The Government of St. Vincent and the Grenadines has committed itself to millions of dollars in revenue guarantee for the international airlines flying to St. Vincent and the Grenadines.
And while the Air Canada Rouge flights from Toronto to Argyle International Airport (AIA) have been well subscribed and will continue with no government support, so far, Kingstown has had to dole out more than US$1 million to support Caribbean Airlines’ (CAL) flights between New York and AIA.
Minister of Tourism Cecil “Ces” McKie made the disclosure on Tuesday in Parliament as he responded to a question from Opposition Leader, Godwin Friday.
The opposition lawmaker asked the tourism minister to tell Parliament under what financial arrangements, if any, do Air Canada, CAL and American Airlines provide air service to SVG and, in particular, indicate whether and to what extent the government must subsidize the operation of the services.
McKie told legislators that SVG, through the Tourism Authority, entered into contractual arrangements with Air Canada for the period Nov. 28, 2017 to July 31, 2018.
The service period was Dec. 14, 2017 to April 12, 2018 and SVG provided a revenue guarantee of CAD$1,593,723 for the flights in the winter season.
The service during the period was provided by Air Canada Rouge’s 737 aircraft, with a seating capacity of 137, and they flew from Pearson International in Toronto, the minister said.
The minister said that the service provided during the period was around 91 per cent capacity and satisfied the revenue guarantee threshold required of the airline.
“As a result of the favourable performance of the flights, St. Vincent and the Grenadines did not incur any expenses to the airlines.”
The minister said that Air Canada Rouge currently provides year-round
flights to St. SVG on Thursdays and this service commenced on Oct. 25, 2018.
An additional second flight commenced on Dec. 16,
“St. Vincent and the Grenadines was not required to enter into any new contractual arrangements and the airline currently operates these flights independently,” the minister told parliament.
McKie further said that a similar contract was entered into with American Airlines for Jan. 18, 2018 to Feb. 15, 2020 for flights between AIA and Miami International Airport.
These flights operate year-round on Saturday from Dec. 15, 2018 to Dec. 18, 2019 using a 737 aircraft with 128-seats.
The three flights operated in December 2019 brought in 375 passengers and 365 departed.
“St. Vincent and the Grenadines established a letter of credit in the amount if US$1 million (EC$2,716,900) with the carrier. A revenue guarantee of US$33,672 for each one-way flight is also in place,” McKie said.
The minister said that the airline will make flight data submission on a quarterly basis for reconciliation.
No such submission has been made, as the first quarter is not yet complete.
The contract and service period with CAL is for March 14, 2018 to March 13, 2021.
The airline makes year-round flights between AIA and JFK International Airport in New York, using a 737 aircraft with a capacity of 154 seats.
SVG provided a revenue guarantee of US$110,380 per return flight
The revenue guarantee requirement was met for 14 of 49 round trips operated to date.
The remaining flights operated under the revenue guarantee threshold, resulting in a shortfall of US$1,059,724 for the operating period thus far.
“The figure was settled through the Tourism Authority for that period, March to December 2018.”
The minister said that billing and reconciliation is done quarterly.
He said 8,412 passengers arrived on CAL at AIA from March 2018 to December 2018 and 8,227 departed.
McKie said that revenue generated over this period was US$2,858,766.
“Revenue guarantee for those flights was US$3,918,490, hence the shortfall of US$1.059 million, which is 27 per cent of the threshold established.”
He said that to these numbers should be added those of the SunWing charters.
These 737 aircraft flights, with a capacity of 180 made 16 return flights between January and December 2018.
They brought in 1,898 passengers to AIA and took out 2,324 passengers.
“All told, these four international carriers made some 99 return calls and a one-way flight between December 2017 and December 2018. They brought in 14,584 passengers and took out 14,354 passengers, a total movement of 28,938 passengers in and out of the Argyle International Airport.”
Asked by Friday if the monies paid to CAL are sustainable going forward, the minister said:
“I think the honourable prime minister, when he addressed the operation of the Argyle International Airport, and I also endorsed it, we made these contractual arrangements with the understanding that the airport will not be up to profitable stage from the beginning.
“It will take some time and I think the nation understands this and accepts this explanation. These contractual arrangements will be reviewed on an on-going basis, and, importantly, we are in discussion with other airlines and the assessment will have to be done in terms of how profitable and how quickly we can have these aircraft operate on a profitable basis.”
Friday said: “I hope soon, Mr. Speaker.”
McKie replied, “Rome wasn’t built in a day.”
“We’re not in Rome,” Friday said.
If “The Government of St. Vincent and the Grenadines has committed itself to millions of dollars in revenue guarantee for the international airlines flying to St. Vincent and the Grenadines.” Is this AIA, the “Argyle International Airport” therefore a terrible white elephant, to be subsidised by the already hard pressed Vincentian Tax payers?
That is not what we were originally told would happen! If we have “had to dole out more than US$1 million to support Caribbean Airlines’ (CAL) flights between New York and AIA.” Just think of what that sum could otherwise contributed in jobs creation with lower tax levels on businesses and individuals here.
What has happened to that slogan “Build it and they will come”? We have been had! We were sold nothing but a pussy in a bag!
Don’t forget that AIA costs over $EC 13 million more than the perfectly servicable E.T. Joshua airport to operate.
Also note that because the new international flights compete with LIAT flights from Barbados, Grenada, and St. Lucia for customers and that SVG is a major owner of the chronically money-losing LIAT. One dollar spent on a ticket on Air Canada or CAL, is one dollar less available for LIAT.
Overall, AIA will be a net money-loser for our country for decades to come: the additional revenue for the tourist sector will never match all the cost associated with the airport (including interest payments on its construction loans).
While it is understood that some international routes/ flights to St. Vincent were not likely to be profitable from the outset, I would imagine that the Tourism Authority (TA) would have at least given themselves a timeline (approved by the Government) within which revenue guarantees should be consistently achieved. If this is in fact the case, there should be no difficulty in disclosing that timeline – as it will be irresponsible for us (this is the people’s business) to be pouring revenue into these operations indefinitely.
I also think that it is understood that the path to sustainably operating these international flights that service the AIA, cannot be based on gut feelings and casual efforts (the Minister’s responses do not dispel this concern). There must be a well-defined path to making these routes profitable for the airlines, exceeding our revenue guarantees, thus justifying our pursuit of additional flights on new and existing routes.
I do believe that the Honorable Minister and his administration means well on this matter. I simply would like to see a clearer demonstration of a more methodical approach to making these operations sustainable over the short to medium-term.
Argyle airport was built without a feasibility plan which was why our traditional patrons — America, Canada, the United Kingdom, the European Union, World Bank and others declined to fund it. The airlines were also invited to operate here without any feasibility study but gladly signed binding agreements with the government ensuring they would make money doing so a our expense.
Many well known, world class hotel and resort developers were also invited to invest in our mainland tourist industry but all declined.
There has never been nor will there ever be a, “… well-defined path to making these routes profitable for the airlines, exceeding our revenue guarantees.”
This has always been about one overarching issue: gaining power in one national election after another based on the elemenary observation that the mass of our people badly wanted an international airport whether we needed or not.
Neither the airport nor the airlines It have ever been about developing a large and profitable mainland tourist industry if only because this is an impossible task given the absence of miles of pristine white sand beaches boardering shallow and shimmering aquamarine waters on our mainland.
Something is wrong with Cecil McKie’s or your arithmetic.
You quote him as saying that, “… 8,412 passengers arrived on CAL at AIA from March 2018 to December 2018 and 8,227 departed” on 49 flights which is impossible unless some of the passengers flew sitting on to the wings of the planes!
49 flights X 154 maximum capacity = 7,546 passengers, or 866 passengers less.
Kenton Chance, is this a typo on your part or fake math from the tourism authority?
Yes, Minister McKie is right to say that, “Rome wasn’t built in a day.”
Actually, it took approximately 1,009,491 days to build Rome which works out to 276 years.
Is that how long we have to wait for AIA to reach its potential?!
Is this the same Cecil McKie who predicted that, “So where we welcomed just over (a few) visitors by air each year now, we expect that those numbers will triple in the next two years once the international airport is opened” (see http://www.caribbean360.com/travel/heres-why-st-vincent-is-expecting-a-tourism-boom-in-2015#ixzz5e85Qhnjf ).
Now, “Rome wasn’t built in a day.”
How these politicians love to lie so.
True! McKie does not have a good track record when it comes to projections, neither does Ralph Gonsalves. The general population of SVG is so very doltish that they only pay attention to what they want to be true but not what really is true. The real truth is that this airport, as nice as it is, has turned into an economic disaster. If the government follows through with building a “new Kingstown” in Arnos Vale, expect taxes to increase even more, meaning less Privat Sector investment and more poverty.
A lot of googly gook about what they understood and what they thought. Exactly why is Mr. McKie jumping up and dancing? I assume that he knows that the airport is supposed to make money on the fights and not spend millions on them. Better invest the millions in facilities in and around the airport services. increase employment. Employment for real people. (Oh, those are the very long term plans) It doesn’t look like with this approach that this would be self-sustaining enterprise anytime soon with you in charge unless you involve a lot of people.
The building of this alternative airport was always an “upside down affair” in the first place. An action on the government’s part based entirely on nothing more than political expediency, over and above all economic practically. This thus has resulted in a build to create a demand, rather than a build because there was or is a demand.
Hence for a solution to this mess we have now found ourselves in, of paying these airlines to come, this economic- illiterate and incompetent family administration, needs to go back to basics, and begin to promote the cleaning-up of mainland SVG, while advocating a more “polite and civil” behaviour, on the part of service providers of services by all stakeholders here, including its own civil servants, if it is its aims to attract foreign tourist to our mainland.
As things now stands currently, one has to ask the question, why on earth would a first world visitor grace us on the mainland with their presence, unless they wished to go slumming it? Therefore, let us just face up to the fact that there is most certainly, nothing here to offer the discerning traveller, except rude service providers, a risk of being killed and Vinci-cannabis.
Sloppy journalism. Have some pride in your work! Making basic rookie mistakes and missing simple details. There are so many dates messed up in here, such as flights running from December 2018 until April 2018. It’s confusing! Also, details such as the type of aircraft: Air Canada Rouge operates Airbus A319’s and A321’s, not 737’s, and I believe one of the other airlines operates Airbus, not Boeing. These may seem like small details, but they are easy ones to get right, and when there are more than half a dozen mistake, it calls into question the entire reporting.
Are we to report what you say or what the minister told Parliament?
Correct. But you could also have noted the errors in the original story.
Vincentians, should note that it is a common practice to pay Airline to attract them to some route that might not other wise be profitable. I think what should be taken into account is the amount of foreign exchange that is being earn from the passengers entering the country. If a substantial about of foreign exchange is being earn it is worth paying the Airline to come. As Caribbean people we need to stop being so myopic.