By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian airlines are voicing fears they will be “strangled” by six-fold and greater fee increases proposed as part of adjustments to this nation’s air navigation services regime charges.

Domestic carriers told Tribune Business that the Bahamas Air Navigation Services Authority’s (BANSA) new fee regime, which it is proposing to implement for the next four fiscal years through 2028-2029, threatens to further eradicate already-slim industry margins while deterring route expansion and fresh investment via a rebalancing that places the financial burden disproportionately on their operations.

BANSA’s “cost base review and charges adjustment” proposal, dated February 2025 and which has been seen by this newspaper, is shifting the fee burden away from overflight fees - levies paid almost entirely by international carriers that fly through Bahamian air space without stopping in this nation - to so-called origin/destination charges. 

The latter are fees levied on planes that take-off and land in The Bahamas, and BANSA’s own consultation paper revealed that 77 percent of such flights between May 2021 and December 2023 were operated by locally-owned carriers or charters. All origin/destination charges are proposed to suffer between four-fold and more than six-fold increases, ranging from a minimum of 294 percent to a high of 679 percent.

In contrast, all overflight fee categories will enjoy reductions in both absolute dollar and percentage terms, with the latter involving cuts ranging from 36 percent to a maximum of 69 percent. The BANSA paper, citing the example of an ATR72-600, said the overflight fee rate will be reduced from $29.60 per 100 nautical miles to just $9.16, representing a 69 percent drop or a rate equivalent to 12 cents per passenger seat.

And, for a Boeing 777, the Authority is proposing to reduce the rate for transiting Bahamian air space from $51.60 per 100 nautical miles to $33.01, which marks a 36 percent reduction. And, given that the rate will be spread over a greater number of seats due to that aircraft’s capacity, economies of scale kick-in with the charge per seat or passenger dropping to just eight cents.

However, when it comes to the origin/destination charges (take-off and landing in The Bahamas), the fees for small planes with a maximum take-off weight (MTOW) of less than 10,000 kilograms - the likes of Piper Aztecs, Cessna 402s and Piper Navajos - are increasing from $10 to $65.09 - a 551 percent or more than six-fold jump. The per seat charge for a Cessna 525, a small jet, is shown as $10.85. 

While private planes with a single piston have been exempt from both overflight and origin/destination charges, the two categories that make up The Bahamas’ air navigation services regime, all those planes mentioned are twin engine and will likely be captured by it.

As for commercial planes, the origin/destination fee for an ATR 72-600 is proposed to increase by 294 percent from the present $35 to $137.92 - equivalent to $1.84 per seat. And charges for a Boeing 777 will jump more than seven-fold - from $61 to a new capped maximum of $477.05 - which represents a 679 percent hike.

Paul Aranha, founder of Trans-Island Airways, told Tribune Business that the issue was not necessarily the proposed origin/destination fee hikes by themselves but the ‘bigger picture’ for a Bahamian aviation industry that has faced a barrage of multiple new and increased fees in the years following Hurricane Dorian and COVID-19.

Besides the up to three-fold and six-fold increases in Customs ‘inbound’ and ‘outbound’ fees unveiled in last May’s Budget, the sector has also faced the imposition of airport infrastructure improvement fees at Lynden Pindling International Airport (LPIA) and jumps in landing and other fees. Further fee increases, along the lines of those implemented in Bimini, are almost certain to follow to pay for upgraded Family Island airports.

Mr Aranha explained that while the dollar amount of the BANSA increases by themselves may seem small, it quickly adds up given the multiple daily flights Bahamian carriers and charter operators make. And, when combined with other fee increases and more likely to come in the near future, they represent a significant burden for an industry that operates with relatively low margins.

“What’s happening is every single agency is acting independently,” he said. “Each agency is increasing their charges and fees in silos. The same action is being taken by Customs, Civil Aviation, BANSA, the airports. All these things individually are seemingly tiny, but collectively they represent a very large percentage of each flight or charter.

“There are three areas of concern that I see. One, aviation is a highly capital-intensive business that has very small margins. However, capital requirements often cloud external bodies’ opinions of the industry’s ability to sustain price increases.

“The problem is those fees impact the very small margins that operators have every single day. For people flying scheduled flights, it shifts the needle as to whether they will add extra routes or not. It makes scheduling additional routes, particularly in the Family Islands, a harder sell,” Mr Aranha added.

“For people looking to make investments in the aviation industry, it makes an already marginally attractive industry in a challenging business environment even less appealing, therefore further reducing investment in the industry. It also strains local operators and impacts their ability to invest their cash flow to acquire newer and safer planes because the Bahamian aviation industry does face an ever-aging fleet.”

Rick Gardner, a Bahamas Flying Ambassador, told Tribune Business that while he had not studied BANSA’s proposed fee adjustments in detail it seemed as if the changes were designed to incentivise commercial traffic and private pilots to fly over The Bahamas rather than land in the country to spend money for the economy’s benefit.

“It appears to be more bad idea that will just further alienate the aviation market,” he added of the cut in fee rates to transit Bahamian air space. “Think about it. You are raising fees to visit The Bahamas yet making it less expensive to overfly. What a great incentive to visit Turks & Caicos, Dominican Republic etc.”

Tribune Business understands that the BANSA fee proposals are due to be discussed further with the aviation industry and its stakeholders at an upcoming meeting on March 5. One source, speaking on condition of anonymity, said smaller planes were those “most sensitive” to any increase, and they added: “A 550 percent increase in fees is not a small number.”

Citing a Nassau to North Eleuthera round-trip as an example, they said domestic operators or charters would likely charge between $1,600 to $2,000 depending on whether the plane was an Aztec or Cessna. With the new $65.09 route, they pointed out that this would be incurred twice - upon landing in Eleuthera and landing back in Nassau - for a total $130.18.

Should the same plane fly this route multiple times per day or week, they added that this fee increase compared to the present $10 will rapidly add up and result in an annual expense increase worth thousands of dollars. In contrast, international carriers would only pay the origin/destination charge once when they land in The Bahamas.

“The origin/destination charge is really going to hurt local airlines,” they said. “You risk strangling your aviation sector for these fees. You are creating a fee structure that depends on domestic aircraft movement but you are strangling this at the same time by adding all these fees and taxes.”

The source suggested BANSA’s fee rebalancing, and increased origin/destination charges, also seems to run directly counter to The Bahamas’ efforts to reduce airlift costs which represent the price to access the destination. In particular, they will impact Family Island airlift costs and tourism and, inevitably, the extra expense will most likely almost all be passed on to consumers via higher ticket prices.

Kerry Fountain, the Bahama Out Island Promotion Board’s executive director, who last week called for a reduction in airline ticket taxes and fees, said he was aware of the BANSA fee proposal as he called for a rebalancing of the tourism tax burden towards lower-spending cruise passengers and away from stopover visitors.

“I think we really need government and all private sector partners that bring expertise to this area.. we really need to sit down and figure out a way to look at what I said earlier this [last] week - to convert our proximity to affordability,” he said.

“We’re not going to be able to do that by only looking at increasing taxes or burdening our air stopovers that are spending the most money with increased taxes time after time after time. It’s not government bashing but we want to sit down as partners to figure out the best way to help the Government find the revenue it needs to govern the country.

“If it means looking at visitors who make the largest footprint, and that’s the eight to nine million cruise passengers visiting Nassau and their private islands - how they can share in the tax burden that our stopovers are constantly being burdened to lift. That’s my take on it. How do we level the playing field there?”

Several Bahamian aviation sources, speaking on condition of anonymity, said the rebalancing from ‘overflight’ fees to place a much greater burden on themselves through the jump in origin/destination charges appears designed to appease the US government and foreign airlines. “This has 100 percent been done to appease the Americans,” one source, speaking of condition of anonymity, said.

The US Department of Transportation previously voiced “serious concerns” about the level of the fees and whether they are excessive when compared to the actual expenses The Bahamas incurs for providing air navigation services. 

And it also challenged whether the level of charges is compliant with the Air Transport Agreement treaty agreed between The Bahamas and US, sparking discussions at the diplomatic level between the two countries over revising the BANSA fee structure. The proposed new fees appear to the product of those discussions plus three “consultations” with industry stakeholders.

The US Department of Transportation’s concerns over whether The Bahamas’ fees are excessive likely stem from the fact that this nation, in 2021, agreed a 10-year deal where the US Federal Aviation Administration (FAA) continue managing Bahamian air space above 6,000 feet. The FAA also agreed to waive the cost of air navigation services it was providing and accept a mere $80,000 fee per annum.

As a result, both the US government and members of the Airlines4America consortium - the likes of American Airlines, Jet Blue, FedEx, Delta, Southwest Airlines, United Airlines, and the United Parcel Service - are arguing that The Bahamas is presently offering very little in services for the money it is taking in.

Asserting that the fees should only cover the cost of providing the service, they allege here was no justification for “the tens of millions of dollars” that The Bahamas is collecting given that it is just paying, at most, $80,000-$100,000 to the FAA - sum equivalent to 1 percent of the charges. They claim this “runs afoul” of global best practice and agreements, plus the US International Air Transport Fair Competitive Practices Act 1974.

The commercial passenger and cargo airlines, especially, have been using regulatory challenges and other aggressive lobbying/pressure tactics to force The Bahamas to back down. And it is they who stand to benefit most from the proposed cut in the rates for transiting Bahamian air space as they constantly have flights moving between the North and South America continents.

The Bahamas, though, will argue that it needs the air navigation services revenue to build the human, financial and physical resources necessary to eventually take over management of its entire air space from the FAA. And the monies raised are also designed to ensure its civil aviation regulatory regime - Civil Aviation, BANSA etc - no longer has to be financed and subsidised by Bahamian taxpayers via the Budget.  

Civil Aviation, for example, is due to receive an $8m subsidy during the current 2024-2025 financial year.