Oil Slump Rescues Sky[Bahamas] From Fee Hikes Impact

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Oil Slump Rescues Sky[Bahamas] From Fee Hikes Impact

Unread post by bimjim » Fri Feb 06, 2015

http://www.tribune242.com/news/2015/feb ... es-impact/

Oil Slump Rescues Sky[Bahamas] From Fee Hikes Impact
NEIL HARTNELL Tribune Business Editor
Thursday, February 5, 2015

Sky Bahamas and its shareholders would be “sitting at the table looking at doing something else” if the sharp decline in oil prices had not offset the latest batch of tax/fee increases, its top executive said yesterday,

Captain Randy Butler, the airline’s chief executive, hinted that any further round of tax increases could prompt its owners to consider their aviation future, given the squeeze being imposed on tight profit margins.

He was speaking after the Civil Aviation Department (CAD) imposed a $7 per passenger ‘security fee’ for travellers heading to Bimini, and ahead of an impending 3 per cent rise in several key fees levied by the Nassau Airport Development Company (NAD).

While acknowledging that the increases by themselves did not amount to much, Captain Butler said the various airport, regulatory and government agencies needed to consider any rises in the context of the overall tax burden faced by Bahamian-owned airlines.

He disclosed that the new CAD fee for Bimini, a market Sky Bahamas is targeting with both domestic and international flights, had been imposed with just 48 hours warning.

This, Captain Butler said, meant Sky Bahamas would have to absorb the fee for all passengers who had pre-booked prior to end-January 2015, threatening its profit margin on many flights.

“The biggest thing I have with this is that there is no rhyme or reason for it,” Captain Butler told Tribune Business, “and they [CAD] tell you on the evening of the 27th that they’re going to introduce it on the 29th.

“They drop it on you at the last minute. No consultation. It is what it is.”

Some passengers heading to Bimini had booked their tickets up to three months in advance, with persons heading to a funeral in Bishop Neil Ellis’s family also having paid early.

“The thing is they don’t collect the fee from the passenger; they collect it from me,” Captain Butler added. “If I can’t collect it from the people, $7 a head on a 33-seater, that’s your profit gone out the door.”

Confirming that airline industry margins are “very thin”, Captain Butler said passengers leaving Bimini for Fort Lauderdale now had to pay the $7 security fee in addition to a $35 departure tax - making for a $42 charge that he described as “crazy”.

Similar ‘security fees’ have been implemented on Abaco, Exuma and other islands, but Captain Butler said it was unclear what was being provided in return.

While he was unsure whether NAD was this month implementing fee increases it had previously advertised in October, the Sky Bahamas chief said it was certainly raising landing fees, aircraft parking fees and aircraft bridge fees by 3 per cent from May 2015.

“When people look at this in isolation, they say it’s very little,” he told Tribune Business. “I say ‘no, you have to look at it on the whole’.

“What happens when people get here from Canada and want to go to the other islands, only to find the ticket shows it is almost as expensive as going to Canada?

“The thing for us is the fuel price has dropped. Had the oil price not dropped, I’d have been sat at the table with my shareholders looking at something else.”

Warning that Sky Bahamas may also have to do that were the aviation industry hit by another batch of tax/fee increases, Captain Butler said the airline had no choice but to pass 100 per cent of these increases on to its passengers.

The NAD fee increases are likely designed to enable the Lynden Pindling International Airport (LPIA) operator to meet its debt servicing costs, while simultaneously maintaining the airport’s upkeep and service standards.

Captain Butler added, though, that successive rounds of fee increases, together with Value-Added Tax’s (VAT) implementation, had created a “rolling effect” on airlines’ costs.

Taking all together, and with service providers having raised their costs, the Sky Bahamas chief said the impact for air travellers would be closer to a 15-20 per cent price increase - not 7.5 per cent.

“We wait this year out,” Captain Butler told Tribune Business. “The worst part about this is that I believe the VAT is going to be increased next year, as the Government is still not going to meet their revenue target.”

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