Airport Authority Act Amendment Debate - Prime Minister Hubert Ingraham

Speaking Notes
Rt. Hon. Hubert A. Ingraham
Prime Minister
Amendment of the Airport Authority Act
House of Assembly

The purpose of this amendment is to limit the current discretion in the setting of fees at the LPIA by the Airport Authority. This limitation of the discretion in fee setting is viewed as a precondition to the successful completion of the non-Guaranteed financing for the airport redevelopment project.

The cost of the LPIA Redevelopment Project has been estimated at $450 million and is to be funded exclusively from revenue derived from the LPIA and without a Government Guarantee.

A significant portion of the Nassau Airport Development Company (NAD’s) revenues (and, therefore, its creditworthiness) is derived from aeronautical fees (i.e. landing fees, terminal fees, bridge fees, aircraft parking fees), passenger facility charges (PFC’s) and other fees applied directly to air carriers, aircraft operators and passengers.

This would exclude security fees, which are collected to offset the cost of the security services which are still provided by the Airport Authority directly.

Under current Bahamas law, the Airport Authority, with the consent of the Minister responsible for the Airport Authority, determines the Airport Charges from time to time.

Lenders in a long-term non-recourse financing will be averse to bearing “regulatory” risk, namely, that the airport Charges will not be approved at a level sufficient to ensure (based on reasonable traffic assumptions) that the revenues of NAD are sufficient to meet its operating and maintenance expenses, required (either routine or legally mandated) capital expenditures and to comply with the terms of the financing provided by such lenders.

To provide the lenders with certainty regarding the level of Airport Charges it is proposed to amend the Airport Authority Act, 2000 (the “Act”) to provide that the Airport Authority, shall determine Airport Charges, in accordance with procedures to be agreed by the Minister through the promulgation of Regulations

These Regulations would also be incorporated into the commercial contracts between NAD and the Airport Authority and would set out principles which NAD shall take into consideration when determining the level of Airport Charges for any particular period. NAD would also be required to notify to the Airport Authority at least once a year of any pending change or no change in airport charges or the implementation of any new charge.

The principals that would be taken into account would include:
International Standards [ICAO’s Policies on Charges for Airports and Air Navigation Systems (Seventh Edition - 2004))].
A comparison of Airport Charges to those of similar size and similar level-of-service airports in the Caribbean region.

The amount of the Airport Charges (as determined by NAD) should be such that the Airport Charges, in combination with all other airport revenues (concessions, leases, parking, etc.) of NAD, shall be sufficient to:

      fund operating and capital expenditures (including funding of a major maintenance reserve account), plus
      generate sufficient revenues for debt service, plus
      achieve compliance with financial covenants (including achievement of certain projected average and minimum debt service coverage ratios)
      fund debt service reserve and other required reserve accounts, in each case, consistent with an investment-grade rating for the senior debt of NAD, plus
      provide an agreed return, if any, to the shareholder, which is now the Government.


NAD would also be required to disclose publicly (through newspaper advertisements) and directly to impacted air carriers a notification of any intent to change the amount or application of an Airport Charge or the introduction of a new Airport Charge (“Airport Charge Notification”).

This disclosure would:
Outline the rationale of the proposed increase or changes,
Be issued at least 180 days prior to the proposed effective date, and
Invite comments on such proposed changes from members of the public and from air carriers.
In addition consultation would be held with impacted air carriers to discuss the proposed changes to the Airport Charges. The consultation would include disclosure of financial and other information to airlines to support planned Airport Charge increases and / or changes; a demonstration of consistency with the factors considered.

NAD would also be required to provide a response to any comments received in response to the proposed increases; to publish these comments and their responses to these comments on its website and respond directly to the individual or entity providing the comments and the impacted carriers.

The Airport Authority would also be provided copies of all comments and the responses provided.

Only once this process is completed would the Airport Authority be obliged to consider any fee increase proposal by NAD for aeronautical fees.