As airlines around the world register losses, face bankruptcy and seek more and more government funding, one of the Caribbean’s oldest indigenous airlines is taking a new tack. Garry Cullen, CEO, expects to secure the viability of LIAT with an integrated suite of strategies, including a web-based distribution system, direct customer relationships, upgraded fleet and convenient schedules, and competitive pricing.

Now it’s up to customers to take notice, and take advantage of, the service that the new on-line system affords.

LIAT launched its new distribution system at midnight on October 11, 2005, just before its 49th anniversary. It will include a new website for booking and buying; support from a LIAT call centre; local offices; as well as the traditional travel agency network.

Promotions and communications which are being handled by Lonsdale Saatchi & Saatchi will begin with the simple message “Plan to Save” and information about how to get the lowest fares available.

Garry Cullen admits that a new system in a traditional market like LIAT’s is not without risk. There are enough persons out there to tell him about them. How many web-literate customers does LIAT have for instance? An initial estimate of 10 percent on-line customers may be expected to grow in three years. At the same time, web bookings from extra-regional customers – about 25% of LIAT’s total – may be expected to grow more rapidly. For Caribbean customers, there will be a call centre and local LIAT offices; as well as the network of travel agents and the traditional booking system.

In 2000, as the airline – 90% government owned, 10% by staff – prepared for a floatation, he made the assessment that the CEO needed to be able to take the company through the IPO into the new dispensation, a process that could take up to five years. Cullen decided to exit. His plan was to get out of aviation, perhaps to lecture at IATA or the Irish Management Institute.
The call came from Wilbur Harrigan, then Chairman of LIAT, who had noted Cullen’s time at LIAT in a piece about the CEO of Aer Lingus in Flight International magazine. “I said to him ‘thank you but no thanks’,” remembers Cullen. “Wilbur said, ‘Look just come down here for three months because we’re at the point of deciding whether to keep the airline’.”
“I arrived in Antigua in April 2000 and am still here, still struggling to right the ship,” he says. “The company had been privatized in 1996, and the plan was that it would be re-capitalised. No money came to the airline, and by 2000, there was a chronic cash flow problem. I was asked to see whether it could be made viable or not. That was the same time that Caribbean Star came into being, hoping I think that LIAT would fold.”

The new strategic plan led by Cullen involved: reduce losses; reduce the payroll bill by 30%; get rid of old aircraft and get three new 50-seater Dash-8s; form a marketing alliance with BWIA; among other initiatives. An expected capital injection of US$25 million from shareholders did not materialise.

“We were faced with a major cash flow crisis in 2003,” he says, but managed to raise money on bond issues. By 2004, there was a fortunate break for LIAT as the new Prime Minister of St Vincent, Dr Ralph Gonsalves, became Aviation Chairman in the Caribbean Heads conferences. Gonsalves believes in and is an ardent advocate of the vital strategic role of LIAT and indigenous airlines to the region.”

LIAT has succeeded in cutting losses by 50%. It is time for what Cullen calls “a break out strategy.” He notes, “We have taken a lot of cost out of the airline. But savings have been swallowed up by lower fares and higher fuel costs.”

There are many costs that airlines have no control over: landing rights, insurance, fuel, parts and aircraft. The key area over which there is control is distribution. Traditional global distribution systems have included costs per leg, per passenger, per change, per ticket. The LIAT executive has therefore decided to move to one of the new age low cost distribution systems already being used successfully by carriers like JetBlue, Southwest, Ryanair. The Navitaire system is rooted in revenue accounting and revenue protection solutions offered to major carriers over the last 10 years, and already in use by mainstream airlines including American, Continental, Air Canada, Delta, United, US Airways in North America; Gol in Brazil, Monarch and EasyJet in the UK, and many others around the world.

The new distribution and revenue management system requires fundamental changes in the way the airline does business. It’s not just a matter of replicating new low cost carriers. Fundamental changes in what Cullen calls “the value equation” are required. This is the public perception of value, and one which is tied to price, efficiency and customer convenience. Customers must now appreciate that the purchase price of travel can be transparent, based entirely on what the customer wants, and not on conditions imposed such as minimum stopovers, maximum stays. “The cheapest fare available at any given time is what will be in your face,” says Cullen.

This system allows ticketless travel, and other savings in collateral material such as the paper used on boarding passes. The introduction of Navitaire allows new streamlined procedures as well as better assessment of empty seats – and special low price offers - at any given time.

Cullen admits that customer empowerment is at the leading edge of the strategies intended to transform the airline in the next two years. It starts with direct and transparent access to booking and buying through the web-based platform (also available through LIAT offices and travel agents) that allows customers to plan travel itineraries on their own time and take advantage of lowest fares available. But it will extend through the demand chain to more non-stop services which in turn improved the integrity of schedules, in which punctuality is often compromised by the “multi-hops” from one place to another.

- Press Release

Officials of LIAT at Relaunch in Antigua

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