Tag: air connectivity

How taxes impact air connectivity in the Caribbean

Last week, during a press briefing on the proposed air services by St Maarten-based Windward Islands Airways International NV (Winair) between TT and St Maarten, Winair’s CEO Hans van de Velde explained the airline’s cautious yet confident approach with regard to its TT operations. “We don’t want to make the mistake other airlines have made in the past, wanting to go too fast. So, we will do it steadily. And if success is there, and we think it will be there, we will grow,” said van de Velde.

On February 1, the airline will begin nonstop twice-weekly scheduled service between Trinidad’s Piarco International Airport (POS) and Sint Maarten’s Princess Juliana International Airport (SXM) using its 48-seater ATR 42-500s.

On the issue of low fares for intra-Caribbean travel, van de Velde said, “It’s impossible in this region to operate for low prices, because running an airline here is expensive, and there are a number of reasons. One is that there are very high taxes,” he said. “So, we have an introductory fare of US$200 one way, literally half of it is tax. As an airline, you don’t keep that; that tax goes to the government. So, offering low prices is not very realistic, and we have seen in this region that many airlines went bankrupt. It shows that it’s difficult to run an airline,”

Other airlines have raised the issue of high taxes on airline travel. In April 2018, during the launch of the CaribSKY alliance by LIAT 1974, Air Antilles and Winair, the airlines called the Caribbean governments are being encouraged to revisit the level of taxation on airline tickets for regional travel.

LIAT’s CEO Julie Reifer-Jones said taxation was a “ticklish issue” but a solution had to be found.

She said a recent study showed that intra-regional travel had declined significantly. LIAT, she said, was now moving 750 000 passengers annually in comparison to one million in the past.

“When we tried to get behind the numbers and look at some of the factors impacting that decline, the taxes – and this includes both airport and the taxes directly from the government – are acting as a significant deterrent to travel across the region.

“Because we are connecting passengers across several territories, we are actually picking up taxes from three or four territories every time somebody flies from one destination to the next and we also have the issue of in transit taxes because we’re stopping at St Maarten or we’re stopping in St Vincent or we’re stopping in Barbados,” Reifer-Jones said.

The CEO revealed that while LIAT 1974 had raised its base fare by about three per cent between 2009 and 2016, taxes had increased by about 56 per cent.

“What the passenger sees is not the base fare. They are going to see the total package and their reaction to buying a ticket to travel to Guadeloupe or travel to Dominica is going to be impacted by that total bottom line picture,” she said.

In September 2022 the International Air Transport Association (IATA) warned Caribbean countries that they are pricing themselves out of the global tourism market.

The caution came at the Caribbean Aviation Day in the Cayman Islands on September 14, 2022. The event was staged under the theme ‘recover, reconnect, revive,’ the event saw government ministers, industry experts, and senior aviation executives come together to discuss key challenges impacting the region and opportunities for growth.

With global passenger air traffic now at 74.6 per cent of pre-covid levels, IATA vice president for the Americas, Peter Cerdá stressed that Caribbean destinations are “running the risk of pricing themselves out of the global travel and tourism market, where passengers have more choice than ever before.”

“A recurring theme is also taxes and charges levied on aviation. Yes, we understand that the provision of adequate infrastructure for aviation comes at a cost, but very often it is difficult to see the correlation between the level of costs and charges, and the actual service provided,” said Cerdá.

He highlighted that while globally taxes and charges make up approximately 15 per cent of the ticket price, in the Caribbean this constitutes 30 per cent of the price on average, with some destinations reaching as high as 50 per cent of the total ticket cost. When compared to destinations like Lima, Peru, Cancun, Mexico, add other relatively close beach destinations whose taxes and fees only represent 23 per cent, the Caribbean is becoming a less attractive destination.

“Today’s passengers have a choice, and as the total cost of vacations increasingly becomes a decision-making factor, governments must be prudent and not price themselves out of the market,” urged Cedá, noting that t the World Travel and Tourism Council (WTTC) forecasted a possible annual 6.7 per cent travel and tourism GDP increase between 2022 and 2023 if the right policies are implemented.

Speaking later at the conference, Barbados’ Tourism Minister Lisa Cummins defended the taxes and charges to her country. “Let us break down where fees and charges go to in-country because the things that we want and the things that we have to be able to provide come with a price tag,” said Cummins. She argued that taxes and charges do not go to the government’s consolidated fund as revenue, but instead go back into providing infrastructure and services in the aviation industry.

“We realised that even if Barbados would, and we have been looking at it, look at the changes that we potentially can make to our tax structure… We don’t have the number of seats that compensates for those losses in revenue,” said Cummins about the trade-off between government revenue and taxes.

The 2025 State of the Tourism Industry Conference (SOTIC) was hosted by the Caribbean Tourism Organization (CTO) in Barbados from September 30 to October 3, 2025, at the Hilton Barbados Resort, centered on “Reimagining Caribbean Tourism: Research, Relevance and the Road Ahead.” The event brought together over 400 regional and international leaders to discuss sustainability, innovation, and industry growth.

The conference discussed the high cost of regional travel which remains a vexing issue for travellers between the Caribbean islands. Among the key factors contributing to these high costs are the taxes imposed by regional governments on airline ticket prices.

The conference noted that intra-Caribbean flights often carry taxes and fees that exceed the base airfare, significantly increasing the cost of tickets for travel between islands. In contrast, Europe and Southeast Asia tend to have lower aviation taxes, especially for regional travel. Budget airlines thrive in those regions due to minimal fees and government support — a phenomenon not commonly seen in the Caribbean.

These taxes have several negative impacts on intra-regional travel as they discourage regional movement, with locals being priced out of flying between islands. In turn, this hurts tourism as visitors face unexpectedly high costs, reducing demand.

The taxes also strain local airlines. Homegrown carriers struggle to compete with subsidized foreign airlines, making it harder for them to survive in the market. Among those homegrown airlines is LIAT Air. The company, which began operations in 2024, faces several challenges, including the need to distance itself from its failed predecessor, LIAT 1974. These problems are only exacerbated by hefty taxes, as highlighted by airline CEO Hafsah Abdulsalam on the opening day of the SOTIC 2025.

In an impassioned response to questions about the challenges contributing to high airfares, Abdulsalam emphasized that both her airline and regional governments must play their part in improving connectivity. Abdulsalam, who also revealed LIAT’s plans to connect the region with South America and Africa in the near future, noted that regional taxes remain a major issue.

“We need to be a lot more efficient, for efficiency reduces costs. Production and reduced costs ultimately reduce the amount we charge for the ticket,” she said.

A 2018 Caribbean Development Bank (CDB) working paper stated that air connectivity growth in the Caribbean has been generally and relatively weak, and limited with one of the primary barriers to connectivity in the Region being high costs such as taxes, airport fees and other charges in air transportation.

The CDB recommended as follows:

A reduction in aviation taxes: The price elasticity of demand to airfares (which include taxes) reflects the travellers’ sensitivity to changes in price – and the taxes in the Caribbean add to this price. This distortion appears to be greater for intra-regional travel.

A reduction in airport charges: Lowering charges may allow airlines to operate in markets which are considered thin and where operating costs are important for viability. This may also be a way for airports to attract services, especially for the extra-regional markets.

These recommendations are still very relevant today.

Boosting air connectivity through collaboration

The air transport industry is strategically important because it is a vital economic engine, fostering growth in global trade, tourism and employment, while providing essential connectivity for national and international integration and social cohesion.

It enables high-speed access, connects peripheral regions and supports diverse economic activities.

Airlines are the primary facilitators and service providers of the air transport industry, fulfilling crucial roles in global connectivity, economic development and the rapid movement of people and goods.

They achieve this by operating aircraft fleets, managing flight schedules and services, and generating revenue through the sale of passenger tickets and cargo space.

Airlines serve as vital catalysts for trade and travel, connecting economies and societies.

Airlines ensure the safety and comfort of passengers throughout the entire journey from check-in, boarding, in-flight services and baggage retrieval upon arrival at the destination.

They also provide cargo services, which is vital for global trade, by transporting goods via dedicated cargo aircraft or in the belly of passenger aircraft.

Global economy: Primary driver of air transportation

Strong GDP growth, a rising middle class and increased urbanisation expand the potential passenger base, particularly in emerging markets like North America, Europe and the Asia-Pacific.

Global economic factors significantly impact aircraft manufacturing by influencing airline demand, production costs and overall industry health.

Strong economies boost demand for new aircraft as airlines and businesses expand, while recessions reduce demand, leading to deferred orders and slower fleet renewal. Economic factors like inflation, interest rates and fuel prices increase production and financing costs, affecting both manufacturer profitability and aircraft affordability. Additionally, supply chain disruptions, often linked to economic or geopolitical instability, can delay production, further impacting the industry.

Industry collaboration

The collaboration between airlines and aircraft manufacturers in deciding the fleet requirements for airlines is a very complex process that synthesises macroeconomic and geopolitical factors based on market intelligence.

It builds comprehensive, long-term projections on airline future aircraft needs.

As the primary operators of aircraft, airlines have a deep understanding of their commercial needs.

During the development phase of a new aircraft, airlines can provide technical feedback to manufacturers on aspects like range, fuel economy, maintainability, seating configuration and passenger comfort.

Manufacturers then use this input to develop new aircraft models or variants that meet these specific airline demands, fostering a partnership that shapes the future of aviation.

Airlines’ fleet strategies and their assessments of future market trends provide vital information for manufacturers to develop aircraft that will be competitive.

Aircraft manufacturers like Airbus and Boeing integrate these airline requirements into the design of their aircraft.

This involves a careful balancing of competing factors, such as payload capacity, operating costs, range and noise levels.

This collaboration can lead to the development of new aircraft models tailored to specific airline needs or the creation of variants of existing aircraft with updated features.

In some cases, airlines and manufacturers can form joint development programmes where they work together to define the specifications for a completely new aircraft type.

This close relationship ensures that the aircraft manufactured are not only technologically advanced but also commercially viable and meet the specific operational needs of the airlines that will acquire and operate them. The result is a continuous evolution of aircraft design, driven by the collaboration between manufacturers and their airline customers.

In the early 60s, the four-engine Boeing 747 was conceived as a joint venture between Boeing and Pan American Airways (Pan Am).

Juan Trippe, president of Pan Am and one of Boeing’s most important airline customers, asked for a new jet airliner two and a half times the size of the Boeing 707, with a 30 per cent lower cost per available seat mile and the capability to offer mass air travel on international routes.

The result was the world’s first twin-aisle wide-body Boeing 747 dubbed the “jumbo jet.”

In April 1966, Pan Am, as the launch customer, ordered 25 Boeing 747-100 aircraft for US$525 million.

Boeing delivered 1,573 B 747 to airlines all over the world.

The three-engine DC-10 was the second wide-body aircraft type to be introduced and was built by Mc Donald Douglas based on an initial proposal from American Airlines for a twin-engine wide-body aircraft smaller than the Boeing 747, yet capable of flying similar long-range routes from airports with shorter runways. It entered commercial service with American Airlines in 1971.

The Airbus A300 is Airbus’ first production aircraft and the world’s first twin-engine, double-aisle wide-body airliner.

It was developed by European aircraft manufacturer Airbus Industrie GIE, as a competitor to the US-manufactured B747 and the DC-10.

In 1974, the first A300 entered service with launch customer Air France, flying from Paris to London. A total of 561 A300 and its variants were built.

The Airbus A380, nicknamed “superjumbo,” is a very large wide-body airliner, developed and manufactured by Airbus.

It is the world’s largest passenger airliner with the only full-length double-deck.

The first A380 was delivered to Singapore Airlines and entered service in 2007

Airbus delivered 251 Airbus A380 aircraft with the largest operator Emirates, followed by Singapore Airlines, Lufthansa, Qantas and British Airways.

In 2015, Boeing determined the market was large enough to launch the New Midsize Aircraft (NMA).

In 2017, multiple airlines expressed interest in a composite, seven-abreast twin-aisle with an elliptical cross-section culturally referred to as the Boeing 797.

In June 2022, Boeing indicated that it would not pursue development of the NMA for “at least a couple of years,” until significant progress has been made on the next generation of engines and new digital development tools are sufficiently mature.

The average age of the global fleet is constantly changing. Manufacturers forecast the replacement cycle for older, less fuel-efficient aircraft with newer, more advanced models.

Jet fuel is a major operating cost for airlines. Manufacturers factor in price forecasts when designing new aircraft, as fuel efficiency is a significant selling point for airlines seeking to control costs and improve profitability.

They also consider advancements like electric and hybrid propulsion that could affect future demand.

Air links in the Global South

DURING his recent visit to Trinidad and Tobago, the Indian Prime Minister Narendra Modi, in addressing a joint sitting of the Parliament, stressed that progress is not possible without “empowering the Global South.”

Framing India as a voice of the Global South, Modi said: “We see our development as a responsibility towards others. Our priority will always be the Global South.”

The term Global South refers to a group of countries, not in any particular geographical order, primarily located in Africa, Asia, Latin America and the Caribbean, that have faced colonialism and have historically been marginalised in global power structures and economic systems.

Air services among countries of the Global South in particular – Caricom, South America, Africa and India – provide connectivity that can serve as a major catalyst for social and economic co-operation.

Caribbean leaders have spoken for decades about having direct air links with Africa at various forums with no success.

In September 2022, during her keynote address at the launch of the first ever AfriCaribbean Trade and Investment Forum (ACTIF), host Barbados Prime Minister Mia Mottley, called for direct air links between the Caribbean and Africa saying the two regions “have business to do” and underscored the need for connecting the Caribbean and Africa through airbridges.

Former Minister of Works and Transport Rohan Sinanan, left, and Nigerian Aviation and Aerospace Development Minister Festus Keyamo sign a bilateral air services agreement between the two countries at the Piarco Airport VIP Lounge on April 14. – Photo by Paula Lindo

Mottley’s statements were consistent with those made by her earlier in 2021 during the virtual Caricom Africa Summit under the theme, Unity Across Continents and Oceans: Opportunities for Deepening Integration.

At that summit, Mottley proposed that the two regions agree to weekly direct flights between Africa and Caricom, “even if it means that we may have to, initially, subsidise it.”

“The only thing that stops us from having a direct air links between Africa and the Caribbean is the will of those of us who continue not to recognise the importance of unlocking 1.4 billion people who have a common ancestry to be able to work with each other.”

During a recent visit to St Lucia, Nigerian President Bola Ahmed Tinubu met with Prime Minister Philip J Pierre. Both leaders announced deepening co-operation across sectors between Nigeria and St Lucia.

PM Pierre emphasised St Lucia’s openness to Nigerian tourists, artists and entrepreneurs, while calling for the establishment of a “direct air link” to boost connectivity.

Shortly after being appointed as TT’s new Minister of Trade, Investment and Tourism, Satyakama Maharaj spoke of ambitious plans to reshape TT’s business landscape at a time when the country continues to face challenges with its ease of doing business.

“I think one of the biggest markets we have to explore is Africa,” he said. “They want to do business with us and we should be focused. West Africa is 470 million people. Republic Bank has 42 branches in Ghana and a base over there. But it takes two days to get to Ghana. But a big Airbus can go in eight hours, straight across.”

He added, “If you cannot visit, you cannot do business. So, we have to open that market and negotiate… and we’ll have to open factories all over the place to manufacture for that market.”

The major issue with air links between the Caribbean and Africa and India is the low demand for such services.

Airlines are in business to make profits and will only operate new routes when strategic marketing studies have determined that the route has the potential to become profitable on a sustainable basis.

The large African and Indian diaspora in the Caribbean region have tremendous opportunities for business, tourism and culture on both sides of the Atlantic.

The drivers of these opportunities must be the respective governments of Caricom, Africa and India, who must create the right environments for exploiting business opportunities, which include the removal of trade barriers.

Air transport linkages through the rapid movement of people and goods will connect Caricom with India and Africa, enabling access to global markets, thereby facilitating economic partnerships through travel, tourism and trade.

Air transportation has three key dimensions.

The first one is sustainability. The travelling public must have the confidence that airlines can consistently provide the required capacity to support trade and tourism between regional and global markets.

The second is affordability. The cost for the carriage of passengers and cargo must be fixed at levels that the wider travelling public and shippers can afford.

Airlines generally fix passenger fares and cargo rates based on the level of demand that can realise a profitable operation.

The third is building profitable route networks. Airlines develop route networks based on structured processes such as comprehensive feasibility studies.

These studies identify the levels of demand for air travel and its growth.

Airlines will not operate routes that will result in operational losses, except where the routes are subsidised by either governments or the private sector.

In March 2008, COPA launched a TT-Panama route with a frequency of four flights per week using a 94 seater two class EMB 190 aircraft.

The route is now a major gateway to Central and South America with daily flights from TT using the larger Boeing 737 Max 8 aircraft.

Today, travel between the Caribbean and Africa or India has to be done either through North America or Europe.

With connecting flights such journeys can take approximately twenty five hours elapsed time, with those to India taking longer.

A non-stop flight from TT to Lagos, Nigeria will take approximately nine hours and thirty minutes.

A non-stop flight from Lagos to Mumbai, India will take approximately ten hours.
Therefore, assuming a two-hour layover in Lagos, a one-stop flight from TT to Mumbai via Lagos can take approximately twenty one hours and thirty minutes elapsed time.

Nigeria has signed bilateral air service agreements with TT and India.

This cements the regulatory platform with “fifth freedom” rights for the operation of flights by TT, Nigerian and Indian airlines to each other’s countries.

Two Nigerian airlines have expressed serious interests in operating flights between Nigeria and the Caribbean, with one proposing to use TT as a hub to facilitate connections with other Caricom States.