Sir Richard Branson wants to invest in and expand LIAT, a troubled Caribbean airline. Is Virgin Caribbean around the corner?
Leeward Islands Air Transport, or LIAT for short, may be seen as more of a public utility than a profit-generating airlines. The airline is jointy-owned by seven Caribbean governments, though the four below own about 95%:
- Barbados
- Antigua & Barbuda
- Dominica
- St. Vincent and the Grenadines
The airline is headquartered at V. C. Bird International Airport in Antigua and has a fleet of 10 ATR aircraft, providing essential air service in the region.
But the airline loses money. Consistently. And even as LIAT has become far more operationally reliable in recent years, its reputation among locals and visitors is not great.
Branson, who lives on Necker Island in the British Virgin Isles, has offered an initial $7 million investment in LIAT. Lionel Hurst, a senior Antigua and Barbuda government official, told the Caribbean Broadcasting Corporation:
He has proposed investing USD7 million, he would wet-lease several aircraft, jets, and they would very likely fly from Fort Lauderdale International to maybe Jamaica, Haiti, down into Antigua, Barbados, maybe even as far south as Trinidad and Guyana. The whole idea is to enlarge LIAT rather than collapse LIAT or making it a smaller entity.
So right away, an expansion. Hurst explained that absent an expansion, LIAT would never be profitable:
There just isn’t sufficient number of passengers and other kinds of possibilities to make LIAT profitable within the Caribbean and many of the countries that now utilize LIAT services are showing some reticence in providing LIAT with the resources it needs from time to time. So we have to look at another to make LIAT work and Branson stepping in would be such a way.
Branson does not strike me a passive investor and I can see him wanting to leave a mark in his own backyard. My prediction: more expansion for LIAT.
CONCLUSION
I’m not expecting LIAT to acquire wide body jets and start flying to Europe (Virgin Atlantic already has that covered), but making the carrier a more robust regional option with expanded U.S. presence would be an interesting move. American Airlines’ defunct San Juan, Puerto Rico hub has still left a gap in the region and I do not underestimate what Branson might have in mind.
image: Virgin
Good investment from him,we hope to see the airline become great again.
This is so great news. Hopefully UVF and SLU will benefit. The reputation OF LIAT is terrible, as the reputation of to many crooked gvmts involved. I hope Sie Branson will be able to invest, without getting into the swamp.
Being a billionaire doesn’t guarantee success and Branson has just about as many small to medium size failures as he does big successes – which have paid for the latter. Indeed, his airline record is somewhat mediocre in terms of the ability to generate sustainable enterprises. That’s why Delta bought half of Virgin Atlantic and Alaska bought Virgin America. Does anyone think that Delta will allow him to create a new competitor to the US from the Caribbean?
What LIAT really needs a complete recapitalization, tear down, and build back up. Still, the decades of old bad habits engrained from the top to bottom of the airline (not to mention local government intervention) – it will make it tough if not impossible to accomplish this task.
It would be easier and better for Branson to start a new Caribbean airline (serving just the Caribbean), bringing on LIAT’s best people to create a high quality product people are willing to pay for. Focus on routes that can make money, and there are plenty, and for the marginal yet important ones, charge what it truly costs to provide that service. Or, instead of governments throwing good money after bad, set up those routes with an annual subsidy like the US Essential Air Service program.
There’s definitely room for some new competition in the eastern Caribbean region. In particular, places like Trinidad & Tobago, Guyana and Suriname appear very underserved. There’s a lot of potential here. If implemented correctly, Branson could find a pathway to success for LIAT.