Making The Caribbean Competitive Colin Jones, Cyriel Kronenburg International Air Transport Association, 2007
Air transport is critical to the global economy We are a US$450 billion industry We support US$2.9 trillion in economic activity
Air transport is critical to LATAM/CAR 570.000 direct jobs $20.5 billion GDP contribution
With Wide Catalytic Effects Passengers,Mail & Cargo Trade Tourism Investment Labor Supply Social benefits Connectivity
But an industry in crisis since 2001 needs leadership
Airlines improved their bottom line even as fuel prices skyrocketed
The industry is moving in the right direction
Positive Developments Improved Consultations RASOS Open concessions Improved Collections of Rates & Charges
But it s a bit early to celebrate Significant increases in passenger / airline charges No harmonized policy on infrastructure development Islands benchmark charges within the Caribbean
Aviation is an economic engine One daily international 747 flight: 840 jobs $97 million business revenue $22 million wages Subsequent Federal taxes
Tourism needs aviation, and vice versa An example in Costa Rica: 1,1 mln arrivals, 72% by air 5 fold increase in a decade Tourism spending of $1,3 bln Hotels doubled in a decade
Reducing taxes can actually benefit Governments Toronto Canada: Effect of reduction in airport rent of $ 58 mln Traffic increase = 2.2% Incr. tax revenue: $ 62 mln Business revenue: $300 mln 3000 extra jobs
The Caribbean still has international potential
But the region competes increasingly with other regions, not just Island v.s. Island Airlines increasingly receive requests from new tourism markets for service with only limited resources available
Airlines have increased choice where to utilize their fleet
Economic Barriers prevent potential aviation & economic growth in the Caribbean Airlines passengers often overtaxed Lack of intra Caribbean harmonization / cooperation High dependency on airline revenue Lack of economic regulation
And the Caribbean is often expensive compared to new markets
An added problem is that not all Caribbean visitors are treated equally
A Real World Example: Tax on airline passenger USD 30+ Tax on cruise ship passenger USD 1
Where one could argue, which passenger actually contributes more?
The wider industry faces the same problem Caribbean Tourism Industry is unduly subjected to taxes not found in other sectors* * Caribbean Regional Sustainable Tourism Development Programme CRSTDP study 2007
Airport & ATC Costs Per Passenger raise serious concern Caribbean Cost 1 st Semester 2006 2 nd Semester 2006 1 st Semester 2007 2 nd Semester 2007 Per Passenger $ 795 $ 862 $ 884 $ 909 * 2006 2007 Comparison of a major IATA member airline, adjusted for traffic effects
Wake-up call: Don t kill us with an overdose of taxation
What can airports do to improve bottom line costs? Agree to challenging efficiency targets Work together with airlines as business partners in long term strategies and investments Drive cost reduction and efficiency improvement with more speed Some Examples:
Simplifying The Business Five focus areas ET BCBP e-freight CUSS RFID Adopted and approved by IATA Board of Governors and AGM in June 2004.
US$6.5 US$6.5 billion billion Why simplify? Drive efficiency Leverage self-service Improve customer service Deliver savings Annual Annual cost cost savings savings of of
CUSS: A kiosk shared by multiple Airlines for check-in Aruba Barbados Jamaica St Lucia Trinidad
Benefits Common Use Kiosks 1 2 3 Customer: Time-saving check-in at airport or other locations Airports: Airlines: More efficient use of check-in and other facilities Savings in terminal facilities, systems and manpower (US$3.50/check-in)
Desk / Counter $2m? $25K $5K Kiosk
Desk / Counter 18-20 PPH 40 PPH Kiosk
Check-in cost $4.50 $.55 Kiosk
A potential saver. Common Use Kiosks [CUSS] Will offer a major opportunity to satisfy demand at reduced costs for Airports and airlines IATA is ready to assist
E-Ticketing Penetration Worldwide Aug 2007 United States 95.2% Americas 90% Europe 85% Middle East 60% Africa 77% North Asia 96% Asia Pac 80%
E-Ticketing Objective 73% TK 96% Bahamas 95% Jamaica 92% Cayman 95% DR 97% Haiti 79% EAC Elimination of paper tickets Main targets 97% of tickets to be ET by December 2007 100% of tickets to be ET by May 31 2008
2D BCBP Bar Code Boarding Pass
IATA Board of Governors Mandate Deadlines for the industry End 2008: all airlines are BCBP capable End 2010: all boarding passes are BCBP Aruba, Barbados, Jamaica, St. Lucia & Trinidad/Tobago
Boarding Passes: Automated Boarding Control 2D bar code (IATA standard) 1D bar code Magnetic Stripe Manual entry Sequence or seat number
Magnetic v.s. 3d: US$ 0.01 Courtesy of Mexicana vs. US$ 0.05
Cost reduction in equipment ATB printer $4,000-$6,000 ATB reader $4,000-$6,000 GPP printer $700-$2,000 2DBC scanner $300-$2,000
Conclusion: Airports are an important partner in change
Increase Non-Aeronautical Airport Revenue Reduce Aeronautical Charges
The Revenue Cycle
The Revenue Cycle Traffic Unit Costs
The Revenue Cycle
The Revenue Cycle
It Works Both Ways
The Revenue Cycle
The Revenue Cycle
We need a continuous focus on Improved ATC Performance Financial Performance Operational Performance Both Impact Our Bottom Line
The fragmented Caribbean ATC system is relatively expensive
ATC Challenges Harmonization of Services Standardization of Infrastructure Reduce Number Of Providers Key to reduce costs
What can governments do to help? Value aviation as economic engine Ensure independent economic regulation Remove obstacles such as fragmentation and unduly taxation
Economic Regulation A Government Responsibility Stakeholder engagement Transparency Agree on investments Single-till financing Adhere to ICAO policies Non-discriminatory Independent appeal body
In Summary: Lower costs will lead to growth & revenue: Simplify The Business Independent Economic Regulation Eliminate surtaxes
Aviation is a key economic contributor The Caribbean competes with the world The Caribbean needs a regional approach
There is a bright future for the Caribbean
A Positive Future A healthy aviation sector is in all our best interests IATA is here to help
Thank You