IATA exec – High aviation taxes weighing down Caribbean tourism

CHARLOTTE AMALIE, St. Thomas — Aviation taxes increase the cost of travel to the Caribbean and make the islands less competitive with other destinations, warned Peter Cerda, IATA’s regional vice president for the Americas.

Cerda spoke on Aviation Day, which preceded the opening of the Caribbean Tourism Organization’s State of the Industry Conference taking place this week in St. Thomas.

He singled out Jamaica, where the airports in Montego Bay and Kingston recently proposed an increase of more than 100% in airport taxes.

“Governments have to foster positive business environments through consultation with the industry and transparency in order to ensure win-win situations for all,” said Cerda.

He said that each $1 increase in ticket tax could result in 40,000 fewer passengers, $20 million less tourist spending and 1,200 fewer jobs.

Caribbean tourism and aviation facilitate and support more than 140,000 jobs and contribute $3.12 billion, which represents 7.2% of the Caribbean’s GDP, according to Cerda.

Airlines are expected to earn a net profit of $18 billion in 2014, which “might sound impressive, but on revenues of $746 billion, this is equivalent to a net profit margin of 2.4%, or $5.42 per passenger carried,” Cerda said. “Looking only at Latin America and the Caribbean, the airlines in this region are expected to earn $1.1 billion, which translates to a profit of $4.21 per passenger and a net margin of 3%. We are in a tough and very competitive business.”

Also, the cost of jet fuel is an issue, with costs across the Caribbean 14% higher than the world average, he said. In the Dominican Republic, although fuel charges were recently reduced, tax on international jet fuel still remains high at 6.5%.

Another example is the Bahamas, which has applied a 7% import duty on jet fuel.