By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

Bahamasair has yet to determine the timing or amount of any ticket price increases or baggage fee levies, its managing director said yesterday.

Tracey Cooper, asked by Tribune Business when the national flag carrier plans to introduce the “nominal” $20 fee for each bag it handles, said: “We haven’t scheduled a date for that yet, but it is something we are trying to fit into the mix. As you can imagine, COVID-19 has its own challenges so we have to be strategic as to how we approach that.

“It is too far out considering COVID-19, but it is something we know from the PwC SOE (state-owned enterprises) review that in order for us to not be over-dependent on the public purse we are going to have to start to do these measures.”

Mr Cooper responded after Dionisio D’Aguilar, minister of tourism and aviation, told the House of Assembly on Wednesday that the economic and fiscal crisis caused by the pandemic “implores” Bahamasair to increase revenues by $7.5m annually through the levying of “nominal” ticket price rises and baggage fees.

He added that Bahamasair was set to implement recommendations from PricewaterhouseCoopers (PwC), the accounting firm, which was hired by the Ministry of Finance to conduct a study on how loss-making state owned enterprises (SOEs) such as Bahamasair can reduce the annual $400m-plus burden they inflict on Bahamian taxpayers to subsidise them.

PwC, which found that Bahamasair had not increased its ticket prices for eight years, called for the airline to better align pricing with the cost of service on its domestic routes between Nassau and the Family Islands.

Revealing that a $20 per return ticket increase had been recommended, Mr D’Aguilar said this would boost Bahamasair’s revenues by $3m per year. And PwC also urged the airline to target “ancillary revenue streams” by levying a charge for carrying passenger bags - a common practice in the industry.

“The combination of a $20 nominal domestic fare increase, coupled with a similar $20 nominal fee for the first bag, will keep the airline competitive while improving its revenue stream by some $7.5m each year,” the minister added.

“Bahamasair must modernise its pricing models to ensure future profitability and avoid a persistent drain on the public purse. The study found that Bahamasair has not increased domestic airfares in over eight years.

“Whereas this pricing model is beneficial for the consumer, it ultimately becomes the burden and responsibility of the public’s Treasury. The study recommends that Bahamasair adjust its domestic fares to better align with the ever-increasing costs of operating a premier airline.”

Mr D’Aguilar, though, hinted that Bahamasair’s role in providing a transportation lifeline to many remote Family Islands meant ticket price hikes could not be so exorbitant that they priced Bahamians out of the market.

“An adjustment of $20 per return ticket has been recommended to Bahamasair. This would provide an expected increase in revenue of some $3m per year,” he said. “Now, this means that Nassau to Freeport, round trip, would cost $180 instead of $160. Nassau to North Eleuthera, again round trip, $156 instead of $136.”

As for the proposal to levy fees on bags, Mr D’Aguilar told the House of Assembly: “The reality is that this phenomenon is not localised to the Commonwealth of The Bahamas. In 2018, the airline industry brought in an estimated $92.9bn through ancillary fees for bags and on-board services.

“As we are all aware, Bahamasair hauls bags.... When compared to other carriers on Bahamasair’s international routes, there are no justifiable reasons why the airline cannot charge a nominal fee for each bag handled. Airlines for years have relied on this ancillary fee to keep their ticket prices low.”

While many Bahamians, used to bringing huge quantities of shopping home from Florida and the US, may take time getting used to the cultural shock of paying baggage fees and higher ticket prices, change is being forced upon the national fag carrier. The Ministry of Finance has already given itself the target of reducing collective annual SOE subsidies by $100m over the next five years, of which Bahamasair accounts for a major portion.

Mr D’Aguilar said on Wednesday: “I have made it abundantly clear to the chairman, Board and management of Bahamasair that the government cannot provide a cent more in the upcoming 2020-2021 budget cycle. In fact, it is our hope and expectation that Bahamasair can reform itself to require less than the sums allocated.

“Though this will certainly prove a mammoth challenge for Bahamasair, efforts are already underway to enhance revenues and reduce costs wherever possible.”