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LIAT to be Liquidated and New Airline to be Formed

by: - June 29, 2020
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The Prime Minister of Antigua and Barbuda Gaston Browne has announced Caribbean airline LIAT would be liquidated following a series of unsuccessful months due to COVID-19. The airline, based in Antigua, will be formed into a new entity that will provide vital connections between the Caribbean islands.

The decision was announced and shared with local media outlets on June 27th. It comes after months of losses due to the coronavirus alongside a particularly unprofitable 2019.

Last year, the airlines recorded a loss of EC$12m (US$4.4m). While it may have hoped to recover this year, LIAT could not have foreseen the scale of the coronavirus. In May, it said it needed US$5.4m to recover. There was a spell of hope for investment from Richard Branson, which later turned out to be bogus.

It goes without saying that the coronavirus has been kind to very few if any, airlines. Small regional carriers like LIAT are now feeling the pinch after months of parking their aircraft and paying staff. Unfortunately, for LIAT, the toll was just too much.

The airline is currently awaiting a stakeholder review where its fate will be decided. The hope is that a new carrier can rise from LIAT’s ashes to bring vital connectivity within the Caribbean.

In a local radio interview in Antigua, Gaston Browne spoke confidently about the need for a new airline to be formed in Antigua. It’s essential. As an island in an archipelago, connectivity is vital, and allowing LIAT to collapse without investing in an alternative is non-negotiable.

At this point, the Prime Minister hopes that the LIAT brand can be restored on a revamped carrier. According to Barbados Today, Browne said in a local radio interview that, “We should not be running away from the name LIAT. LIAT is a Caribbean institution built by Caribbean people of which we should be proud.”

However, realizing that ideal is fraught with difficulties. In the interview, Browne’s cautionary approach was evident. Currently, four Caribbean isles own LIAT; Barbados, Antigua and Barbuda, St. Vincent and the Grenadines, and Dominica. Should that continue to be the case for the new carrier, it will be challenging to determine the best course of action for the airline. With each state following different agendas, it will be better for the new LIAT to have even stronger leadership this time around.

However, while the promise of a new airline is where everyone wants to focus their interest, there are a few loose ends that need tying up first. For starters, how will LIAT manage its employees? Having made a loss in 2019 and owning very few planes, there are very few avenues where money can be recouped.

Of course, paying staff is a priority, but currently, it is unclear exactly how the airline will be able to manage. Hundreds of jobs will be lost in the collapse that will not be recovered. While LIAT will need to come back stronger than ever, it must also be smaller to adapt to the current climate.

Bankrupt regional carrier LIAT owes its staff some $94 million in severance and holiday payment, which the chair of its shareholder governments, Prime Minister Ralph Gonsalves, said it is unable to pay.

“Because even though they laid off about 500 workers, they kept on a staff of about 168 across the network. Then, for maintenance of the aircraft, insurance, repatriation of staff and health insurance coverage and rental of office equipment, utilities, that number comes up to about EC$10.8 million. And then you have about –their paid booking at May 2020, LIAT had paid bookings of US$4.3 million outstanding.

“Now, these are things which the liquidator would have to deal with. But severance payment in total, for all the workers, as per the existing collective agreements, which is not necessarily what the law of Antigua would specify but I am taking the law of Antigua in relation to insolvency, the number may be smaller, but if you are dealing with just the existing collective agreements, you’re looking at 83.9 million in severance payment and there are people who have vacation pay and for all the countries, it’s another $10 million in vacation pay, so you are talking about $93.9, call it $94 million,” Gonsalves said.

He said LIAT is “insolvent, LIAT doesn’t have any assets to pay anybody anything.

The prime minister said that the Caribbean Development Bank owns three of the aircraft that LIAT operates and has a priority charge on them and the remaining seven planes are leased.

The airline services 15 destinations, from Puerto Rico to Guyana.

 

(SKN Observer/iWNSVG)