Significant reform needed to transform regional aviation industry
President of the Caribbean Development Bank (CDB), Dr. Wm. Warren Smith, is calling for a new paradigm in the aviation industry, defined by connectivity which is convenient, flexible, and reasonably priced. Speaking at Aviation Day Caribbean on June 29, Dr. Smith noted that transforming the Caribbean airline industry will demand significant reforms and actions by regional governments, but will also lead to a better overall customer experience and to aviation making an even bigger contribution to regional economic activity.
The CDB President said that the cost of intra-regional travel is a major deterrent to travel, saying that in many instances, high taxes have made fares uncompetitive. He noted that a reduction in these costs could lead to an increase in travel.
“Intra-regional fares have risen steadily to the point where it is often cheaper to fly to the Eastern Seaboard of the United States than it is to fly to neighbouring Caribbean islands. […] Studies commissioned by CDB, confirm that air travel is price elastic, so that reductions in these imposts should lead to increased travel, which in turn, should lead to additional tax revenue flow to replace some of the revenues foregone. Additionally, one should expect secondary benefits to government revenue arising from the in-country spend associated with the larger number of visitors,” said Dr. Smith.
Specific measures recommended by the CDB President to revamp the aviation industry included harmonising regulation across the Caribbean, adopting and implementing a comprehensive open skies agreement, and strengthening the internal operation of Caribbean airlines.
CDB partnered with the International Air Transport Association (IATA) and the Latin American and Caribbean Air Transport Association (ALTA) to host Aviation Day Caribbean, which was held at the Hilton Barbados Resort.
Regional Vice President, The Americas for IATA, Peter Cerdá, said that air transport is vital to supporting sustained economic development in the Caribbean. He noted however, that while the global aviation industry is doing well, the profit per passenger in the Latin America and Caribbean region is less than half the global average.
“The lack of growth in Caribbean connectivity is due to a combination of high taxes, fees and charges in air transportation, as they add to the cost of travel and make the Caribbean an expensive region to operate in; regulatory barriers, including the lack of liberalization in air services and an inefficient and aging infrastructure.”
Mr. Cerdá added that while many countries consider raising taxes and fees to be a quick revenue generator, the long-term impact is not often considered.
“According to a study published by IATA, each $1 of ticket tax could lead to over 40,000 fewer foreign passengers, $20M of reduced tourist expenditure 1,200 fewer jobs. While we understand the budgetary challenges facing many governments in the region, imposing heavy fees and taxes on aviation and air travel directly affects levels of tourism and business travel—the very things required for a vibrant economy.”
Minister of Tourism and International Transport for Barbados, Hon. Kerrie Symmonds, who also spoke during the opening ceremony outlined several new revenue measures adopted by the Government of Barbados, including a new tax on air travelers. He said that the government intends to use the additional revenue to enhance the airport facilities, by, amoung other things, introducing automated passport control kiosks and upgrading the departure lounge.
“While we accept that there has been some disquiet, and while we, with the greatest possible reluctance, have gone to the point of institutionalising the increases in departure tax, […] we believe that we can treat this as an investment towards making the airport experience and all that has gone with it traditionally, a completely different and enhanced one as we go forward into the future,” said Minister Symmonds.
Aviation Day Caribbean brought together experts in air travel, tourism and economic development, as well as government authorities, to discuss how aviation can deliver even greater benefits to the Region. CDB also released a study entitled Air Transport Competitiveness and Connectivity during Aviation Day. The study raises awareness about the options available to improve the competitiveness of the regional air transport sector.