Problems with Intra-Regional Travel feature at CDB Meeting

The thorny issue of air transportation in the region was featured highly at the 48th annual Board of Directors meeting of the Caribbean Development Bank (CDB) held in Grenada last week.

Prime Minister Dr. Mitchell repeats calls for LIAT to operate as a business

Addressing the opening ceremony last Wednesday at the Grenada Trade Centre, host Prime Minister Dr. Keith Mitchell made another call for the boiling issue of regional air travel to be addressed by the Governors and for there to be a reduction in cost of travel throughout the region.

“I have long advocated that we urgently need to reduce the cost of intra-regional air travel. I echo my call made at various Heads of Government Conferences that the Heads should collectively agree to reduce the airline ticket taxes, and some other fees which attach to intra-regional air travel”, he told the gathering.

According to Dr. Mitchell, if this is done it can represent “a significant installment to the regional integration account, while facilitating enhanced freedom of movement of goods, services and people”.

Over the years, the issue of regional transportation has been a hotly debated issue with the trading of words between the Grenadian Prime Minister and his Vincentian counterpart, Dr. Ralph Gonsalves.

St. Vincent is a major shareholder of the island hopping regional carrier, Liat while Grenada is not a financial contributor.

Dr. Gonsalves has consistently called on Grenada to stop talking and to put up money to help finance the cash-strapped airline with PM Mitchell hitting back with a promise to donate cash if there is improvement in the service provided to Grenadians by Liat.

Dr. Mitchell reiterated before the CDB Governors the need for Liat, the premier airline in the region to start operating as a business.

“I continue to strongly advance that the region’s major air travel carrier must be made to operate as an efficient and sustainable business. I, therefore, look forward to the recommendations from CDB’s thematic study on improving connectivity and competitiveness in the regional aviation industry, which will be presented this afternoon”,
he said.

“I also look forward to the Bank’s forthcoming research on regional transportation, which will focus on enhancing the policy and operational frameworks for marine and road transport,” he added.

The issue of regional transportation was also addressed by the President of CDB, Dr. Warren Smith, who stated that between the period 2003 and 2016, the number of annual roundtrip journeys by Eastern Caribbean residents to the United States rose by more than 200% to 250,000 while Caribbean-originating roundtrips to the Eastern Caribbean fell by 30% to 420,000.

Dr. Warren Smith – answers can come from the CDB study on Regional Travel

Based on a study funded by the CDB, Dr. Smith attributed the increasing trek by Caribbean people to the U.S on the high cost of tickets and the number of taxes a traveller has to incur when flying to another island.

He said: “The Eastern Caribbean’s air transportation connectivity problems stem from operational inefficiencies within the principal air carrier and issues in the business environment within which that carrier operates – high and regressive taxes and airport-related charges lead to an escalation in the cost of travel and a reduction in the number of passengers travelling between the islands, regulations relating to security, border control, and other issues militate against the seamless and expeditious movement of connecting passengers to out-bound flights, and the arrangements for funding the principal air carrier, its governance framework and the industrial relations environment add to the difficulties”.

The President warned that there is no sound justification for the regional airline industry remaining in the situation that it is currently in and noted that its survivability is currently threatened as nothing is being done to rectify the issues.

Dr Smith recalled that in July 2017, the Heads of Government of CARICOM “agreed that the incidence and impact of taxation on air transport in the region should be properly studied and proposals made on financially viable changes to taxation to make regional air travel more affordable without hurting government revenues”.

“At CDB, we are satisfied that resolution of the issue of high and regressive taxation on air travel within CARICOM without loss of revenue to regional governments is a vital part of the resolution of the regional aviation crisis in the Eastern Caribbean.

“The CDB study confirms that air travel within the Eastern Caribbean is price elastic. It also concludes that reductions in both taxes and airport charges would lead to sizeable growth in arrivals in virtually all countries,” he said.

“Lowering taxes, liberalising the regional market and making changes to the increase airport efficiency could lead to a 60% jump in intra-regional visitor numbers by 2023.

“Strengthening connectivity of the regional airlines and lowering fares via reduced taxes are two key options for a smart regional transportation sector.

These measures promise improvements in the resilience and efficiency of the transportation network, with downstream enhancements in overall economic resilience…”.

Dr. Smith assured Governors that CDB will continue to work with stakeholder governments to accelerate implementation of reforms needed to create a sustainable and resilient inter-island transport system.

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