The International Air Transport Association (IATA) has called on governments and shareholders in the Caribbean to “maximize the benefits” of aviation.

“Aviation is essential to support tourism in the Caribbean region, transporting approximately 50% of all tourists who travel here, and it also provides a vital lifeline when a disaster occurs, as occurred during the devastating hurricane season of last autumn, “said Peter Cerda, IATA’s Regional Vice President for The Americas. “Aviation can do much more if governments work with industry to maximize the value offered by aviation. Unfortunately, many governments in the region still believe that air travel is primarily a luxury for the rich, and an easy target for taxes, these taxes and fees are generally not spent on increasing the efficiency and capacity of airport infrastructure and airways, but rather to put money in the treasury.”

Cerda, while speaking at Aviation Day Caribbean, said that the aviation industry supports over 1.6 million jobs in the region and at least $35.9 billion in GDP.

Yet, many argue that aviation could play an even bigger role in the Caribbean. Approximately 70% of the unidirectional average rate is made of taxes and charges. In Barbados, for example, where high taxes were only recently implemented, a family of four traveling to Barbados from Europe or North America now faces an additional $280 (that’s $70 per ticket) in their travel cost simply from taxes alone. These same taxes add $35 to each ticket while traveling between Caribbean nations.

“Each $1 of ticket tax could lead to over 40,000 fewer passengers, $20 million reduced tourist expenditure, and 1,200 fewer jobs. While we understand the budgetary challenges facing many of our partners in the region, imposing these heavy fees and charges on aviation affects the level of tourism and business travel,” Cerda said.

Short-haul markets in the Caribbean are already struggling, and, if governments and shareholders alike work to reduce taxes on tickets, the industry could grow exponentially. Reduced taxes would encourage more people to fly, increasing revenue and boosting the Caribbean’s collective economy.

“Often, it is cheaper to fly back to Miami to reach another Caribbean destination from the other island in the Caribbean. Unfortunately, air connectivity growth in the region has been relatively weak, limited only to a few countries. Those are the countries that are prospering in the region while the others are struggling to stay competitive,” he added.

Warren Smith, the President of the Caribbean Development Bank, said that transforming the Caribbean airline industry will demand substantial reforms from regional governments, but could also lead to greater accessibility to aviation and a better passenger experience.

Reducing taxes could also make international travel to the Caribbean more appealing, as reduced ticket costs would make a trip there viable for a great number of people. This would boost the economy of the Caribbean by attracting more tourists to the region who not only fly but shop, eat, and stay in the Caribbean, boosting multiple industries and raising the GDP of Caribbean nations even higher.

“One should expect secondary benefits to government revenue arising from the in-country spend associated with the larger number of visitors,” Smith said.

“While the budgetary challenges faced by many governments in the region cannot be denied, imposing high tariffs and taxes on aviation and air travel negatively affects levels of tourism and business travel, the same things necessary for a dynamic economy,” said Cerda.

High operating costs, especially attributed to high airport fees, are also a factor in expensive aviation fares. Finding a way to reduce airport charges while maintaining the wages of airport workers and minimizing layoffs could allow for further price drops, attracting even more travelers.

Reducing charges could even allow for more competition. If ticket prices are low enough, new airlines could be able to realistically compete for passengers. Having more airlines in the region would lower ticket prices purely based on increased competition, allowing for even lower ticket prices and further encouraging air travel.

“The Caribbean region is well positioned to increase the benefits that aviation can offer, but this can only happen in partnership with governments that recognize that the true value of aviation lies in the connectivity it provides and the opportunities it creates, not in the rates and taxes that can be extracted from it,” said Cerda.

Featured image by Scott Olson/Getty Images

Categories: Industry Talk