Caribbean governments are looking towards securing financial assistance from the European Investment Bank (EIB) for the regional transportation sector amid concerns that shareholder governments may be forced to close down the cash-strapped regional airline, LIAT.
Prime Minister Mia Mottley, whose country is one of the four major shareholders of the Antigua-based airline, has confirmed that she has started discussions with the EIB on support for the region’s “transportation sector”.
While she did not name the struggling airline by name, she told reporters that during her recent visit to Canada and the United States, she met with the EIB Senior Vice President, Alexander Stubb adding that the European bank has expressed a willingness to assist with regional projects.
“The EIB doesn’t only lend to the government, it also lends to private companies like the Barbados Light and Power in the past and it has also engaged here with not just national projects but also regional projects.
“And as the lead Prime Minister for the single market and single economy, I also had to engage in discussions with them on opportunities within the transport sector in particular, with respect to the EIB and its role in the region,” Mottley said.
Her announcement comes in the wake of a statement by St. Vincent and the Grenadines Prime Minister Dr. Ralph Gonsalves, earlier this month that the regional carrier may be forced to close its operations after Caribbean governments appear reluctant to provide the necessary cash injection need to keep the airline flying.
Speaking on a Grenada Broadcasting Network (GBN) programme, Gonsalves said only Grenada so far had responded positively to the call for US$5.4 million to help the airline deal with its current financial problems.
“Prime Minister (Dr. Keith) Mitchell has put in approximately one million dollars (One EC dollar=US$0.37 cents) towards emergency funding because he is interested in seeing LIAT remain in the sky”, Gonsalves said, hinting that LIAT, which has a compliment of 10 aircraft will soon have to be made on the way forward.
Three of the aircraft are owned by the Barbados-based Caribbean Development Bank (CDB) that provided the funds to the regional government shareholders to purchase them while the seven others are leased.
“We probably will have to ask the CDB to sell those three aircraft and operate seven of them and then get other smaller airline like One Caribbean to fly between here and St. Lucia, rather than get LIAT to fly on one of the routes which is going to Trinidad which is not economical to cut it.
“The governments have not been responding so the shareholders are reaching a critical point now and if you ask me, what is likely to happen … there will be a transitional restructuring leading to a closure of LIAT,” Gonsalves told the GBN programme, adding that a new airline would then have to be the next option for the region if LIAT is closed.
When asked to share more information about the initial meetings with the EIB on transportation in the region, Mottley declined but promised to do so in due course, adding that “running a government means going where the policy takes us, where the data takes us and where the information is.
“The discussions with the EIB are preliminary but by the same token, there are very few entities that the region as a whole can borrow from with respect to regional projects. The Europeans, in spite of everything else, have remained engaged with us, they understand the dynamics of a single market because they themselves have literally managed a single market and single economy for decades. So, when we are ready to speak on that, rest assured we will be,” Mottley said.
Apart from Barbados, the other shareholder governments of LIAT are St. Vincent and the Grenadines, Dominica and Antigua and Barbuda.
Earlier this month, LIAT said despite pilots and its workers across all its 15 destinations agreeing to a six per cent salary cut, the airline is still facing a severe financial problem and may require additional salary cuts from its employees.
According to an internal document seen by the Caribbean Media Corporation (CMC), following a shareholders’ meeting in St. Vincent and the Grenadines, the regional airline said that the six per cent cut did not go far enough.
“The shareholders are of the view that this proposal did not go far enough and that the six per cent cut did not meet the immediate cost reduction objectives of the company at this time.”
The document said that the shareholders are ‘considering additional measures to address the financial challenges of the airline and that it would continue to update staff on discussions and the proposed measures that will be agreed upon”.
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This will all come down to “who said what”.
Having spent 14 years at LIAT, I know the main problems, firsthand. In fact, everyone knows most of them, but are afraid to implement them for fear of distressing someone else.
The Europeans may well lend LIAT that “lifeline” cash, but at the same cost that has always been recommended.
We will see unprofitable routes reduced or cancelled unless subsidized by those governments.
We will see a reduction in local airport taxes, which are used to repay for expanded or new facilities.
We will see increments change from percentages to fixed amounts.
We will see salaries leveling out according to projected financial growth.
We will see more partnerships to new and lucrative destinations as more South Americans do more business in the Caribbean.
We will see a reduction of managerial redundancy which was done to keep “friends” employed.
We will see changes in the procurement of spares as that old system was often expensive and time consuming.
There are many other changes that will have to be made to put LIAT on a more successful road, but, as I mentioned, only if the Europeans say so, then it will be done.
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