By Harald Linkels
Kingstown, St. Vincent- Paul Gravel, founder and CEO of St. Vincent & Grenadines Air (SVG Air) is convinced that taxes are killing all airlines in the Caribbean Region.
Gravel recently expressed his grave concerns about the regional air transport business during a radio interview on ‘Early in the Morning’ of news man Jerry S. George.
According to Gravel, taxes have reached such a level that people from the Caribbean Islands can simply not afford to fly any more, having a devastating effect on local carriers.
Gravel feels that governments of various Caribbean countries see tax on tickets as an easy way to generate income for projects which are, in many cases, way too expensive.
“Aviation to many Caribbean Governments is like a milk cow. You can keep milking the cow and you will get milk at first, but at some point the cow gets sick and won’t continue to give milk. This is exactly what is happening to the Caribbean Airline industry”, said Gravel.
Gravel points to the fact that a recent study by the Caribbean Development Bank showed that no less than 54%(!) of Liat’s ticket prices now consist of taxes and charges.
“Liat used to transport about 1.3 million passengers per year. This has gradually dropped off to about 600.000 last year. This has been caused mainly by the fact that people cannot afford to fly anymore”.
Gravel says he fears that soon the last remaining Caribbean airlines will also have to close their doors. “There are a few local airlines left, like SVG and Mustique Airways, but if things continue like this, we will also have to close down”, said Gravel.
“Living above our means“
According to Gravel, many Caribbean islands have the tendency to live above their means and have constructed airports which they simply cannot afford, and -according to Gravel- don’t really need either. The entrepreneur is convinced that the current approach towards the local Airline industry makes no sense.
Gravel is of the opinion that the current situation is also counter productive to local economies, as people simply do not reach the islands anymore to spend their money. According to Gravel, the day-tripping business used to be an important source of income for both the islands and the airlines operating in the region, but that the high taxes and charges have completely killed that business.
Air Connectivity creates jobs
The report to which Gravel refers, ‘Air Transport Competitiveness and Connectivity in the Caribbean’ points to the huge impact competitive pricing and increased connectivity could have for many Caribbean economies.
“Air connectivity is a critical element to economic growth and development, especially for the small island nations of the Caribbean. Improved connectivity means additional air services, frequencies and traffic volumes. These have been found to contribute to increased employment opportunities and to benefit the wider economy” according to the report compiled by the Caribbean Development bank.
According to CDB, the International Air Transport Association’s Connectivity Index shows that air connectivity growth in the Caribbean has been generally and relatively weak, and limited to a few countries.
“Based on the application of a gravity model, high costs are among the primary factors contributing to weak intra-regional air travel demand and the related constraints on connectivity”, according to the report.
Introducing policy remedies could, according to CDB, lead to increased long-term employment, adding approximately 288,000 jobs, as well as USD4.4 billion in GDP across the Caribbean.