EDITORIAL: More harm than good?

Regional air travel came to the fore recently with the announcement that Antigua and Barbuda was willing to support Dominica in its bid to maintain a campus of Ross University School of Medicine on that island, through the elimination of transit taxes for students passing through the twin-island state en route to the university in Dominica.  The second bit of news was a somewhat odd advertisement from Caribbean

Airlines which was headlined, “Caribbean Airlines remains on flight path to profitability for the first half of 2018.”

Some may want us to consider the news that “Caribbean Airlines remains on flight path to profitability for the first half of 2018” or that the new ferry service to Barbuda has been halted, mere weeks after being announced as part of the transit story, but those are for another time.  At the moment, details related to the termination of Lady Caroline service are near non-existent beyond the short release.  Plus, ferry service, while related, falls into the larger category of regional travel. So, for now, we will concentrate on air travel alone and introduce our beloved LIAT into the mix.

The prime minister’s announcement that we will eliminate transit taxes for students passing through Antigua and Barbuda on the way to Dominica is good news.  Not often do we see any type of support for our neighbours, as we are usually too self-centered to care about what happens to our extended family throughout the region.  So, as a gesture of support, there can be no arguing the intent.  The execution may prove difficult when you consider that a mechanism to identify students would have to be developed, when they book their tickets.  In the complex online world of booking travel, we suspect that this will be a hard task, but we leave that to the experts.

This concession to students raises a long talked about issue in the region: fees and taxes.  For decades, there has been talk of the impact of fees and taxes to the cost of regional travel.  LIAT has pointed to them as key contributors to the costs of tickets and has lobbied for a reduction or removal, so as to increase travel numbers and ultimately put them on their flight path to profitability.  This has not been done, for one reason or another, but evidently, it needs to be investigated and either implemented or rejected so that the future can be planned with more certainty. 

To give you an idea of what we are talking about, we visited LIAT’s website at liat.com and picked random dates to visit Guyana in

December.  The cost of a round trip ticket for December 13 to December 20 was US $577.50.  Taxes and fees were US $197.50; representing 34 percent of overall ticket price.  In essence, LIAT charges US $380 for the return fare and the rest is fees and taxes – almost US $200!!! 

The obvious and often posed question that arises is, will air traffic increase if the fees and taxes are reduced or eliminated.  There is US $75 in “ANU Airport Admin Charge” and US $38 in “ANU Ticket Tax”.  Then there is a “Service Fee” of

US $30, “GEO Passenger Facilitation Charge” of US $18 and “GEO Travel Tax” of

US $17.  The “GEO” charges are on the Guyana leg of the trip only.  The rest of the charges are relatively minor and consist of Fuel Surcharge (US $14.50) and Security Surcharge (US $5).

In contrast, it is interesting to note that a round trip ticket to San Diego, California for the same dates on American Airlines costs US $1,066 with taxes and fees amounting to US $228; or around 21 percent of the fare.  More interesting is, out of that

US $228, Antigua fees and taxes amount to US $158.80 (Airport Administration Charge of US $75 and Ticket Tax of $83.50).  Basically, 70 percent of the taxes and fees on that flight are imposed by Antigua and Barbuda.  

The economics of taxation policy and airline pricing are extremely complex so these taxes and fees may be completely justifiable, but we need to know if they do more harm than good. Meaning, if we lowered or eliminated the fees and taxes, will we increase travel and spending in country to offset or better what we get today. If more people travel because of lower airfares, will the other direct and indirect taxes, or spending benefits to the economy be greater than the taxes which we collect on the flights and which cause an initial barrier to travel?

The answers to these questions seem to be long overdue.

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