INSIDE GRENADA JANUARY 11, 2008 by Sandra Ferguson 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 Caribbean Star flies out of regional business today Seasons’s Greetings Honourable Prime Ministers! I noted the above-referenced headline in one of our weekly newspapers, the Grenadian Voice, of Saturday, November 17th , 2007. This newspaper was carrying a story emanating out of Barbados on November 15th, advising of the “complete takeover by competitor LIAT” and describing the transaction as “one of the most significant business deals in the history of the Caribbean”. Further to my letter of March 31st to you, offering my concerns and observations in respect of what was then a proposed merger/alliance, I have continued to follow whatever information was available. I therefore consider it appropriate to follow-up with a letter to you to express my APPRECIATION of your efforts to rescue L.I.A.T., our Caribbean airline. I also take this opportunity to thank the Office of the Hon. Prime Minister of Barbados for its most gracious acknowledgement of my letter of March 31st. While the C.E.O. of LIAT did advise the traveling public to expect some “turbulence” during the transition phase, I am most distressed and dismayed over the numerous complaints emanating from all around the region about the QUALITY OF SERVICE meted out by the airline. There has always been complaints but it seems to me that LIAT has become a WHIPPING HORSE, with people blaming what they consider poor or indifferent service on the fact that LIAT is now a MONOPOLY. The industrial action by the pilots and then flight attendants, on the eve of a very busy Christmas weekend, has not at all helped LIAT’s cause. I trust, Sirs, that a significant and crucial part of the new LIAT are plans to REPAIR and RESTORE the faith of the people of the region in LIAT. I trust that this is a COMMITMENT of all concerned – shareholders, board of directors, management and staff at all levels – and that there will a COLLECTIVE effort in this regard. I am therefore at a loss to understand the recent industrial action taken by pilots and most recently by flight attendants. I would hope that ALL issues were taken on board during the negotiation stage and a commitment given as to HOW and WHEN they would be resolved. There appears to be some PERENNIAL problems associated with LIAT and I trust that “one of the most significant business deals in the history of the Caribbean” will not turn out to be just more OLD wine in NEW bottles. It distresses me that I am not hearing many voices in the region loudly cheering for LIAT. Most puzzling has been the reaction of our Caribbean leaders, not least among them, the Honourable Prime Ministers of the OECS region that has been FAITHFULLY SERVED by LIAT over the last 30 years. Our political leaders and some influential members of the Caribbean private sector would have us believe that LIAT is denying Caribbean people some inalienable right, CHEAP AIR FARES. Indeed the incredibly cheap fares that were recently enjoyed were brought about by the SENSELESS, CUT- THROAT COMPETITON, - endorsed by our Caribbean leaders, who granted licences to Caribbean Star to run LIAT out of business - to the detriment of LIAT and air transport in the region. Is this an indication of the TRUE state of affairs of the Caribbean integration process that is supposed to be led by our honourable political leaders? Permit me to suggest, Honourable Prime Ministers, that there needs to be more TRANSPARENCY with regards to the affairs of LIAT. Information on the operations of the airline, particularly in regards to pricing structure and costs of operations, needs to be disseminated throughout the region, particularly to key sectors and users. What is the REAL COST of getting the airline from one destination to another? How do these costs compare with the airfares charged? Possibly, this information could contribute to more INFORMED OPINION on the issue of air fares. I have heard the following attributed to a particular vociferous minister in the region who is reported to have stated that it does not take a GENIUS to see that something is wrong when one pays almost the same fare to fly 30 miles as to fly 3000 miles. It seems to me, Honourable Sirs, that it is really a matter of the SIMPLE LESSONS OF ECONOMICS – FIXED COSTS, variable costs and the law of decreasing marginal costs/increasing marginal returns. As I understand it, EVERYTIME LIAT takes off, that is a particular FIXED COST INCURRED, IRRESPECTIVE of the NUMBER OF PASSENGERS. Add that to the fact that, relatively speaking, the DISTANCE between our islands is short. So we have HIGH FIXED COSTS to fly a FEW passengers, SHORT DISTANCES, between islands. Our pilots and maintenance crew are specialist SKILLED WORKERS who would require certain levels of remuneration. The support staff also do not come cheaply. Add to this the increasing world oil prices. Wherever did we get this notion that regional air travel was cheap? That is one of the realities of our smallness. It is my view that such FUNDAMENTAL economics of air travel in the region NEEDS TO BE UNDERSTOOD and appreciated by those entrusted with the task of governing our respective islands and managing their economic development. Air transport between our islands is expensive and therefore the issue of reliable and modern sea transport, as a complement to air transport, to facilitate the movement of people and goods must be on a REGIONAL agenda in the era of the CARICOM Single Market and Economy. Why not develop sea transport as another aspect of our tourism package? It would do us well to learn from the first people of the region. We should also note that in more developed and continental countries, people use trains and buses to travel great distances. I trust, Sirs, that the New Year, 2008, will be a better year for LIAT and for the region. I look forward to a RELIABLE and VIABLE LIAT and trust that my faith in this regional airline is not misplaced. Thank you, Sirs, for the opportunity to once again offer these comments and observations. Permit me to extend my very best wishes for the New Year to each of you, your families and to the government and people of your respective islands. Please receive my assurances of highest regard and esteem. Respectfully yours, Sandra C.A. Ferguson