FEE increases for airlines operating out of the Lynden Pindling International Airport (LPIA) will ultimately spell higher ticket prices for consumers, one Bahamian-owned airline has told Tribune Business, while another questioned the method behind the rises.
The Nassau Airport Development Company (NAD), as part of its strategy to raise additional revenues and ensure it complies with the debt repyaments/financing covenants related to LPIA's $409.5 million redevelopment and expansion, last week confirmed a 10 per cent increase in landing fees and a 3 per cent increase in terminal, aircraft loading bridge fees and aircraft parking fees. The imposition of the fees take effect in 90 days' time, meaning fromn New Year's Day 2012.
Rex Rolle, president and chief executive of Western Air, told Tribune Business: "Any kind of increase in fees will have an impact on our operations. I think based on the economy right now, any kind of fee increase will not be a good option.
"NAD has aggressively been doing some capital spending to make their quota, so they have to increase their fees. There are some fees that stay with us, and there are some fees that will be passed on to travellers. Security fees and passenger facility fees are passed on. We collect them on behalf of NAD, but it makes our ticket prices go up. What we will have to do is increase the ticket prices accordingly, based on the increase."
Sky Bahamas chief executive and president, Randy Butler, told Tribune Business that the fee increases were counter to the Government's plans to reduce air travel costs and boost tourism.
"I can't understand the method behind the tax," he said. "I thought they would have considered delaying the increase of these fees. I really think there needs to be more consultation, especially from Ministry of Aviation's side.
"You have NAD fees, Civil Aviation, fuel, security and it goes on and on. As these fees increase, everyone is going to be looking at Bahamasair to see if they are going to increase their ticket prices, but Bahamasair is a government-subsidised entity. In the future it's going to have an impact. There has still been no real consultation from Civil Aviation, and the minister responsible for Civil Aviation, on a strategic plan going forward."
In justifying the fee increases, NAD compared its charges to those levied by other Caribbean airports in 2011, and their plans for 2012.
Basing its benchmarking exercise on a Boeing 737-700, with 75 per cent load factor (102 passengers) and 90-minute turnaround time, NAD said: "Excluding government's taxes, LPIA's costs are currently $38.21 per passenger and, with the recommended increase, become $40.52 per passenger.
"The average cost of Caribbean airports presented in the graph, excluding LPIA, is $43.53 per passenger. LPIA's recommended rates are very competitive at $3.01 or 6.9 per cent less than the Caribbean average."
NAD emphasised that among its financial covenants was a condition that it maintain a debt service coverage ratio (DSCR) of not less than 1.3 to 1. "The average DSCR for the period of 2012 to 2020 is currently projected at 1.53 to 1, consistent with an investment grade rating," the LPIA operator added.
Further fee increases, it said, were planned for 2013, followed by aeronautical fee rises linked to inflation measured via the Consumer Price Index (CPI). "The gradual increases contained within the financial model are necessary for the Nassau Airport Development Company to meet its operational needs and the financial covenants of the Phase II financing," NAD added.