Merger gets off the ground BY CAROL MATROO Guardian 06.23.03 A holding company, Caribbean Airlines (Holding) Ltd, would be incorporated= =20 in T&T within two weeks, to hold shares within BWIA and LIAT as several=20 governments prepare to reorganise the region=92s airline business. Prime=20 Minister of St Vincent and the Grenadines, Ralph Gonsalves, yesterday said= =20 that the holding company would act as a frame for the two bankrupt=20 companies. =93We have established a clear nexus between BWIA and LIAT, but= =20 you must have a frame and that frame is the holding company,=94 Gonsalves=20 said during a news conference at the Central Bank of T&T, Port-of-Spain,=20 yesterday. The holding company would be subject to approval from the=20 Registrar of Companies. This, he said, may result in a possible merger=20 between the two airlines, creating one major Caribbean airline. =93This will= =20 be a structure helping us to reorganise the airline business in the=20 Caribbean and owning that business,=94 Gonsalves said. Gonsalves had earlier met with Prime Minister Patrick Manning, junior=20 Finance Ministers Ken Valley, Conrad Enill and Christine Sahadeo and Labour= =20 Minister Franklyn Khan to discuss the matter. He also met with the deputy=20 PM of Antigua and Barbuda, Robin Yearwood, Barbados=92 Minister of=20 International Transport, Noel Lynch, BWIA=92s chief executive officer,= Nelson=20 Tom Yew, LIAT=92s CEO Garry Cullen and other LIAT and Caricom officials. Talks of a merger between the two cash-strapped airlines have been bouncing= =20 around for some time now, but it is only after a report from a=20 yet-to-appointed technical co-ordinator that the two leaders would decide=20 on the feasibility of the enture. Gonsalves said the decision to=20 co-ordinate a holding company came after an interim report from a Barbadian= =20 technical team appointed on April 13. The appointed technical=20 co-ordinator=92s job would be to prepare and co-ordinate the implementation= =20 of a detailed plan for the establishment of the new company, and the=20 restructuring and rationalisation of the operations of BWIA and LIAT, he=20 said. The technical team would also continue to work with the co-ordinator= =20 to determine the strategic and operational issues for the new airline and=20 the equity requirements for the holding committee. The leaders also decided= =20 that other financial contacts should be sought, adding that the airlines=20 would restructure their efforts towards viability as a pre-condition for=20 any further public sector participation. Manning said T&T would provide=20 initial funding for the retention of the services of the technical=20 co-ordinator, but explained that the cost would be =93minimal=94. The aviation problem The decision by regional leaders, meeting in Port-of-Spain yesterday, to=20 establish a holding company to facilitate the establishment of a regional=20 airline is a neat solution to a possibly messy problem. The problem: How to= =20 establish a properly-capitalised, low-cost regional carrier in the Eastern= =20 Caribbean at the least cost to the owners =96 presumably regional=20 governments, the regional and international private sector and the workers.= =20 The holding company, Caribbean Airline (Holdings) Ltd, would own a majority= =20 of shares in two existing airlines =96 BWIA and LIAT =96 but could hold= shares=20 in other airlines which may be encouraged to join. BWIA and LIAT would=20 become subsidiaries of the holding company. Who will control it As it stands, the T&T Government holds a 49 per cent stake in BWIA =96 33.5= =20 per cent by the Corporation Sole and 15.5 per cent in trust for the=20 airline=92s workers stake. These shares have not been transferred to the=20 workers as yet. LIAT is owned by regional governments. Twenty-nine per cent= =20 of LIAT is owned by BWIA, which also owns 49 per cent of Tobago Express,=20 the airbridge airline, which, like LIAT, flies Dash-8s, a short-haul=20 aircraft. It is likely that the T&T Government, because of its financial=20 strength, would be the largest single shareholder in the new airline. This= =20 means that the Manning administration would be in a position to call the=20 shots in aviation in the Southern Caribbean by having the airline based at= =20 Piarco, choosing the new CEO and dictating labour terms. It also means that= =20 the T&T tax-payer would be called upon to fund the airline, at least in its= =20 initial stages. Why a holding company? Holding companies are companies which have control over several operating=20 companies. When Royal Bank decided to embark on regional expansion, it=20 opted to form a holding company (RBTT Financial Holdings) which would own=20 its local and regional subsidiaries. Likewise Guardian Life. The advantage= =20 of a holding company is continuity =96 the existing airlines would be able= to=20 maintain their identities and their route rights. The obvious disadvantage= =20 is that the new owners of the airline may not be able to force new wage and= =20 salary terms and conditions on the company=92s employees. Other options? The governments could have pulled the rugs on both airlines and attempt to= =20 form a new structure from the ruins. This would have been an expensive=20 option with millions being paid in retrenchment costs. There is also the=20 issue of the debt that both airlines carry, especially to the airline=20 leasing companies. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.carib-link.net/naparima/naps.html TnT Webdirectory: http://search.co.tt *********************************************************