THE recent $EC 3 million dollar contribution of Dominica to the Regional island-hopping airline LIAT was a display of leadership by the Dominica government and hopefully other governments that benefit from the services of the Regional carrier will follow suit and provide financial support to ensure the airline regains profitability.

Dominica’s Prime Minister Roosevelt Skerritt said the investment in LIAT was a means of “safeguarding and protecting the investments the government has made in tourism ….”
The injection of badly needed fresh capital and an additional shareholder was made against the backdrop of three years of losses for the airline, which Chairman Jean Holder says was “never properly capitalised”.
Holder told me that the airline has been operating “hand to mouth” for years and is always trying financially to “catch up” due to high operating costs and under capitalisation.
Holder, who welcomed the Dominica government’s contribution, feels that for the airline to be put on a sound financial footing it needs new capital and not just from its major shareholders Barbados, Antigua and Barbuda and St. Vincent and the Grenadines. He feels the amount of shares currently held by smaller CARICOM shareholders should be increased.
Losses over the past three years are in the vicinity of E.C. 80 million dollars. Chief Executive Officer Ian Brunton has reported that the airline’s estimated losses for 2012 is EC$23 million. However, some good news is on the horizons.LIAT is projected to reverse its current losses and record a profit of EC$7 million in 2013 and by 2017, profits in excess of EC$40 million are projected.
Brunton has noted that since 2009, the airline has had to deal with high fuel costs and lower passenger traffic that has seriously affected its finances.
Liat flies to 21 destinations in the Region and has to maintain offices with staff in all the English, French, Spanish and Dutch countries.The airline’s fleet of 18 planes does over 100 flights per day.
Last year, a fire destroyed a LIAT Dash 8 passenger aircraft, a hangar and two office buildings operated by the airline.
Over the last few years,because the airline was cash-strapped, it did not have funds to buy new planes. The LIAT Chairman says the airline needs to replace its Dash 8 aircraft with ATR planes, which have larger capacity. The airline announced this week it will be purchasing three 48-seater ATR 42-600s aircraft.
According to Holder, by changing its fleet, 90 per cent of its maintenance costs would be eliminated and 50 percent of its fuel costs would disappear.
In addition to new equipment, the airline is under-insured for buildings at its St. John’s headquarters in Antigua.
Commenting on the recent setting up of a Caribbean Tourism Organization (CTO) Aviation Task Force, Holder called for the issue of fuel subsidies and a level playing field among Caribbean carriers to be addressed.
He observed that in Barbados the national bus service, which is “excellent” is subsidised, alluding to his contention that there can be no low fares without subsidies.
Another agenda item he recommends for the Task Force is examining the impact of adding more and more airline capacity to already thin Caribbean markets. The best approach, in his view, is to form alliances that will result in joint marketing and joint purchasing and this will enable carriers to offer decent prices.
He also observed that private sector-owned or operated airlines and charters operating in the Region have not survived. Red Jet, which offered clearly unsustainable low fares, and EzJet, are two of the most recent airline failures in the Caribbean.
Fly Jamaica Airways is scheduled to have its inaugural flight to John F. Kennedy International Airport in New York this week. The airline has announced that plans are in the pipeline to also fly to Toronto and also Guyana.
The LIAT Chairman is encouraged by recently resuscitated talks with Caribbean Airlines Limited (CAL) on how the two airlines can collaborate. He feels it is “not beyond”  LIAT’s major shareholder governments and Trinidad and Tobago to come up with new approaches that will see LIAT and CAL operate as collaborators rather than competitors.
He is convinced that working cooperatively, the two airlines can be “very serious competition” for other airlines flying into the Region.
LIAT recently reduced its workforce from approximately 1,000 to 850. Its management has the unenviable task of dealing with as much as 10 different unions.Holder advised me that the industrial relations climate has improved.
Former CEO of LIAT, Dr. Warren Smith, feels the airline’s business model needs to be revisited.
“Liat needs to be put on an economic basis flying economic routes, charging economic fares and should receive the same subsidies from governments that they provide to airlines such as American Airlines and British Airways to come into the Region,” Smith, now President of the Caribbean Development Bank (CDB) told me recently.
He agrees with LIAT Chairman Jean Holder that there can be no low fares without subsidies for the airline.
Smith feels talk that LIAT fares are high is unjustified and is a moot point. He argues that given the configuration of inter-island aviation and thin markets is many destinations, there is bound to be high operational costs.
He also observed that CAL has a “serious advantage” in terms of fuel over LIAT.
According to Smith, Regional aviation, in terms of uneconomical routes, has to be rationalised. “We can’t expect to fly routes which are uneconomical and expect fares that are low.”
Both the LIAT Chairman and former CEO agree that the Caribbean Single Market and Economy (CSME) will never be effective without reliable and affordable Regional air transportation that can adequately provide for the movement of passengers and cargo across the Region.
It is something that Regional governments ought to bear in mind. Those countries that benefit from the services of the airline should consider injecting some capital to ensure LIAT’s plans to operate on a more secure financial footing materialise.