Published On: Thu, Jul 23rd, 2015

Unlocking the value of aviation in the Caribbean

InselAirMIAMI - This year the global airline industry will transport 3.3 billion passengers and 52 million tons of cargo. Worldwide, aviation supports jobs for 58 million people. It is the means to market for a third of the goods – by value – which are traded internationally. And it plays a unique role in connecting business to markets, uniting family and friends, bringing people together to solve problems, build understanding and develop global insights. It also is a powerful enabler of economic growth, employment and tourism.

Nowhere is this more apparent than in the Caribbean.

Air travel is a lifeline in our region and also is the preferred mode of transportation of one of our most important economic assets: foreign visitors. Tourism is a global and highly competitive business. And many nations of the world are fighting for the same tourist dollars the Caribbean needs to attract.

Tourism and the aviation sector facilitate and support nearly 1 million jobs and contribute US$14.8 billion, roughly 8.7 per cent of the region’s GDP. And while this contribution is significant, it could be much more. The onerous taxes and charges most countries in the Caribbean levy on travelers and airlines make the region a very expensive destination and a difficult place for airlines to conduct business. The result is that aviation is unable to play a bigger role in helping to grow local economies and stimulate job creation.

There are dozens of different types of taxes and charges in the Caribbean. Some are meant to foster tourism, but this makes no sense since they do exactly the opposite: taxes hurt tourism and the economy of the states imposing them. The same holds true for user charges, which in many cases have no relation whatsoever with services provided to airlines.

The true value of aviation to government coffers is its ability to catalyze economic activity and stimulate employment. Focusing on receipts through a layered web of taxes actually stifles the region’s economic potential.

As an example, taking the islands as a whole, each $1 of ticket tax could lead to:

  • Over 40,000 fewer foreign visitors
  • $20 million of reduced tourist spending
  • 1,200 fewer jobs

Not surprisingly, the region’s tourism industry and many of its political leaders are closely aligned with this approach. The Caribbean Hotel & Tourism Association recently commended Bahamas Prime Minister and outgoing CARICOM Chairman Perry Christie’s statement that “tourism development and all that it entails is the fastest path to reducing unemployment in our region and the fastest path to reducing the debt burdens that terrifies upcoming generations.”

In the same speech, Christie added: “With taxes on airline tickets approaching 65% of the total ticket prices in some cases in the Caribbean, there is an argument to be made that the social and economic benefits to be derived from increased volumes of visitors exceed the taxes removed.”

The good news is that aviation is a largely standardized industry with many global references to guide us. IATA urges and reminds authorities to adhere to the key principles set out by the International Civil Aviation Organization (ICAO).

And there are also many good examples to follow of countries that recognize the economic benefits of connectivity and have fostered a dynamic and thriving aviation industry not shackled by heavy taxes and regulations. In places like Dubai, and closer to home, Panama and Chile, governments treat the air industry as a partner and as a result reap the unique economic and social benefits from robust air connectivity.

IATA is a firm believer that partnering for mutual benefit is a key element in shaping positive outcomes and I am confident that if Caribbean governments strengthen their partnership with the aviation industry, we will generate the transformative economic growth our industry can deliver. I have seen it change lives for the better and improve prosperity in nations where the industry finds a supportive home and I am convinced we can achieve the same in our region.

I stand ready to offer my personal support and that of IATA to help achieve it.

Lionel Van der Walt, Caribbean Area Manager
International Air Transport Association


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