COVID-19 sends lifeline carrier into liquidation

Bert Wilkinson | 7/2/2020, midnight
The lifeline commuter service had been ailing for years, with regional governments shelling out millions to keep it in the ...
COVID-19/Coronavirus Image by Gerd Altmann from Pixabay

The lifeline commuter service had been ailing for years, with regional governments shelling out millions to keep it in the air, but the strain of weeks of downtime from the COVID-19 lockdown has proven to be too much to bear for its already cash-strapped regional shareholding governments.

So governments like Antigua, St. Vincent, Barbados and others which own shares in Antigua-based Leeward Island Air Transport 1974 Limited (LIAT) have finally decided to throw in the towel, collapse the airline and form a completely new entity while keeping the globally known LIAT brand name.

The airline with several relatively new turbo prop French-made ATR aircraft appears to be planning to take a leaf out of the books of Trinidad which had back in 2006-07 collapsed its money losing state owned carrier-BWIA, and replaced it with the existing Caribbean Airlines which has performed significantly better than BWIA. Caribbean Airlines has been leaner, having dumped some unprofitable routes like London and purchased or leased more modern and fuel efficient aircraft.

Since management grounded the fleet nearly three months ago to minimize the spread of the coronavirus, planes have basically only operated charter and special flights while management has to still fork out hundreds of thousands of dollars to meet monthly lease payments.

Antiguan Prime Minister Gaston Browne whose country functions as LIAT’s headquarters says the current level of losses cannot be sustained and the best option to exercise might well be to start all over from day one.

“Back in 1974 when LIAT was collapsed, my understanding is that it took a day to start the operation of a new entity. It may be a little more difficult to get it done within 24 hours and I do understand that there are a number of stakeholders that we have to satisfy, especially creditors and I believe that we could do a work out with the various creditors and to literally get some arrangement in which they can accept that we are not conveniently closing LIAT 1974 Limited. The governments cannot go any further with it,” Browne said on a regional radio program at the weekend.

To all of the smaller nations in the Eastern Caribbean sub grouping especially, LIAT is a lifeline carrier, as it is the main commuter service connecting the string of islands from Puerto Rico in the north to as far South as Guyana on the South American mainland and many in between this geographic area.

Any prolonged service disruptions by LIAT during non-COVID times could be devastating to regional economies, as a number of rival carriers which flew alongside LIAT over the decades have disappeared under the weight of huge losses. LIAT has only remained airborne because of subsidies and cash injections from governments.

Browne said LIAT would have racked up about $4 million in losses last year, a figure that he deemed as manageable and bearable, but argues that the current extended period of downtime has made it extremely difficult to recover from.

“Let’s face it, it’s going to be a right-sized entity. You are going to have significant job losses, there’s no doubt about it. Hundreds of people are going to lose their work, it is inescapable. But if you are going to have a new entity that is scaled down, that is viable, that is efficient, that can meet the connectivity needs of the Caribbean people then clearly that has to be the option that we pursue.”

Meanwhile, Caribbean Airlines, the other major regional lifeline carrier, says it lost $14 million in a single month as a result from the COVID-19 lockdown and restricted operations. Suriname Airways and Bahamas Air, have also complained about the severe impact of restricted operations with Bahamas Air saying it is losing up to seven million in revenues monthly from the current state of affairs.