As LIAT embarks on a new flight plan towards viability, a key funder has expressed he is anxious to start seeing a turnaround in fortunes after pumping some $600 million dollars into the cash-strapped regional airline.
President of the Caribbean Development Bank (CDB) Dr Warren Smith drew on recent CDB-backed studies that said while intra-regional travel remained an important part of the successful development of the region, “heavy taxation” was dragging down the sector.
One of the findings in a CDB study showed that the island-hopping carrier used to transport in the region of 1.2 million people per year, but was only now carrying approximately 730,000 passengers.
Dr Smith told Barbados TODAY: “It is affecting the level of business that is done between the island.
“So that there is an urgent need to address that issue.
“There is an urgent need to improve the financial performance of LIAT because it’s sustainability depends on addressing that issue.”
The latest CDB study, which was completed in mid-2018 and presented to LIAT’s shareholder governments, outlined the airline’s challenges and opportunities and put forward a series of recommendations.
Apart from the need to strengthen human resource functions including productivity and performance capacity, the study had found deficiencies in the airline’s effectiveness in transferring passengers from one flight to their connection.
Dr Smith said the CDB had provided funding through regional governments over the years to address the issues facing the airline and he believed it was time some noticeable results are seen.
He said: “I think currently our exposure is somewhere in the region of about US$300 million [$600 million] and we are certainly anxious for there to be a turnaround in the performance of the regional aviation system.”
But Dr Smith said he was “very pleased to see that some changes are being made”, as he highlighted the new board of the struggling carrier that includes former Prime Minister Owen Arthur who, he suggested, has a very good understanding of the airline’s issues.
“He was there originally when Barbados became the largest shareholder in LIAT. My expectation is that we are going to see some progress in that regard,” said Dr Smith.
Arthur was officially appointed as the new chairman at the start of the year.
The board of directors is made up of a mix of business people, former public servants, and a former banker. They hail from Barbados, Antigua and Barbuda and St Vincent and the Grenadines.
As it announced the new board, LIAT said in a statement: “The new chairman has been tasked by the board to undertake a special assignment to meet with regional prime ministers to discuss sustainability of the airline.”
Dr Smith said he was hopeful that regional travel would improve in the coming years, adding that while there continued to be discussions surrounding the development of an inter-island ferry service in some member states, it should be seen as a complement to aviation and not a replacement.
“It is a part of the infrastructure that needs to be built out in our Caribbean countries,” said Smith.
One of the recommendations coming out the last CDB study was for there to be a “dramatic reduction in the level of taxation”, which often makes up about half of the total airfare.
As part of its austerity measures, Barbados introduced an airline travel and tourism development fee of $140 (US$70) on travel to extra-regional destinations, and a $70 (US$35) fee for travel within the Caribbean, which took effect in late 2018.
Overall, tourism grew by almost three per cent last year due mainly to further penetration of the US and UK markets, but the results were lopsided on account of a weaker performance of the Canadian and Caribbean Community (CARICOM) markets, according to the Central Bank of Barbados.