Bridgetown, Barbados, June 5, 2019 (Barbados TODAY): Barbados is to give up its majority ownership of regional airline LIAT handing it back to Antigua and Barbuda, Prime Minister Mottley announced in Parliament tonight, ending weeks of speculation triggered by St John’s revelations of Bridgetown’s plans.
But the announcement puts the Mottley administration’s for regional aviation into sharp focus, amid speculation it may back the startup of a rival carrier involving Barbadian investors and a multilateral lender, Barbados TODAY has learned.
Mottley confirmed to the House that Barbados has accepted an offer from Prime Minister Gaston Browne to take up most of its 49.4 per cent stake in LIAT.
But she did not specify what percentage of shares is to be sold to Antigua and Barbuda which currently holds 34 per cent ownership, followed by St Vincent and the Grenadines and Dominica to make up 94.7 per cent of the total. Private shareholders and staff own the remaining 5.3 per cent.
The Prime Minister disclosed that Attorney General Dale Marshall is to head the negotiating team to settle terms with St John’s.
She told lawmakers: “We have accepted an offer from a sister Caribbean state, Antigua and Barbuda, to re-enter into negotiations with them to see whether a deal could be concluded with respect to Antigua and Barbuda taking up our shares in exchange for them taking up our responsibilities as a shareholder within the context of LIAT.
“This would require negotiations on the part of both countries and therefore we will be writing Prime Minister Browne to indicate that just as he has established a negotiating team, the Government of Barbados will establish a negotiating team that will meet with his negotiating team to settle the terms if we can, with respect to the conclusion of the transfer of the shareholding.”
Mottley’s comments have come several weeks after Browne publicly announced that Barbados had agreed to sell all but ten per cent of its stake in LIAT.
Browne said then: “An offer was made for Antigua and Barbuda to acquire the LIAT shares owned by Barbados, through a take-over of the liability of Barbados to the Caribbean Development Bank (CDB).”
Confirmation of the sale decision comes after months of wrangling with Eastern Caribbean governments over their failure to take up an offer to pump money into the cash-strapped carrier that remains a vital link in inter-regional travel, trade and tourism.
Leeward Islands Air Transport, created by Kittitian Sir Frank Delisle, began life in 1956 with a single plane ferrying passengers between Antigua and Montserrat. A newly organised LIAT 1974 Limited saw ownership pass to Eastern Caribbean governments.
Mottley maintained that due to the country’s current economic position, it was simply not in a financial position to support LIAT.
She said Government had made a decision to “take a step back”.
Mottley told Parliament: “There is only so much that Barbados can responsibly do at this time given our current circumstances.
“Therefore notwithstanding our absolute commitment to regional air travel given the fact that studies have recommended a different model of restructuring for LIAT and given the inability of the Government of Barbados to do for LIAT in the next five to ten years what we have done for LIAT in the last five to ten years when we moved significantly to assume major shareholder responsibilities, we have taken the determination and decision as a Cabinet that it is time for us to step back while at the same time allowing other governments to continue with their proposals to restructure LIAT in the way which they have determined.”
While not revealing the full details of the transaction, Mottley made it clear that Barbados would still serve as a minority shareholder and would provide a revenue guarantee on particular routes.
The Prime Minister said that the regional carrier, which serves 15 Caribbean destinations with close to 500 flights, was in urgent need of an overhaul.
She said: “The current model which LIAT has within the 1974 limited is not an attractive model and what is needed is significant restructuring. Indeed a new model of governance, a new financial model and a new operational model in order for it to be able to extract greater benefits and provide the services which it does.”
The Prime Minister wished the Antiguan government well in its attempts to restructure the regional airline and said Barbados would still play a vital role as a minority shareholder, and ensure that routes provided are commercially viable so that it does not place pressure or burden on the overall finances of the airline.
But the decision to sell is also said to have been sparked by largely Antigua’s resistance to Bridgetown’s suggestions for a leaner and more efficient airline, which currently has some 660 workers at its Antigua headquarters, sources close to the plans have told Barbados TODAY.
Aviation experts said the ratio of workers per aircraft for LIAT’s fleet of French-Italian-made ATR turboprop planes is between two and three times what is required for a profitable airline.
The 48-seat ATR 42 plane ought to have 25 workers per plane and the 68-seat ATR 72 should carry a ratio of 35 workers per plane, the sources said.
But with 660-odd workers at its flight operations, engineering, call centre and customer relations departments in Antigua, its commercial office in Barbados and stations on its 15-destination network, the airline’s ten aircraft shoulder an ratio of 66 workers per plane. Experts suggested to Barbados TODAY this ratio is unsustainable.
Mottley gave an assurance that once the discussions were completed Barbados and Antigua and Barbuda, the Government will report to the Barbadian people.
But in speaking at the annual luncheon of the Barbados Employers’ Confederation (BEC) in early May, Prime Minister Mottley said she was primarily focused on ensuring reliable and affordable regional transport, as she confirmed receiving Antigua and Barbuda’s expression of interest in purchasing her country’s shares in LIAT.
In comments that raised questions of Barbados’ possible shift towards its own carrier, she said then: “Let’s just say we agree on the mission, and the mission is that there must always be reliable affordable access for travel in the region as there must be nationally. And I can assure you and the country that we are working on this every day.
“But you also have to take the reality of an existence as you find it and then determine whether the modality that you have is the best mechanism by which to deliver on that objective.”
Barbados TODAY has learned that much of the work towards a national flag carrier hinges on attaining category one status with the United States Federal Aviation Administration (FAA).
A requirement for reaching this status, which would allow Barbados to operate routes into the United States mainland and its Caribbean territory, Puerto Rico, is the establishment of a civil aviation authority which Government is working towards creating.
Mottley told journalists last month that a bill to establish the regulator is now being drafted and is expected to be taken to Parliament for approval by September or October.
She declared that the issue of the absence of a Civil Aviation Authority had been outstanding for too long given its importance.