We do not need to blame anyone else; we do bad all by ourselves.
This seems to be the indictment against the Caribbean for its deficient governing policies in managing air travel in the region. So many of the 30 member-states charge excessive aviation fees and airport taxes that they discourage, dis-invite and dissuade trading partners (and tourists) from consuming our shores and hospitality.
So the “defect is our own”. – The Bible
Shrewd management of taxes can encourage or discourage good or bad behavior. For example, high “sin” taxes on tobacco and alcohol tend to dissuade consumption; and tax cuts tend to incentivize investments. This is a known fact! And yet, many Caribbean member-state governments charge exorbitant fees and taxes for basic air travel – sometimes the fees are higher than the air fare themselves – see below.
This subject is part of the focus on the economic realities of “flying the Caribbean skies”. This commentary continues the 3-part series on Flying the Caribbean Skies. This entry is 2 of 3 in this series from the movement behind the book Go Lean … Caribbean in consideration of societal defects in the region’s management of air travel. These defects have awful-ized an already depressed economic situation in the Caribbean region. The other commentaries in the series are cataloged as follows:
- Flying the Caribbean Skies: New Regional Options
- Flying the Caribbean Skies: ‘Shooting Ourselves in the Foot’ – ENCORE
- Flying the Caribbean Skies: The Need to Manage Airspace
All of these commentaries relate to “how” the stewards for a new Caribbean can empower regional commerce by optimizing the air travel eco-system. This submission asserts that empowerment in this industry space can begin right at the front door, the portal to air travel, the airports. In a previous Go Lean commentary, this governing flaw was exposed. This commentary is an ENCORE of that previous blog from December 6, 2014.
See that submission here:
Go Lean Commentary – Caribbean less competitive due to increasing aviation taxes
The book Go Lean … Caribbean relates the significance of supporting the airline industry so as to facilitate the region’s primary economic driver: Tourism.
Tourism is a leisure activity; many times participants in leisure are in no hurry to get to their destinations, they often drive. This relates to countries on a continental mainland; but for islands, not so much. For 27 of the 30 Caribbean member-states, island life is the reality. (Belize is in Central America; Guyana and Suriname are in South America).
If speed is not the requirement then boating should be an option. But the only boating/transport options for Caribbean tourists are cruise lines.
This following article relates the biggest threat to Caribbean tourism is Caribbean governments. These ones are authorized to assess taxes, but for far too often they have targeted airline tickets to generate needed revenues. This is such a flawed strategy, a betrayal of the public trust. They “cut off their nose to spite their face”, as the article here relates:
By: Ernie Seon, Caribbean-360 Contributor
ST. THOMAS, US Virgin Islands – The International Air Transportation Association (IATA) Tuesday urged regional aviation authorities to adhere to the key principles set out by International Civil Aviation Organization.
IATA’s regional vice president for the Americas, Peter Cerda said it is unfortunate that many governments had chosen to ignore the principles, a global issue that was particularly acute in the Caribbean.
Addressing tourism and industry officials gathered here on the occasion of World Aviation Day, Cerda noted that aviation taxes continue to increase the cost of travelling to the Caribbean. He said this made the region less competitive to other destinations.
“Taking the islands as a whole, each dollar of ticket tax could lead to over 40,000 fewer foreign passengers,” he said, adding that US$20 million of reduced tourist expenditure meant 1,200 fewer jobs across the region.
“Caribbean countries must therefore consider the aviation industry as a key element for tourism development,” he advised.
The IATA official noted that in terms of charges, two airports in the region, Montego Bay and Kingston, both in Jamaica, recently proposed airport tariff increases of over 100 per cent so as to attain a return of capital of around 20 per cent a year in US dollars.
He said that measures such as these do not encourage or support the development of the industry in the region.
“The regulators must act strongly and swiftly against such big increases. Governments have to foster positive business environments through consultation with the industry and transparency in order to ensure win-win situations for all,” he warned.
Cerda said the issue of taxes and charges in the region transcends the formal breaches of global standards and recommended practices and that the simple truth is that this region is a very expensive place for airlines to do business.
In the Caribbean, tourism and the aviation sector facilitate and support some 140,000 jobs and contribute US$3.12 billion, roughly 7.2 per cent of the Caribbean’s gross domestic product (GDP).
The airline industry is celebrating its 100th anniversary year in the black, according to industry figures released here. Globally, airlines are expected to earn a net profit of US$18 billion in 2014.
Cerda noted that while that might sound impressive, on revenues of US$746 billion, this is equivalent to a net profit margin of 2.4 per cent or US$5.42 per passenger carried.
“Looking only at Latin America and the Caribbean, the airlines in this region are expected to earn $1.1 billion.”This is a profit of US$4.21 per passenger and a net margin of three per cent. We are in a tough and very competitive business,” he added.
The aviation official said fuel expense across the Caribbean is estimated at 14 per cent higher than the world average, adding that this represents about a third of an airline’s operating costs.
He noted that in the case of the Dominican Republic, although fuel charges were recently reduced, tax on international jet fuel still remains high at 6.5 per cent.
“Another example is the Bahamas applying a seven per cent import duty on Jet fuel. Jet fuel supply is an issue in the region, the complexity of the fuel supply and the seasonal demand is costly and difficult, making fuel costs in the region a challenge for airlines.”
In addition, Cerda noted that airports are using the fuel concession fees as a source of revenue and they are still waiting to see any of these monies re-invested in improving fuel facilities.
On the issue of safety, he said that this has been in the spotlight in recent months, with July being an especially sad month for all involved with aviation.
However, Cerda said despite the recent tragedies, flying remains by far the safest mode of transportation.
“Every day, approximately 100,000 flights take to the sky and land without incident. Nonetheless, accidents do happen. Every life lost recommits us to improve on our safety performance.
“It is no secret that safety has been an issue in this region. Even though it is still under performing the global average, performance is improving,” he said.
The IATA official said that the aviation industry has come a long way since the very first flight from St. Petersburg to Tampa 100 years ago, turning this large planet into one small world.
He said through it all, one thing has remained constant: when governments support the conditions for a thriving industry the economic benefits are felt by all.
However Cerda cautioned that for the industry to deliver the most benefits to the citizens in the Caribbean and spur additional tourism and trade, “we need to be able to compete on a level playing field and have the infrastructure capacity needed to grow.”
He said he remains confident that if the Caribbean governments continue to strengthen their partnership with the aviation industry, “we will deliver the unique transformative economic growth only our industry can deliver, making the second century of aviation in this region even more beneficial than the first”.
Caribbean-360 Online News (Posted 09/17/2014; retrieved 12/06/2014) –
This foregoing article highlights a defective premise, predatory taxing, and so thusly depicts the need for improved regional oversight of economic and governing engines.
See this photo of a recent airline ticket (price breakdown), for one of the stakeholders in the Go Lean movement, who was travelling from a Caribbean island. The reality of these aviation taxes defies logic!
Yes, the governments need their revenues, but this should not be pursued at the expense of undermining viable economic engines; this is self-defeating. Likewise there was a recent conflict with British Aviation Authorities and their unilateral tax on Caribbean air transport. The solution there/then is the same as now: regional coordination and a heightened advocacy; see Appendix–VIDEO.
Change has now come to the Caribbean. The book Go Lean … Caribbean serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU), an alliance of the 30 Caribbean member-states. This Go Lean roadmap has 3 prime directives:
- Optimization of the economic engines in order to grow the regional economy to $800 Billion and create 2.2 million new jobs..
- Establishment of a security apparatus to protect the resultant economic engines.
- Improve Caribbean governance to support these engines.
The roadmap calls for the CU to navigate the changed landscape of the globalized air transport industry. There is the need for regional integration, administration, and promotion for Caribbean air travel among local and foreign carriers. The book posits that transportation and logistics empower the economic engines of a community. There must be air carrier solutions to service the transportation and tourism needs of the Caribbean islands. This point is fully appreciated by Caribbean tourism stakeholders; the book relates that the region’s Hotel and Tourism Association channel the vision of Robert Crandall, former Chairman of American Airlines, who remarked at a Caribbean Hotel and Tourism Investment Conference in May 2010 that the region is uniquely dependent on tourism:
“Everyone involved in travel and tourism knows that our [airline] industry is immensely important to the world economy, generating and supporting – either directly or indirectly – about one in eleven jobs worldwide. Here in the Caribbean, it is even more important. On a number of islands, travel and tourism accounts for more than 50% of all employment, and on some islands for more than 75%. Overall, about 20% of Caribbean employment is travel and tourism dependent – something on the order of 2.5 million jobs.” – Go Lean … Caribbean Page 60.
The Go Lean book asserts that air travel options must be optimized to impact Caribbean society – thus the need for more regional coordination, regulation and promotion of the Caribbean’s aviation industry. New models are detailed in the book in which tourism can be enhanced with “air lifts” to facilitate Caribbean events, and “Air Bridges” to allow for targeting High Net Worth markets. This roadmap also introduces the Union Atlantic Turnpike to offer more transportation solutions (ferries, toll roads, railways, and pipelines) to better facilitate the efficient movement of people and cargo.
This is one way the CU will empower the region’s economic engines. This is an example of the change that the CU technocracy will bring!
The Go Lean book presents a series of community ethos that must be adapted to forge this change. In addition, there are these specific strategies, tactics, implementation and advocacies to apply:
|Community Ethos – Job Multiplier||Page 22|
|Community Ethos – Lean Operations||Page 24|
|Community Ethos – Cooperatives||Page 25|
|Community Ethos – Ways to Improve Sharing||Page 35|
|Community Ethos – Impacting the Greater Good||Page 37|
|Strategy – Customers – Visitors||Page 47|
|Strategy – Competitive Analysis – Event Patrons||Page 55|
|Strategy – Core Competence – Tourism||Page 58|
|Anecdote – Caribbean Hotel & Tourism Assoc. focus on Air Transport||Page 60|
|Tactical – Fostering a Technocracy||Page 64|
|Tactical – Commerce – Tourism Promotion||Page 78|
|Tactical – Aviation Administration & Promotion||Page 84|
|Implementation – Ways to Deliver||Page 109|
|Implementation – Trade Mission Objectives||Page 116|
|Planning – 10 Big Ideas for the Caribbean Region – #7: Virtual Turnpike||Page 127|
|Planning – Ways to Improve Trade||Page 128|
|Advocacy – Ways to Improve Governance||Page 168|
|Advocacy – Ways to Optimize Government Revenue Sources||Page 172|
|Advocacy – Ways to Enhance Tourism||Page 190|
|Advocacy – Ways to Impact Events||Page 191|
|Advocacy – Ways to Market Southern California – Air Bridge||Page 194|
|Advocacy – Ways to Improve Transportation – Aviation Promotion||Page 205|
|Appendix – Airport Cities – New Approach for Optimizing Business Model||Page 287|
This commentary posits that the status quo of Caribbean aviation taxes reflect a flawed economic policy, reflective of the dysfunction in the region. This commentary also relates to other lessons of economic optimizations and dysfunctions previously detailed in Go Lean blogs, as sampled here:
The world loves the Caribbean; people want to come visit and enjoy our hospitality. It is better for them, and for us in the region that they come by air transport. But cruises are viable options, though the Caribbean communities get less benefits from cruise lines (Pages 61 & 193). We simply “fatten our frogs for snake”. The more dysfunction we create with air transport – like these excessive aviation taxes – the more we push visitors to the cruise option; meaning less direct-indirect spending: hotels, taxis, restaurants, casinos, etc.
Now is the time to lean-in to this roadmap for Caribbean change, as depicted in the book Go Lean…Caribbean. We cannot afford to undermine our economic strengths with disabling tax policies. This is a public trust, betrayed. The Caribbean can – and must – do better. 🙂
Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.
APPENDIX Video: A Tax Too Far…? – http://youtu.be/Jbh8DJxUNC8
Uploaded on Oct 30, 2011 – A documentary on how the Air Passenger Duty instituted by the UK is affecting Caribbean Tourism, and the lobbying efforts of the Caribbean Tourism Organization to have it reduced, removed, or the Caribbean re-banded. Get more information about the APD on the CTO website: http://www.onecaribbean.org/our-work/advocacy/