Barbados TODAY – The Caribbean Development Bank (CDB) has weighed in on the slow pace of restructuring of regional airline LIAT, which is owned by Barbados and three other Eastern Caribbean Governments.
CDB President Warren Smith said he was “disappointed” with progress towards executing a plan the bank funded to stem losses, improve efficiency and reverse a sharp decline in passengers using the island-hopping carrier.
The CDB-funded study of the cash-strapped carrier, which was completed in mid-2018 and presented to shareholder Governments, outlined the airline’s challenges and opportunities, and put forward a series of recommendations.
“I must confess that I am disappointed that those recommendations have not been taken on-board in the way in which we had anticipated they would have,” said Smith as he complained of very little progress to date on the restructuring effort.
He suggested it was critical that the countries that benefit from the airline come together to urgently address the airline’s issues given how critical airlift is to intra-regional travel.
Smith said: “One would argue that it is taking place in the context that a number of countries are facing financial difficulties and they had to put their fiscal situation first, but I think sometimes we are not sufficiently farsighted in the way in which we approach these reforms and we don’t recognize that many of our countries benefit quite a bit from aviation.
“The study is before the shareholders. It is for them, in collaboration with the management of LIAT, to make the appropriate changes that can put the airline on a different footing.”
Minister of Tourism and International Transport Kerrie Symmonds told Barbados TODAY earlier this week that shareholder Governments were awaiting a detailed report from LIAT on its operations in order for major changes to be introduced.
Among the pending changes are the implementation of an employee performance index to help determine promotion and pay increases, possibly a new funding model and amendments to labour laws in Antigua and Barbuda, the airline’s home base.
The major shareholders in the airline are Barbados, Antigua and Barbuda, Dominica and St Vincent and the Grenadines.
The CDB-funded analysis looked at the airline’s performance, its challenges and some possible solutions and opportunities.
The study found a number of weaknesses within LIAT’s human resource functions, specifically low productivity and performance.
It also found that the airline was encountering problems in transferring passengers from one aircraft to their connection.
Smith added: “One of the other issues had to do with the type of manner in which LIAT operated as it related to the schedule. At the present time, there is a significant amount of stopping and starting up the island chain and one of the recommendations was that LIAT should look now at moving toward a hub-and-spoke-type arrangement.”
This arrangement, he said, would better facilitate travel for individuals seeking to travel to one destination in the morning, get to another in the afternoon and do business and then return home the same day.
“That would be a major change,” said Smith.
“We naturally, are very concerned about the impact that it has on our economies because LIAT connects the islands of the Eastern Caribbean and is the major carrier from that perspective,” the region’s chief development banker told said.
The most startling of the findings for him, he said, was that the airline used to transport somewhere in the region of 1.2 million people per year, but was only now carrying between approximately 720,000 and 730,000 passengers.
Smith said: “That is a massive drop. So I think we don’t need to be airline people to appreciate the impact that has on revenues, and the overheads are what they are, they remain.”
One of the recommendations coming out the study was for there to be a “dramatic reduction in the level of taxation”, which makes up almost half of the total airfare.
With Barbados increasing its taxes last year instead of decreasing them, Smith said that while he could not tell Government how to run its fiscal affairs, the tax was “an issue that has to be addressed”.
“Barbados is a major player in the regional aviation system and Barbados will have to lead on this along with Antigua and Barbuda and some of the other countries that are so heavily dependent on LIAT,” said Smith.
Another recommendation was to widen the shareholding in LIAT so the burden of funding the airline could be eased from the four major shareholders and allow those who benefit to “pay their fair share”.
“That is not right because there are some countries in this region that get a tremendous amount of LIAT flights and traffic and they are not paying their fair share, but again that is a political issue,” said Smith.
The CDB president, a career economist, contended that all of the recommendations would “lead to an improvement in the overall performance of the airline and hopefully also positively impact its financial performance”.
“We know that if we don’t have a good aviation system, one that is efficient and effective it is going to stymie potential growth of those islands,” added Smith.
He said the CDB was determined to continue to ensure that air transport in the region was improved given that the Organization of Eastern Caribbean States were a “very serious aspect” of the bank’s development mandate.