The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Family Islands will be unable to capitalise on a projected 2.4 per cent annual growth rate in air passengers over the next 17 years unless $160 million is invested to bring their airports to “the highest possible” standards.

A newly-released Inter-American Development Bank (IDB) report warns that these islands cannot improve their tourism and economic competitiveness without a major overhaul of their 28 airports, which have “lacked investment for some time”.

The report, which has been obtained by Tribune Business, outlines the proposed ‘Airport Infrastructure Programme’, which will be financed by a $35 million loan from the IDB to the Government.

The project aims to identify the Family Island airports best-suited to a replication of the ‘NAD model’, which has overseen the transformation of Lynden Pindling International Airport (LPIA) via a $409.5 million public-private partnership (PPP).

Under that model, the Government has retained 100 per cent ownership of LPIA and all its assets, while handing over the airport’s daily operations and management to Nassau Airport Development Company (NAD), part of Vantage Airport Group.

The IDB-financed project will assess 13 Family Island airports to determine whether they are suitable for a NAD-type PPP, and also develop the best structure for agreements between the Government and the private sector relating to their ownership and financing.

The bulk of the monies, some $33 million, will be spent on financing the Government’s share of the investment required to upgrade the airports suitable for PPPs.

“The 28 Family Island airports in the Bahamas have been in need of investment for some time and require a wide range of aviation and infrastructure upgrades to improve their regional and global integration,” the IDB report said.

“The airports require maintenance and improvements in operating conditions, and also protection of the airside and its operation protected zones.”

The IDB report continued: “It has been projected that in the next 20 years, the passenger demands on the Family Island airports would increase by 2.4 per cent annually to reach 1.7 million passengers by 2033.

“For the Family Islands to capitalise on this opportunity, and to have a strong market presence in a very competitive Caribbean tourist industry, it is crucial that the island gateway airports offer the highest possible level of safety and quality of aviation services.”

The IDB report said the 28 Family Island airports had bucked the general trend of reduced seating capacity in the Bahamian aviation market over the decade to 2013.

“Based on the Official Airline Guide (OAG), The Bahamas in 2013 offered 6.5 million seats (national and international), a decrease of 1.6 per cent since 2004,” the report revealed.

“Most of these cuts were on the international routes (-10.9 per cent per annum), compared to a smaller reduction on the domestic market (-2.4 per cent per annum).

“However, the 28 Family Island airports (all airports except LPIA) have seen their market marginally but steadily increasing, and by 2013 they accounted for 23 per cent of the seating capacity in the Bahamas. Since 2003, this seating capacity has increased annually by 0.4 per cent.”

The IDB report warned that the aviation industry was “critical to the health” of Family Island tourism, as it represented the main means of access for higher-yielding stopover visitors to these destinations.

The sector was also

“pivotal” in providing Family Island residents with access to goods and services in New Providence and abroad, and “the only reasonable option available to isolated island communities for the movement of people and goods across significant distances”.

A previous report by the Canadian consultants, Stantec, estimated that a collective $160 million investment was required to bring all main 28 Family Island airports into line with international regulatory standards and best practices.

The IDB project, and $35 million, is intended to build upon this work and facilitate that actual physical upgrades that are necessary.

However, acknowledging that the Government’s strained fiscal position made it impossible for the Christie administration to finance the full $160 million, the IDB said it was essential that private capital be attracted to these infrastructure improvements.

“The solution to the Family Islands air transport issue is to invest in the improvement of the infrastructure required to make these airports compliant with international aviation requirements,” the IDB said.

“In the current economic climate, there is a need for fiscal and economic prudence, and given the significant investment needed to upgrade, operate and maintain all of the airports, this operation will support the Government of the Bahamas to design and implement a Public-Private Partnership (PPP) that would allow for private investment in select airport(s) with the most potential, while maintaining public ownership and oversight.

“The financing under this operation will provide for the upgrade of selected airports, and provide the necessary technical and legal support to tender the concessions of the upgraded airports through a PPP mechanism.”

Stantec’s report divided the Family Island airports into Tier 1, 2 and 3 facilities, based on their relative importance, level of aircraft activity and passenger volumes.

The Marsh Harbour, Georgetown (Exuma), North Eleuthera, San Salvador, Bimini and Governor’s Harbour airports were placed into the Tier 1 category.

And the Rock Sound (Eleuthera), Deadman’s Cay (Long Island), New Bight (Cat Island), Fresh Creek (Andros), Matthew Town, Great Harbour Cay (Berry Islands) and San Andros all found themselves in Tier 2.

These 13 will now be assessed by a consultancy firm hired under the IDB project to determine whether they may be suitable for a PPP ownership/operation model, and attractive enough for private sector capital to invest in the infrastructure upgrades.

The IDB will lend the Government some $33 million to finance its share of the upgrades, and the report added: “This component will finance investment needed to upgrade the Family Island airports to comply with international aviation standards, and would also contribute to the attractiveness of the facilities for PPP schemes.

“These include, but are not limited, to air and landside investments in infrastructure and equipment, including those for security and mitigation of climate change risks. Investments would be made in runway, taxiway and parking aprons to cater for projected traffic and climate resilience; runway lights, markings and fencing for safety; and security compliances and terminal works to equip the airports with infrastructure capable of handling passenger numbers while providing energy efficiency and being resilient to climate change.”

The IDB said the project, and its associated investments, would boost aviation connectivity “in a country that is highly dependent on tourism, while also attracting “increased foreign direct investment” via the private sector’s share of PPP financing.

Dissecting the Bahamian aviation market further, the IDB report said this nation was serviced by 17 international and five domestic carriers, with Nassau enjoying non-stop connectivity to 21 destinations in the US, Caribbean, Canada and the UK.

And of the Bahamas’ 53 licensed airports, 18 serve as international gateways; eight act as domestic commercial airports; and the remaining 27 are secondary destinations for general aviation.

“LPIA in Nassau is the main international gateway and domestic hub of the Bahamas, concentrating over two-thirds (68 per cent) of the available domestic and international seats,” the report said.

“Grand Bahama International Airport (GBIA) in Freeport is second in importance with 11 per cent of capacity. Marsh Harbour, George Town and North Eleuthera follow, each with around 4 per cent. The remaining airports account for 9 per cent.”