CATEGORY:LETTER ---------------------- INSIDE GRENADA FRIDAY April 27,2007 Prime Minister, Hon. Baldwin Spencer Office of the Prime Minister, Antigua & Barbuda Prime Minister, Hon. Owen Arthur Office of the Prime Minister, Barbados Prime Minister, Hon. Ralph Gonsalves Office of the Prime Minister, St. Vincent and the Grenadines Honourable Sirs, Re L.I.A.T. Re-establishes Monopoly I am a citizen of Grenada. I am one who has been served by LIAT, particularly as a former student of the University of the West Indies, St. Augustine, Trinidad during the early 80s and in the early 90s as a student of the Universite Antilles-Guyane, Guadeloupe. I have not always been pleased with the standard of service meted out by the airline. Notwithstanding this, I have remained a LIAT loyalist through thick and thin. You see, Sirs, I was a secondary school student and ardent listener of Radio Antilles ( Big A, Monsterrat) which helped me to appreciate the imperative which led to the hurried formation of LIAT(1974) following the collapse of Courtline. ( an English company), former shareholders and operators of LIAT. It was during the period when few of our Eastern Caribbean islands boasted of international airports and LIAT was the lifeline of air communication between the islands. I also recall that on the occasion of his visit to St. Augustine campus in early 1980s, the late Hon. Errol Walton Barrow, former Prime Minister of Barbados, inspired us with compelling reason and commitment to LIAT as the “airline of the Caribbean”. Over its thirty odd years of existence, LIAT has struggled. We, the people of the region, have seen airlines come and airlines go but LIAT has remained, loyally serving we the people of the region. Permit me, therefore, to offer my appreciation to your governments, as the principal shareholders, of LIAT (1974), whose commitment has ensured that LIAT remained in the skies. I have therefore been following, with great interest, the developments regarding the proposed LIAT-Caribbean Star merger. The most recent information has come from two of the Grenadian weeklies, Grenada Informer and Grenada Today. Both newspapers, issues of March 16th,, have carried a story headlined, L.I.A.T. Re-establishes Monopoly. From this story, I have gathered the following: • LIAT has agreed to BUY out Caribbean Star for US$55 million, eliminating its competition and re-establishing its once dominant position in intra-regional air travel. • The two rivals have finally agreed to the terms and conditions of a MERGER. • The ALLIANCE (?) between the two companies should take the form of a purchase of Caribbean Star Airlines by LIAT (1974) Ltd. • The Stanford Financial Group (SFG) will LEND the Shareholder Governments the sum of US$ 55 million for the purpose of liquidating the financial liabilities of LIAT – the settlement of all obligations which are necessary conditions of the conclusion of the ALLIANCE and funding of working capital going forward. • Stanford Financial Group will immediately advance the initial loan proceeds, US$11 million to LIAT- US$6 million to be used for the purpose of SETTLEMENT OF DEBT and US$5 million for immediate use as WORKING CAPITAL for the airline. • The ratio of the share ownership in the new LIAT will be: (i) Caribbean Shareholder Governments and other shareholders 60 percent (I note that these shareholders are already indebted to SFG for US$55 mn. in order to own this 60 percent and the new company owes SFG US$11 mn.) (ii) Stanford Financial Group owns 35 percent. (It seems to me that in actual fact the SFG owns 95 percent.) (iii) The staff of LIAT (1974) Ltd. owns 5 percent. Honourable Sirs, I am totally CONFUSED!! Maybe editorial license has been exercised by the newspapers. I fail to understand the logic – LIAT has agreed to buy out Caribbean Star for US$55mn ELIMINATING (?) the competition and RE-ESTABLISHING its once dominant position in intra-regional air travel?! I thought that: • MERGERS were about TWO BECOMING ONE. • the merger was about ensuring efficient air travel in the region served by LIAT and Caribbean Star. • that the merger was about RATIONALIZING air travel on the routes served by LIAT and Caribbean Star, eliminating wasteful competition. Do the arrangements arrived at have anything to do with Mr. Stanford’s aversion to trade unions? Can you, Honourable Sirs, explain how LIAT and the people of the region served by LIAT are better off? Have we merely substituted the name LIAT for Caribbean Star to make it more palatable to the people of the region? I FAIL to see how one can talk about “ LIAT re-establishing its dominant position” when the 60 percent share of the Caribbean Shareholder Governments’ is tied to the US$55mn DEBT to the SFG .and the new LIAT already owes US$11 to SFG. It seems to me that it is merely a matter of time before SFG totally owns LIAT, handed it to it on a DEBT platter!! I hasten to ask, Sirs, what MEASURES are now in place to ensure the efficient and profitable operations of LIAT and therefore of air transport in the region it serves? Or is it old wine in new bottles? It is my opinion, Sirs, that the demise of LIAT (1974) rests squarely with the shareholder governments and other regional governments, past and present, who FAILED to exercise the necessary political will and provide the political support to ensure that LIAT (1974) operated as efficiently as possible. The governments of your respective countries have each contributed to this demise: • The cause of much of woes of LIAT (1974) can be traced to inefficiencies of operations in LIAT’ s HEADQUARTERS in Antigua which was also TOP HEAVY. These inefficiencies affected operations through the entire chain on a daily basis. May I also note that the most impolite and indifferent service that I have ever received at the hands of LIAT staff was in May 2004 in Antigua. It was the first time that I had ever come near to changing allegiance. • Sometime in the early 90’s, the Barbados government launched Caribbean Airways in direct competition with LIAT, jet service and all ! (Actually, I think that there was also another service operating during the 80’s.). Some of we the people of the region smiled and shook our heads!! We had seen them come and seen them go. We stuck with “good ole” LIAT. No matter that sometimes it “ left island any time”, we knew that it would leave!! Within less than a year, Caribbean Airways folded. • Caribbean Star burst on the scene, in DIRECT COMPETITION to LIAT, embraced by Antigua and St. Vincent, as well as other governments throughout the region. LIAT was already in DIRE financial straits. We the people could not understand the rationale for regional governments affording licences to Caribbean Star, to run LIAT out of business – to run the SAME ROUTES AT THE SAME TIME, both them running HALF EMPTY. Then came the ridiculously LOW prices. LIAT felt obliged to follow suit. We the people of the region understood that Mr. Allan Stanford of Caribbean Star had VERY DEEP POCKETS. He could afford it. LIAT and its shareholders could not!! • And in between, let us not forget EC Express of Air Jamaica and BWee Express of BWIA. Many travelers got wise to EC Express. It was liable to cancel flights at will. It was NOT going to run with less than a certain number. BWIA was having its own problems. Somewhere along the line, both ceased their operations. It is time, Honourable, Sirs, that we come to grips with the reality of our region. Many persons have not appreciated the island-hopping reality of LIAT. But that is the reality of our region. We are small islands with small populations. The numbers that will travel from some islands at any one time are quite small and make it uneconomical for flights. But they expect to be served. And that is what LIAT did!! Because of these constraints, there were a lot of inadequacies. Was the answer to have competition to LIAT or was it to rationalize the service to ensure efficiency and effectiveness? ALL OUR REGIONAL AIRLINES ARE IN TROUBLE. But other airlines seem to be doing quite well and, in some of our islands, WE ARE FINDING THE MONEY TO PAY THEM TO OPERATE IN THE REGION but we are unable to support our regional airline. Do we have a long term vision? Is there a REGIONAL AIR TRANSPORT POLICY? Is there a regional transport policy? Honourable Sirs, may I ask that you place on your agenda and the wider regional agenda, the issue of SEA TRANSPORT – the need for an efficient FERRY service between the islands. We are small ISLANDS. Islands and sea go together. In an era of the CARICOM Single Market and Economy, we need to facilitate cheaper movement of people between the islands and facilitate easier trading. Sea transport can help this cause. I thank you, Sirs, for the opportunity to raise these concerns and make these observations. I understand that Grenada owns less than one percent share in LIAT. I therefore hope that you will not find me “out of place” in my observations about LIAT. I am sure that the airline will be serving Grenada and I will continue to be a loyal supporter. Notwithstanding, it is also my expectation that LIAT will “shape up”. Please receive, Sirs, my assurances of highest consideration and regard. Respectfully yours, Sandra C. A. Ferguson