Attracting Airlift: How Can Caribbean Islands Increase Airlift?

ATTRACTING AIRLIFT: HOW CAN CARIBBEAN ISLANDS INCREASE AIRLIFT?

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

Air traffic is vital to island economies but getting (and keeping) carriers interested requires careful coordination and negotiation.

Air travel has come a long way since the Wright brothers first took to the sky in 1903. That pioneering first flight lasted 12 seconds. Today the longest route in the world is a staggering 17.5 hours, from Auckland to Doha, and will soon be surpassed by the 19-hour journey from Singapore to Newark, New Jersey, set to launch in October.

With long-range jets taking over the skies, distance is no longer a hurdle to growth for the Caribbean tourism industry. Provided they can stomach the long flight time, passengers will be able to travel non-stop from all over the world for a taste of Caribbean sunshine. As these new markets, new routes and new customers become a reality, industry and governments must build new relationships with airlines and cement longstanding partnerships, as well as address longstanding barriers to growth within the sector.

Most Caribbean countries offer their carriers incentives such as rebates, discounts on airport fees, revenue guarantees or promotional funding

CO-ORDINATION AND COMMUNICATION

Caribbean aviation and tourism stakeholders came together this month for the Caribavia meet-up, held in The Bahamas. The three-day event tackled one of the region’s most pressing problems - how to increase airlift.

Vice President of ICF Aviation Consulting Jared Harckham, who spoke at the conference, said destinations need to address a number of factors when pitching an airline but the most crucial element is to present a united front. “If a destination wants to pursue new service, the best way to do that is with stakeholders coming together and talking to the airlines with one voice.”

When it comes to discussions with airlines, almost everyone has a stake in the outcome. From government and tourism agencies to hotel associations, airports and chambers of commerce. These participants have to band together and sell the destination based on accurate, comprehensive and detailed market research, according to Harckham. “It needs to be a co-ordinated effort. It is important to come to the airlines with a clearly defined opportunity. The most important thing is to have a well-thoughtout, well-structured, business case. The more information, the better. It saves the airline time, it captures their attention and they will take you more seriously as a destination.”

Above all, an airline wants to know that a destination will be profitable . . . and can sustain that profitability. To convey this, destinations need to communicate effectively with carriers, speaking their language to close the deal. When assessing the merits of a route or hub, airlines examine a number of factors including whether they have the right fleet to fly that route, if it fits with their existing network and whether it coincides with their brand strategy. This type of route forecasting is a science, according to Harckham, and also encompasses trade links, migration flows, tourism attractions and infrastructure. “Airlines want sustainable opportunities.”

SWEETENING THE DEAL

The Caribbean is a disparate region with certain similiarities. With every destination relying on the sun, sand and sea model, competition for carriers is extremely fierce. As the fight to secure more routes and stand out from the crowd increases, so too does the relative bargaining power of airlines.

It is now extremely common for destinations to pitch something above and beyond a comprehensive business plan. Most Caribbean countries offer their carriers incentives such as rebates, discounts on airport fees, revenue guarantees or promotional funding.

While some argue that incentives are a step too far - failing to lower costs for the consumer and forcing destinations to take on too much financial risk - Harckham believes that they are a necessary evil, and have become so commonplace that they are now industry practice. “Airlines tend to expect something to be put on the table, whether as a good faith gesture or enough to guarantee that they will make money. It is a negotiation.”

Harckham urges destinations to weigh up how far they are willing to go and to consider the ultimate pay-off in the longterm. “It is worth getting it right on air service development. It is really important to understand the value of the service and what you are willing to spend to get that. The benefits are more flights, more revenue for the airport and more economic impact for the community. One flight can be worth tens of millions of dollars. It is usually a good investment.”

REAPING THE REWARDS

Air transport stimulates economic growth, increases employment, improves competitiveness and raises incomes. The direct and indirect benefits are far-reaching and long-term. In a report released at its AGM last month, the Caribbean Development Bank (CDB) said the air transport industry could contribute US$4.4bn to the regional GDP, provided certain steps were taken. These include full liberalisation of the Caribbean airspace, reduction in airport charges and aviation taxes, and improvements to infrastructure and regulations.

Barbados Prime Minister Mia Mottley told reporters last week, “For those who may be worried, may I remind persons that in Saint Lucia they raised their fee at the airport through similar taxes and, in spite of that, they saw not a reduction in travel but an 11% growth in tourism.”

In 2017, Saint Lucia came under fire for a significant increase in its airport tax system - introducing a US$35 Airport Development Tax and increasing the Airport Departure Tax for foreign visitors from US$25 to US$63. Justifying the hike, government said the additional revenue would be used to fund tourism growth and airport development.

Saint Lucia currently collects around US$15m in airport taxes each year, part of which will be used to secure a major expansion of the Hewannora International Airport. The phased US$100m redevelopment includes construction of a new terminal and air traffic control tower. Saint Lucia is not alone in its attitude to air traffic taxes and fees. A 2015 CDB study found that, for American Airlines, six out of their ten highest taxed destinations were in the Caribbean. The end goal of any airlift strategy is growth. This is best achieved by keeping both customers and carriers happy. Productive, informed and co-ordinated negotiations with airlines will help establish new routes, but filling those routes requires less taxes, charges and rigid regulation. A fully liberalised market with more competitive pricing helps elevate the entire economy and generate long-term business for both destinations and the airlines that serve them.