JetBlue has delivered a stark warning to the Bahamas that its relatively high ticket tax burden may prompt it to reduce airlift capacity into Nassau.
Robin Hayes, the low cost carrier’s president chief executive, issued the alert during his keynote address at the Caribbean Tourism Organisation’s (CTO) State of the Industry Conference (SOTIC) last week in Curacao.
A CHTA release said he stunned the audience when he said: “At JetBlue, we are very much thinking about the relative tax burden on our customers as we allocate capacity.”
For countries that rely heavily on the air transportation of visitors for up to 70 per cent of their GDP, few tourism planners in the Caribbean have ever considered examining their relative position within the region concerning taxes on airline tickets.
Mr Hayes added that “between USand foreign (Caribbean) taxes and fees, travellers can easily be hit with an extra $150 on top of their airfare”.
According to figures provided by the trade association, Airlines For America (A4A), of which JetBlue is a member, the average federal tax on a $300 airline ticket in the United States is $63, meaning that the airline receives only $237 from the ticket price.
Based on data taken from JetBlue’s website, Nassau ranked as the fourth most expensive destination in the Caribbean for ticket taxes and charges for a flight originating from JFK International Airport.
The Bahamas levied just over $140 in taxes/charges, barely renking below the three most expensive locations - Punta Cana, Bermuda and Montego Bay.
In comparison, the ticket taxes levied by the likes of Las Vegas and San Juan, Puerto Rico, were around $50.
The CHTA said the examination of Caribbean ticket taxes shows that they range from a low of $55 per ticket in the US affiliated territories up to $155 per ticket for others.
In contrast, a $300 airfare to the Caribbean, depending on the destination, would result in airline yields from a high of $245 to a low of $145 per ticket.
If a passenger has a budget of $300 per ticket, according to Mr Hayes’ reasoning and other factors being equal, the airline would be more inclined to serve those destinations that deliver far better yields for an airfare.
This has important implications for the Bahamas given that it is seeking to drive a major increase in airlift capacity for whenever Baha Mar’s extra 2,000 rooms come online.
The Bahamas will need an extra 400,000 seats per annum whenever that happens, but its relatively high ticket taxes could deter new airlines from offering service and lower the destination’s competitiveness.
The CHTA said it was “an open secret in the region” that airlines often request revenue guarantees from destinations before they commit to flights.
Many of these guarantees come from the promotional budgets of the Tourism Boards, which substantially reduces the capacity of those Boards to promote the destination in source markets.
Emil Lee, president of the Caribbean Hotel and Tourism Association (CHTA), said: “While there is no gederal government of the Caribbean, CHTA will do its part to inform Caribbean governments of their relative position concerning their taxes on tickets by publishing the chart below, which shows the range of these taxes for a sample set of Caribbean destinations.
“We now know why there is no correlation between ticket prices and distances flown to and within the Caribbean.”