The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

AVIATION executives believe establishing The Bahamas as a true aircraft maintenance, repair and overhaul (MRO) hub is “a golden opportunity” but warned that multiple legal, regulatory, taxation, skills, land and cost barriers must first be overcome.

Dr Anthony Hamilton, president of the Bahamas Association of Air Transport Operators, told Tribune Business that creating such a facility “can be done and ought to be done” after Jobeth Coleby-Davis, the Cabinet minister responsible for aviation, last week unveiled the Davis administration’s ambitions to stem the annual outflow of millions of dollars in aircraft maintenance spending by creating an MRO.

He agreed that Bahamian-owned carrier and operators are spending “a healthy penny” overseas on aircraft repairs, upgrades and regular maintenance that could otherwise be spent in this nation, helping to create well-paying jobs, business opportunities and reducing the drain of foreign currency.

However, others in the industry warned that establishing the first 14 CFR Part 145-certified MRO facility in The Bahamas, as referenced by Mrs Coleby-Davis, is not so simple as there are numerous potential obstacles that must first be overcome to meet the Government’s goal.

Captain Randy Butler, the former Sky Bahamas principal, now head of Aviation Safety & Security Consultants, told this newspaper the proposed MRO “can succeed” but “a credible implementation plan must establish the market, investment, regulatory capability and environmental safeguards needed to sustain it”.

Explaining that The Bahamas needs to first identify “which aircraft and maintenance services the facility will support”, he added that this nation also needs to provide “a clear pathway” for students studying at home and abroad to obtain the necessary technical qualifications and experience so that this nation builds the skilled workforce required by an MRO.

And Captain Butler also warned that The Bahamas will have to review its tax structure, particularly the imposition of Customs duty and VAT on imported aircraft parts, if an MRO is to be cost competitive with rival jurisdictions that offer “infrastructure grants, tax incentives and workforce support” to attract and maintain aircraft repair and maintenance facilities after recognising the beneficial economic impact they have.

He was backed by another aviation operator, speaking on condition of anonymity, who told Tribune Business that - besides the tax and skilled workforce capacity issues - The Bahamas will also have to overcome its high operating cost environment, especially energy costs, and lack of available land space at Lynden Pindling International Airport (LPIA) to accommodate and expand the MRO envisaged by the Government.

“I was surprised they said that,” the source said of Mrs Coleby-Davis’s comments. “There’s not a ton of business. The structure doesn’t allow for it. If you bring in parts, you have to pay duty and VAT on those parts. Why bring in a $200,000 part and pay $20,000 VAT on that part when you can go to the US and not pay VAT?

“There are also very few operators with their own maintenance licence. The big money is Bahamasair and Western Air. Once you are below that it is very small margin stuff and cheaper operators, so 10 percent, 20 percent, makes a difference. It’s great that we have these students going through college programmes to get their degrees and qualifications to do it, but there still needs to be an avenue for them to get the experience to become professionals.

“The Bahamas becoming a full-scale MRO, while it sounds very attractive, is far from reality due to our duty structure, tax structure, utilities structure making us uncompetitive with nearby jurisdictions. We still have an uphill battle.”

Echoing Captain Butler, the source added that Florida incentivises maintenance and repairs for business and commercial aircraft by not applying its state sales tax to planes weighing above a certain amount, thereby giving them a major tax break and exemption.

“There’s no land at LPIA where you can build a large-scale MRO where you can expand it,” he said. “That’s another hurdle. Even if you build it, the lease terms for the land are not attractive. Between high land, labour, tax and utility costs we are not an attractive location to do that.”

However, Dr Hamilton struck a more optimistic tone, asserting that The Bahamas has “great need of a proper maintenance facility” for its aviation industry. He warned, though, that the idea of an MRO is far from new, and said previous local operators who had explored setting one up had been “frustrated” by the process and it had failed.

Mrs Coleby-Davis last week said the Airport Authority and Civil Aviation Authority Bahamas are advancing discussions with Middle Tennessee State University (MTSU) and its aviation programme on establishing an MRO, and Dr Hamilton told Tribune Business: “That’s a very interesting exercise.

“The Bahamas has great need of a proper maintenance facility outside of Bahamasair. There’s a definite deficiency in The Bahamas in that regard. It’s a challenge. However, I’m not familiar with the contents of that in terms of the structure and who the participants will be.”

Dr Hamilton said Southern Air, the carrier he works for, has “in the past proposed something of that nature in conjunction with the College of The Bahamas (COB)”, now the University of The Bahamas (UoB), but it had never come to fruition.

“It’s a golden opportunity,” he told this newspaper of Mrs Coleby-Davis’s ambition, “but there are local operators that have tried and been frustrated by the process. It can be, and ought to be, done. It’s a healthy penny that is being spent overseas. I don’t have a precise figure, but it’s a lot.

“Especially when you think of the mixture of expenditures for operators, maintenance is a major part of that process. It is a worthy exercise and a future for young Bahamians. It’s a viable future for young Bahamians….

“A lot of maintenance for Bahamian operators is done overseas,” Dr Hamilton added. “Very serious, heavy maintenance is done overseas. Minimal maintenance is done here. Bahamasair has a facility, and other operators do maintenance, but the majority is done overseas. We are exporting funds, which puts pressure on our foreign exchange. We are spending money overseas and ought to have that foreign currency here stay here.

“By virtue of our proximity to the US, this is an excellent business opportunity for The Bahamas. We can easily attract traffic coming from deeper south that is going into the US and manifest benefits to Bahamian aviation. They are flying over us to have work done in the US. Where we are positioned, in addition to the domestic market, gives us an opportunity to attract foreign exchange.”

Acknowledging the “potential obstacles” cited by Captain Butler and others, Dr Hamilton nevertheless argued: “I believe we can overcome it. We are capable of doing that. It’s not a cut and paste situation. We have the capacity of being able to do it. I don’t think anything is past us as Bahamians. We have the mix of talent and skills in our industry to accomplish it with proper partnerships.

“We will certainly not regret it. As a national slogan, ‘forward, onward, upward, together’, that’s how we’re going to deal with it. Get the vision, and the people behind the vision, and we can do it. There’s nothing passed us being able to accomplish it. But we must be able to do it together.”