By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Global aviation’s trade body has warned it is “imperative” that Bahamian and other airlines not be penalised by triple-digit retroactive fee hikes as a result of “errors” by local regulators.

The International Air Transport Association (IATA), which represents 340 airlines and 80 percent of global aviation traffic, told the Bahamas Air Navigation Services Authority (BANSA) that seeking to retroactively impose its new fee regime to cover the period May 2021 to end-July 2024 will create an “unexpected” and “significant” financial burden that threatens to undermine airlift growth for this nation.

Peter Cerda, IATA’s regional vice-president, in a March 28, 2025, letter to Lenn King, BANSA’s director, asserted that the regulator is effectively making airlines that service The Bahamas pay the price for its mistakes as it attempts to “recover losses” incurred during that three-year period as a result of flawed air navigation services charges.

The letter, which was sent to all airlines and has been obtained by Tribune Business, adds that “a limited number of operators conducting regular flights to The Bahamas” will be responsible for “a significant portion” of these retroactive fees. In other words, the burden will fall most heavily on those airlines responsible for bringing high-spending stopover visitors to The Bahamas and moving locals internationally and inter-island.

Mr Cerda, backing concerns already voiced by Bahamian aviation operators, wrote: “Several airlines, particularly those operating out of Bahamas airports, have expressed significant concern regarding the substantial outstanding balances BANSA is charging them for unpaid origin/destination (O/D) charges. These charges stem from errors in the calculations used to define RP1 (May 2021 to July 2024).

“The issue originated when a request for retroactive credit to the overflight fees was made. At that time, the revised cost structure, including the increase in O/D charges, was not yet in place, and discussions were focused solely on overflights.

“With the introduction of the new cost structure and the subsequent significant increases in O/D charges, airlines are now being asked to cover BANSA’s calculation errors. These retroactive charges impose a substantial financial burden on the affected airlines, generating serious concerns among them.”

Returning to the same theme several paragraphs later, the senior IATA executive reiterated: “It is imperative that BANSA does not switch to a completely different charging formula and apply it retrospectively to recover losses.

“The losses resulted from the initial decision to use a different cost determination and allocation method. This retrospective application of a new charging formula has resulted in significant financial burdens for some airlines.

Airlines made operational decisions based on the original cost structure, and a sudden change would disrupt financial planning and operational stability. The unexpected costs would also impact the airlines’ ability to invest in future growth and development, potentially hindering their operations in The Bahamas,” Mr Cerda continued.

“... The challenges associated with the new charging schemes have become apparent as BANSA seeks to recover costs related to RP1 (reporting period one). A limited number of operators conducting regular flights to The Bahamas are expected to cover a significant portion of that total cost.”

The fees at the heart of these concerns are those levied under the fledgling air navigation services regime overseen by BANSA. These fees are split into two types - origin/destination charges, which are levied on planes that take-off and land in The Bahamas, and then overflight fees. The latter are levies paid almost entirely by international carriers that fly through Bahamian air space without stopping in this nation.

BANSA is restructuring its air navigation services fee regime in a way that shifts the financial burden of these fees on to take-off/landing fees, and away from overflight fees. Tribune Business previously revealed how these changes will potentially impose six-fold and greater fee increases over the next four fiscal years through 2028-2029 on carriers that are Bahamian-owned or service this nation.

However, what was not known at that time was the extent to which BANSA planned to impose this new structure - together with the associated fee rebalancing and hikes - retroactively for the period between May 2021 and July 2024. That only emerged with the arrival of billings earlier this month, which followed a consultation meeting with aviation industry stakeholders on the reforms on Wednesday, March 5.

Sherrexcia ‘Rexy’ Rolle, Western Air’s president, chief executive and general counsel, told Tribune Business that BANSA is now demanding the carrier pay an extra $2.4m over and above what it has already paid in air navigation services fees.

“BANSA is requesting $2.4m separate from what we have already paid to them, and separate from what was previously invoiced,” she said. “Thus it is not ‘$1.3m-plus’ increase. It is $2.4m they are requesting despite never invoicing or notifying of such charges.”

Based on the fact Western Air has already paid $1.1m in fees for the relevant period, May 2021 to end-July 2024, the additional $2.4m will take the total demand to around $3.5m - more than tripling its bill via a 218 percent increase. Similarly, fellow Bahamian carrier, Trans-Island Airways, has seen its bill more than triple and grow by almost 260 percent compared to the original for the same period.

IATA and Mr Cerda, meanwhile, also raised concerns about BANSA basing its fees on an aircraft’s maximum take-off weight. They argued this would effectively penalise large commercial passenger jets and freight cargo planes even though the costs and resources used in managing their passage through Bahamian air space were not much greater than for smaller planes.

The global aviation trade body, in urging BANSA to develop “a balanced and cost-effective” fee structure, also asserted that smaller planes are “not paying their fair share” even though they are responsible for much of the traffic congestion in the Caribbean. And it also noted that the proposed reduction in overflight fees is much less than was originally suggested.

Finally, calling on BANSA to adopt “a clear and transparent” approach to crafting the air navigation services fee regime, Mr Cerda and IATA said the aviation industry wants a third-party auditor to determine whether the fees and income generated are in line with the actual costs incurred by the Bahamian regulator in providing services to the aviation industry.

“The high level of O/D charges, and the significant impact of the weight variable, are particularly burdensome for airlines. While introducing a charge cap for wide-body users is appreciated, the formulas and calculations supporting cost recovery remain unclear,” IATA said of BANSA’s proposed charging scheme for the upcoming four years.

“Given the relatively low traffic congestion, handling an aircraft on approach with a maximum take-off weight (MTOW) over 60,000 tons is not inherently more resource-intensive than managing a smaller aircraft’s approach. The disproportionate costs imposed on larger aircraft under the proposed scheme do not reflect service demands and could hinder future growth.”

Taking issue with the size bias, Mr Cerda and IATA added: “The proposed O/D charging structure indicates that smaller aircraft, which contribute significantly to congestion in the Caribbean, are not paying their fair share relative to the cost structure. This becomes particularly evident when compared to the charges levied on larger aircraft.

“Therefore, developing a balanced charging scheme that accurately reflects all aircraft types’ resource demands and congestion contributions is crucial.... Based on our example, airlines operating heavier aircraft pay a disproportionate level of the costs. Charging formulas should be more cost-related and ensure all users pay their fair share.”

And, noting that the reductions in overflight fees have been watered down over the past year, IATA said: “Overflight charges have also increased significantly during the consultation process to compensate for reductions in O/D charges.

“When the consultation process began in April 2024, the initial plan proposed a reduction in overflight charges of more than 90 percent. For example, 92 percent for the Boeing 738. With the latest proposal, the reduction is now 67 percent for the Boeing 738 and 36 percent for the Boeing 777. This raises questions about the cost basis, the correct allocation of services provided, and the value of the overflight service offered by BANSA.”

IATA pointed out that BANSA’s costs for providing services between 2021 and 2024 did not accurately reflect the charges imposed. Concerns over whether this nation’s air navigation services charges are excessive are nothing new, with US airlines and the US Department of Transportation arguing that The Bahamas was offering very little in services for the money it is taking in.

This is because The Bahamas, 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, the industry is arguing that The Bahamas is providing little while also having few costs to cover.

“Significant concerns exist between the services provided by the FAA and BANSA, and the implemented charging scheme. The actual costs incurred during 2021-2024 did not align with the charges,” IATA told BANSA on March 28.

“There are still uncertainties regarding the distinction between services provided by the FAA and those offered by BANSA, complicating the ability of some operators to fully accept the proposed scheme and the cost base supporting it.....The calculations underlying cost recovery remain a concern, and we believe that a clear and transparent approach to these calculations is essential.

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.

However, IATA concluded: “The industry has expressed the need for either a thorough on-site verification of BANSA’s current air navigation structure or an audit performed by a neutral party before implementing the new charging model.

“This step is crucial to ensure the model accurately reflects the infrastructure, services provided and investments made. IATA is open to co-ordinating and leading this activity in co-ordination with BANSA and the airlines.

Given the divergent positions among our airline members, depending on the nature of their operations in The  Bahamas - whether overflight or O/D services - it is essential to allow additional time before the new charging scheme is implemented. This extra time will ensure that all stakeholders have the opportunity to resolve bilateral discussions as necessary.” it continued.

“We will continue to lobby for a more balanced approach to the proposed charging scheme that accurately reflects the industry’s needs and the actual costs incurred by BANSA for services provided under the FAA/BANSA agreement. Our goal is to ensure transparency and clarity in the services provided and the associated costs.

“Our goal is to develop a balanced and cost-efficient model that supports the growth and development of air navigation in The Bahamas while ensuring fairness for all airlines operating within or transiting through Bahamas airspace.”