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ANTIGUA | Browne shares Plan with Mottley, Gonsalves in last-ditch effort to save LIAT

Featured Antigua and Barbuda Prime Minister Gaston Browne. Antigua and Barbuda Prime Minister Gaston Browne.
ST. JOHNS,  Antigua, July 20, 2020 - In a last-ditch effort to save the cash strapped regional airline LIAT from liquidation, Antigua and Barbuda’s prime minister Gaston Browne was today expected to meet with two of the airlines largest shareholders, Barbados and St. Vincent and the Grenadines, where he is expected to pitch his newly minted plan to save the airline that calls for the injection of US$40M in new equity.

ralph gonsalves chair 460While its well known that Barbados Prime Minister Mia Mottley and St. Vincent and the Grenadines’ Ralph Gonsalves are bent on liquidating the regional airline, under Browne’s reorganization plan, the Antigua and Barbuda Government is expected to inject up to 50 per cent of the equity, maintaining that re-organisation instead of liquidation would benefit creditors who could end up with as little as less than 10 per cent in the event of liquidation.

The plan would also guarantee that creditors would receive no less than they would get had the company been liquidated. According to the Antigua and Barbuda Government, the proposal seeks to preserve shareholders value; protect the airline; and enhance regional integration.

It argues that “liquidation…would dispose of the company’s assets for a fraction of its value, resulting in greater losses to stakeholders, including creditor.” It was noted, too, that some $100M worth of the company’s assets are unlikely to yield more than 15 cents in the dollar ($15M), after realisation costs, resulting in a loss value of $85M.

“The $15M realisable value from the piecemeal liquidation would result in payments of creditors of less than 10 per cent of their outstanding liabilities. [It] would leave all other creditors, including employees, in an invidious position, compared to reorganisation with a superior lead.

The proposed reorganisation and recapitalisation of LIAT would result in an injection of new equity that would cover at least 50 percent of the outstanding staff liabilities,” the report said.

LIAT’s debt currently totals over US$100M, some US$11M of which is owed to passengers, and another over US$80M being owed to staff.

Due to year-on-year successive losses, the airline was particularly hard hit by the recent COVID-19 pandemic which effected severe travel restrictions and mass airport closures around the world.

However, even before the COVID-19 situation hit, the airline had been having successive years of financial difficulties, operating at a loss. In 2019, that loss amounted to US$4.44M. Hence, while most airlines were hard hit by the COVID-19 situation and restrictions on travel, LIAT was drowning.

Browne, however, believes it is not too late to revive the company, if prudent cost-cutting measures are taken and the US$40M is injected.

liat logo 460“The balance sheet would be strengthened with the injection of $108M in new equity, of which the Antigua and Barbuda Government is prepared to underwrite up to 50 per cent. Of the new capital, $45M will be used to repay staff costs.

Though the proposal seeks to address monies owed to staff and other creditors, it said nothing about how the re-organisation would address monies owed to customers.

LIAT patrons from around the region are anxious to recoup the money they handed over to the airline for flights that never took off and thus far, the company has only been offering customers credit, notwithstanding possible liquidation plans.

According to the report, “If the existing shareholder governments are not interested in investing in the reorganised LIAT, they will be requested to surrender their shares for $1, which is a superior offer to what they would get at liquidation.” Antigua, along with the governments of St. Vincent, Barbados and Dominica are the largest shareholders of the airline.

The report points out that prior to the COVID-19 situation, shareholder governments had agreed to a December 2019 restructuring plan for the company, which had called for a cash injection of US$35M.

Browne, however, is advocating as best he can to save the airline. “LIAT is dying; some have prescribed corporate euthanasia. Antigua and Barbuda, a nation of courageous and resilient people, recommends re-organisation,” Browne said in a Facebook post on Sunday.

Browne credits the airline, which is headquartered in Antigua, with being a part of the Caribbean landscape, and says its liquidation will be a travesty.

“LIAT is a Caribbean Institution; the pride of the Caribbean people… It has served well the Caribbean Community, shareholder governments, and the cause of regional integration, and it can continue to do so provided it is reorganised,” he said.

mia mottley 460 3“It is those who undermined LIAT by encouraging transient profit-seekers in competition that failed the airline. LIAT’s challenges, including its operating losses, derived from its continuous battles to maintain aviation stability and sustainability for the Caribbean people against opportunistic rivals, who abandoned the area when their ambitions to profit from it,” Gaston declared.

“Caribbean governments are willing to spend tens of millions of dollars to subsidize foreign carriers but expects LIAT to operate their unprofitable routes without financial support. The new LIAT would bring this inequity to an end and would only operate those routes with a supporting MRG,” he added.

Last week, Gonsalves whonow head of CARICOM and is responsible for transpertation on the quaisi  Cabinet,  said that he was engaged in putting together, as far as is practicable, an approach to regional air transport, which would see other players involved. He remarked that he has been in conversation with four airlines: Caribbean Airlines, InterCaribbean, One Caribbean and SVG Air.

Although Barbados PM, Mia Mottley outlined that six carriers have expressed interest in taking over LIAT’s routes, Gonsalves indicated that he is focusing on the four airlines owned by people within the English-speaking Caribbean.

There are two others, according to Gonsalves, out of North America and there are two in the French Antilles who are also interested in LIAT’s routes.

As a result, Gonsalves is hoping that we would have a good mix to take people in and out of various territories in the region.

Gonsalves said that any other individual or government can decide what they’re going to do—and he wishes them well. He said: “But clearly the market and the investment requisites would determine how the different airlines play out.“



Last modified onMonday, 20 July 2020 18:21
  • Countries: Antigua_Barbuda