Airlines dispute threatened ‘huge’ $43m consequences


Tribune Business Editor

The US airline industry’s challenge to The Bahamas’ air navigation services fee regime had potentially “huge consequences” by putting close to $43m in annual revenues at risk, it was revealed yesterday.

Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, told the House of Assembly that the situation not only threatened to curtail the ability of Bahamian carriers to access to the US market but also endangered “funding stability” for local aviation regulators.

But, with the US Department of Transportation having dismissed the Airlines4America consortium’s complaint that The Bahamas’ fees were “discriminatory, unjust, anti-competitive and unreasonable”, the Davis administration is seeking to resolve all concerns at the diplomatic or government-to-government level using the provisions of this nation’s Air Transport Agreement with Washington D. C.

Mr Cooper yesterday confirmed that both sides are scheduled to have their first meeting in mid-April in a bid to address the US Department of Transportation’s “serious concerns” that The Bahamas’ fees are excessive when compared to the actual expenses this nation incurs for providing air navigation services. It has already suggested these costs may breach the countries’ Air Transport Agreement.

Detailing how The Bahamas’ arrived at this point, the deputy prime minister said the global aviation industry began to pressure this nation over the level of fees just over one year after the structure was implemented in May 2021. This followed a period of consultation with the airlines and sufficient notice being given of their imposition.

Mr Cooper revealed that The Bahamas is forecast to generate $42.93m from its air space fees during the 2022-2023 fiscal year, although the outcome is “expected to be higher based on the faster-than-expected recovery in air traffic movements” post-COVID.

“Between May 2021 and November 2022, fees invoiced under the air space scheme totaled $49.693m, of which $44.69m represented air navigation services fees; $4.45m origin/destination fees, and $1.3m was for the passenger levy,” he added. “Total fees collected through November 2022 are $42.68m, with receivables at $6.46m.”

The air navigation services fees and origin/destination fees are split between the Bahamas Civil Aviation Authority (BCAA) and Bahamas Air Navigation Services Authority (BANSA), while the former is the sole recipient of the passenger levy. The fee structure was created to provide a financing mechanism for civil aviation regulation and oversight in The Bahamas, so that the sector no longer has to rely on the Bahamian taxpayer.

And the funding stream it generates is also intended to enable this nation to build the necessary human capital and infrastructure capacity so that it can ultimately take control of, and manage, all its air space rather than outsource control of 75 percent to the Federal Aviation Administration (FAA) for an annual $80,000 fee. FAA control only applies above 6,000 feet.

However, US airlines especially have given The Bahamas a hard time over efforts to exercise its sovereignty. “Shortly after the fee charging scheme’s one-year anniversary, The Bahamas was invited to a follow-up meeting in June 2022 by IATA (the International Air Transport Association), in Miami, Florida, to provide its members with an update on the new charging scheme,” Mr Cooper said.

“It was during this meeting that the IATA members expressed strong concerns over The Bahamas’ charging scheme, basically characterising it as prohibitive with no new or incremental services provided for the additional cost imposed, and that the cross-subsidisation of lower air space operations by the overflight fees was at variance with the ICAO (International Civil Aviation Organisation) cross-relatedness principle.”

The Bahamas subsequently pushed back against this criticism, including during a Nassau meeting between IATA’s regional vice-president for the Americas and Mr Cooper’s office. However, the differences quickly escalated when American Airlines made a formal protest over having to pay The Bahamas some $4.2m in fees for the six-month period June to November 2022.

“On November 29, 2022, The Bahamas was advised by the IATA Clearing House (ICH), where the bulk of the airline payments are cleared, that American Airlines lodged a formal protest on its payments for the last six months (June to November 2022), which totalled $4.2m,” Mr Cooper asserted.

“Following the rules of the ICH, BANSA presented a formal response on December 8, 2022, justifying the validity of The Bahamas’ fee charging scheme, and how it was considered to be consistent with ICAO principles. On December 15, 2022, The Bahamas was advised by the ICH that, having reviewed the position of American Airlines and The Bahamas, it concluded that a substantive dispute existed between the two parties.

“Under the ICH rules, therefore, the ICH notified that the $4.2m in dispute would be held in an escrow account until the matter is resolved.” The dispute was then widened when the Airlines4America group, which includes American Airlines, Jet Blue, FedEx, Delta, Southwest Airlines, United Airlines, and the United Parcel Service, filed their complaint that The Bahamas’ air navigation services fee regime was “unjust and discriminatory”.

“This acceleration in the dispute presented huge consequences for the stability of funding our air navigation services and the continuity of operations of our domestic carriers into the US,” Mr Cooper said. However, as previously reported by Tribune Business, the US Department of Transportation dismissed the airlines’ allegations, asserting: “We cannot conclude in those circumstances that the fee structure constitutes unjustifiable or unreasonable discrimination.”

With the dispute now having moved from the airline industry to the inter-government level, the deputy prime minister added: “The Government remains committed to achieving a successful resolution of all continuing concerns with the cost basis analysis for our overflight fees.

“We are keen to protect The Bahamas’ sovereign rights to recover the level of fees necessary to provide air navigational services to our air space users, which should include building out both the human and infrastructure capital necessary to eventually take control of the management of our airspace. Our intention is also to ensure that The Bahamas’ fee charging scheme is compliant with ICAO principles.

“We have already received a formal request from the US Department of Transportation to commence formal consultations under Article 13 of the US-Bahamas Air Transport Agreement. Our intention is to move quickly to formalise consultations, along these diplomatic channels, to reach a satisfactory conclusion to these issues at the earliest. In fact, the first meeting is already scheduled to be held mid-April.”

The Bahamas’ fee structure is split into three components. They include the air navigation services fees, that are charged to all commercial aircraft flying over Bahamian air space, and range from $8.50 to $51.60 per 100 nautical miles based on the plane’s maximum take-off weight.

Origin and destination fees are charged on flights originating from or landing in The Bahamas, and range from $10 to $61 per flight based on the aircraft’s maximum take-off weight. And a passenger levy fee of $1 per passenger is applied to all commercial airlines originating or terminating in The Bahamas.


Maximilianotto says...

Smoke and mirrors. The real costs are $80,000 Lol? To build “human capital?” Detailed audited breakdown please.

Posted 23 March 2023, 12:49 p.m. Suggest removal

birdiestrachan says...

Here we go again the high and mighty bullies would they have done this to America ?

Posted 23 March 2023, 3:11 p.m. Suggest removal

Flyingfish says...

Their has to be higher than normal fees associated with our airspace in order to ensure equipment, facilities, and training necessary for us to take over our airspace can be payed for.

The airlines re going to have to get accustomed to the extra fees they have managed to avoid for the past 50+ years.

Posted 23 March 2023, 3:42 p.m. Suggest removal

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