At a recent meeting of LIAT (1974) Ltd’s shareholder governments, it was agreed that it would be necessary to further delay the 2018 recommendation by the Caribbean Development Bank (CDB) to lower ticket prices for the cash-strapped regional carrier by 25 per cent.
The 2018 CDB study “assumes that lower taxes and charges will lead to cheaper airfares, and stimulate passenger demand”.
Attending the recent meeting, Prime Minister Gaston Browne said that, “the CDB would have done a report confirming that [there is a relationship between] demand for travel and price… [and] that there is some elasticity.
“So, if we could reduce the price by about, maybe, 25 per cent, that may probably increase air travel by about 10 per cent and then [LIAT] would probably break even.”
Browne said, however, “the problem is whether or not we have the fiscal space to give up 25 percent of that revenue”.
“I think what we have to do is hold those taxes stable for the time being and maybe in a few years, we’re in a better position, especially when we could have reduced the debt, then we can give a reduction … in the sense that the reliance on those taxes to service the debt may not be as great,” he added.
Browne offered a timeline of about two years for the air carrier to begin phasing in its first round of airfare reductions with a possible 15 per cent with another reduction 12 months after with another reduction of 15 per cent.
“To cut fares by about 25 … 30 per cent in one fell swoop … I think is going to create a fiscal problem or, let’s say, financial challenge for all of the airport authorities within the region,” he said.