Friday, July 16, 2010

A book on LIAT

On Wednesday, July 14, 2010, a book of historical and contemporary significance on LIAT was launched in Barbados.  It is entitled Don’t Burn Our Bridges: The Case for Owning Airlines and published recently by the University of the West Indies Press.  It is authored by Dr. Jean Holder, the former distinguished head of the Caribbean Tourism Organisation and currently the innovative Chairman of the Board of Directors of LIAT.  By training and experience, Dr. Holder has no equal in the Caribbean or elsewhere to write such a book, a point made in the volume’s Foreword by Professor Hilary Beckles, the Principal of the Cave Hill Campus of the UWI.

The book, too, is about more than LIAT, since it also examines broadly the state of the airline industry in the Caribbean and its umbilical connection to tourism.  But it is largely about LIAT.  

The volume reeks with a robust, thoughtful nationalism, and its title reflects, summarily, that perspective in the interest of our Caribbean civilisation.  It is a “must read” to anyone interested in public policy in our region.

Over thirteen chapters and nine appendices, Dr. Holder enriches immeasurably our understanding of LIAT and the regional air transportation industry.  The chapters traverse the following subject areas: The case for Caribbean carriers; the history of the main regional air carriers; comparative financial performance of Caribbean and international airlines; the options for cooperation between regional airlines; the LIAT case study; the LIAT-Caribbean Star merger and the negotiations with Star’s owner, Sir Allen Stanford; the issue of the circumstances when an airline monopoly is justifiable; deregulation, fare setting, and oil prices; the year 2008, the worst in civil aviation history; the 2008 economic crisis and the region’s response; Caribbean tourism and air transport; and air transportation in the CSME’s future. 

The nine appendices cover a range of statistics relevant to LIAT, air transport, tourism, airplanes, and LIAT itself.  They constitute a rich harvest of relevant information for policy makers and the general public.

St. Vincent and the Grenadines and saving LIAT

Dr. Holder rightly highlights the roles of the ULP administration in ST. VINCENT AND THE GRENADINES and Prime Minister Ralph Gonsalves in the saving and restructuring of LIAT.  Let Dr. Holder’s words speak:
“In reality, LIAT became largely dependent on the Antigua and Barbuda government until a government led by the Hon. Dr. Ralph Gonsalves was elected in St. Vincent and the Grenadines.  

Prime Minister Gonsalves became a strong supporter of LIAT and won the support of Barbados for the cause.  Speedwing’s call for EC $26 million from governments only yielded EC $2.6 million from St. Vincent and the Grenadines.  Prime Minister Gonsalves was also responsible for bringing other private sector resources on board.  He later took the lead in the hiring of Zwaig Financial Consultants of Canada, whose sound advice, delivered  largely through Cameron Mc Caw, was to prove a major turning point for LIAT.  By 2004, the Government of St. Vincent and the Grenadines had become LIAT’s largest shareholder with 25.26 percent of the shares, ahead of Barbados with 22.19 percent, and Antigua and Barbuda with 18.38 percent”.

In fact, Dr. Holder does not record everything here about ST. VINCENT AND THE GRENADINES’s initial material contribution: The figure is not $2.6 million but $2.9 million in equity plus $2 million in LIAT’s bonds purchased by the state-owned VINLEC, and some $6 million, which LIAT owed ST. VINCENT AND THE GRENADINES in landing fees and taxes was converted into preference shares in the company for ST. VINCENT AND THE GRENADINES.  

Nevertheless, we thank him for highlighting the role of the ULP government and the Comrade in saving LIAT in those dark, rough days.

Dr. Holder goes on further to state:
“The period from 2000 to 2004, which included the horrors of 9/11, was one of the most difficult on record for regional and international air transport.  Cost inputs into air transportation, especially those relating to safety, security and insurance, began to escalate exponentially.  The launch of Caribbean Star in 2000 had been followed by that of Caribbean Sun in 2003, operating out of San Juan, Puerto Rico, and also competing with LIAT on some of its routes.  It was later discovered that both Caribbean Star and Caribbean Sun were suffering huge losses; but thanks to Sir Allen Stanford’s deep pockets, seemed totally unaffected by their losses”.

In the light of some recent negative sounds emanating from Trinidad and Tobago about the use of the CARICOM Petroleum Stabilisation Fund (also known as the CARICOM Petroleum Facility), it is useful to record its assistance to a vital regional entity.  Dr. Holder addresses this matter, thus:
“In 2004, LIAT’s Shareholder governments (Antigua and Barbuda, Barbados and St. Vincent and the Grenadines) provided LIAT with EC $21 million; and in the first quarter of 2005, they persuaded the Government of Trinidad and Tobago, with the approval of the CARICOM governments, to provide LIAT with a grant of EC $44 million from the CARICOM Petroleum Stabilisation Fund.  This was a major achievement by Prime Ministers Arthur, Spencer and Gonsalves, since initially, Prime Minister Manning was adamant that his government would provide no further support to LIAT.  What brought about the change of heart in a session behind closed doors would probably be interesting to listen”.

Actually, Ralph Gonsalves was the person who was primarily responsible for persuading Manning.  Arthur and Manning had clashed verbally in the wider meeting with government officials and LIAT’s Board.  Ralph called for “time out” and a private session.  He placed LIAT within a regional context, raised the possibility of a nexus between LIAT and BWIA, and traced the historic role of the Caribbean’s titans including Dr. Eric Williams in keeping LIAT in the air.  Ralph’s personal friendship with Patrick Manning since university days helped.  Later, Owen Arthur was to applaud Ralph for a splendid performance.  Our Prime Minister, as Chairman of LIAT’s shareholders, was entrusted with the task of persuading all the CARICOM Heads of Government about using EC $44 million for LIAT.  It was quite a task.  It took PM Gonsalves ten days to do so.  This experience told him a lot, positive and negative, about CARICOM.

Purchase of Caribbean Star

In 2007, the losses incurred by Caribbean Star, in excess of US $35 annually, compelled Stanford to “sue for peace” with LIAT.  He realised that he was unable to win in a battle with three strong-willed Prime Ministers and the people of the region.  All of Stanford money could not purchase our nationalist leaders.  To buy the assets of Caribbean Star (which did not cost a great deal) and to assist in LIAT’s further restructuring, LIAT’s three shareholder governments borrowed US $60 million from the Caribbean Development Bank (CDB).  Barbados was responsible to repay US$35M million; Antigua and Barbuda, US $20 million; St. Vincent and the Grenadines, US $5 million.  St. Vincent and the Grenadines insisted on the application of the principle: Equity among equals, proportionality among unequals.  St. Vincent and the Grenadines had taken LIAT out of trouble, seen off a dangerous competitor in Stanford, and was now prepared to assure a lesser though still significant financial burden.  In the process, Barbados became the largest shareholder; Antigua-Barbuda, the next; and St. Vincent and the Grenadines, the smallest shareholder government.  Ralph Gonsalves remained the Chairman of the Shareholders, given his historic role in the saving of LIAT.

All of this and more is in this informative book by Dr. Holder.

LIAT as a monopoly

Dr. Holder defends the near-monopoly status of LIAT as a good thing for the region.  Some monopolies are good; others are bad.  Holder’s case for LIAT is overwhelmingly strong and convincing. 

It is more than time for the other Caribbean governments to provide LIAT with market support or to put equity capital in it.  LIAT is too vital to be left to three governments.  More money is needed right away for fleet renewal!

From The Vincentian