Aviation Tax Rises ‘Absolute Insanity’

By NEIL HARTNELL

Tribune Business Editor


The Opposition’s shadow tourism spokesman yesterday described the increased Customs fees/taxes levied on the aviation industry as “absolute insanity”, and called on the Government to “urgently” revisit its policy.

Responding to the Airlines for America consortium, which warned that its members might “reconsider their service levels to the Bahamas” in the wake of the 2013-2014 Budget’s tax rises, John Bostwick, an attorney and FNM Senator, said the episode raised questions over the Christie administration’s “ability to govern in a modern, globalized world”.

Pointing out that the tax increases, and airline industry response, threatened to undermine efforts to increase airlift capacity into the Bahamas by 400,000 seats in preparation for Baha Mar’s 2015 opening, Mr Bostwick told Tribune Business he had “some serious concerns”.

Noting that Michael Halkitis, minister of state for finance, appeared to “dismiss” concerns raised by the private aviation industry over the new $50 refueling stop and Customs processing fee, plus associated departure tax rises, Mr Bostwick said the situation had resulted from the Government’s “total failure to consult”.

Tribune Business revealed yesterday that the Airlines for America coalition, which represents key operators such as Jet Blue, Delta and American Airlines, had warned that its members “may be forced to reconsider their service levels to the Bahamas”.

Keith Glatz, Airlines for America’s (A4A) vice-president of international affairs, warned Customs Comptroller Charles Turner in a June 28 letter, in no uncertain terms, that the new charges threatened his members’ “exceedingly slim profit margins” and could “undermine the desire to stimulate the Bahamas’ economy”.

In response, Mr Bostwick said: “My concern with this administration in general goes beyond the airlines. It’s a failure to consult with those interested, period, as to the net consequences of their actions.

“It’s insanity. How could they make such a decision without sourcing industry consultation with local and international airlines who have the majority of the airlift?”

“A4A’s members want to maintain and grow, where demand warrants, their operations to the Bahamas,” Mr Glatz told Mr Turner. “Higher taxes will not encourage A4A members to grow their service to the islands.

“With exceedingly slim profit margins and the inability to recoup the taxes and fees that they pay directly to governments, airlines may be forced to reconsider their service levels to the Bahamas.

“The proposed fees may have unintended consequences and undermine the desire to stimulate the Bahamian economy.”

Mr Bostwick questioned where the Ministry of Tourism was on the Customs fee increases, given that it regularly met the major airlines on a monthly - even weekly - basis to address their concerns and develop airlift.

“How could they not consult with them on this fee increase? It’s madness. It’s insanity,” the FNM Senator told Tribune Business.

“That cannot be the intended policy to push away the airline industry at a time when we’re trying to fill this big hotel. That is absolute insanity.

“It shows a lack of vision, a lack of planning, a lack of consultation and a lack of proper governance. We hope they revisit this and do so urgently, and be seen to revisit urgently.

“It’s a complete and total failure of consultation. You have to question their ability to govern in a modern, globalized society. You really have to question it.”

While acknowledging that the Government needed to find ways to raise revenue, Mr Bostwick said it had to do it in ways that resulted in a “net gain” for all concerned - not collect $1 and someone lose $10 in return.

He added that the Government needed to sit up and take the Airlines for America warning seriously, given the airlines it represented and the speed with which the letter had been issued.

This, he said, indicated the letter was supported by the 10 US airline members, and that each company’s Board must have approved its wording.

It’s a serious thing,” Mr Bostwick said.

Emphasizing that his organization represented 10 US airlines, Mr Glatz said they and their marketing partners accounted for “over 90 per cent of total US-Bahamas scheduled passenger airline capacity” in terms of available seat miles for the year to end-June 2013.

Describing airlift as “a key economic driver which supports and stimulates increased business travel, tourism and shipping” between the US and the Bahamas, Mr Glatz said the carriers were especially concerned at the rise in Customs services’ charges and the new Customs processing fee.

“This development is of particular concern to A4A’s member airlines due to the lack of notice, transparency and cost-based justification for the new charges and increased fees,” Mr Glatz charged.

“Less than two weeks is insufficient time for airlines to re-program their systems to accommodate the new fees and increased charges.”

Noting that all flights would be charged $75 for both arrival and departure, for a grand total of $150 per flight, the airlines also slammed the Customs service charge for planes arriving after 5pm, and before 9am, on any given day.

Commercial aircraft with a seating capacity of less than 30 will be charged $50 per hour; airliners with seats numbering between 31-70 will be charged $100 per hour; and those with 71 seats or more will be charged $200 per hour.

And A4A’s members also expressed concern over Customs’ new 1 percent administrative processing fee, which will be added to brakes, tires and other aircraft parts imported to the Bahamas for repairs. This fee, capped at $500 per import, replaces the previous $10 Stamp Duty levy.

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