A new tax on passenger tickets will reduce the cost of operating an airline in Bermuda by almost one third, Transport Minister Dr. Ewart Brown told the House of Assembly yesterday.

Dr. Brown said the new passenger facility charge (PFC), a $4 tax on US tickets and $3 tax on non-US tickets, would be included in the purchase fare of flights departing Bermuda. Even with the extra tax, he said, total Bermuda departure fees are still substantially below departure fees from the US on international flights.

The result would be that the six airlines that service Bermuda (Delta, American Airlines, Continental, Air Canada, US Airways and British Airways) would save a combined estimate of $1.5 million per year. The average reduction per airline, said Dr. Brown, would be about $300,000, or a third of the cost of doing business in Bermuda.

Although the tax - at first blush - appeared to raise the cost of airline tickets, he said: "by reducing airline station expenses... fare reductions become more likely for travelling Bermudians in the future.

"Since the tragic events of September 11, it has been no secret that the airline industry has taken a tremendous blow financially, with one filing for bankruptcy and many others still struggling to maintain at least a 50 percent passenger load," he continued.

"It is Government's belief that reducing airport fees charged to air carriers is critical in the present circumstances. As a result, we have proposed to introduce the passenger facility charge."

Pointing out that PFC is common practice at airports in the US and rapidly being adopted elsewhere, Dr. Brown said: "We have had full consultation with the airlines now serving Bermuda, all of whom unanimously support this modernisation of the airport's fee structure and hail the move as a welcome step forward."

Dr. Brown also said the PFC also increased Bermuda's attractiveness as a destination to several prospective airlines considering increased flight frequencies and routes to Bermuda.

In fact, said Bermuda International Airport general manager James Howes: "I have already conveyed the good news to several of our airlines here, and they are very appreciative to government.

"We are certainly delighted that the House of Assembly favoured the PFC because it is something we have been working on very closely with our airlines here since last summer."

The PFC, made under the Civil Airports Act of 1949, comes into operation on March 1.