The Tribune

• Aims to cut ‘asymmetry’ of Nassau dominance

• As ‘huge cohort of hotels nowhere at capacity’

• Govt already reviewing Out Island airport fees

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is seeking to “recalibrate the aviation asymmetry” that results in more than two-thirds of international flights coming to Nassau as opposed to other islands, it was revealed yesterday.

Jim Lew, managing director of LeighFisher, the consultants hired by the Government to develop the tender process for outsourcing seven Bahamian airports via the public-private partnership (PPP) model, told a briefing for potential bidders that the project was vital to boosting tourism as “there’s a huge cohort of hotels nowhere near at capacity”.

Driving increased direct international flights will be a key remit for the successful bidder(s) in a process that has presently separated Grand Bahama International Airport into a separate bid from six Family Island gateways in Abaco, Exuma, North Eleuthera, San Salvador, Long Island, and the Berry Islands.

Bidders can submit offers for either Grand Bahama or the Family Islands “bundle”, or both, but were warned that “it’s not possible to cherry-pick put a single airport” from the latter group via a tender document that will be released in a 2021 third quarter that begins this week.

Mr Lew, in his presentation, said it was vital that The Bahamas’ key aviation infrastructure and its management/operation be enhanced and expanded to enable it to cope with the increased tourism growth that is anticipated once the COVID-19 pandemic recedes.

He added that better airport facilities are essential to both aiding and encouraging tourism industry expansion, especially in the Family Islands, given that there has been $5.4bn in “indicative approved inflows” of foreign direct investment (FDI) into the seven targeted islands between 2017 and 2021.

Such a figure may surprise some observers, and was not broken down into projects, although Mr Lew attributed some $3bn of this sum to Grand Bahama. Another $900m was allocated to Long Island, some $700m to North Eleuthera, and $400m each to Abaco and Exuma based on data said to have been provided by the Bahamas Investment Authority (BIA).

“This is all about upside, unlocking value in assets to generate incremental growth in line with tourism projects under way, aligning with the tourism and hospitality sector to maximise the potential in these assets, and unlocking future growth potential,” Mr Lew explained, adding that “it’s critical to the economy” that the seven airports be transformed into “the best possible capacity”.

Bidders, he added, will be required to operate all airports as “profit centres”, which he acknowledged is “a little different to how they are managed now”, and increase revenues and control costs to earn a bottom line return.

Private sector developers/operators will likely introduce a passenger facility user fee, similar to the one levied at Lynden Pindling International Airport (LPIA) in Nassau, as a critical income stream for generating a return on their investment and paying for all the upgrades they undertake.

No such fee is presently levied at many Family Island airports, and Bahamians and residents who live there - as well as tourists - will likely have to soon get used to paying one via their airline ticket. Algernon Cargill, director of aviation, told Tribune Business that the Government is already reviewing the present fee structure at the airports subject to the PPP.

“If you invest money, you have to pay for it somehow,” he said. “The Government is reviewing all of the airport fees because, at some of the airports, the fees have not changed in more than 30 years. There are very few changes proposed for Grand Bahama; there are more changes proposed for the Family Islands airports.”

Mr Cargill also confirmed that Bahamian bidders are free to joint venture with their foreign counterparts, explaining: “There are absolutely no limitations. This is a process open to the entire world, and if Bahamians want to partner with foreign investors to have a stronger response, that’s perfectly acceptable.”

Mr Lew, meanwhile, said the Government is also looking for bidders to make airport infrastructure more resilient against natural disasters such as hurricanes given the devastating impact that Hurricane Dorian had on facilities in Abaco and Grand Bahama.

Noting that 5.3m passengers were transported throughout The Bahamas by air in 2018, including 3.7m international departures and arrivals, Mr Lew said there were some 141,000 aircraft movements that year. Some 70 percent of these were international flights, with the remaining 30 percent domestic, and generating around $57m in recurrent revenues.

He added that 17,627 hotel rooms were served by that airlift, with the sector’s average occupancy standing at 62 percent. “We’re trying to enhance and incrementally grow airlift passengers,” Mr Lew said. “There’s a huge cohort of hotels that are nowhere near at capacity. There is a need to recognise the potential uplift”

Some 69 percent of international flights in 2018 terminated in Nassau, with 22 percent going direct to the Family Islands and just 8 percent to Grand Bahama. “You see the asymmetry in the destinations, and that’s why we’re looking to recalibrate that to align with foreign direct investment happening in the tourism product space,” Mr Lew said.

Explaining that the seven airports have been picked “for their upside potential and ability to drive growth”, he said that in 2018 they had seen a combined 1.26m in passengers supplied by 16 airlines, who produced 42,000 aircraft movements. Total recurrent revenues stood at $17.8m, and 5,114 hotel rooms with an average 49 percent occupancy served.

Grand Bahama that year catered to 440,000 passengers and 14,900 aircraft movements, producing $13.8m in revenues and catering to 1,694 hotel rooms with an average 50 percent occupancy. The six Family Island airports accommodated a combined 820,000 passengers via 28,000 aircraft movements, producing recurrent revenue of $4m and serving 3,420 hotel rooms with a 48 percent occupancy.

No forward projections, though, were provided due to the difficulties created by the COVID-19 pandemic. There was also no mention of the legal action launched by commoners that could tie-up land needed for North Eleuthera’s airport expansion.

The prize for successful PPP airport bidders is the award of long-term concessions for up to 30 years, which will see them operate, manage, develop and maintain these facilities that will be leased to them by the Government, which will retain ownership of the asset.

Mr Lew pledged that the bid will be “market driven”, with structure determined by the level of interest from the private sector. A decision on the successful bidder or bidders will be taken in the 2022 first quarter, with commercial terms also agreed in that period.