Airlines representing 90 per cent of US airlift into the Bahamas have warned they may cut their services due to the Budget’s tax increases, a move that will undermine the tourism industry and threaten plans for a 400,000 seat capacity increase.
A June 28, 2013, letter to Customs Comptroller Charles Turner from the Airlines for America coalition, which represents key operators such as Jet Blue, Delta and American Airlines, warned that its members “may be forced to reconsider their service levels to the Bahamas”.
The letter, which has been obtained by Tribune Business, expressed particular unhappiness at the late notice provided by Customs to the airline industry of the tax /fee increases.
Keith Glatz, Airlines for America’s (A4A) vice-president of international affairs, warned Mr Turner 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”.
“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”.
The A4A letter, and the implied threat that airlift to the Bahamas may be cut in response, is likely to send shockwaves through this nation’s largest industry, which is still trying to recover – especially on room rates – from the recession.
Airline service is the lifeblood for the hotel and tourism industry, and any carrier cutbacks on service to the Bahamas could result in reduced occupancies, lower revenues/profits, and produce sector lay-offs.
The airline industry’s reaction to the new Customs-related charges could also not have come at a worse time for plans to increase airlift capacity into the Bahamas by 400,000 seats, a move timed to coincide with Baha Mar’s early 2015 opening.
The Government, Nassau Airport Development Company (NAD) and the private sector – chiefly Atlantis and Baha Mar – have been travelling extensively in a bid to increase airlift, and the Budget’s tax reforms threaten to undermine their efforts in one fell swoop.
The situation means that the Government has now alienated the commercial airline industry, in addition to the private aircraft sector.
Frank Comito, the Bahamas Hotel and Tourism Association’s executive vice-president, declined to comment.
By Neil Hartnell
Tribune Business Editor