STATEMENT BY PREMIER AND MINISTER OF FINANCE
DURING THE TENTH SITTING OF THE SECOND SESSION OF THE FOURTH HOUSE OF ASSEMBLY
Friday, June 19 2020
BVI Airport Authority Consultant Report
Mr. Speaker, as you are aware, your Government is committed to the highest standards of transparency and accountability in our handling of the public’s affairs.
As Premier, I have said on numerous occasions that we will be open in providing information to all Members of this House, especially the Members of Her Majesty’s Opposition, and to the public, so that all are kept well informed.
To this end, I wish to provide an update on some of the work that has been taking place through the BVI Airports Authority, which aim to position the BVI as a competitive air transport hub and which aim to support the growth of the Territory’s tourism sector, as well as other industries.
Honourable Members would know very well by now that the Territorial Vision, set by your Government, is to transform the Virgin Islands into a leading regional economy by 2025 through entrepreneurship, innovation and local and foreign investment.
Notwithstanding the economic setbacks and complications presented by COVID-19, that mission still stands.
Over the past few months, your Government has been nurturing the conversation on intra-regional trade and intra-regional travel.
In January, 2020, based on the work that the BVIAA Board and Management had been doing over the previous months, representatives from Caribbean Airlines Limited had visited the Terrence B Lettsome International Airport with a view to adding the BVI to their route network. Discussions were also held with LIAT concerning the increase and improvement of the availability, reliability and quality of airlift to the Territory.
COVID-19 has, expectedly, thrown the timetables off, but we are confident that once air travel and tourism begins reawakening, these initiatives will resume.
Members would recall that under your new Government, and together with the BVIAA, we have been actively exploring the topic of longer-range flights and larger aircraft that can present more viable connections to the US mainland and beyond. The successful landing of Titan Airways’ Airbus A-318, with passengers, in late December 2019, direct from Halifax, Canada, and its subsequent successful take-off destined for the UK, was part of this exploratory work.
All of this has been vital towards the approach that the Authority and your Government intend to take to get us to where we aim to be so that we can create a sustainable future for the BVI.
The philosophy of our approach has been to maximise the use of what we presently have while we work on our long-term goals.
The discussion on the suitability of our aerodrome to support the passenger volumes that we have targeted is not a new one. Everyone is quite settled on the fact that larger passenger volumes require more space for arrivals, departure and check-in functions. It also requires more apron space. Larger aircraft, generally, require longer runway length.
The debates that have been taking place surround which options should be pursued and how this would be financed.
To assist the BVIAA in its decision making and planning, the Authority engaged the services of Brakkam Aviation Management LLC (“Brakkam”), an Atlanta-based consulting firm, in December, 2019. The objective of the consultancy is to assist the Authority in assessing, shaping and planning the role of air transportation in terms of the Territorial Vision and your Government’s commitment to build the resiliency of the Virgin Islands, particularly given changing traveller and tourist demographics; natural and manmade disaster such as global warming and catastrophic storms; and pandemics like COVID-19.
Brakkam has presented the BVIAA with a six-month interim report, which contains feedback on a number of crucial issues that we need too take into account as a Territory, not just from the aviation and aeronautical sector but also in areas such as tourism and cargo shipment.
Mr Speaker, I crave the indulgence of Honourable Members as I share some of this feedback.
But before I do so, permit me to say a few brief words about the qualifications of Brakkam and its founder, Mr Miguel Southwell.
Brakkam is a global transportation management consulting firm headquartered in Atlanta, Georgia in the United States. Mr Southwell, who serves as the firm’s President and CEO, has an aviation and transportation management career that spans over 30 years, including as head of Hartsfield Jackson Atlanta International – the world’s busiest passenger airport with over 100 million annual passengers, and as deputy head of Miami International Airport, the busiest international air cargo airport in the United States.
Mr Southwell is also a former Oregon regional bank executive, and also served as an adjunct professor of airport, airline, and transportation management courses at Georgia State University.
He has served on numerous Boards including on that of Airports Council International’s (ACI) World Governing Board, and is past-president of both the ACI Latin America and Caribbean Region that consists of over 200 airports, and the ACI Fund, which provides training to airport officials in developing countries around the world. Mr Southwell himself has taught courses on behalf of ACI in Africa, Asia and Latin America and the Caribbean.
ACI, by the way, is the official and global association of over 1,800 airports in five regions that include Africa; Asia; Europe; Latin America and the Caribbean; and North America.
Brakkam and Mr Southwell have done extensive aviation work in Antigua and Barbuda; Jamaica; Burmingham, Alabama, Seattle; Columbia; Guangdong, China; and the Indian Ocean Region.
Based on the feedback provided to the BVIAA, the following points are worthy of note as the BVI seeks to position itself in the regional aviation arena, and to capitalise on the possibilities of the modern tourism market.
- The Millennials – roughly 26 to 43-year age bracket – form the majority of today’s tourists. These persons grew up in a high-tech environment surrounded by computers and the internet, and are frequently online or socially networking through the internet.
This demographic is always connected to their cell phones and therefore mobile photography is part of their daily lives. They use cell phones to document their travels.
Hotels, resorts and tour companies should train employees and tour guides to seek opportunities to assist this new generation of tourist to stage and take such photographs.
- Millennials are not interested in mundane vacations and just lying on the beach. They are seeking what is called “Adventure Travel” which can have three elements or characteristics:
- Connects the tourist to nature;
- Provides physical activity; and
- And provides interaction with culture.
They like Soft Adventure which includes hiking, rafting, snorkeling, and kayaking; and Hard Adventure which includes climbing, trekking, camping, paragliding, and surfing. There is a third type of adventure called Extreme Adventure, such as swimming with the sharks.
- Millennials also tend to be very aware of the impact that their travel experiences have on the environment, and are more likely to choose hotels and resorts that promote sustainable tourism, including recycling of waste, reuse of materials, and energy conservation.
You can see here, Mr Speaker, how relevant and on point your Government is with our focus on going 60 percent Green by 2030; transitioning to renewable such as solar, and cleaner energy sources such as LPG; adopting Smart technology in public infrastructure; and focusing on waste management, reduction, reuse and recycling.
- Millennials are not content to spend a considerable period of time connecting through multiple hubs to reach their vacation destinations; they have choices and will increasingly opt for better ones. They are not going to waste hours waiting in airports to catch multiple connection flights to come to the BVI, when by comparison, most competing non-stop Caribbean destinations with non-stop jet service from Atlanta take less than four (4) hours at less than half the cost.
That is why we need to get the direct flights and reliable flights that do not involve lengthy transfers and excessive transfers.
If we do not do this, we will lose tourism market share to other regional destinations with easier access, and who are now waking up to the competitiveness of their own unique tourism offerings.
- Mr Speaker, the BVI is trying to increase our market share in the niche markets such as MICE (that is Meetings, Incentives, Conferences and Exhibitions).
We have also been courting companies to bring their operating bases to the BVI or to do more business with the BVI.
But for companies to be interested in the destination, direct air service access between the company’s headquarters and the potential new site is a must.
In the 21st century, in order to remain competitive, it is essential that companies are able to move their goods and people quickly. With no direct air service to any global economic center, the BVI will not succeed in attracting any such foreign direct investment.
- Air transportation access plays a direct and crucial role in the level of resiliency of the BVI’s recovery from any disaster, whether a hurricane or global pandemic.
The current dependency on the availability and condition of other Caribbean airport feeder hubs for global aid/relief to the BVI during the aftermath of regional storms and pandemic closures, means that understandably, such hubs in the Caribbean will give priority policy-consideration to their own needs, and not those of the BVI.
Correspondingly, for the tourist who wishes to travel to the BVI when such travel restrictions are lifted in the BVI, if quarantines remain in place at such existing Caribbean feeder hubs, such tourists will choose to forgo a BVI vacation.
- Thus, if the BVI’s recovery efforts are slowed in the aftermath of disasters, the resiliency of the BVI economic recovery from such disasters will be equally sluggish. For this reason, non-stop commercial jet service is again crucial to BVI disaster resiliency.
Brakkam reached out to JetBlue and WestJet. And, while interest to serve the BVI was strong, the current runway length at the Terrance B. Lettsome International Airport neither renders such service operationally nor financially viable.
So, if we want to attract the modern travellers, and if we want to be competitive and resilient, we have to deal with our infrastructure capacity so that we can get the larger aircraft to come in.
Brakkam considered options for extending or reorienting the runway, as well as constructing an alternative runway. The consultant took into consideration the costs that would be involved with land reclamation versus options that did not involve reclamation, among other factors.
The consultant has recommended an option that will allow us to build a new runway without much land reclamation. This will allow for the construction of a 9,100 linear foot (LF) runway at an estimated probable cost of $183.78 million. A shorter runway of 7,250 LF would cost approximately $150.65 million.
Avoidance or minimisation of land reclamation presents the lowest cost and shortest timetable for delivery.
Suffice it to say when the BVIAA Board took up office in July, 2019, they met on file a proposal for extending the existing runway by a mere 1,500 FL at a cost of $203 million, and involving land reclamation to carry out the extension.
The new Board, through Brakkam has been able to identify an option for constructing an entire 9,100 LF runway with not much land reclamation for less than what the previous administration was going to spend for a 1,500 FL extension.
The consultant advises that this entire project, should we decide to proceed on this option, will take three to five years from start to finish including financing, design and construction of the new runway, and the ancillary improvements to the taxiway, aircraft parking apron and passenger terminal, among other project tasks.
Through this new resilience programme, brought along by climate change, we will now be able to bring flights direct from Germany and the UK, and other areas in Europe, direct to the BVI, and these tourists will then be able to enjoy the BVI and hop over to the US Virgin Islands. This will present tremendous economic opportunities for our people.
This now makes it imminent for major hotel chains, that have long expressed an interest in the potential of the BVI but which were discouraged by our limited airlift capacity, to now venture in because the potential for viability would be increased.
This will increase the Territory’s room inventory, which will increase our capacity for welcoming greater numbers of visitors and tourists, whose presence will contribute to economic activity.
Mr Speaker, I commend all the previous Governments for all they have done for the BVI’s tourism industry, but we have been swimming in shallow waters. Therefore, the benefits that can be derived can only be those that are in shallow waters.
What your Government, through the people, is doing is to launch the Territory out into deep water, where the benefits there are for the expansion of the industry and where the economic activity exists to take our tourism product to unprecedented revenue contributions to the national flow of income.
We must remember that one of the reasons why tourists do not come to the BVI during the hurricane season is because of the uncertainty that they will be able to get airlift in the event of an emergency like an impending storm.
A longer runway, capable of facilitating larger aircraft that are able to fly directly to the US mainland and Europe, means that there are options that will open up to counteract this concern. Tourists will be able to come to the BVI and be confident that in the event that it becomes necessary, the airlift can be available to get them safely back to their home countries.
This will increase the volume of arrivals during what is traditionally a slow period annually for one of our main economic engines, and this will translate into more money going into the pockets of our Virgin Islands people and their businesses.
Mr Speaker, you would recall that the Junior Minister for Tourism, in her inaugural speech, spoke about streamlining revenues in the tourism industry. You will be hearing more from us on this, however, the runway and new hotel chains, that will come out of this initiative, are all part and parcel of the overall vision for our tourism product.
A World-Class High-End New FBO (Private Jet Experience)
Brakkam has noted that, for its size, the Terrance B. Lettsome International Airport accommodates a large number of private state-of-the-art corporate jets. However, the Airport lacks a comparable world-class fixed based operator (FBO) facility.
Brakkam has proposed to develop such a facility through a tender process.
The FBO will be located immediately east of the existing passenger terminal, coupled with an associated large hangar capable of accommodating two modern corporate jets.
In collaboration with Airport Administration, Brakkam first developed an Expression of Interest (EOI) to which four companies responded and were shortlisted. Brakkam subsequently completed a Request for Proposal (RFP), with an accompanying draft Lease Development Agreement. Responses to the RFP are due on Monday 20th July 2020.
A Safer, Paved Runway for Virgin Gorda Airport
Mr Speaker, in 2019, the BVIAA issued an RFP for a company to design and construct new runway pavement on the airstrip in Virgin Gorda, to promote safety and growth in aircraft operations.
Brakkam was tasked to review the four proposals that were submitted.
Brakkam, subsequently made a recommendation to the Board to separate the project into two parts - one a design and construction management (oversight) function, and the other a construction function.
The consultant further recommended that the design and construction oversight function be awarded to AVIA NG, which proposed the lowest price.
Brakkam drafted and organized the execution of the Agreement.
The runway pavement construction is scheduled to be completed by early December 2020.
As your Government continues to say, Mr Speaker, while we are working on putting the longer-term elements in place, we have to make the most of what we have at present.
With the help of Brakkam a number of initiatives have been identified to improve passenger experience and to contribute to increasing non-aeronautical revenue.
Interim Terminal Improvements (Appearance Plan)
The BVIAA recognizes that some interim improvement can be made at the Terrence B. Lettsome International Airport that will enhance passenger experience.
At the urging of the BVIAA Board and in collaboration with Airport Administration, Brakkam has developed a “Snag List” and successfully recommended to the Board, a process to expedite the completion of minor improvements to provide the Airport with an “opening-day-fresh” appearance until major renovations can be completed.
At an estimated cost of $290.3k, the major components of these interim improvements are to the restrooms and ticketing areas, roof repairs to the passenger terminal, and the expansion and renovation of the international arrivals area.
Work is expected to be completed by November 30, 2020, using a pool of construction firms, the tender documents for which is currently being developed.
Improved Airport Amenities
Mr Speaker, amenities are important for improving passenger experience which encourages passenger spending while at the airport, contributing to non-aeronautical revenue generation for the Authority, and hence the Government and people of the Virgin Islands.
In collaboration with staff, Brakkam has recommended, the reconfiguration of the existing unoccupied restaurant space to:
- Serve food and beverage on the passenger holdroom side only, and close off restaurant’s access from the terminal lobby, to improve sales
- Reduce the size of the restaurant to make it smaller and more financially viable for the restaurant operator
- Permit the security checkpoint area to be expanded into the partially vacated restaurant space
Prior to Brakkam’s engagement, a restaurant operator was selected through a tender process, and Brakkam is working with Airport Administration to structure that Concession Agreement.
The plan is to have the space reconfigured and restaurant recommissioned by November 16, 2020.
Separately, Brakkam has worked in collaboration with Airport Administration to develop rates and charges for the opening of a new Airport VIP Lounge, and has developed and issued an RFP to solicit and engage a hospitality-sector entity with either airline-lounge, hotel, restaurant, or school-of-hospitality operational experience, to operate and manage the Lounge on behalf of the BVIAA.
The deadline for that RFP submittal 10th July 2020.
Research shows that business travellers account for 12 percent of airlines' passengers, but they are typically twice as lucrative – accounting for as much as 75 percent of profits.
Passengers, especially business passengers, look at the amenities, especially the airport lounges, when choosing whether to travel through an airport.
Therefore, by improving the airport’s amenities, we are improving its attractiveness and competitiveness, and which has numerous benefits for the Territory.
Aviation Services – Relocation and Revenue Growth
To make way for the expansion of the airport facilities, and as provided in the Airport Master Plan, Brakkam, working in collaboration with Airport Administration, has developed an RFP for the relocation/development of a new fuel farm to service commercial aircraft at Beef Island.
Loss Recovery Protection and Insurance Policy Revisions
Brakkam has assisted the Airport Administration to revise its insurance policy to ensure adequate coverage for typical and costly storm damage such as mold removal and repairs, which were not previously covered in its policy and which will aid in the resiliency of the Airport’s recovery from storm damage.
Additionally, Brakkam has instituted strict guidelines that now consistently require performance and payment bonds from contractors. This eliminates the BVIAA being exposed in the event contractors do not complete the project or fail to pay their subcontractors.
Collaboration with LIAT
Mr Speaker, Brakkam has also been instrumental in assisting the BVIAA in its discussions with LIAT.
In a nutshell, LIAT had requested an annual subsidy from the Government of the Virgin Islands to continue servicing the BVI.
Brakkam was able to conduct analysis of LIAT’s submission that allowed the Government to put forward an alternative argument, and expressed a willingness to collaborate on building traffic to the BVI and for LIAT.
Brakkam has also been working with the BVIAA to conduct an organisational assessment and to develop a roadmap for building a cohesive, efficient, effective and knowledgeable airport team.
The consultant conducted an extensive organisation assessment of the BVIAA Airport Administration.
Management qualifications, culture, structure, key processes and the level of staff engagement were all examined.
Brakkam has made a series of recommendations to the BVIAA Board and Management. Together, they are urgently creating opportunities to ensure that BVIAA is delivering service and operating at the highest standards.
Mr Speaker, as you can see, the BVIAA Board, management and staff, have indeed been hard at work to do their part in transforming the BVI into a leading regional economy, to increase the Authority’s revenue and to support the Territory’s growth in related industries.
A lot is earmarked to happen later this year with respect to improving the facilities at the Terrence B. Lettsome International Airport at Beef Island, and the Taddy Bay Airport in Virgin Gorda.
The Board is considering the major capital projects recommended by Brakkan and in due course I will provide further updates to Honourable Members.
Mr Speaker, the Board and Management of the BVIAA remain committed to building resilience at our airports in light of climate change and the other factors that are increasing the urgency for the BVI to increase the efficiency of its industries. This resilience will boost our tourism product and enhance the wellbeing of our people of the BVI.
I thank you.