Dr. Jean Holder, chairman of LIAT. - file

LIAT (1974), the 50-year-old commuter airline owned primarily by three Eastern Caribbean countries and Caribbean Star, a competitor launched in the mid-1990s by the Antigua-based American financier, Allen Stanford, have begun formal talks on a merger, it was announced yesterday.

"It seems a positive development that we have begun formal talks after a period of exploratory negotiations," LIAT's chairman, Jean Holder, the former CEO of the Caribbean Tourism Organisation (CTO), told Wednesday Business.

LIAT, headquartered in St John's, the Antigua capital, was founded by Antiguan aviation pioneer Frank Delisle. Over its five decades, LIAT has undergone a myriad ownership structures and management permutations, without returning a profit, despite been seen as providing a critical service to the Eastern Caribbean.

Currently owned about 80 per cent by Barbados, Antigua and Barbuda and St. Vincent and the Grenadines, LIAT has debts in excess of US$270 million and, like most international airlines, faced with rising fuel bills and stiff competition, has seen the red ink flow in recent years. For instance, it lost an estimated US$9.5 million in 2004 and is expected to report an even higher deficit in 2005.

BLEEDING

But while figures for the privately-held Caribbean Star and its subsidiary, Caribbean Sun, were not immediately available, Stanford, a Texan-born billionaire financier who made his money mostly through offshore banking, has conceded that his airline, too has, bled red ink.

Both LIAT and Caribbean Star mostly fly Dash 8 aircraft between the same Eastern Caribbean destinations, often taking off and landing within five minutes of each other.

Yesterday, Holder described this as "suicidal competition."

"It is not the kind of competition that makes sense at all," said the LIAT chairman, who has a long history of promoting cooperation, if not formal merger between the bevy of loss-making Caribbean airlines.

"It is senseless competition that forces prices below what you should charge."

Stanford could not be immediately contacted for comment, but in an earlier statement, he said he was "willing to work ... to help to create what could eventually become the most modern and efficient airline in the Caribbean, framed within the context of the strategic economic development of the region.

"This venture gives me yet another opportunity to demonstrate my commitment to something of value to this region, as I did recently with the Stanford 20/20 cricket tournament," Stanford said.

At one stage, from the mid-1970s to the early 1990s, Jamaica was a significant shareholder in LIAT after regional governments stepped in to save the airline when its then owner, the British leisure group, Courtline, collapsed in 1974.

Among LIAT's current shareholders is Trinidad and Tobago's struggling carrier, BWIA, which at one time held as much as 78 per cent before that was whittled down over the years to under 10 per cent.

In 2003, BWIA and LIAT, as has been the case on and off over the years, had substantial talks on a merger before these finally collapsed.

business@gleanerjm.com