Commentary: Finding virginity in the Caribbean

By Ramesh Lutchmedial

Amid recent meetings of LIAT shareholder governments aimed at coming up with a survival plan for the financially stricken airline, Antigua and Barbuda announced on last Friday that it was willing to acquire Barbados’s majority shareholding in LIAT, a bid which if successful would increase Antigua and Barbuda shareholding in LIAT from 34 percent to 81 percent.

This is certainly linked to an earlier public announcement by Antigua and Barbuda government Chief of Staff that billionaire Richard Branson, owner of the Virgin Group, wants to invest US$7 million in LIAT.

Without much details, some shareholder governments expressed mild scepticism, but were willing to give serious consideration to the Branson offer as LIAT urgently needs cash to stay airborne.
Branson is one of the UK’s most successful entrepreneur whose astuteness, business acumen and dynamic leadership are responsible for the huge successes of the Virgin Group with product lines that include banking, airline, rail, mobile phones, health care, and jewellery.

The Caribbean is where Branson first got his taste of the airline business. In early 1984, he was stuck in Puerto Rico when his flight to the British Virgin Islands (BVI) was cancelled due to insufficient passengers to make the flight economical. In his desire to get to the BVI quickly, he chartered an aircraft and sold the remaining seats to the other ‘bumped’ passengers for US$ 39 one way. In June 1984 using a leased Boeing 747-200, Branson launched Virgin Atlantic Airways. Today Branson has shareholdings in several airlines in major continents, some of which carry the Virgin brand.

A thorough understanding of the person you seek to do business with is vital to a successful partnership. Therefore, before embracing Branson’s offer to invest, it is important for the leaders of LIAT shareholder governments to pause and take the time to read Branson’s latest captivating autobiography, “Finding My Virginity.” The book gives a deep insight into Branson’s vast empire and reveals his unique philosophy on business, success and life.

Branson does not invest money to lose money, but rather to realise generous profits. Therefore, the Branson offer will be accompanied by conditions that will seek to rightfully protect his investment which perhaps is what gave rise to Antigua and Barbuda optimism that a deal with Branson can save and expand LIAT.

A Branson investment in the ownership of LIAT will significantly change the dynamics of the Caribbean air transport industry creating waves in the boardrooms of the region’s domiciled airlines. As an investor in LIAT , Branson may be there for the long haul and will push for efficiency, accountability and good governance in LIAT’s operations. He will seek to forge functional cooperation between LIAT and his other airlines creating positive synergies. This approach may eventually see an expanded LIAT “in the black” with a competitive advantage over the region’s other domiciled airlines.

With his financial clout, Branson will more than likely insist that the airline be restructured with routes and aircraft rationalisation to achieve profitability. Branson fully understands that for an airline to be successful, it must be managed along sound business principles and practices, a position that is also advocated by other shareholder governments. He will certainly not tolerate the finger of interference in the management of the airline, a factor that may have contributed to LIAT’s woes. He may also push for LIAT to take advantage of new marketing opportunities created by the recently revised and much liberal CARICOM multilateral air services agreement.

Apart from money, Branson will bring to the table airline management expertise and the route connectivity of the Virgin Airlines Group. However, the cost of air travel in the Caribbean is impacted by high taxes and charges which in many instances are more than the base fare. A 2018 Caribbean Development Bank (CDB) Report, “Air Transport Competitiveness and Connectivity” identified that the high cost of intra-regional travel is exacerbated by taxes and charges.

The 2018 CDB report recommended the reduction of aviation taxes to make intra-regional travel more affordable and the lowering of airport charges to allow airlines to operate in markets that are considered thin and where operating costs are important to the viability of the airlines. These recommendations have not received much positive consideration because taxes and charges are sources of governments and airports revenues.

The Caribbean, particularly the Eastern Caribbean sub-region is in dire need of regular, reliable and affordable air connectivity to support social and economic development, particularly the tourism industry. If the regional governments cannot deliver on this, then Branson and Virgin may very well fill that void.

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