JetBlue: High taxes a turn-off for airlines
An airline boss has warned that high airport taxes and charges can dissuade passengers from flying to certain destinations, and in turn be a disincentive for airlines to serve those routes.
Robin Hayes, chief executive officer of JetBlue Airways, made his remarks at a Caribbean tourism event in Curaçao.
This year the Bermuda Government has increased airport taxes and charges faced by passengers. In March, the departure tax was raised from $35 to $50. This was followed in August by a further hike that has taken the maximum total departure tax to $78, including a $16 airport improvement fee.
On a list of the highest ticket taxes and charges faced by JetBlue passengers flying from New York’s JFK International Airport to a selection of Caribbean region destinations, Bermuda is ranked second behind Jamaica. The list was compiled using sample rates on JetBlue’s website, and is included in a statement from the Caribbean Hotel & Tourism Association (CHTA).
“At JetBlue, we are very much thinking about the relative tax burden on our customers as we allocate capacity,” said Mr Hayes, who was a keynote speaker at the Caribbean Tourism Organisation’s State of the Industry Conference.
“Between US and foreign (Caribbean) taxes and fees, travellers can easily be hit with an extra $150 on top of their airfare,” he said.
Bermuda has JetBlue services to and from New York and Boston.
The average federal tax on a $300 airline ticket in the US is $63, meaning the airline receives only $237 from the ticket price, according to figures by trade association Airlines For America.
The portion of revenue an airline receives per ticket diminishes further when Caribbean region taxes and fees are also added. Depending on the destination this can mean an airline yield as high as $245 or as low as $145 per ticket.
In its statement, the CHTA said: “If a passenger has a budget of $300 per ticket, according to Hayes’ reasoning and other factors being equal, the airline would be more inclined to serve those destinations that deliver far better yields for a given airfare.”
The organisation noted that it was an “open secret” that in the region airlines often requested revenue guarantees from destinations before committing flights.
For many years Bermuda offered such guarantees. In the most recently published consolidated fund financial statement, dated March 31, 2014, the Government had signed agreements with three commercial airlines, guaranteeing the airlines either a certain level of revenue or specific profit on a particular route. If there was a shortfall, Government was committed to paying out an agreed sum. As of March 2014, the estimated liability was $2.7 million. The Royal Gazette was last night seeking to establish whether such guarantees still exist.
The CHTA said: “Hayes’ revelations are prompting some countries to re-examine their air transportation policies as it would appear to be counterproductive to add taxes to airline tickets making the destination less competitive then paying those taxes out again in revenue guarantees to attract airlines.
“The matter is compounded in the region by a broad range of landing, ground handling and fuel costs that vary widely from country to country. Some conclude that it would be more productive to lower ticket prices and airline handling charges to make their destination more attractive and retain promotional funds to promote those more attractive airfares.”
Emil Lee, president of the CHTA, noted that Airlines for America was working with some jurisdictions in the US to hold airline taxes, pointing out airline ticket taxes in the country had increased thirtyfold since 1972, and were a threat to millions of jobs that support commercial aviation.
Mr Lee said that, while there was no federal government of the Caribbean, his organisation would play its part to inform governments in the region about their relative position concerning airline ticket taxes and fees by publishing the chart showing the relative sampling of destinations together with the taxes and charges that are added to airline tickets.
“We now know why there is no correlation between ticket prices and distances flown to and within the Caribbean,” he said.
Mr Lee said the CHTA was not “a proponent of reducing government income”, but aimed to find ways for governments to increase revenue through increased visitors and visitor spending.
“There is now strong evidence that reducing taxes on airline tickets increases the inclination of airlines to serve the destination, increases demand for the destination, increases funds available for promotion, increases taxes collected and most importantly leads to increases in employment. That should be very good news for the Caribbean, the world’s most travel and tourism dependent region,” he said.
“Given that Airlines For America has had such success in making their case in the US, we will work with them, JetBlue and other carriers, and public and private stakeholders to make the same case for our region.”
The Royal Gazette contacted the Bermuda Tourism Authority (BTA) and the Ministry of Tourism and Transport seeking responses to Mr Hayes’ comments and the possible impact of airport taxes and fees. The BTA said it felt the matter was best directed to the Government.
As of press time this newspaper was awaiting a reply from the Ministry.
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