By NEIL HARTNELL
Tribune Business Editor
Out Island resorts are “dialling the volume up” on air fare and fuel credits in a bid to offset the impact of fuel price volatility on airline tickets, a senior executive has revealed, thus enabling them to avoid slashing room rates.
Kerry Fountain, the Bahamas Out Islands Promotion Board’s executive director, told Tribune Business that its member hotels always have the ability to pull initiatives out from “the back burner” in times of “crisis” such as that sparked by COVID-19, its aftermath and Russia’s invasion of Ukraine.
While air fare hikes have not yet materialised to their full extent, he said the various promotions the Board’s hotel members can offer provide potential travellers with “added value” and the incentive to take lengthy stays across the archipelago.
“Back in 2008, when we experienced rising fuel costs at the pump, and we foretold during the great recession of that year that rising fuel costs will impact airline tickets, we haven’t seen much of that yet this time,” Mr Fountain told this newspaper.
“Again, our $250 air fare credit, fly free from Nassau, $300 boat fuel credit and $300 fuel credit for private pilots, all those are designed for crises like this. They are all in effect. We feel we have always been prepared for a crisis like this. Some of them are seasonal, some of them are year-round.”
Mr Fountain explained that these promotions were critical to defraying air fare costs for travelling to the Family Islands, which are typically more expensive than the cost of tickets flying into Lynden Pindling International Airport (LPIA), thus representing a potential deterrent and access barrier for tourists.
“Even when we don’t have a crisis, the cost of getting to the Family Islands via LPIA is much higher,” he added. “We’ve never really discontinued those. We’ve scaled them down, made some seasonal as opposed to year-round. To get to the Out Islands is always more expensive than getting to Nassau.
“We always have them on the back burner and dial the volume up and promote them when there are crises like this. What that provides for our member hotels, say there is a $250 air fare credit if they stay four nights or two fly free out of Nassau if they stay four nights. What that allows is all member hotels can produce that as added value, and do not have to cut rates to encourage people to stay in their hotels.
“It’s critical. It’s just a matter of moving these promotions from the back burner to the front burner and dialling the promotional interest up to let people know that these are available.” Mr Fountain spoke out after Tracy Cooper, Bahamasair’s managing director, recently confirmed that the national flag carrier has been forced to respond to aviation fuel price volatility through raising its air fares by $3 on domestic routes and by $10 internationally.
With fuel costs soaring by an “extra $100,000 per week”, Mr Cooper told Tribune Business that the airline had no choice but to pass some of the increase on to passengers as it was impossible to “absorb all of that” within its existing expense structure. He added that aviation fuel prices had risen by $1.50 per gallon over the past six to seven weeks after Russia’s invasion of Ukraine sparked sudden volatility in global oil prices.
The increased fuel burden comes as Bahamasair struggles to return to pre-pandemic passenger load factors, with Mr Cooper confirming that the airline and its rivals are “not there yet”. COVID’s Omicron variant was a further setback for the industry in January and February, but he said customer volumes had started to come back in March and voiced optimism that the elimination of testing for inter-island travel would provide a timely boost for Easter.
Forecasting that Bahamasair was unlikely to recover fully from the pandemic until the rest of the economy does likewise, which is estimated to be some time in late 2023, Mr Cooper said of current aviation industry conditions: “What we have is the fact that the fuel prices have gone up significantly. We’re up $1.50 or so more on a gallon of aviation fuel. It’s over $4.12 a gallon of aviation fuel.
“This has obviously been the impact of the Russian invasion. Unfortunately, Bahamasair is using 90,000 to 95,00 gallons of fuel a week, so it’s a significant impact. It’s easily costing the airline an additional $100,000 a week in fuel costs. We don’t have any choice but to pass some of that on to the consumer because we cannot absorb all of that.”
Based on the $1.50 per gallon increase figure supplied by Mr Cooper, and the 90,000-95,000 gallons consumed by Bahamasair per week, this newspaper’s calculations show that the airline’s fuel costs have risen by between $135,000 and $142,500 per week. Based on a four-week month, that means monthly costs have jumped by between $540,000 and $570,000. Over a year, that translates into between a $7.02m and $7.41m expense hike.