Barbados TODAY Editorial: Playing ‘chicken’ with LIAT

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In economics game theory, the game of chicken typically involves two parties heading toward each other. The players continue on the same path, seemingly destined to collide – unless one swerves: the “loser” – who is labelled the chicken. Implicitly, it is the second, braver party who never flinches and presumably continues on its merry way that wins.

We believe that this week, two Caribbean governments, one of them our own, played the game of chicken as they sought to determine the future of the regional airline they co-own with two other nations – LIAT 1974 Limited.

Trouble is, we are not convinced that either party won; more likely,  it is the travelling public of the Eastern Caribbean and Guyana who possibly lost a little ground this week

The Government of Barbados met this week to iron out the details of ridding itself of its 49.4 per cent majority shareholding in LIAT – a policy, we might add, that was kept from the Barbadian public until the eleventh hour after Antigua and Barbuda’s persistent telegraphing of Bridgetown’s intent to sell.

Barbados, we are told, wanted guarantees that the Gaston Browne administration as outright owners of the Antiguan-based carrier would not shed jobs at its Barbados base in favour of Antiguans at its main base. Antigua and Barbuda, quite rightly, playing its political cards, could give no such guarantee.

And this is where we all lose.

Neither Miss Mottley nor Messrs Gonsalves and Skerrit seem able to persuade Mr Browne in St John’s to respond to reason and operate the carrier along firmer aviation business principles. By commercial aviation metrics, LIAT operates with twice the requisite number of workers per aircraft for profitability – which goes a long way towards explaining the desperate straits in which the carrier found itself as the year began, walking with the proverbial carrot – a plea for a $10 million (US$5.4 million) injection – and the “stick” – a minimum revenue guarantee that would automatically shed unprofitable flights.

Frankly, we are also disappointed at our Government which could afford to pay a two-man firm $54 million for an as-yet undelivered debt restructuring deal with foreign creditors while seemingly anxious to rid itself of ownership of a couple of aircraft that deliver not a few among the million-odd passengers who pass through our airport to drive our nation’s and our region’s trade, tourism and commerce.

So we are left asking what really is going on with our government’s plans with regard to regional airline LIAT?

Does it really want to sell the majority stake in the cash-strapped carrier,  or is it really plumping for a better deal from a largely intransigent Antigua and Barbuda, which is hardly more financially endowed than Barbados?

Make no mistake: Barbados, in ceding the majority of its shares for what would be a mere token stake in a beleaguered but yet vital inter-island connecting airline, gives up any right to dictate terms to a fellow owner, if not what little moral suasion it might have with an intransigent administration in St John’s.

We think it is time Government take the people into its confidence with the issue of a definitive, ministerial-grade statement on aviation policy.

There is much work yet to be done – the creation of a national civil aviation authority; the quest for category one status with the United States; upgrades and expansion at Grantley Adams airport, including a new terminal for the very inter-island travellers who come predominantly on LIAT, among others.

And the aviation policy should get real about the weighing down of LIAT airline tickets with 60 cents on the dollar in taxation. We abolished the Road Tax in favour of a consumption tax; what ‘s so difficult about releasing the damping effect of taxes on air travel here?

From hotel and tourism executives to researchers to armchair economists agree that if you lower the price of admission you will put more bums or airline seats. More people travelling to this nation to pay VAT on everything from tickets to toothbrushes might have a better knock-on effect on our economy.

It is unlikely that the articulation of Government policy crafted not merely in rhetorical vision but a rigorous plan of action will alter the course of negotiations with what is, after all, not a private commercial entity but a sovereign state and fellow member of the Caribbean Community.

But walking away from owning LIAT, problematic as it may be, will almost certainly guarantee its collapse. That’s playing chicken – and we all stand to lose.