LIAT PRESS CONFERENCE AT ANTIGUA 7TH DECEMBER 2012

Presented by Chairman Jean Holder.

LIAT Directors
Executive Managers
Ladies and Gentlemen of the Press

It is my pleasure to welcome you to this press conference, the main purpose of which, is to share with you important aspects of the new Business Plan for LIAT Airline.

The main aspects of this will be presented by our CEO, Captain Ian Brunton, who is no stranger to you, supported, as he sees fit, by members of the Executive Management.

I however crave your indulgence to make a few remarks by way of introduction and background.

Sustainability
This airline was established on 16th October 1956, which makes it, at 56 years of age, the longest surviving Caribbean carrier. During this period some 30 airlines have come and gone, some of them began operations with a Business Plan, based on the demise of LIAT. It is reported that one of the stalwarts of the region, American Eagle, will cease to operate after March 2013, and it should be noted that British Airways which began services into San Juan two years ago, will also cease to operate there after March 2013.

On the face of it, judging from the annual losses reported globally, operating any airline service is challenging. Providing a Caribbean intra-regional air service is fraught with difficulty given many aspects of its peculiar financial and operating environment. LIAT, however faces these challenges every day, providing network services to 21 countries, English, Dutch, French, Spanish and American, starting in the North with the Dominican Republic and ending with Guyana in mainland South America.

A casual glance at most departure and arrival boards at airports in the Eastern Caribbean will reveal that LIAT’s services comprise the vast majority of operations. These services are essential, meaning that without them, there would be a high level of paralysis of air travel in the region.

Insolvency
From time to time, LIAT has come very close to closure. At my first meeting as chairman in 2004, the financial report presented, indicated that the airline was insolvent and the suggested action was a declaration of bankruptcy. It was saved by a series of negotiations with banks, suppliers, governments and unions. In 2004, 2005 and 2006, its major shareholders were forced to intervene with financial support.

From 2000, Caribbean Star, and from 2003, Caribbean Sun, owned by Alan Stanford competed head to head with LIAT on price. As a direct result of these price wars, both airlines haemorrhaged cash and were in danger of going out of business. In 2007, after Stanford’s airlines had lost some BDS 660 million, he approached LIAT to discuss a merger. Those negotiations ended with LIAT taking over his assets with the help of a loan provided to the LIAT shareholders by the Caribbean Development Bank. Had Stanford taken over LIAT’s assets, all the planes would have been grounded in 2008 when Stanford was arrested and all his assets seized by the U.S. Authorities.

There seems to be a general belief abroad in the Caribbean that somehow LIAT has been exempt from the pain and suffering caused to all businesses by the poor state of the global economy, especially the economic difficulties in our tourism

source markets, including the Caribbean market; that it is exempt from the extremely high cost of fuel, maintenance and manpower. Perhaps the reason for this, is that through all these difficult times, LIAT has continued to deliver its extensive services, many of which are not commercially profitable and amount to nothing more than a public service. This situation cannot continue, especially when only three of the 21 destinations served by LIAT come to its aid when it is in financial difficulties.

Unlike all the other Caribbean airlines in the region, LIAT does not enjoy the luxury of an annual subsidy in its annual budget up front to cushion annual financial losses. It also does not frequently enjoy the marketing support and flight guarantees that several foreign operators receive. As far as its daily operations are concerned, LIAT stays alive by negotiations with its bankers, the skills of it management, and being forced to charge the customer a level of fares that meet its costs. LIAT has no control over the level of taxes charged. It simply collects them.

There are those who argue that all the problems of air transportation in the region will be solved by competition which will lead to lower fares. They point out that when Caribbean Star, Caribbean Sun and Redjet, were operating and offering cheap fares, a great deal more people were travelling. This, however, is hardly surprising. If indeed, such airlines had decided, instead of offering cheap fares , to offer no fares at all, the number of people travelling would be so great that it could not be contained by the regions’ airports. The people who argue in this manner, seem to take away no lessons from the fact that all the airlines mentioned above, went bankrupt and ceased to operate and the investors lost their money. Currently, the operations of all Caribbean carriers offering fares not covered by their commercial costs, are subsidized on an annual basis by their governments. So are all commuter airlines in the USA.

The fact is, that any airline operating on these intra-Caribbean routes, which charges fares that reflect its real costs, cannot offer cheap fares, and any airline, not in receipt of subsidies, offering fares that do not reflect its true costs, will not survive.

The real barrier to private sector airline competition entering the region, is not LIAT or any policy of LIAT’s shareholders. It is the realistic fear of failure. Such private sector investments should be made in LIAT, which has stood the test of time. I am confident that this would lead to us having an airline which will perform successfully both in and outside the region.

The focus of LIAT’s current Business Plan is to introduce efficiencies which can lead to reducing costs and increasing revenues and, by this means, to be able to reduce its fares and improve its services.

It also aims at relieving its major shareholders of either the reality, or the threat, of further burdensome transfers.

Some of LIAT’s losses are the result of the high costs of operating an ageing fleet, with high mechanical costs and an expensive fuel burn.

Renewing the fleet is not an option, it is a necessity.

For the last six years, LIAT has not gone to its shareholder governments for any financial support for its daily operations. It however has no option but to approach its shareholders for some capital investment in a new fleet.

LIAT is a private company, operating under the companies Act in Antigua and Barbuda. It has three major shareholders, Antigua and Barbuda, Barbados, and St. Vincent and the Grenadines. But it also has other public and private shareholders. The capital investment now needed will be a lot less onerous if it is shared among those for whom LIAT provides services every day. It is time, as was suggested by the President of the Caribbean Development Bank, to feed the cow, rather than drinking its milk, using a straw through the fence.

I am very encouraged by the promises of financial support made by the government of the Commonwealth of Dominica and its wish to join the other LIAT shareholders. I hope that others will follow this excellent example.

I thank you for your patient listening and now give way to our CEO, who will present key aspects of our Business Plan.