Wednesday, 12 March 2014

Reasons behind airline’s meltdown revealed

Structural challenges including the failure to sell its Dash-8 fleet and to secure promised funds from additional shareholder entities have been some of the reasons cited for LIAT’s horrendous “summer meltdown” and more recently, delays in its payroll system.

Both Chairman of shareholder governments Dr. Ralph Gonsalves and Chairman of the LIAT’S Board of Directors, Dr. Jean Holder, have also acknowledged cases of mismanagement.

Still, the company is hoping and working feverishly to stabilise its financial situation in the coming months, whilst improving on time performance and delivering a more reliable schedule.

Members of the Board met with the Prime Ministers of shareholder governments in a crucial meeting last Thursday to discuss a recovery plan for the challenged airlines, hoping to as swiftly as possible cut costs and grow revenue in a way that caused minimal pain to those who worked for the airlines.

The failure to sell its existing fleet of Dash-8 craft and recoup those much needed funds was according to Dr. Gonsalves, a result of not having all of the necessary fleet information being requested by buyers to be able to sell at optimal price.

“We were suppose to sell the Dash 8’s [but] we did not get those sold as we had expected, not that there is no market for selling these older planes, but... to sell them for the optimal price you need to have all the records and as you are aware, the hangar got burned … [along with it] a lot of records,” he told the media during a press conference immediately following the Prime ministerial meeting.

“Piecing together those records have created a [tremendous] delay, leading to cash shortage,” Gonsalves reported.

Coupled with the delays in the sale of the old craft was LIAT’s inability to persuade additional shareholder governments to come to the table with funds to make up the additional money needed for its re-fleeting programme, an estimated US$35 million. Out of the just over $100 million needed for the programme, LIAT had been able to secure $65 million from the Caribbean Development Bank. The Vincentian Prime Minister disclosed that existing shareholder governments of Barbados, Antigua and Bermuda, St. Vincent and the Grenadines as well as Dominica had been only able to pay 77 per cent of the outstanding balance, leaving a remainder of roughly $6.3 million which he said would be taken care of this year.

“We expected other governments to come on board... only Dominica came, so that we have had to bear the burden of capitalising the difference between what we borrowed from the CDB and what the refleeting will cost,” he said.

The non-existence of these two expected sources of funds ran LIAT into difficulties with paying its staff. It was reported earlier this year that LIAT employees were repeatedly experiencing delays in receiving salaries as the airline had to choose between this and some of its major expenses, including aircraft lease charges.

Acting CEO Julie Riefer-Jones later told The Barbados Advocate that it hoped to “stabalise the problem” within the next three months.

“We are going to be consolidating around our new fleet and working actively to get rid of the Dash-8’s. The payroll situation we hope to stabilise within the next three months, but the whole LIAT financial situation may take a little longer than that because it depends heavily on the sale of the Dash-8’s, we think [however] that we will be able to stabilise in around six months,” Riefer-Jones explained.(RS)

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