Executive Interview with Peter David
Grenada’s Tourism Minister discusses airline subsidy and shareholder issues
Grenada Tourism Minister Peter David spoke with Johnson Johnrose of the Caribbean Tourism Organization at the World Travel Market in London. They discussed the airline subsidy and the Minister’s position on Grenada becoming a Liat Airline shareholder.
JOHNSON JOHNROSE: You said you’re meeting airlines here as well. A number of the airlines over the years have been seeking some type of subsidy – call it market support, whatever it is – what are you discovering as you talk with the airlines?
PETER DAVID: Well, you know, we have found that this move toward subsidies, not only with international airlines, within the Caribbean, Caribbean airlines, everybody’s talking about subsidies. We have found that without them, we are not going to get the airlines, and more and more we are trying to develop a partnership with the airlines, rather than simply just the airlines coming and making money, to see how we can work together. Because the truth is that without us, the airlines cannot function, and without them, we cannot function. So we are moving more and more in the direction of that kind of partnership. What I do believe though … speaking to one minister last night, is that we as a region, we of the Caribbean region - ministers of civil aviation, ministers responsible for airlines, ministers of civil aviation or ministers of transport must sit together to work out a regional kind of arrangement with the airlines, because as small islands, it’s difficult. I mean Grenada spends about 10 million dollars a year on subsidies. We have to find a way to do something about that, and we have found that if we can increase our tourism arrivals, if we can move to the point where the airlines are making simply not just flying, but flying profitably, then we can move in the direction of a reduction of subsidies. So, you know, we’ve had good discussions with the airlines – the airlines continue to work with us, but we must find a way to have the airlines fly without subsidies, and I think the only way to do that is to make it profitable for them by increasing the arrivals in the region, which means increase marketing and other ways in which we can do this.
JOHNROSE: You said 10 million dollars a year?
DAVID: 10 million dollars a year.
JOHNROSE: Is that US dollars?
DAVID: No, that’s EC [East Caribbean] dollars – about 3 to 4 million US dollars a year [US$3.7 million], simply to pay the airlines to fly, which is quite large for a very small economy. Grenada has a very small economy with 100,000 people, 1500 rooms – it’s a large amount to be paying just for the airlines to fly.
JOHNROSE: If you are doing that, does the airline itself feel any obligation to fill its seats all full, because hey, whether or not I am flying empty, I’m fine?
DAVID: With some of the airlines, we have found that they are really trying to do better. With others, you find that that leads to a disincentive. To them, I am doing more marketing and reducing prices and so on. So, yes, there are some who are very profitable, and then there are others who we find, we need to better, but certainly, you are absolutely correct – we need to find a way down the road to remove these subsidies, because … certainly it can be a disincentive to encouraging more flights and more passengers into Grenada.
JOHNROSE: With these 10 million EC dollars, none of it goes to Liat?
DAVID: None of it goes to Liat. You know with respect to Liat, I’ve already said it, I’ve said it a million times – despite all the negativisms about Liat, Liat has been one of our best assets in the Caribbean, particularly in the Southern Caribbean and Eastern Caribbean. Without Liat, movement of people in the area will cease, I must say. Of course, there are all the complaints about Liat in terms of efficiencies, complaints about Liat with respect to late arrivals, all the problems we hear, leaving on island time –we hear all of that, but the truth is I think we should imagine an Eastern Caribbean without Liat, and then we will realize its importance.
JOHNROSE: Will you subsidize it?
DAVID: I have advocated, I have said this publicly, that Liat must be treated as a public utility, not simply as a business, because the practice must be profitable, and we need more people around the Caribbean. In order to do that, we need to be simply to be able to say to Liat, or to any airline for that matter, fly in ways profitable. We find that some would simply move. So yes, I advocate subsidization for Liat, I advocate more government for Liat, simply because it is a public utility, like water and electricity and other public utilities we all subsidize.
JOHNROSE: I expect the Grenada government at some point will say what?
DAVID: I have advocated within our government that we should get on the table with Liat, not only Barbados and Vincent…
JOHNROSE: With shareholders?
DAVID: Absolutely, I have advocated that, of course. These are difficult economic times, and I think everyone is trying as much as possible to reduce expenditure, but I’ve said to my government, and I’ve said publicly, we must not treat Liat simply as an expenditure, it is an investment not only in tourism because of the importance of regional tourism, something we must not minimize. Regional tourism is extremely important, but also because of the movement of people within the region. Regional integration is one of our priorities, that is why we have …
we cannot speak about regional integration. We cannot speak about regional integration if we do not speak about regional transport, if we do not speak about moving people around the region so that integration doesn’t become … integration, it becomes people integration, and Liat is critical in that regard. Of course. I am not suggesting that one should not look at the inefficiencies of Liat, that one should not look at the restructuring of Liat – all of that must be looked at, but at the same time we must look at it with a view to improving it rather than saying let us bring in competition to remove Liat. Of course competition is always good, but competition not with the purpose of removing Liat and bringing in another airline that can eventually increase the fares and reduce flights to the region, so that is my position on that.
JOHNROSE: What is another airline showed up, and this is strictly hypothetical – what if another airline showed up and said we want to do exactly what Liat is doing right now. We will fly to all of these 22+ destinations, we’ll connect them … we would like subsidies?
DAVID: I believe with respect to Liat it is not simply an airline that is there. It’s an airline that we have a stake in. If another airline comes onto the scene and says listen we are willing to do all of that and we want a subsidy, I will not support that simply because we have a stake in that; we have a stake in Liat.
JOHNROSE: What is your stake in Liat, I mean, you’re not a shareholder?
DAVID: Liat is willing to invite us to be a shareholder, so we should have a greater stake in it. We have a stake in it … we as governments… I do not mean Grenada has a stake in it, but I mean the region has a stake in it. We in Grenada should have a larger stake in it along with the other … with the private sector entity coming in… to do that can… you remember Caribbean Star. It was not so long ago Caribbean Star came in, reduced fares, very attractive, and eventually went out of business. Can you imagine if that had happened and Liat had gone out to sea, and we are left with no Caribbean Star, no Liat? So I would advocate that governments encourage any arrangement or participate in any arrangement that would lead to the extinction of Liat.
JOHNROSE: So you’re saying is, better to use it than leave it?
DAVID: Make it work, make it work.