By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian airports are just 20 per cent compliant with international regulatory standards, making it of “paramount importance” that Family Island facilities are upgraded immediately to prevent the suspension of all-important airlift.

The urgent need for rehabilitating the Bahamas’ 28 Family Island airports was reinforced by a September 2016 study from ALG Transportation & Logistics, which noted that bringing them into compliance with the International Civil Aviation Organisation (ICAO) was “particularly challenging”.

The ALG report, obtained by Tribune Business, revealed that the Bahamas’ lowest ranking in the most recent ICAO assessment of this nation’s aviation industry, conducted in 2015, came on aerodromes/airports.

The ‘20 per cent effective implementation’ of ICAO standards contrasted with the Bahamas’ overall compliance improvements, with most areas assessed coming in near to the global average.

The Bahamas even exceeded the ‘global average’ when it came to legislation governing the aviation industry; the sector’s operations’ and accident investigation functions, but ALG warned that the continuing failure to upgrade Family Island airports threatens to short-circuit much of the tourism product.

“The Bahamas has improved the overall level of compliance of the air transport sector with the International Civil Aviation Organisation (ICAO) Standards and Recommended Practices (SARPs),” ALG concedes.

“The country’s scoring at the last Universal Safety Oversight Audit Programme (USOAP), carried out in 2015, was close to the global average in most of the audited areas.

“Nevertheless, the lowest scoring was related to aerodromes (20 per cent of effective implementation), stating the challenges faced by the Ministry of Transport and Aviation to implement SARPs both in airport infrastructure and airport operations.”

Identifying the challenge, ALG added: “Improving the levels of safety in the Family Islands airports is particularly challenging due to the large number of small airports required to serve the scattered population in the archipelago.

“In this regard, it is of paramount importance to ensure that the commercial airports in the Islands comply with the ICAO standards.”

Confirming that Family Island airports “fail to meet” ICAO’s “international safety and security regulations”, ALG added: “If SARPs are not adopted at these airports, they will not be eligible for the certification granted by the Civil Aviation Authority of the Bahamas, failing to provide solid operational guarantees to airlines.

“A prolongation of this situation could lead to the suspension of flights, causing a large impact on the national economy.”

The ALG report is part of a $53.8 million joint venture by the Government and Inter-American Development Bank (IDB) that aims to bring the main Family Island airports - Marsh Harbour/Treasure Cay, Exuma and North Eleuthera - into compliance with ICAO standards, and enable them to cope with increased visitor volumes.

ALG is forecasting that these four airports require an immediate $49.7 million in capital investment collectively to both meet ICAO standards and address other deficiencies.

Some $33.5 million is needed to deal with ICAO, with most of the $16.2 million earmarked for a new terminal building, security fence and firefighting facilities in Exuma.

Of the $33.5 million, ALG said almost half is needed for a new terminal building in North Eleuthera, with a further $11 million dedicated to a new apron and taxiways; runway replacement; and security and firefighting facilities at the same airport.

Assessing the four airport’s investment needs over the 25-year period to 2042, ALG said: “Total capital expenditure required throughout the 25-year period adds up to $89.6 million (in real terms, which translates into $109.8 million in nominal terms: $45.8 million corresponds to North Eleuthera Airport (42 per cent); $34.2 million to Exuma Airport (31 per cent); and $29.8 million to Marsh Harbour and Treasure Cay airports (27 per cent).”

Estimating the potential returns and economic benefits from the IDB project, ALG said the upgrades would be cash flow positive for the Marsh Harbour and Treasure Cay airports throughout the 25 years, apart from the three times major capital investment is required.

Its report projected that the two airports will generate an average 44 per cent earnings before interest, taxation depreciation and amortisation (EBITDA) margin over the project’s lifetime, increasing from $1.4 million in 2018 to $7.6 million by 2041.

“Annual operating margins are expected to grow gradually throughout the 25-year period in line with the expected traffic evolution,” ALG said.

“The total EBITDA generated between 2017 and 2042 accounts for $95.4 million. Given the low level of investment required at Marsh Harbour and Treasure Cay airports and its positive operating margin, the internal rate of return (IRR) of the project cash flow is 55.8 per cent, and the return period for the initial investment is of just two years.”

Exuma’s operating margin average over the 25-year period was pegged at 38 per cent, due to the increased costs associated with the new terminal building’s construction.

“The total EBITDA generated between 2017 and 2042 accounts for $40.1 million,” ALG said, putting the return period on any investment at 23 years.

The 25-year operating margin average was lowest at North Eleuthera, pegged at 25 per cent due to the heavier investment needed in bringing the facility up to standard.

“The total EBITDA generated between 2017 and 2042 is $19.3 million,” ALG said of North Eleuthera. “Due to the high level of investment required in the short-term, the Internal Rate of Return (IRR) of the project cash flow is -11.1 per cent.”

“Improving the level of safety in the Family Islands airports is a critical objective promoted from the Government of the Bahamas,” ALG said.

“Even if the economic benefits of enhancing airport safety are not quantified, it is of paramount importance for the social development of the islands and it is a key enabler of the economic growth.

“Apart from the expected socio-economic return, the main benefit for the population of the Bahamas will be the enhancement of air transport safety and security in the busiest airports of the Family Islands. This benefit is expected to last beyond the lifetime of the project, also favouring the next generation of Bahamians.”