Letter to Chairman of LIAT's Shareholders Committee (February 25 2014) from Dominica Hotelier Gregor Nassief.

Secret  Bay,  Tibay,  Portsmouth,  Dominica 1

     February  25,  2014        Honourable  Dr.  Ralph  Gonsalves  of  St.  Vincent  and  the  Grenadines  LIAT  (1974)  LTD  V.C.  Bird  International  Airport  P  O  Box  819  Coolidge  Antigua    Dear  Prime  Minister  Gonsalves:    Re:    Run  it  like  a  business  before  it  goes  out  of  business    On  the  televised  program  Time  to  Face  the  Facts  on  Sunday,  February  23rd,  I  appealed  to  you  to  step  aside  as  Chairman  of   the  Shareholder’s  committee  of  LIAT.    As  mentioned  on   the  program,  given   the   respect  and  admiration   I  have   for  you,  particularly  on  your  stance  and   leadership  on   issues  such  as   reparations  and  the  cholera  outbreak  in  Haiti,  it  was  personally  difficult  for  me  to  do  this.    But  it  is  necessary.    LIAT  has  moved  from  an  operational  meltdown  in  the  Summer  of  2013  to  a  financial  meltdown  a  mere  7  months   later.     LIAT   drains   our   treasuries,   operates   inefficiently   and   stifles   competition.     The   source   of  LIAT’s  problem  is  its  financial  unsustainability  and  as  with  everything  else  at  LIAT,  no  one  is  accountable.    As  Chairman  of  the  Shareholder’s  committee,  the  buck  stops  with  you.    LIAT  needs  to  fight  the  battle  of  its  life  to  transform  itself  to  be  financially  viable  and  sustainable.    But  you  believe,   and  have   stated   so  publicly,   that   LIAT   can  never   be  profitable.     This   battle,   therefore,   needs   a  different  general.    Unsustainability    LIAT  has  lost  ec$120m  in  the  last  four  years.    Last  month,  LIAT  could  not  pay  both  the  lease  on  its  aircraft  as  well  as  its  payroll.    So  it  chose  one  and  delayed  the  other.    A  leased  ATR  gives  36%  more  seat  capacity  than   its  closest  Dash  8  equivalent  but   is  double  the  (lease)  expense.     In  2015,  repayments  will  begin  on  LIAT’s  recent  loan  of  us$65m  to  purchase  new  aircraft.      So  monthly  cash  outflows  go  up  even  more.    And  the  new  inflows  to  cover  this?    Inter-­‐island  tourism  is  down  60%  in  7  years  and  LIAT’s  load  factor  is  running  at  about  55%.    The  fantasy   (aka  “business  plan”)   is   that  the   load  factor  will  go  up  to  75%.    The  fantasy   is  also  that  LIAT  will   fly   its  way  out  of   losses  by  expanding  to  new  destinations  –   Jamaica,  Haiti,  Aruba,  Panama,  and  eventually  to  cities  in  North  and  South  America.    LIAT  employs  850+  people,   flies  22  destinations,  operates  between  10  and  12  aircraft   from  2  hubs   (3   if  you  count  Trinidad)  to  move  800,000+  passengers  a  year  to  generate  massive  losses.    So  it’s  bail  out  time  again.    Call  on  shareholders,  and  call  on  other  good  neighbors  so  that  we  can  continue  to  drain  our  treasuries,  operate  inefficiently  and  stifle  competition.    And  for  you  this  is  acceptable  because  LIAT  should  not  be  run  like  a  business  and  can  never  make  a  profit.      

Secret  Bay,  Tibay,  Portsmouth,  Dominica 2

Our  fragile  economies  can  no  longer  support  perpetual  bailouts.    If  we  do  not  take  the  bull  by  the  horns  LIAT  will  go  out  of  business  –  it  will  employ  no  one,  fly  nowhere,  operate  no  aircraft  and  use  no  hubs.    But  alas,  it  will  generate  no  losses  and  competitive  players  will  fill  the  gaps  because  LIAT,  the  airline  unfairly  propped  up  by  perpetual  subsidies,  will  not  be  there  to  run  them  out  of  business.    LIAT  must  therefore  immediately  begin  a  journey  towards  financial  sustainability  to  save  itself.    But  if  the  leader   does   not   believe   in   the   journey,   then   the   journey  will   never   begin.     It   is   on   this   basis,  with   full  respect  and  admiration,  that  I  ask  you  to  step  aside  as  Chairman  of  the  Shareholder’s  committee,  so  that  a  new  mandate  to  make  LIAT  financially  sustainable  can  be  ushered  in.    Sustainability    The  new  chairman  of  the  Shareholder’s  committee  needs  to  believe  that  the  battle  can  be  won.    And  what  needs  to  be  done  is  not  rocket  science.        Appoint   a   Chairman  and   a  Board   capable  of   turning   around   the   financial   fortunes  of   the   company   and  running  a  top-­‐notch  airline.    Give  them  the  authority  and  autonomy  to  do  what  needs  to  be  done.    Allow  them  to  appoint  a  CEO  and  restructure  the  management  team  as  necessary.      Allow  LIAT  to  become  a  real  business  free  from  political   interference  tasked  with  a  perfect  safety  record,  high  employee  satisfaction,  great   customer   service  and  solid   financial  performance.    A   fierce   focus  on   the  company’s   finances  with  adjustments  made  to  yield  (including  renegotiation  of  government/airport  taxes),  network  efficiency  and  operating  costs  will  be  required.    The  resulting  operation  will  have  fewer  employees,  fewer  destinations  and   fewer   aircraft.     It   will   be   profitable,   dependable   and   it   will   deliver   great   service.     Like   any   airline,  unprofitable   routes   will   continue   only   with   guarantees   from   the   interested   party/government.     But   at  least   then,   the   taxpayers   will   know   what   they   are   paying   for,   and   can   make   that   decision.     And  other/smaller  airlines  will  take  up  the  slack.    Competition  will  flourish,  as  will  LIAT,  and  the  Caribbean  will  finally  get  the  airlift  network  it  needs.        With   a   restructured   board   and   executive,   confidence   in   the   airline’s   financial   performance   will   be  established  and  other  Caribbean  governments  may  even  want  to  invest.      At   the   right   time,   joint   venture   the   company   while   maintaining   a   minimum   50%   shares   among  shareholder  governments.    The  two  best  run  airlines  in  the  world  (Singapore  Airlines  and  Air  Malaysia)  are  run   like  a  business  and  are  profitable  and  remain  owned  50%  or  more  by   the  State  and  50%  or   less  by  private  interests.    Like  LIAT,  they  were  bleeding  losses  and  their  shareholder  governments  could  no  longer  manage  the  bailouts.    So  they  took  the  tough  decisions,  appointed  the  right  board  and  executive  team,  and  turned  the  airlines  around  to  the  benefit  of  all  stakeholders.    Yes,  it  will  be  painful,  but  it  is  necessary.    And  most  importantly  it  will  pull  LIAT  back  from  the  financial  cliff  and  put  it  on  a  course  to  long  term  financial  sustainability.    Please  consider  that  I  am  a  hotelier  from  an  island  that  is  almost  80%  dependent  on  LIAT  for  airlift.    Cut  one  route  to  Dominica,  and  we/Dominica  will   suffer.    But   if  my  option   is   (a)   to  continue  to  have  all   the  LIAT  routes  we  have  today  with  an  airline  that   is  prone  to  poor  service,  ad  hoc  cancellations,  occasional  and   irrational   pilot   strikes   and   constantly   at   the   edge   of   a   financial   precipice   due   to   insurmountable  financial   losses   -­‐  OR  -­‐   (b)  an  airline  with  fewer  routes  but  with  good  service,  dependable  schedules  and  solid   financial  performance,   then  my  choice   is  definitely   the   latter.    And  other  airlines,  once  permitted,  will  take  up  the  slack.          

Secret  Bay,  Tibay,  Portsmouth,  Dominica 3

 In  Summary    Thomas  Edison  said,  “I  have  not  failed.  I’ve  just  found  10,000  ways  that  won’t  work.”    And  then  finally,  he  invented  the  electric  light  bulb.    We  have  lived  through  and  exhausted  the  many  ways  that  LIAT  won’t  work.    It  is  time  to  try  the  way  that  will.    I  appeal  to  you,  Prime  Minister  Gonsalves,  as  well  as  the  other  Shareholder  Prime  Ministers,  to  mandate  a  new   approach   for   taking   LIAT   and   the   Caribbean   aviation   industry   forward  without   this   perpetual   and  unfair  burden  on  our  treasuries.    It  is  time  to  run  it  like  a  business  before  it  goes  out  of  business.    Respectfully  Yours,  

Gregor  Nassief  Owner/Director  –  Secret  Bay  Executive  Chairman  –  Fort  Young  Hotel    cc:   Honourable  Dr.  Baldwin  Spencer  of  Antigua  and  Barbuda     Honourable  Freundel  Stuart  of  Barbados     Honourable  Roosevelt  Skerrit  of  Dominica    p.s.     As  we  again  desperately  seek  additional  funds  for  yet  another  bailout,  make  it  the  last  please.    Don’t  

put  the  money  into  the  black  hole  of  an  unsustainable  business  model.    Instead,  use  it  to  restructure  the  airline,  rationalize  its  operations  and  place  it  on  a  solid  long  term  footing.    In  other  words,  make  it  the  last  bailout!