GB airport value up six-fold via tourism rebound

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Grand Bahama “tourism turnaround” could produce a six-fold increase in the value of its international airport, which the Government’s consultants currently estimate is as low as $3 million.

McKinsey, in its report on the Government’s policy options over Freeport’s expiring tax incentives, said changing Grand Bahama International Airport’s ownership would make no difference to its financial performance.

The airport’s current ownership, via the Freeport Harbour Company, is split 50.50 between Hutchison Whampoa and the Grand Bahama Port Authority’s (GBPA) Port Group Ltd affiliate, with the asset operating as a private enterprise under the former’s management control.

“Changing ownership of the airport cannot address the root cause of low air passenger volume,” McKinsey warned, “Grand Bahama’s lack of a competitive/compelling tourism product.”

While Grand Bahama International Airport’s fees were only $7 higher than the median for the Caribbean region, McKinsey pointed out that airfares from New York to Freeport were higher than anywhere else in the Caribbean region.

This, it suggested, stemmed from lack of airlift and route competition, and low passenger numbers, both of which “reduce pressure on carriers to price competitively”.

“Grand Bahama International Airport receives fewer air passengers even compared to airports serving a similar number of destinations and flights,” McKinsey said. “Connectivity does not appear to be the issue.

“Grand Bahama does not have the tourism products to command high premiums as top destinations. Grand Bahama International Airport has little pricing power, as airlines could always shift routes away from Grand Bahama if landing at Grand Bahama becomes unprofitable.”

McKinsey estimated that Grand Bahama International Airport’s current worth was as little as $0-$3 million should the island’s tourism ‘status quo’ remain, with free cash flow estimated at just $0.3 million in 2021.

If tourist arrivals rose by 17,000 per year, the report projected that Grand Bahama International Airport’s value would rise to between $8-$12 million, with free cash growing to $0.9 million.

And, in a “complete turnaround”, with Grand Bahama’s stopover arrivals rising by 35,000 per year, McKinsey suggested that Grand Bahama International Airport’s worth would increase to between $15-$18 million, based on $1.4 million in free cash flow and 120,000 visitors passing through.

McKinsey warned the Government against taking over ownership and operations at Grand Bahama International Airport, given that it would incur $7-$10 million in annual net operating costs under current passenger numbers.

“Removing government subsidies could put Grand Bahama International Airport into an operating loss, and reduce valuation significantly,” McKinsey said.

“Concerns over certainty of government regulations could further lower valuations.”

It added that Grand Bahama International Airport’s competitiveness could be improved by lowering fees, and seeking government tax cuts.

The consultants also recommended that retail, parking, land rental and air cargo be explored as new revenue streams to make up for lower aviation-related earnings.

Comments

proudloudandfnm says...

Round trip ticket Freeport to West Palm Beach. 60 miles...

$700.00

Posted 2 February 2016, 2:02 p.m. Suggest removal

brownskinboi says...

Hell, Freeport to Orlando is about $500... Further away and cheaper but still EXPENSIVE.

No, the government shouldn't takeover ownership or operations of FPO. I don't know why the hell they just don't re-open West End or the defunct missile base airstrip. They're both 30 mins or so from FPO and not have to deal with the Whampoa/Port nonsense.

Posted 2 February 2016, 2:26 p.m. Suggest removal

GrassRoot says...

ok. if you built the best airport in the middle of the sahara, you would not draw a crowd to go there. So what kind of logic is that? you have to make the product interesting to draw a crowd. apparently the product is not interesting enough for tourists to rebook their punta cana, turks & caicos, Jamaica vacations to Freeport Bahamas. What can we expect from from f-level politicians.

Posted 2 February 2016, 3:03 p.m. Suggest removal

Economist says...

Over the years the government has directed investors, who have asked to invest in Freeport, to other parts of the country, mostly New Providence.

So having basically stolen the investment from Freeport they turn around and say Freeport isn't working and that they should take over.

Posted 2 February 2016, 4:12 p.m. Suggest removal

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