The Nassau Airport Development Company (NAD) is currently mulling another fee increase, as it predicts a “few more years” of losses following $15.1 million in ‘red ink’ incurred during its 2015 financial year.
Vernice Walkine, NAD’s president and chief executive, in e-mailed responses to Tribune Business questions, revealed that the Lynden Pindling International Airport (LPIA) operator is assessing whether to raise aeronautical fees.
“NAD is currently considering an aeronautical fee increase, which will translate into an $0.08 increase in fees per passenger,” Ms Walkine said.
“NAD is currently in the mid-range for airport fees compared to its competitors in the Caribbean region.”
The latter comment is designed to reassure the aviation industry, plus the travelling public and NAD’s retail/restaurant tenants, that the LPIA operator is not in danger of ‘pricing itself’ out of the market - something that could have serious consequences for the Bahamian tourism industry.
However, NAD’s freedom to raise fees and charges “as necessary”, and without Government or political interference, is vital to its ability to service the debt financing (chiefly bonds) that it took on to fund LPIA’s $409.5 million redevelopment.
The airport operator thus has the ability to increase revenue streams whenever needed to ensure it meets its debt servicing requirements, and keeps both local and international bondholders happy.
NAD’s annual report for the year to end-June 2015, obtained by Tribune Business, shows that the airport operator suffered a $15.101 million net loss, a slight 7.6 per cent reduction from the previous year’s $16.341 million.
Ms Walkine blamed 2015’s net loss on NAD’s debt servicing costs, which remained relatively flat year-over-year at $41.813 million. This was the key factor in wiping out the company’s $49.078 million in operating income, which was up 4 per cent.
“We experienced a net loss of $15.1 million for the period ending 2015, primarily as a result of interest ($42 million) due on our senior and participating debts,” Ms Walkine said. “As you are aware, the redevelopment cost of the airport was $409.5 million, which was financed by a loan from a consortium of lenders.
“We anticipate a net loss for the next few years as we repay this debt, which currently has an interest component that is significantly higher than the principal. As we continue to reduce the principal balance, the interest component is also reduced, and therefore interest expense will become less.”
NAD’s 2015 annual report, which appears to have been produced in March 2016, and not brought to public attention until now, shows that last year’s net loss has pushed the company into an $11.208 million ‘accumulated deficit’ position.
That figure shows the ‘total loss’ NAD has incurred over its corporate life, and again highlights why its ability to raise fees and charges without interference is so vital.
“We have managed our operation carefully, and continued to meet our debt repayment schedules for senior debt and participating debt in financial year 2015,” Ms Walkine said.
“Further, the airport maintained its BBB- investment grade credit rating.” NAD’s financials confirm it is in compliance with the covenants and terms set by its lenders, with more than $17.87 million currently being held in reserve accounts with Citibank in New York.
This sum is equivalent to six months’ worth of debt principal and interest, and is being held to ensure that NAD services its obligations to two tranches of LPIA debt financing.
Ms Walkine said NAD was “projecting a modest increase in passenger and revenue growth” for its upcoming 2017 financial year, compared to the current 12-month period that is set to end tomorrow.
While not providing any financial projections for the 2016 financial year, Ms Walkine said the US departures terminal - the first building completed at the ‘new’ LPIA - remained in “excellent condition.... to deliver world class services” more than five years later.
“The major project focus for 2017 will be on maintaining the facilities, as they represent the very first impression many visitors have of our country,” she told Tribune Business.
“Collectively, the maintenance and engineering team is forecasted to spend on the upkeep of the facility a total of $3.9 million. This $3.9 million includes $1. 4 million for sustaining capital expenditure, and the balance of $2. 5 million for operational expenditure.”
Ms Walkine said NAD had not factored Baha Mar, and the projected increase in passenger numbers and revenues, into its financial numbers for 2015-2016 and future years.
“While Baha Mar represents an exciting addition to the tourism offering in The Bahamas, NAD conservatively did not factor the resort into its projected passenger numbers and revenue streams for the fiscal period represented in the annual report,” she added.
“The Bahamas continues to be a demand destination with a vibrant and well-promoted tourism product in both Nassau/Paradise Island and the Family Islands, and we look forward to the future opening of Baha Mar.”
A 2 per cent year-over-year increase in passengers drove the increase in NAD’s 2015 revenues, with Ms Walkine attributing the growth to 3.3 million to the strengthening US economy.
“Since international passengers account for a significant portion of traffic, LPIA benefits from short and long-term travel incentives and promotions offered by the Government, hoteliers and other tourism attraction operators to increase travel to the Bahamas,” she added.
“NAD continues to partner with its tourism partners to ensure adequate airlift is available to the destination from key routes.
Ms Walkine said NAD remained in talks with a private developer over the construction of a hotel at LPIA, a project that has been on the drawing board for several years.
“We continue to believe that an airport hotel will play an important role in meeting the needs of connecting or in-transit travellers to LPIA,” the NAD chief executive said.
“An important consideration is the timing for such a project. We are still in active discussions in this regard.”
Comments
Economist 8 years, 4 months ago
This was to be expected. The Government had been subsidizing LPIA for years; no one was accountable,it was poorly run and had fallen into disrepair.
The new managers have done a good job in upgrades, many of which should have been done with the money poured into it by past governments.
LPIA can't go to government anymore and it has to stand alone financially. We will all now have to pay for the waste of the last 40 years.
Many complained that Freeport Airport was too expensive, but it was not getting any money from government. Now we will see how the two airports really compare in cost to users.
Well_mudda_take_sic 8 years, 4 months ago
Vernice Walkine is the problem here......she has willingly allowed too many "sweet" deals to be cut by the corrupt Christie-led PLP government's "favored" business cronies with NAD. This is one woman who has only ever had the financial interests of her "political masters" at heart for her own self-gain as opposed to the interests of the Bahamian people! For any given round trip ticket from Nassau to any city in the U.S., the taxes and fees in respect of the departure leg are now more than double what they are for the return leg. Traveling Bahamians are being royally screwed by the outrageously high taxes and fees included in the ticket prices they pay for the outbound leg of their trip from Nassau. This would not be the case if Walkine ensured all of the "sweet" politically connected deals were unravelled so that NAD received the revenue to which it is entitled in order to avoid even more taxes and fees being heaved on to the backs of poor Bahamians. The floor rents being paid by many of the lucrative businesses occupying space inside the airport are way below market rates and need to be significant increased. Yes, Walkine must go or none of us will be able to afford a trip to Florida soon!
banker 8 years, 4 months ago
Any increase in landing fees will have a negative impact on tourism. The Bahamas is already among the most expensive tourism destinations for middle class Americans and Canadians, who are budget-conscious travelers.
The Dominican Republic, Costa Rica, Cuba for Canadians (and soon Americans), and Jamaica offer cheaper vacations with more colour (Costa Rica has the rain forest ecosystems, Jamaica has the Blue Mountains and Ochos Rios river rafting, Cuba has the Spanish culture that is alluring) and we have hair braiders and jet ski operators.
We need another solution other than tourism.
John 8 years, 4 months ago
One part of the problem is LPIA is underutilized. The opening of Bah Mar was suppose to increase passengers at the airport and, one year later, government has done nothing to replace this loss in stop over tourists. A 12 once of locally produced drinking water cost $3.49 plus vat ($3.75 total) in the departure lounge Fort Lauderdale is $3.29 for a 20 once sport bottle of Nestle water. Beers are around $8.00 or $9.00 (Fort Lauderdale is $10.00 a pop) Airports are getting more expensive and so is car rentals. While they will tell you a mid size in Florida costs $35 -$40 a day to rent, the final cost will be around $80.00 a day. Places like detroit is even more and if you travel in the winter they will always try to upgrade you to a suv because of snow and ice on the road. Now because of recent attack on persons on the outside of an airport they are saying they will now have to provide more security on the perimiters of airports. Of course this will translate into additional fees to travellers so LPIA will follow suit.
John 8 years, 4 months ago
Do you know none of the TOP 25 airports are located in the USA. In fact most of Americas airports are too small to handle the volume of tourists travelling through them and many are out-dated. It will take 5 years and $60 billion to bring Americas most active airports up-to-date
John 8 years, 4 months ago
The most expensive airports ever built are: Kansai International in osaka Japan at a cost of$20 Billion. Hong Kong International also at $20 billion,, Almaktown international at 412 billion, London Heathrow at 410.5 billion, Bejing Capital at $8.5 billion, Dubi International at 6 billion and Berlin Brandenberg at $5.5 billion.
John 8 years, 4 months ago
Airports with most passengers. Atlanta is still number 1. .
Rank Airport Location Country Code (IATA/ICAO) Total passengers Rank Change % Change 1. United States Hartsfield–Jackson Atlanta International Airport Atlanta, Georgia United States ATL/KATL 101,491,106 Steady Increase5.5%. .
China Beijing Capital International Airport Chaoyang-Shunyi, Beijing China PEK/ZBAA 89,938,628 Steady Increase4.4%. .
United Arab Emirates Dubai International Airport Garhoud, Dubai United Arab Emirates DXB/OMDB 78,014,841 Increase3 Increase10.7%. .
United States O'Hare International Airport Chicago, Illinois United States ORD/KORD 76,942,493 Increase3 Increase9.8%. .
Japan Tokyo Haneda Airport Ōta, Tokyo Japan HND/RJTT 75,316,718 Decrease1 Increase3.4%.
United Kingdom London Heathrow Airport Hillingdon, London United Kingdom LHR/EGLL 74,989,795 Decrease3 Increase2.2%
MonkeeDoo 8 years, 4 months ago
Lady P's buddy aint paid one days rent since it opened ! 2 million plus I hear.
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