Caribbean very expensive for airlines to do business, IATA official

 Tourism and the aviation sector facilitate and support some 140,000 jobs and contribute US$3.12 billion, roughly 7.2% of Caribbean’s Gross Domestic Product (GDP), IATA’s Regional Vice President for The Americas Peter Cerda said here Tuesday.

Addressing industry officials at Caribbean Aviation Day, Cerda said the airlines in this region are expected to earn US$1.1 billion in 2014, a profit of US$4.21 per passenger and a net margin of 3.0 per cent.

But Cerda described the industry as “a tough and very competitive business”.

He noted that fuel expense across the Caribbean is around 14 per cent higher than the world average, with fuel typically representing about a third of an airline’s operating costs.

“In the case of the Dominican Republic, although fuel charges were recently reduced, tax on international jet fuel still remains high at 6.5 per cent. Another example is the Bahamas applying a 7 percent import duty on Jet fuel,” he said.

“Jet fuel supply is an issue in the region, the complexity of the fuel supply and the seasonal demand is costly and difficult, making fuel costs in the region a challenge for airlines.

“In addition, airports are using the fuel concession fees as a source of revenue and we are still waiting to see any of these monies re-invested in improving fuel facilities,” the IATA official added.

On the issues of taxation, Cerda said even though IATA urges and reminds authorities to adhere to the key principles set out by ICAO, many governments choose to ignore them.

“This is a global issue but it seems to be particularly acute in the Caribbean. Aviation taxes increase the cost of travelling to the Caribbean and make the islands less competitive relative to other destinations,” he said.

He said taking the islands as a whole, each $1 of ticket tax could lead to more than 40,000 fewer foreign passengers; $20 million of reduced tourist expenditure and 1,200 fewer jobs.

“Therefore, Caribbean countries must consider the aviation industry as a key element for tourism development,” he said.

“In terms of charges, two airports in the region, Montego Bay and Kingston, recently proposed airport tariff increases of over 100 percent, to attain a return of capital of around 20 percent a year in US dollars.

“Measures such as these do not encourage or support the development of the industry in the region. The regulators must act strongly and swiftly against such big increases. Governments have to foster positive business environments through consultation with the industry and transparency in order to ensure win-win situations for all,” Cerda added.

He said the issue of taxes and charges in the region transcends the formal breaches of global standards and recommended practices.

“The simple truth is that this region is a very expensive place for airlines to do business,” he said.

Source: Caribbean News Service