LIAT will not fly into the black this year.

The views expressed herein are those of the writer and do not represent the opinions or editorial position of I-Witness News. Opinion pieces can be submitted to [email protected].

I was somewhat taken aback by Mr. Gregor Nassief’s preposterous and unmerited open letter to Dr. Hon. Ralph Gonsalves on LIAT. Fortunately, there has been a very helpful clarification of LIAT-related issues by the Vincentian Prime Minister’s Press Secretary and an announcement on the commercial policy of the airline by its shareholders since that baseless letter appeared. Mr. Nassief obviously overreached when he pronounced with what could only have been an imagined authority on air transportation in the OECS. The Dominican hotelier would do well to stick to his field.

It has been concretely established that Gregor Nassief has no reason whatsoever to call for the resignation of Prime Minister Gonsalves as Chairman of LIAT’s Shareholders Committee. The tried and true Vincentian leader never advocated indefinite subsidies and LIAT was given a mandate to operate as a commercial entity which at least breaks even. It is fair to say though that the company’s shareholders do not expect very large financial returns on their investment, but this is acceptable and consistent with sensible policy given the enormous broader economic returns which are generated as a result of the airline’s service. The British government subsidised London train lines for many years because of similar reasons. The Government of St. Vincent and the Grenadines just announced massive subsidies for an important private sector ferry service to the Grenadines. I’m sure that Mr. Nassief benefited from fiscal incentives for his hotel development. We should always look at the bigger picture and never allow ourselves to be constrained by debilitating narrow-mindedness. Very often, subsidies are simply the price we have to pay to realise millions of dollars worth of profits from tourism and in the various economic sectors. Through it all, it is important to underscore the fact that LIAT has received no recent subsidies.

History has shown that the market base for the air transportation industry is not sufficiently large to support competition between multiple airlines (even though there are no restrictions on market entry apart from compliance with the relevant air services agreement). It is also true that travel is too important for a private sector monopoly to control the skies. That’s why we couldn’t afford to allow LIAT to succumb to pressure from Caribbean Star. God forbid that we see a day when a man like Allen Stanford singlehandedly dictates the terms of travel. Almost any private sector monopoly with fiscal incentives and market guarantees could make huge profits at the cost of economic efficiency. Is that what we want? Do we want air transportation to be only accessible by a privileged few at exorbitant prices? Have we learnt nothing from our bad pre-deregulation experience with telecommunications? The other thing to note is that LIAT ticket rates may have been more affordable if the airline was not bogged down by all manner of onerous government taxes. Far from being a drain on public resources, LIAT may well be propping up state treasuries.

What’s so wrong with LIAT’s plan to increase its revenues through a higher load factor and route expansion to new destinations? That’s the natural thing to do! Contrary to Mr. Nassief’s claims, inter-island tourism has not fallen by anything near 60 per cent over the last seven years, and there are good future prospects. It may well be that his share of the tourism business has fallen off precipitously because of his own bad management and he just wants to take it out on someone.

Gregor Nassief’s arguments are not only underpinned by inaccurate statistics, they also lack any real depth. The Dominican hotelier turned expert on aviation criticised LIAT’s recent change of aircraft. He said that it costs twice as much to lease an ATR as it does to lease its closest Dash 8 equivalent even though the ATR only gives 36 per cent more seating capacity. What about the gains in fuel efficiency and the reduction in maintenance costs? Mr. Nassief should also bear in mind that the original aircraft is no longer in production.

It’s not hard to figure out why a hotelier would have a problem with an airline. We would all like to see LIAT provide a more efficient, affordable and reliable service. We would be happy to witness a resurgence in inter-island travel and greater confidence in the regional airline. I’m quite sure that LIAT’s managers and directors know about the factors which lead to the turnaround of Singapore Airlines and Air Malaysia. They would also know that the vast Asian airspace is in no way comparable to tiny OECS skies.

Mr. Nassief should think twice before asking anyone to step down. Ralph Gonsalves knows a lot more about the air transportation industry in the OECS than Gregor Nassief. Prime Minister Gonsalves is an experienced politician with a great deal of business acumen and insight. He has transformed the economic fortunes of St. Vincent and the Grenadines and I am confident that he would also help to turn LIAT around. I would like to see him remain Chairman for a very long time.

By Honourable R. T. Luke V. Browne
St. Vincent and the Grenadines
[email protected] 

 

The views expressed herein are those of the writer and do not necessarily represent the opinions or editorial position of iWitness News. Opinion pieces can be submitted to [email protected].

4 replies on “The economics of LIAT”

  1. “That’s why we couldn’t afford to allow LIAT to succumb to pressure from Caribbean Star.”

    That line alone says it all. I wonder what must be done to stop any one from being a competition to Liat. Luke I know you well we went to the SVG grammar school together, and you were a pompous prat then and you are the same pompous prat now. Do you know that Liat is one of the most unreliable airline in the world? no one can dispute that, and I don’t think anyone with any substance or even common sense would take anything that Dr Ralph (who is lawyer by profession) says about anything about economics without a sound track record, and we all know that Dr Ralph is not good with numbers or balancing any kind of books, that is left in the domain of Mr Eustace who has been around numbers all his life and is an economist.

    The above article reads like something out of a story book, it’s not even worth picking apart because no one would take anything you said above as fact. Come back to the real world then people would tae you more seriously.

    Edit: Oh one last thing, your an economist right? I have to ask because you sound just like our lawyer Prime Minister, who just know how to spin words and go nowhere.

  2. I like Luke Browne and the energy that he has when it comes to his ambitions. However this article seems to be aimed more at defending the Dr. Hon. Ralph Gonsalves rather than addressing the issues regarding “The economics of Liat”.

    I am not an island scholar nor a rhodes scholar. I am an ordinary man with common sense. It is clear that LIAT continues to show us that it is incapable of providing quality service to the people of the OECS. The problem with LIAT is not only economics but the way they do business. I’ve read online about LIAT being called “The Pirates of the Caribbean” by foreigners from outside the region. This is so because of their extremely poor customer relations and quite frankly the worst possible that I have ever encountered.

    I must however, congratulate our Prime Minister on lobbying against the subsidy that Caribbean Airlines (CAL) was receiving, and as a result the Government of Trinidad and Tobago has since removed that subsidy. However, in the past Dr.Gonsalves’ reason for objecting to CAL was that subsidy, and there has been recent talks of CAL servicing St.Vincent as early as mid April with further expansion in the region in the near future according to an online newspaper article in Trinidad. This will, in my opinion, spell the end for LIAT. I’ve heard persons say that they would rather pay more on a CAL rather than travel on liat out of Grenada.

    Mr.Browne as a scholar one should appreciate something as simple as research. There is as Mr. Nassief mentioned a Dash 8 equivalent on the market Bombardier the company that makes the Dash-8 has now since changed the name to Q400 Next Gen and is in fact the next generation Dash-8 aircraft.

    Have a read Luke:

    http://theflyingengineer.com/aircraft/proud-to-fly-a-turboprop-q400-vs-atr72/

    Finally, the new ATR aircraft seems to be allergic to wind which caused a lot of cancellations in the recent past. I wonder how it will fair at the Argyle international Airport.

  3. Andy Woodley says:

    If Vincentians have to pick an argument over liat, the reluctance of St Lucia, Grenada and St Kitts to support Liat, to extent that SVG does, would be a good one. The presence of international airports in these countries provide other options for passengers travelling to and from these destinations. It would be interesting to see our position after the completion of Argyle International. By their limited involvement, they save millions of dollars. These savings go into other projects. Warner Park , St Kitts, is now ready for night matches. Should be staging CPL in this years’s tournament. How far off are we?

    Where is Ivan on this one?

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