Low patronage and lack of government subsidies may undermine the success of any other airline that might replace LIAT, said Dr. Thompson Fontaine, a former IMF economist. He attributed the operational struggles of the moribund LIAT to low patronage, saying it is not necessarily bad management as people widely believe.
He said there was not enough air travel from people in the region where LIAT covered, and that the regional aircraft would have been dead long before now without subsidies from its government owners. While six airlines have indicated interests to acquire LIAT’s travel routes, Fontaine said they may have to increase air travel costs to remain operational due to low patronage from those routes and cessation of government subsidies.
The six airlines are –
- SVG Air
- One Caribbean Ltd
- Caribbean Airlines
- InterCaribbean Airways
- Silver Airways
- Air Antilles
Any airline that comes will have a problem. It can decide to lower the cost of a ticket to encourage people to travel…but the marginal cost is practically standard. Now, if you lower your price, it means you are now going to lower your revenue and there is no guarantee that you will get more passengers [on account of fare reduction] because the demand is not there.
Dr. Thompson Fontaine
The economist pointed out that regional governments would never provide subsidies to any LIAT replacement if it is privately owned; and that any potential airline that would survive in LIAT’s travel routes must be a subsidiary of a bigger airline who could offer financial floats to keep the subsidiary running.
Chairman of CARICOM and Barbados Prime Minister, Mia Motley, said the Caribbean Community would work with the six airlines that indicated interest as well as others to come to a reasonable agreement on flying LIAT’s routes again.
Prime Minister of Antigua and Barbuda, Gaston Brown, said CARICOM can either save LIAT 1974 Ltd or invest in a replacement. He warned that he would register a new airline company to be called LIAT 2020 Ltd if LIAT’s regional shareholders would not heed his recommendation.
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