a Phoenix – a plan for the re-organization of LIAT that, “is essential to connect the Caribbean people by providing safe, reliable, affordable and comfortable air transportation and to support tourism feeder traffic between the islands.”

Caribbean News Global liat_2020plan LIAT: Rising like a Phoenix Prime minister Browne is expected to present his plan to prime minister Mia Mottley of Barbados and Dr Ralph Gonsalves of St Vincent and the Grenadines, major shareholders of LIAT, at a meeting scheduled for Monday, July 20.

Meanwhile, all persons having claims against the company are required to submit the same on or before Monday, July 27, 2020. The airline’s board of directors issued a notice of a meeting with its creditors slated for July 31 at the company’s head office in the Sealy Building on the Sir George Walter Highway ‘to consider winding up the company’.

However, “LIAT will be saved” prime minister Browne insists having developed a plan for the re-organization of LIAT and the Companies (Amendment) Act 2020 Gazetted on Wednesday, July 15, 2020.

On Saturday, July 11, 2020, the parliament of Antigua and Barbuda amended the country’s Companies Act to include an option for insolvent companies other than liquidation. The amendments to the Act recognize, that reorganization is a superior option to piecemeal liquidation which would dispose of the company’s assets for a fraction of its value, resulting in greater losses to stakeholders including creditors.

Debating the amendments at a special sitting of parliament “We will save LIAT in the interest of the Caribbean and all we ask is for my colleagues (the other shareholders) to give us a chance,” Browne stated. Under the 1995 Act, one can only “liquidate by selling the assets on a piecemeal basis of a company or you can sell the assets on a wholesale basis to a new entity to do a quick transition from old to new”. Changes are to ensure that “companies who may have solvency issues but at the same time may have a strong business brand, doing a significant amount of business and also companies that are significant to the economic wellbeing of the country and its people, will have an additional option” to liquidation.

The rehabilitation provisions in the Companies Act of Antigua and Barbuda allows for the appointment of an administrator, who will be the sole representative of the LIAT estate. All decisions involving the affairs of LIAT would be taken exclusively by the administrator and not the directors, or shareholders.

“LIAT is a Caribbean in­stitution that is key to the in­tegration process and it has served the region well. It is the pride of the Caribbe­an and a significant part of our Caribbean civilization. Unfortunately, we have not given LIAT the support it deserves. Rather, we spend time criticizing the airline and some countries pre­fer to provide support for extra-regional carriers to fly into their territories but deny LIAT similar privileg­es,” prime minister Browne said.

Additional benefits to the amendments should see Antigua and Barbuda move up the ranks on the ‘Ease of Doing Business’ survey.

Minister of foreign af­fairs and trade, E.P Chet Greene, said: “The adoption of this Act will modernize the frame­work for doing business in Antigua and Barbuda. It will also do so by giving re­lief to companies that might encounter difficulties pro­viding them with the chance to re-organise in such a way that they can continue to provide goods and services to the community, retaining satisfactory employee com­pliments and giving them time to negotiate payment to their creditors.”

Prime minister, Dr Keith Mitchell, has disclosed that Grenada will soon be reducing taxes on airline tickets as part of measures aimed at encouraging intra-regional travel within CARICOM, as governments implement various strategies to encourage travel within the region.

Caribbean News Global Top-Header-Banner LIAT: Rising like a Phoenix

“There is a combination of opportunities that will be available to ensure that we have, not just to replace what LIAT was bringing if it has not returned, but to have expanded opportunities.” He said, “We expect with the additional transport to the individual countries in the region and the reduction of taxes in general and airport fees, in general, we will see further development of inter-island travel,” Dr Mitchell said.

Browne’s plan states that “The proposed lowering of airport taxes throughout the region should result in at least a 20 percent increase in intraregional travel. The latter is based on a CDB study on the effect of pricing on the demand for intraregional travel. This adjustment in fees and the corresponding medium-term increase in travel demand was not factored into the projections.”

Prime minister of St Kitts and Nevis, Dr Timothy Harris, has commented on the proposed liquidation of LIAT noting that air travel within the Caribbean Community (CARICOM) should meet three main attributes.

“We have always said that we want affordable, reliable and safe transportation for people leaving St Kitts and coming into St Kitts. Whatever comes forward, we are willing to give support and to participate because a regional mechanism for transporting our people is critical to the way we live, our tourism industry and regional integration,” prime minister Harris expressed. He added that the majority shareholders “wield significant power and control over LIAT and in that regard their plans have not yet been shared with … those who are not significant shareholders and we await that so that we can make an informed decision.”

Prime minister Browne proposed new capital requirements of a reorganized LIAT up to EC$108 million of which, the government of Antigua and Barbuda is prepared to underwrite up to 50 percent. It is expected that the remaining $54 million will be shared by other private and public sector entities including existing shareholder governments. If the existing shareholder governments are not interested in investing in the reorganized LIAT; they will be requested to surrender their shares for $1.00, which is a superior offer to what they would get in liquidation.

“We note that Caribbean governments are willing to spend tens of millions of dollars, to subsidize foreign carriers, but expects LIAT to operate their unprofitable routes without financial support. The new LIAT would bring this inequity to an end and would only operate those routes with a supporting MRG. The attached projections in appendix 2 confirms, that LIAT could operate profitably without any subsidy, as an airline operated by professional airline managers, with exclusive commercial considerations,” the plan notes.

Caribbean News Global gaston_browne LIAT: Rising like a Phoenix

The reorganization will preserve the value of LIAT for the airline and its stakeholders, unlike a disorderly liquidation and the chaos and confusion that will come with the latter.

Reorganization will also maintain all its route rights including ports in the United States. territories that it presently serves. Any new airline would have to secure ‘economic authority’ from the US Department of Transport – a long process with heavy conditionalities. Additionally, any such new airline would have to operate from an area that enjoys Category 1 status from the US Federal Aviation Administration. Neither the OECS area nor Barbados currently enjoy Category 1 status.

Breaking up LIAT would undermine the aviation market in the subregion, resulting in market instability including, the ability of any of the other competitors, to serve as a reliable feeder airline for large aircraft bringing tourists to the region. 

“The market structure in the region is too small, to accommodate each independent state having its own airline and airbase; thus, will result in destructive competition among small under-capitalized airlines and a significant wastage of resources and business failures. The history of airline performance in the past attest to the indisputable veracity of this observation.

“The private sector in the region lacked the capital to sustain an airline of the size and quality of LIAT, much less, a new airline in each member state. However, as far as practicable, the private sector should be encouraged to participate in the recapitalization and directorship of LIAT. Private sector ownership and participation is desirable and would bring a greater focus on commercial operations of LIAT and profitability.

In light of the more viable re-organisational option, the forced liquidation of LIAT against the wishes of some stakeholders, to facilitate parochial interests, may be construed as an act of malevolence, that could undermine Caribbean unity and the integration movement.

LIAT has been and continues to be a most important institution in connecting the Caribbean people. In this regard, Caribbean governments need to be mindful of the importance of preserving institutions, especially if there is a clear case that they can be reorganized and strengthened to safeguard the interests of the people of the region.”

@GlobalCaribbean   Caribbean News Global fav LIAT: Rising like a Phoenix   Read: Plan-for-the-Reorganisation-of-LIAT-Final

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