NCE again St Vincent’s Prime Minister Dr Ralph Gonsalves is taking issue with the fuel subsidy the Trinidad and Tobago government grants to national carrier Caribbean Airlines Limited (CAL).

By Victoria February 12, 2013 10:33

NCE again St Vincent’s Prime Minister Dr Ralph Gonsalves is taking issue with the fuel subsidy the Trinidad and Tobago government grants to national carrier Caribbean Airlines Limited (CAL).

Dr Gonsalves, who is chair of the Liat shareholder governments, now up to four with the recent inclusion of the Commonwealth of Dominica, indicates he doesn’t want a fight with the Kamla Persad-Bissessar administration in Port-of-Spain, but would prefer an informed discussion on the matter, a discussion which is “not antagonistic”, but rather conducted in a “co-operative manner”.

But obviously CAL’s fuel subsidy is a worrisome issue for the Vincentian Prime Minister because just a month ago, during his Budget presentation in the St Vincent Parliament, Gonsalves listed the fuel subsidy as one of the “central challenges” which Liat faced.

Since however, he is armed with a legal opinion on the issue and one which says, according to Gonsalves, CAL’s fuel subsidy is in contravention of the revised Treaty of Chaguaramas which governs the Caribbean Community (Caricom). He said that Liat has complained in the past that it was placed at a disadvantage because of CAL’s fuel subsidy.

PM Gonsalves said the fuel subsidy now enjoyed by CAL was not in accordance with the Multilateral Air Services Agreement (MASA) in the revised Treaty of Chaguaramas, a view which he himself has held for some time. He described the legal opinion as “confidential”.

Industry observers are now left wondering whether Gonsalves has not put the cart before the horse, since apart from various utterings over the issue in the past year, he has never publicly announced an interest in discussing the matter with the Trinidad and Tobago Government, or for that matter Caribbean Airlines.

Sources familiar with the issue said Gonsalves’ latest position was that he would have raised it at the 24th Inter-Sessional meeting of Caricom Heads which began in Haiti on Sunday, although at the time of writing, it was not on the agenda. Prime Minister Kamla Persad-Bissessar attended that meeting and returned home yesterday.

Meanwhile observers of the aviation and travel industries internationally as well as in the region are raising some concerns about Liat’s bold decision to acquire a brand new fleet of 12 turbo prop airplanes by the end of next year as part of a daring business plan it rolled out in early December in Antigua. According to a recent official release, Liat has placed a firm order for three ATR-42-600s, the first of which is expected to be delivered in June, with the other two expected in the Caribbean in August and September.

At the same time however, the airline has an option for two larger aircraft – the ATR-72-600. The ATR-42s are 48-seater aircraft, while the 72s are configured to 68 seats.

Within days of announcing the ATR deal, Liat revealed it had signed a lease with Los Angeles-based Air Lease Corporation (ALC) for two ATR-72-600s. No details about the lease arrangement have been released and no date has been given as to when these aircraft will arrive in the Caribbean or how soon they would begin operating Liat services.

At the end of the day, what Liat’s acquisition plans call for is a new fleet of 12 turbo prop aircraft to replace its current 16-plane Dash-8 fleet. The new fleet would comprise five ATR-42-600s and seven ATR-72-600s (leasing is hooked into the plan somewhere) by the end of next year at an estimated cost of more than (US)$230 million.

According to Liat spokesman Desmond Brown, the airline is hoping to negotiate a “soft” long term commercial loan of (US)$74.1 million to be used to partially finance the acquisition of five of the new aircraft, which cost has been put at (US)$97.2 million.

The remaining funding (US)$23.1 million, would come, Brown said, from current shareholders Barbados, Antigua and Barbuda and St Vincent and the Grenadines and the Commonwealth of Dominica, as well as some un-named potential new shareholders.

While the Freundel Stuart government in Bridgetown has stated that Barbados, the airline’s largest single shareholder government, had committed to investing millions of dollars more in Liat, since, as he saw it Barbados, despite its own financial troubles, could not afford to withhold support from the beleaguered carrier.

But the Barbadian leader did not indicate how much more money it was prepared to pump into the ailing carrier and while some monies have come from St Vincent and Dominica, the Baldwin Spencer administration in St John’s, Antigua has remained mum on the issue of its contribution. However the general elections in Barbados could put “a spoke in the funding wheel” if the Stuart government is not returned to government.

However, while this (US)$97.2 million funding takes care of the five smaller planes, nothing has been revealed as to the source of funding for the seven larger aircraft, whether it would be done through another commercial loan or from contributions from the shareholder countries. This figure according to current world prices could amount to a further (US)$119 million.

The concerns were racked up a bit when LIAT back tracked on a forecast of a $7 million profit for 2013 it had revealed in its Business Plan. Within weeks, the airline announced that it had reviewed this prediction and the new figures reflected more of a break even position.

But for all intents and purposes, it would seem that there are in fact new planes coming to LIAT soon. How they help the airline move from a red bottom line to one of black remains to be seen.

By Victoria February 12, 2013 10:33
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