The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas has suffered an airlift decline of more than 50,000 seats for 2013 to-date, Tribune Business has been told, as airlines phase out services and adjust schedules to traveller demand.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, said airlift to the Bahamas had chiefly been impacted by Spirit Airlines and Jet Blue phasing out their respective services from Fort Lauderdale and Westchester, New York.

Jet Blue and United Airlines had also adjusted airlift levels to the Bahamas from Fort Lauderdale and Newark, and Mr Sands told Tribune Business: “The airlines are more nimble these days, and quickly adjust the size of their aircraft and frequency of flights based upon demand.

“Year-to-date, this has resulted in a loss of over 50,000 seats. Airlines have also become very sensitive to the cost of operations, and any taxes and fees which directly impact their operating costs can result in their redeploying aircraft to destinations with higher yields and lower operating costs.”

The 50,000 seat loss revelation comes with the Government expected to decide imminently whether it will modify the new, and increased, taxes that the 2013-2014 Budget imposed upon the commercial and private aviation industries.

Both had reacted angrily to the new and increased fees, with airlines representing 90 per cent of US market airlift into the Bahamas warning they “may reconsider their service levels to the Bahamas”.

To-date, the Government has stuck to its position that it needs the $4-$5 million in extra revenue the new and increased fees would bring it, despite the howls of protest.

However, the Bahamas Hotel and Tourism Association’s (BHTA) August newsletter details the compromise proposals submitted by the private sector, which are now thought to be under active review by the Christie administration.

The BHTA document describes the “consensus” as being a major reduction to the 1 per cent Customs processing fee, and total elimination of the ‘attendance charge’ for flights arriving after 5pm, and before 9am.

To make up the revenue loss suffered by the Government, the private sector has proposed increasing the passenger departure tax by $4 per head.

“BHTA, working closely with the airlines, the Nassau Paradise Island Promotion Board and the Ministry of Tourism, conducted a detailed impact analysis which was presented to the Ministry of Finance,” the BHTA newsletter said.

“The Government countered that it needed to raise $4-$5 million in revenue which was anticipated through the fees.

“BHTA advocated that lost business from cancelled flights could negate any impact and provided a detailed analysis in support of that argument.......

“From the discussions, the consensus was to recommend eliminating the [Customs] attendance fees and significantly reducing the Customs processing fees for commercial airlines, replacing it with a $4 increase in departure tax which would take effect later this year.”

Airline service is the lifeblood for the hotel and tourism industry, and any carrier cutbacks on service to the Bahamas could result in reduced occupancies, lower revenues/profits, and produce sector lay-offs.

The BHTA acknowledged that the issue was “particularly sensitive” given the tourism industry’s drive to attract new and increased airlift ahead of the $2.6 billion Baha Mar project’s late 2014 opening.

David Johnson, the Ministry of Tourism’s director-general, declined to comment on the Government’s position on the aviation taxes when contacted by this newspaper, but indicated that a decision could come as early as this week.

Describing the issue as a “sensitive one”, given that it was under the purview of the Minister of Finance (Prime Minister Perry Christie) and had reached Cabinet level.

But, in common with the BHTA newsletter, which expects a decision on whether to modify the aviation tax regime by early September, Mr Johnson indicated a decision was imminent.

“I believe that in a few days your questions will be effectively answered,” Mr Johnson said.

“I anticipate that in a further three days there should be some light shone on that. I believe the matter will be resolved in a few days.”

Mr Sands, too, added that the private sector was “hopeful that in very short order” the aviation tax issues would be dealt with.

“The industry and Ministry of Tourism quickly assessed the potential downside of the new fees, recognised the dilemma government faces in raising revenue, and came up with an alternative plan to address the airlines’ concerns,” he told Tribune Business.

Meanwhile, Stuart Bowe, the BHTA’s president, referred to “a noted drop in airline seats through July” as one factor behind the Bahamian hotel and tourism industry’s “mixed results” for the 2013 first half.

Noting that air travel prices had been cited as ‘the greatest financial deterrent to leisure travel’ by 54 per cent of respondents to a US Travel Association Survey, Mr Bowe acknowledged in the BHTA newsletter: “Affordable airlift continues to be a primary challenge for the destination.”

He added that the Bahamas needed to secure an extra 1,200 seats per day by the end of 2014 to meet Baha Mar’s increased room inventory needs.

Mr Sands, though, said the tourism industry- working with the Government and Nassau Airport Development Company (NAD) had “developed a plan” to both deal with this and regain the airlift lost.

As previously reported by Tribune Business, the private aviation industry had expressed annoyance at the extra $50 fee being levied by Customs to process their forms when they land in the Bahamas, plus a fee - also $50 - being charged for refuelling stops in this nation.

Both private and commercial airline flights are being charged $75 for arrival and departure, making for a grand total of $150 per flight.

In addition, the commercial airlines - especially the foreign carriers - slammed the Customs service charge for planes arriving after 5pm, and before 9am, on any given day.

Commercial aircraft with a seating capacity of less than 30 are charged $50 per hour; airliners with seats numbering between 31-70 are charged $100 per hour; and those with 71 seats or more are charged $200 per hour.

The airlines also expressed concern over Customs’ new 1 per cent administrative processing fee, which is now added to brakes, tyres and other aircraft parts imported to the Bahamas for repairs. This fee, capped at $500 per import, replaces the previous $10 Stamp Duty levy.