The Tribune

• US airlines: Air navigation costs just 1% of charges

• Allege Bahamas breaching own law in Gov’t rebuttal

• Demand ‘prompt remedy’, but not seeking to ‘disrupt’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

US airlines yesterday slammed the Government’s “red herring” defence of an air navigation system that allegedly costs just 1 percent of the fees charged by The Bahamas.

Members of the Airlines4America group, responding to the Government’s rebuttal of their complaint, denied they were challenging The Bahamas’ sovereignty or ability to levy fees for air navigation services provided to aircraft using its air space. However, they claimed that the charges breach this nation’s own Bahamas Air Navigation Services Act which requires that fees must be “reasonably related to the expenses incurred or to be incurred”.

The consortium, whose members include the likes of American Airlines, Delta and Jet Blue, also denied that the challenge to what they assert is an “unjust, discriminatory and anti-competitive” fees regime was intended to result in the imposition of sanctions on Bahamian carriers who could, in a worse case scenario, be barred from - or have access severely curtailed to - the US air transportation market.

Hinting that the industry would like to come to a mutually beneficial resolution without further legal action, Airlines4America voiced hope that The Bahamas will introduce “a prompt remedy” that makes its air navigation services “fully compliant with all laws, guidelines and agreements”.

Hitting back at the Government’s stance in documents obtained by Tribune Business, Airlines4America said its reply had failed “to address the members’ claim that Bahamas’ air navigation service charges are unjustified and unreasonably discriminatory, and fail to provide evidence to rebut that claim.

“Instead, The Bahamas’ answer attempts to distract the Department [of Transportation] with red herring arguments, including that The Bahamas’ underlying authority to levy charges is at stake. It is not. The members do not question The Bahamas’ underlying authority, nor do they seek absolution from the entirety of The Bahamas’ charges,” the US airlines added. 

“The respondents have simply missed the point: The members request that the Department act in the public interest for the unjustified amount of the charges. According to the evidence presented by both the members and the respondents, The Bahamas annually charges tens of millions of dollars to air carriers transiting Bahamas’ airspace for air navigation services that cost The Bahamas far less - approximately $80,000 to $100,000, or about 1 percent of what The Bahamas’ charges.”

The $80,000-$100,000 referenced is the annual fee that The Bahamas pays to the Federal Aviation Administration (FAA) for the provision of air traffic data. This was part of a 10-year deal that saw The Bahamas, in 2021, outsource management of 75 percent of its air space above 6,000 feet to the FAA, with the US agency agreeing to waive the air navigation fees it previously levied for using this country’s air space.

The Bahamas subsequently imposed its own air navigation services charges in a bid to generate revenue sufficient to fund the development of civil aviation safety and oversight in The Bahamas, and associated regulatory functions. This will thus eliminate the need for Bahamian taxpayers to fund this, saving the Public Treasury millions of dollars per annum at a time when it is coming under increasing fiscal stress.

However, arguing that these fees should only cover the cost of providing the service, the US airlines are alleging there is no justification for “the tens of millions of dollars” that The Bahamas is collecting given that it is just paying, at most, a six figure sum to the FAA. They claim this “runs afoul” of global best practice and agreements, plus the US International Air Transport Fair Competitive Practices Act 1974.

“Members pay far more than other users to simply transit Bahamas’ airspace,” Airlines4America alleged. “In fact, those payments from members to The Bahamas effectively fund The Bahamas’ entire air navigation system, including facilities, infrastructure, operations, non-commercial airports and systems that are unrelated to members’ transit operations—a clearly unreasonable discriminatory charge by The Bahamas.

“As a threshold matter, we reiterate that the members do not question The Bahamas’ sovereignty, its authority over its sovereign airspace, nor its underlying authority to levy charges for members’ use of Bahamas’ airspace. Those facts are not in dispute. However, The Bahamas cherry picks guidelines to state, on factual background, that its imposition of charges is ‘justified’.”

The Bahamas has established a sliding scale for its air navigation fees that ranges from $8.50 to $51.60 per 100 nautical miles based on the aircraft’s weight. Several observers have privately suggested to Tribune Business that the US airlines are seeking to bully The Bahamas by placing no value on the worth of this country’s sovereign air space.

They believe the sector is longing for a return to the days when The Bahamas earned not a single cent in revenue from the aviation industry’s use of its air space, which sits on key Atlantic and other routes between Europe and the western hemisphere and North and South America. The FAA used to waive air navigation fees for planes that took off and/or landed in the US after passing through Bahamian air space, thus giving them free use of this country.

The Government, in its answer to the US airlines’ complaint, asserted that The Bahamas’ air navigation services regime was compliant with the Chicago Convention - the agreement that established the main principles of global air transport - as well as International Civil Aviation Organisation (ICAO) guidelines.

However, Airlines for America accused The Bahamas of “glossing over” the late 2020 consultation process on the fees during which itself, as well as the International Air Transportation Association (IATA), voiced concerns over what they alleged were “unfair and unreasonable” levies. 

“First, their only proven operating expenses are FAA’s annual fees, while the operating costs they put forth appear to be nothing more than mere projections,” Airlines4 America said of the Civil Aviation Authority of The Bahamas (CAAB). “As well known, the FAA only charges The Bahamas approximately $80,000 to $100,000 per year for its services.

“However, The Bahamas projects millions in operating costs when their only current functions are the processing of flight data - an accounting function - for the purposes of imposing the charges and the administration of levying the charges. Consequently, The Bahamas has not proven that even a portion of the tens of millions of dollars it collects from operators have any relationship to its costs. Those charges are therefore unjustifiable.

“Second, The Bahamas admits it has no assets to provide air navigation services to members for transit flights, which belies The Bahamas’ inclusion of amortisation or depreciation. To include amortisation or depreciation, The Bahamas needs to have assets that are used for services that support the transit flights of members. In the two years it has imposed the charges, The Bahamas does not have any such assets and has admitted that it still has no infrastructure.”

The US airlines also returned to allegations that the air navigation services fees are discriminatory, asserting: “The charges for operations that simply transit The Bahamas’ airspace amount to millions, while charges for operations that originate or depart from The Bahamas (which one would expect are more predominately conducted by Bahamian operators) are charged a fraction of such amounts.

“Although operators in the same category of operations may be charged the same amount, as asserted by the [Government], the unreasonable discriminatory nature of The Bahamas charges is The Bahamas’ use of charges to transiting operators to bankroll The Bahamas’ entire air navigation services system, including for services not used by such operators.

“This issue was raised during the consultation between The Bahamas and industry, but The Bahamas repeatedly dodged the question, pointing to ICAO guidance that does not support such discrimination.” 

But, striking a more conciliatory tone at the last, Airlines4America said: “The members do not seek to disrupt the US-Bahamas air transportation marketplace, but hope that this matter and the actions the Department considers in the public interest result in a prompt remedy by The Bahamas to make the charges fully compliant with all laws, guidance and agreements, and thus justifiable and not unreasonably discriminatory.”