Argyle International Airport. (Photo: Lance Neverson/Facebook)

The views expressed herein are those of the writer and do not necessarily represent the opinions or editorial position of iWitness News. Opinion pieces can be submitted to [email protected]

I think transparency is lacking in the quest to establish international flights to the Argyle International Airport (AIA). The airport is scheduled for its grand opening Feb. 14, 2017. However, there is no disclosure of commitment from any international airline for air service. What is the progress of route development?

In the route development process, airport or tourism representatives charm airline decision-makers and submit reliable data to demonstrate there is a profitable opportunity to launch a new route. We can forgo the charm and data submission because unfortunately, presently, there is no genuine profitability for airlines to operate international flights to AIA. So what would it take to get international flights to AIA?

It would require a significant incentive package to develop international air service(s) to AIA. There are variations of incentives programmes to lure airlines to commence new routes. However, the most common incentives are airport fee discounts, joint marketing support, community ticket trusts (also called travel banks), and minimum revenue guarantee (which I predict would be the primary enticing option for those who have the task of getting international flights to AIA).

So, what is minimum revenue guarantee (MRG)? MRG is guarantee money to an airline if revenue is loss while operating the route? The guarantee is based on revenue an airline must earn to make the route(s) feasible. Think of it this way: the amount of minimum revenue guarantee attached to each route reflects the airlines’ calculation of the financial risk they are taking on to operate that flight. If there is loss revenue while operating the route, the guarantor (e.g. airport or tourism authority) pays the airline the difference.

Take a look at Jamaica, Bermuda, Barbados and St. Kitts and Nevis as examples — countries with superior tourism industry compared to St. Vincent and the Grenadines. They all guarantee minimum revenue to airlines to fly to their gateway.

First illustration: Jamaica. Jamaica’s ministry of tourism, via its entity JAMVAC (Jamaica Vacation Limited), in an effort to “promote airlift to visitors to Jamaica,” agreed to minimum revenue guarantee incentive with American Airlines and other airlines. The American Airline-JAMVAC contract stipulates the air carrier would provide flights to Jamaica from Miami, Chicago, and Dallas gateways, with revenue guarantee of US$1.5million per gateway (totalling US4.5M) providing 130,832 seats for one year.

JAMVAC guarantee American Airlines revenue for round trip flight from MIA to Montego Bay (MBJ) US$24,368 per air service flight, which equal to $34.34 per round trip revenue passenger, using a Boeing 737 with 148 seats configuration. The round trip service to Chicago (ORD) to MBJ guarantee American Airlines US$49.08 per round trip revenue passenger. Total round trip flight charge per flight with Boeing 737 equipment to ORD to MBJ totals $50,686 per air service flight. The Dallas (DFW) to Montego Bay (MBJ) assured revenue of $46,214 per air service flight. And Jamaica is not alone in guaranteeing airlines revenue for flights to their airports.

“Every year, the Bermuda Government and its taxpayers pay out millions of dollars to international airlines serving Bermuda companies to cover the cost of Bermuda flights. They do so because failure to make revenue guarantee deals with airlines would mean losing Bermuda routes,” according to Tourism Minister Mr. Crockwell. As of January 2016, the Bermuda government paid out an annual $2 million-plus subsidy to airlines in minimum revenue agreements.

Barbados, which is one of the major hubs in the Caribbean, gives airlines incentives to fly to its gateway as well. “…Barbados, like many other destinations, continues to spend money to bring airlift here (to Barbados), through what is called in the industry co-op marketing as well as direct subsidies and minimum revenue guarantees,” stated Tourism Minister Richard Sealy. However, Sealy said “the country is now starting to attract more airlift by virtue of increased consumer demand.”

Another example of Caribbean countries paying MRG to air carriers for air services is St. Kitts and Nevis. In 2015, St. Kitts and Nevis signed an MRG agreement with United Airlines. With the minimum revenue guarantee agreement, United Airlines commence flying to St. Kitts and Nevis on Dec. 19, 2015 from Newark (EWR), New Jersey. The MRG to United Airlines was US$1.3 million. Additionally, St. Kitts and Nevis signed a US$1 million MRG agreement with American Airlines to operate routes from New York (JFK) and Miami (MIA).

So unless there is a drastic improvement in consumer demand to visit St. Vincent and the Grenadines, it would take a minimum revenue guarantee incentive contracts to deliver international flights to the Argyle International Airport.

K. Chambers, MBA

The views expressed herein are those of the writer and do not necessarily represent the opinions or editorial position of iWitness News. Opinion pieces can be submitted to [email protected].

9 replies on “What would it take to get international flights to land at Argyle?”

  1. An intelligent, data-based analysis that provides more hard evidence that Argyle International Aiport should never have been constructed because it will yield an overall net loss to our economy after all the costs and benefits, included overall off-airport value-added effects, are factored in, a finding that a thorough pre-construction feasibility study would have surely concluded, if it had ever been undertaken.

    This is a “Labour love” political airport, nothing more, nothing less, that will sink us under a mountain of debt and despair.

  2. Great information! Great detail to fit in with the essays from C. ben.
    Taken along with the information from C.ben, this tells us that we have to make some VERY BIG changes in SVG. We have to reduce crime because SVG is considered as unsafe for tourists. To lower the crime rate the economy has to be improved. To do that, taxes have to be lowered so the would-be criminals can have more disposable income. For that businesses have to be able to create jobs, and businesses have to be invited here or created. With a Prime Minister that believes jobs are created by raising taxes, we are in trouble of these things never happening. Just more government jobs meaning we have to pay even more taxes.
    This essay makes it obvious that if we want an airline to come here we will have to pay even more taxes to help them make their MRG, because how many people will want to come to a country deemed unsafe for tourists? If it ever becomes safe, what do we have that St Lucia Grenada or thousands of other destinations don’t have?…only the Grenadines. Tourists certainly do not want to come here for our high prices, unless it is the super-rich that already go to Mustique.
    At present the volume tourists will never choose SVG as their destination.

  3. Can we not see the handwriting on the wall when the government has had to pay the full cost of charter aircraft to come here (probably one-way only) on Valentine’s Day, hoping they will recoup the costs if all seats are sold to the public and suck up the loss if this doesn’t happen?

    This is only the opening shot in the foot for this needless airport. How many shots will be needed before the invalid dies is anyone’s guess.

  4. This is a well written document that gives a solid picture from a non-Vincentian about the plight of AIA. The examples documented are similar or the same expressed previously by many Vincentians. Why are some Vincentians blind to the truth and basic facts about AIA future quandary?
    I hope this article was distributed to all the new media on the island, so Vincentians can read the opinions of other folks who are not Vincentian nationals. It is important that Vincentians know what they face down the road. We have some Pauls’ who were once Sauls’, but there are many more who have not seen the light. They still feel that any questions about the airport are showing hatred against Ralph. Figures don’t always lie because they can be obtained from an honest prepared balance sheet. We’d have to wait for the final count on the cost of operating AIA in a few months – that’s if they provide the documents.

  5. Readers should be clear about three points:

    1. These MRGs are not necessarily or invariably paid out. They simply guarantee the airlines (with monies paid upfront into a special fund) a reliable and acceptable level of revenue and profit in a cut-throut airline service market like ours where the sellers hold all the cards. In practice, however, hundreds of thousands are actually passed on to each of the airlines by many Caribbean countries every year.

    2. Valuable markets like the one created in Cuba by the new relationship with the United States likely lack MRG agreements or other subsidies negotiated between the airlines and the government because of the huge and growing demand to travel there.

    3. At the other extreme like our own rock bottom stayover tourist industry, these MRGs would be sky high (excuse the pun), would invariably be paid out to their limit, and would never end. The result would be the elimination of all but charter and inter-island air traffic after a year or two along the line of the quick death of LIAT service from the mainland to the white elephant Sir James Mitchell airport in Bequia, a project that should have told us all that building Argyle airport would be a huge folly.

    (For examples about MRGs from Bermuda see http://bernews.com/2015/11/minimum-revenue-guarantee-deals-for-airlines/ ).

  6. Dave from Toronto says:

    [ I think C. b-D is the one writing all of these articles including the comments]

    You guys still are refusing to answer the basic question that I have been posing for a while now. What should happen to AIA now that it has already been built. You are refusing to answer because your answer would expose your ignorance.

    I think most readers have come to the conclusion by now that this guy’s daily rants against AIA have nothing to do against the airport at all. Only a fool sits there arguing about why the barn door was left open after the horses have already left. Maybe, the hinges should have been stronger, or the walls taller. It’s all nonsense arguing a mute point. Go chase after them and corral them. The airport has already been built, yet he keep arguing day after day about why it was constructed. Heck, he as given up before it’s even operational. His daily rants are directed at the PM. However, he doesn’t have the guts to criticize the PM every day. Even the opposition parties say that they would operate AIA if elected.

    It is easy to tell when a man is devoid of some of life’s pleasure. They usually fill the void with with other things like writing useless articles in hopes of admiration from others. But, what does he care? He thinks that the people of this country are idiots. He couldn’t care less about the future of SVG – definitely NOT A REAL VINCY!!

    1. Dave, I think you again missed the point of these articles. And if you look at the writing style it is obvious C. ben did NOT write it. Would not matter even if he did. C ben writes these wake-up articles to preempt people like you that think we should reward stupidity and failure, over and over again. If there is no one to call out all of the wasted money spent by incompetent politicians, they then have no reason to start being careful with the people’s money. The airport was ill-conceived, poorly planned, and poorly built with the purpose of winning an election, and not to really function. Now they are trying to find a way to do that. Is this the way you want your government to act? C ben is a patriot that only wants SVG to make smart changes for the betterment of the country and its people. To do that our society needs people to “wake it up”.

    2. Brown Boy USA says:

      Dave, what’s your argument? You chose not to deal with the matter of the article, which in itself share valid points to a problem which we now facing with the AIA. You should understand people frustration with this project, whether you think it is political or not, many of the concerns should not be overlooked are treated as if it is against the government. The article indicates measures we should consider, like other Caribbean countries, in order to attract international carriers to AIA. At this moment we have no knowledge of any of that is taking place. We have no international carrier lined up to land at AIA after the airport opens on February 14, 2017. Therefore, to the average person it would appear that the AIA was a waste of time and money. The article had no political agenda in my assessment, and while C. ben’s comments may seem political (not saying it is), that does necessarily mean that they are criticizing the government but instead showing frustration as to how the AIA is being handled by the government. You must take into consideration that it does matter which party is in government. The question now is how are we going to start attracting international flights to the AIA? How? And whether you disagree with C. ben’s comments, it does not take away from the facts that these are critical questions we need to address, including your own. The question then is how do we proceed from here to make the AIA viable international airport? We are not hearing anything from our leaders on this matter. Therefore, it is easy to conclude that they do have a clue!

  7. Dave you can’t be serious! I agree that AIA is completed and we’d have to live with it, but one has to wait until tourists start pouring in to know what to do. Investors can’t start to invest until they can see the opportunities to make money from their investments. The planners are the ones who should have been in touch with investors explaining to them what positive step to take to meet the needs of visitors. Then the businesses would look at all the facts and determine if the risk is worthwhile.
    I am sure you are aware that the infrastructures for AIA are nowhere in sight. No new hotels to house passengers from a 747 or even a 737. Then there is the absence of proper medical institution in case of a disaster. These are just few of the things that are still missing to make AIA attractive to tourists.
    If you have ideas you believe will attract visitors, then put them out there. Keep in mind the airport is not what will attract tourists. The greatest attractions in SVG are the Grenadines and you don’t need a plane to get there. Only chartered flights will land at AIA for some time and they would be few and far between – Christmas and Carnival.
    Things are up in the air and this should not be because AIA will operate at a loss for many, many years.
    I hope you get the picture of the frustration folks are going through, especially since they realize they have to foot the bills.

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