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Govt to back down over aviation fee hike

Imposes higher departure tax for passengers in trade-off to accommodate airlines
  • Vernice Walkine.

Guardian Business Editor

Published: Oct 22, 2013

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Over three months after major international airlines complained that increased taxes and fees in the aviation sector would lead to cutbacks in service, the government is expected to back down over some of the increases and impose a rise in departure taxes for passengers as an alternative.

In July, organizations such as Airlines for America suggested the higher fees were imposed without due notice and might force the airlines to reduce their airlift into The Bahamas if not adjusted.

The higher fees and taxes included a $75 fee to be paid by commercial and private pilots when landing and departing in this country.  This was joined by an extra $50 fee for the processing of forms by Customs, and a $50 fee to refuel.  A customs service charge was also introduced for planes arriving after 5 p.m. and before 9 a.m. on any given day.

Yesterday, Guardian Business was reliably informed by private and public sector sources that the government, after meetings with the airline sector, will agree to drop at least some of the fees.

Specifically, it is understood that the $75 that would be paid by airlines arriving and departing The Bahamas will be replaced with a $2.50 fee each way, while a $4 increase in departure taxes for passengers will be implemented, shifting some of the tax burden from the airlines to travelers. Airlines will also be retroactively compensated for the amounts they would have paid in the form of these fees to date, a source close to the industry told Guardian Business.  It is not clear if other fees which were imposed will be adjusted.

In an interview about the Nassau Airport Development (NAD) company’s recent attendance at the Worlds Routes conference in Las Vegas, where the company and other tourism stakeholders including Baha Mar and the Ministry of Tourism met with airline representatives charged with route development in an effort to secure additional airlift, Vernice Walkine, president of NAD, indicated that an arrangement had been reached by the government with the airlines over the fees.

As a result, Walkine said the increased costs did not “color” discussions with airlines about the possibility of increasing service to The Bahamas.

“I think there’s been some accommodation reached,” said Walkine, who did not go into details on the arrangement.

However, other industry sources confirmed that the negotiations, led by Minister of State for Finance Michael Halkitis, had resulted in a climb down for the government to the benefit of the airlines.

Katie Connell, managing director, airline industry public relations and communications for Airlines for America, an aviation industry body, said the organization had not been formally notified of changes to the fees.

“As the U.S. airlines remain key economic drivers that support and stimulate increased business travel, tourism and shipping between the U.S. and The Bahamas, we remain hopeful we will reach a favorable outcome,” said Connell.

The government’s decision to increase aviation fees was just one of many measures implemented in the 2013/2014 budget with the intention of raising revenue.

If the changes are formalized, the aviation sector would be among a very select group of industries to have had their complaints accommodated in terms of adjustments in the fees/taxes increased or implemented.

This is likely because the government is mindful that tourism remains subdued, and the increases would have been at odds with the coordinated efforts on the part of NAD, Baha Mar and others to boost overall airlift into The Bahamas by 400,000 seats in time for the opening of Baha Mar by December 2014.

Earlier this month, The Central Bank of The Bahamas reported “broad-based revenue gains” in August for the government in light of its new revenue-raising measures, of 4.8 percent, accompanied by a 3.3 percent fall in overall expenditure.

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