LIAT devises plan to ‘reorganise’ as opposed to liquidating | Plans to fly in two to three months
Residents in the British Virgin Islands with credited accounts in the cash-strapped regional airline, LIAT, may soon be able to utilise their credit as plans have been announced to ‘reorganise’ the airline, therefore staving off previously-announced plans to liquidate the company.
This is according to statements from Antigua & Barbuda Prime Minister Gaston Browne, who gave that indication coming out of a virtual meeting with LIAT’s shareholder governments last week.
He said the current agreed plan is to sell three of LIAT’s planes that are charged to the Caribbean Development Bank. The proceeds from that sale will be used to repay or to reduce the airline’s outstanding debt.
According to Browne, once the current plan is executed without fail, LIAT may likely resume flights within two to three months.
“LIAT has seven other planes on the ground here which are leased planes and we will get on to the lessors and enter into some new arrangement with them to continue to lease several of the planes so that LIAT could operate and we are hoping that LIAT could be back in the air within 60 to 90 days,” Browne said.
Leaner LIAT to be profitable
Prime Minister Browne also said that the reorganised LIAT will be much different than a normal restructured entity whereby companies restructure to sustain debt but have no major cuts in expenditure.
“In a reorganised LIAT, creditors will be asked to take a cut up to 100 percent in some instances, but on average about 50 per cent. The staff we expect, a 50 percent reduction in the staff liabilities because if they go to liquidation they will be lucky to get 10 percent,” he said.
“In addition, the government of Antigua and Barbuda will work along with the administrator to raise additional capital so that the new reorganised LIAT (1974) Limited would have the capacity to operate on a sustainable and profitable basis,” he added.
LIAT not out of the woods as yet
In a subsequent interview, Browne said that his country will be moving to appoint the aforementioned administrator, who will have to present to the court within a matter of weeks the plan for the reorganisation of LIAT.
To this end, he said the airline could still face the possibility of being liquidated if parties fail to comply with the intended requests of the plan.
He said: “If the administrator fails to get the haircut from the various creditors, then LIAT will still be faced with liquidation, so the company is not out of the woods as yet.”
“But in essence our challenges have just started but we are not daunted by challenges and we feel confident that we will be able to raise the necessary capital so that we can put LIAT back into the air to have it flying and to restore LIAT to profitability and sustainability, and we will be using every effort in order to ensure that those objectives are achieved,” he explained.
Barbados and St. Vincent sell shares
Also developing out of the meeting was the agreement of the Barbados and the St Vincent and the Grenadines governments to sell their shares in LIAT to accommodate the reorganisational plan outlined by Antigua and Barbuda.
According to Browne, both governments agreed to sell their shares for one Eastern Caribbean dollar, which is equivalent to US $0.37.
This move by both governments is an indication that neither were interested in investing in the reorganised LIAT, as the plan outlined by Antigua required all existing shareholder governments to either invest in the company or sell their shares.
Customers still in the dark
Earlier this month LIAT had confirmed on their official website that the company was facing the possibility of being liquidated.
Following that announcement, concerns were raised among stranded customers in the BVI with credited accounts who were left in the dark on how or if they will be refunded their monies owed.
LIAT is yet to announce what measures will be taken going forward, but have asked all customers to continue to monitor their page for all future updates.
Copyright 2024 BVI News, Media Expressions Limited. All Rights Reserved. This material may not be published, broadcast, rewritten or distributed.
This is certainly good news for the region.
Antigua PM consistently paints a rosy & progressive picture of LIAT developments, whilst the remainder of the Caribbean has given up on them. In situations like this, one should be skeptical of those over promising, especially when we understand his country’s stake in it. Time will tell if he is vindicated, but these tend to play out one way.
LIAT, now LIAT(1974), as an entity got airborne in the region in 1956 and has been serving the region for the past 64 years. Like the region and air travel, it has had and has it challenges, eg, economic, operational, institutional, governmental……..etc. Regional air connectivity is important for economic growth and development and business, leisure and family and friend travel. And a restructured LIAT can play and become an important part in regional air connectivity.
In discussing the LIAT situation with family and friends, the common conclusion is that LIAT has been around for a long time, should be doing better and it is time for LIAT to move on. LIAT( Leave Island Any Time) has earned that reputation. Nonetheless, LIAT’s situation is rooted in two primary factors,ie, 1. LIAT itself, and 2. the market in which it operates. I will comment briefly on the latter.
LIAT operates in a small market. Typically, the airline business is a capital intensive, labour intensive, maintenance intensive, high operating cost, high safety margin requirement and razor-thin profit margin business. LIAT moved people primarily. A key economic metric in passenger airline(s) operations is passenger load factor (PLF), which is the ratio of Revenue per Passenger Mile(RPM) to Available Seat Mile(ASM).
Every aircraft that takes off and lands incurs a fixed cost. A passenger airline needs a minimum number of paying passengers to cover that fix cost, break even cost(Break Even Load Factor); however, the airline is a business and needs to turn a profit to stay in business, to stay airborne. Covid-19 exacerbates LIAT’s already shaky financial position.
Nevertheless, LIAT like the phoenix can rise from the ashes. But to do so, it must get leaner, restructured, ably led/operated and staffed with eminently qualified and experienced people, and established a new vision/mission.
K. You sound as if you have had at least some education in aviation operation and management. My bet was that did. True or false?
If a monopoly with high ticket prices never return a profit why should anyone expects that will change unless the new management and Directors and anyone related to them never worked for LIAT in the past.