St. Lucia calls for LIAT shakeup and guarantees EC$3 million loan

By Admin Friday November 15 2013 in Caribbean
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CASTRIES: St. Lucia has called for a shakeup of the financially strapped regional airline, LIAT, as it agreed to guarantee an EC$3-million (one EC dollar=US$0.37 cents) loan for the airline, now undergoing a modernization of its aging fleet.

 

“It’s not just a matter of changing the chief executive officer but dealing decisively with a problem in management that has been inherited over the years,” said Prime Minister Dr. Kenny Anthony.

 

The airline, which last week had been forced to cancel many of its flights because of a strike by its pilots, has been without a chief executive officer since Trinidadian Ian Brunton resigned in September.

 

Dr. Anthony, who is also Minister of Finance, said that there was a need for a complete overhaul of the airline’s business model in order to ensure its long-term sustainability and recommended a revision of operations and logistics.

 

He said that LIAT, which flies to more than 21 destinations daily, must stop operating in a traditional manner, believing that the only two bases it can have in the region are Antigua and Barbados.

 

“It has to rethink for example where (should it place) its maintenance facility, these are questions that loom very large and it can’t any longer be a question of historic entitlements where governments are putting money,” said Anthony of the airline, whose shareholder governments are Antigua & Barbuda, Barbados, Dominica and St. Vincent & the Grenadines.

 

Castries has now become the fifth regional court to have a stake in the airline that in September signed a US$65 million loan with the Barbados-based Caribbean Development Bank (CDB) to finance the purchase of aircraft in the context of a fleet modernization project.

 

LIAT said that the loan agreements “provide for the loans to be on lent-to and repaid by LIAT over a 13-year period following a grace period of two years”.

 

The fleet modernization project involves the replacement of LIAT’s aging fleet through a combination of lease and purchase of aircraft, the transition costs associated with the changeover and the upgrade of maintenance facilities.

 

Anthony said although administration was lending support to the regional airline, it was doing so cautiously.

 

“We are prepared to agree to a guarantee, in other words they are not the ones taking the loan and we are merely guaranteeing it,” he said. “The reality is that it’s not money up front which we are taking from the treasury and passing it on to LIAT. But regardless we have to very careful because all the loans you take end up being ascribed to your GDP, because it becomes what is called a contingent liability.”

 

Anthony said that the guarantee comes with stipulations, including the selection of routes which he contends should be market driven.

 

“We have to review carefully the routes selected by the airline, to make sure that the people of St. Lucia are not disadvantaged, as we think that they have been some very bizarre routes,” he said. “There have been instances where for example you fly past St. Lucia to go to Barbados to pick up an aircraft from Barbados and then return to St. Lucia. So that’s an issue for us and we need to determine whether LIAT is acting in a fair manner and whether there is equity in its decision to support certain routes,” he said.

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