The Tribune

• Passenger facility charges to pay for improvements

• Levies set to be phased-in over four-year period

• Airline seats up 4% over pre-COVID in December

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian and international travellers will ultimately have to pay user fees of up to $43 per person to finance the collective $263m redevelopment of the 14 Family Island airports put out to bid yesterday.

The project information memorandum (PIM), released to interested private sector bidders, reveals that “recommendations” have already been made to levy passenger facility fees that will increase through a series of phased-in rises over a four-year period to pay for upcoming infrastructure upgrades at the major Family Island airports.

The finance structure mirrors that put in place at Lynden Pindling International Airport (LPIA) to repay investors for their collective $409.5m investment in its transformation more than a decade ago. The bidding documents confirm there will be “passenger facility fees for all redeveloped or airports planned for redevelopment, which are Grand Bahama, Exuma, North Eleuthera, Marsh Harbour, Deadman’s Cay, Great Harbour Cay, San Salvador, Cat Island.

“A passenger facility fee of $15 for departing international passengers and $12 for departing domestic passengers [will] be increased annually until 2025, ending at an amount of $43 for departing international passengers and $25 for departing domestic passengers.” Given that the initial airport user fees were due to be implemented in 2022, this schedule will likely be delayed by a year.

Besides repaying private investors for financing the Family Island airport upgrades, the passenger facility fees will also help to cover their operational and ongoing maintenance costs. The fees for Bahamian/resident travellers will thus double over the four-year period, increasing from $12 to $25, while near tripling for international travellers as these rise from $15 to $43 per trip.

The bid documents revealed that the increase will apply only to those airports defined as ‘Tier one’ and ‘Tier two’ in the tender process. These are Exuma International Airport; Marsh Harbour; North Eleuthera; Rock Sound; Governor’s Harbour; Long Island International Airport San Salvador International Airport; and Cat Island’s New Bight International Airport.

“The Government plans to restructure passengers’ fees to ensure the financial viability of the airports’ development,” the bid documents confirmed. “The Airport Authority is subsidised significantly by the Government of The Bahamas whereby most of the subsidy is used to pay people-related costs with a minimum left to invest into the infrastructural upgrades/maintenance of Family Island airports.

“The Airport Authority derives revenue from airport parking fees; aircraft tie down; official sunset fees; midnight fees; and fuel royalty fees. These airport-related fees were not changed since the 1980s. In addition to the mentioned revenue structure, the Airport Authority does not charge passenger facility fees (with the exception of Grand Bahama) despite the legislative framework that allows such charges.”

Thus Family Island residents could be in for something of a culture shock, with airline ticket prices and the cost of travel increasing to reflect the new fees that will finance a return on investment for the private sector groups bidding to take over redevelopment, operation and management of these airports.

Other Family Island airports not included in the top two “tiers” will initially impose a passenger facility fee of $7 for departing international passengers and $5 for departing domestic passengers “to be increased annually until 2025, ending at an amount of $15 for departing international passengers and $12 for departing domestic passengers”.

The bid documents added that passenger security fees at all airports, including LPIA, will be levied at between $7 to $10 for departing domestic passengers and from $9 to $12 for departing international passengers. “Revisions to the schedule of other airport fees and charges to be implemented on a date to be determined,” bidders were informed.

The Ministry of Tourism, Aviation and Investments is estimating that a collective $263m investment will be required to turn the 14 selected airports into hubs of a size and standard appropriate for their location. Exuma and North Eleuthera are projected to require the greatest capital spend, at around $65m each, with Governor’s Harbour, Rock Sound, New Bight and Deadman’s Cay (Long Island) all pegged at around $18m apiece.

San Salvador was projected to carry a $15m price tag, with the quartet of Marsh Harbour, Sandy Point, Treasure Cay and Congo Town in Andros all projected to need a $10m investment. The smaller aviation gateways in the Exuma cays - Staniel Cay, Fowl Cay and Black Point, were each pegged at $2m.

Bidders were informed that airline seat capacity into The Bahamas for December 2022 was up 4 percent on pre-COVID comparisons from the same month in 2019. While capacity into Nassau was down 7 percent, Freeport and Marsh Harbour were up by 261 percent and 348 percent, respectively. The latter comparisons, though, are somewhat misleading because both destinations were still struggling to recover from Hurricane Dorian in December 2019.

“International airlift to the Family Islands was up 65 percent over December 2019 on average,” potential bidders were informed. “Seat capacity increases for Freeport and Marsh Harbour were exceptionally high in December 2022 over 2019 because of the small numbers in December 2019 post-Dorian. A better benchmark would be 2018.

“Accordingly, international seat capacity for December 2022 was 35 percent less than December 2018 for Freeport and 2 percent higher for Marsh Harbour for the same period.” The Government also sought to entice potential airport investors with projections about the foreign direct investment (FDI) pipeline for the Family Islands.

It forecast projects worth potentially $1bn as being on the drawing board for Abaco, along with $692m targeted at Grand Bahama; some $685m for Exuma; $137m for Eleuthera; and $250m for Long Island. These figures, though, were not broken out or potential investors identified.

The Government is seeking private partners for the redevelopment, upgrade, financing and management of the 14 selected airports via public-private partnership (PPP) agreements with the winning bidders. They will be granted 30-year PPP leasehold concessions similar to that for LPIA. Shortlisted parties will be invited to participate in the Request for Proposal (RFP) stage, which is tentatively scheduled to be released in May 2023.

Enhancing the Family Island airports will provide for better airlift and transport connectivity, enable these facilities to accommodate increased flights and visitor numbers, and offer an improved first and last impression of The Bahamas for tourists.

Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, said in a statement: “Investors’ interest in The Bahamas’ airports infrastructural projects is an indication of the global confidence in The Bahamas as a destination, especially after 2022 foreign air arrivals and overall seat capacity soared towards, and in some cases, exceeded the historic pre-pandemic levels.

“This move affirms the national priority and commitment of the Government to aggressively address the state of The Bahamas’ airports infrastructure to support ongoing economic development.” Dr Kenneth Romer, acting director of aviation, said the latest PPP release builds on the tender issued last year for Grand Bahama International Airport.

“This next phase is considered a continuation and expansion of this initiative designed to drive traffic, improve operational efficiency, grow revenue and enhance the quality of service in the targeted airports,” he added.