The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is eyeing a proposal to outsource Lynden Pindling International Airport's (LPIA) freight terminal to private sector developers and operators, it has been revealed.

Documents accompanying the 2023-2024 Budget, in an annex detailing private-public partnerships (PPP), lay out the "justification to design, finance, build and operate a new air freight terminal".

"The purpose of this proposal is for the Government to transfer the property consisting of the Air Freight Terminal to a special purpose vehicle (SPV) owned by the Government, and then to lease that property to JDL in order to design, finance, build and operate a new air freight terminal," the Budget documents state.

No further details are provided, and "JDL" is not identified. The closest matches, based on Internet searches conducted by this newspaper, are a Taiwan-headquartered company, JD Logistics, and a Wisconsin outfit with a similar name. Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, did not return Tribune Business messages seeking comment before press time last night.

Dr Kenneth Romer, the Ministry of Tourism's deputy director-general and acting director of aviation, said he was unable to comment but promised to look into the matter. Tribune Business aviation industry sources, and those with contacts at LPIA's operator, the Nassau Airport Development Company (NAD), said they, too, were unaware of the project and did not believe it has been put out to competitive tender or bid.

Meanwhile, the 2023-2024 Budget shows that Bahamian taxpayers will once again start subsidising the Civil Aviation Authority of the Bahamas (CAAB) again from the next fiscal period onwards to the tune of $8m per year. Well-placed sources, speaking on condition of anonymity, suggested this was directly related to US airlines withholding due payment of air navigation services fees to The Bahamas amid the ongoing dispute with this nation.

Mr Cooper told the House of Assembly earlier this year that American Airlines was paying its fees into an escrow account as it awaits the outcome of talks between The Bahamas and US Department of Transportation over the latter's concerns that this nation's charges are excessive and too high in comparison to the services being provided.

Detailing how The Bahamas’ arrived at this point, the deputy prime minister previously the global aviation industry began to pressure this nation over the level of fees just over one year after the structure was implemented in May 2021. This followed a period of consultation with the airlines and sufficient notice being given of their imposition.

Mr Cooper revealed that The Bahamas is forecast to generate $42.93m from its air space fees during the 2022-2023 fiscal year, although the outcome is “expected to be higher based on the faster-than-expected recovery in air traffic movements” post-COVID.

“Between May 2021 and November 2022, fees invoiced under the air space scheme totaled $49.693m, of which $44.69m represented air navigation services fees; $4.45m origin/destination fees, and $1.3m was for the passenger levy,” he added. “Total fees collected through November 2022 are $42.68m, with receivables at $6.46m.”

The air navigation services fees and origin/destination fees are split between the Bahamas Civil Aviation Authority (BCAA) and Bahamas Air Navigation Services Authority (BANSA), while the former is the sole recipient of the passenger levy. The fee structure was created to provide a financing mechanism for civil aviation regulation and oversight in The Bahamas, so that the sector no longer has to rely on the Bahamian taxpayer.

And the funding stream it generates is also intended to enable this nation to build the necessary human capital and infrastructure capacity so that it can ultimately take control of, and manage, all its air space rather than outsource control of 75 percent to the Federal Aviation Administration (FAA) for an annual $80,000 fee. FAA control only applies above 6,000 feet.

However, US airlines especially have given The Bahamas a hard time over efforts to exercise its sovereignty. “Shortly after the fee charging scheme’s one-year anniversary, The Bahamas was invited to a follow-up meeting in June 2022 by IATA (the International Air Transport Association), in Miami, Florida, to provide its members with an update on the new charging scheme,” Mr Cooper said.

“It was during this meeting that the IATA members expressed strong concerns over The Bahamas’ charging scheme, basically characterising it as prohibitive with no new or incremental services provided for the additional cost imposed, and that the cross-subsidisation of lower air space operations by the overflight fees was at variance with the ICAO (International Civil Aviation Organisation) cross-relatedness principle.”

The Bahamas subsequently pushed back against this criticism, including during a Nassau meeting between IATA’s regional vice-president for the Americas and Mr Cooper’s office. However, the differences quickly escalated when American Airlines made a formal protest over having to pay The Bahamas some $4.2m in fees for the six-month period June to November 2022.

“On November 29, 2022, The Bahamas was advised by the IATA Clearing House (ICH), where the bulk of the airline payments are cleared, that American Airlines lodged a formal protest on its payments for the last six months (June to November 2022), which totalled $4.2m,” Mr Cooper asserted.

“Following the rules of the ICH, BANSA presented a formal response on December 8, 2022, justifying the validity of The Bahamas’ fee charging scheme, and how it was considered to be consistent with ICAO principles. On December 15, 2022, The Bahamas was advised by the ICH that, having reviewed the position of American Airlines and The Bahamas, it concluded that a substantive dispute existed between the two parties.

“Under the ICH rules, therefore, the ICH notified that the $4.2m in dispute would be held in an escrow account until the matter is resolved.” The dispute was then widened when the Airlines4America group, which includes American Airlines, Jet Blue, FedEx, Delta, Southwest Airlines, United Airlines, and the United Parcel Service, filed their complaint that The Bahamas’ air navigation services fee regime was “unjust and discriminatory”.

“This acceleration in the dispute presented huge consequences for the stability of funding our air navigation services and the continuity of operations of our domestic carriers into the US,” Mr Cooper said. However, as previously reported by Tribune Business, the US Department of Transportation dismissed the airlines’ allegations, asserting: “We cannot conclude in those circumstances that the fee structure constitutes unjustifiable or unreasonable discrimination.”

With the dispute now having moved from the airline industry to the inter-government level, the deputy prime minister added: “The Government remains committed to achieving a successful resolution of all continuing concerns with the cost basis analysis for our overflight fees.

“We are keen to protect The Bahamas’ sovereign rights to recover the level of fees necessary to provide air navigational services to our air space users, which should include building out both the human and infrastructure capital necessary to eventually take control of the management of our airspace. Our intention is also to ensure that The Bahamas’ fee charging scheme is compliant with ICAO principles."