GLOBAL INSIGHT / Jamaica report 2020

Jamaican aviation looks to the next horizon

GLOBAL INSIGHT

The Airports Authority of Jamaica’s President Audley Deidrick describes the investments and developments that are transforming the country’s airports and aerodromes.

The Airports Authority of Jamaica (AAJ) is the independent statutory body that oversees the country’s airports and aerodromes. It is also responsible for ensuring a safe and secure airport system for Jamaica, and undertakes the long-term planning and development of that system. Could you explain how important the aviation sector is for the Jamaican economy?

The Jamaican economy has never been in a more positive position, to sum it up simply. Jamaica has had its fair share of economic challenges but, because of policies and programs that the government embarked on from as early as 2007, a unified long-term planning mechanism has been used to put the country on a sound economic path and we are now seeing the fruits of those plans and programs.

Jamaica is a multi-industry-based economy. As it stands now, tourism and aviation stand front and center as two of the country’s key economic drivers. Our aviation industry is growing in leaps and bounds, and has been significantly influenced by the increase in tourism — around 80 percent of our current annual air traffic is based on that sector.

Jamaica has a very rich aviation history, with the industry officially starting here in 1911. Once that started, tourism soon followed and the two have been inseparable ever since.

Our airports have been seeing particularly significant traffic growth over the last three to five years, growing on average by 3 percent to 5 percent a year. In 2017, we got a major uptick when traffic grew by 8.4 percent nationally. The year 2018 saw a further 6 percent rise and we have not dropped the ball since — we expect to have recorded an increased percentage in the double digits in 2019. Again, this is mostly tourism driven, as there has been an expansion in accommodation stock and an improvement in hotel occupancy levels.

Could you provide a background to the airports that AAJ has responsibility for?

As it stands now, we have three international airports and three aerodromes for domestic flights that are under the auspices of the AAJ. We also have a small number of private airstrips that are receiving support from the current government in order to redevelop them into fully functioning domestic-flight airports and further widen the network of aviation services across the country. The Sangster International Airport (SIA) in Montego Bay, which is being run by a private concession, MBJ Airports, is the largest of our three airports. It is currently driving visitor traffic by being responsible for 4.7 million passengers per year, which was forecast to reach 5 million by the end of 2019.

Norman Manley International Airport (NMIA), which serves Kingston and is smaller, currently accounts for 1.7 million passengers. In October 2018, we signed a concession agreement with a company called Grupo Aeroportuario del Pacífico to operate NMIA. It is a major player in the airport business in Mexico, operating 12 facilities across the country. It is also a 75 percent shareholder within the MBJ Airports concession for SIA, although it has 100 percent of the concession at NMIA.

Ian Fleming International Airport (IFIA) near Ocho Rios is the smallest of our three airports. It caters to a different type of traffic that covers general aviation and small-scale tourism.

How are the airports that you are responsible for being developed?

The government and the AAJ have consistently been engaging in significant capital investments in the airports because, if they are to increase in capacity and service quality, then we must invest. Over the last 15 years or so, the country’s two major airports have seen about $500 million in investments — around $350 million in SIA and $150 million in NMIA.

While both airports will operate under private concessions going forward, these investments are planned to continue. Right now, SIA is rolling out a new master plan for another $250 million in investments that will take place over the next 10 years or thereabouts.

The operators that have taken over NMIA have a capital investment program for the airport of over $200 million. That means we are looking at about another $500 million going into those airports within the next 15 years. This will be used to improve operational efficiencies and service quality but also to build capacity, as we expect the growth that we have been experiencing in tourism and, by extension, aviation, to continue on the same trajectory it is following.

The same model is being rolled out for IFIA and it is the same approach that we are using to look at the development of the Lionel Densham Aerodrome on the south coast of St. Elizabeth, which is a privately operated facility.

The country has embarked on a public-private partnership for our major international airports, where the government currently owns the airports and is handing operation to private bidders. However, what we are doing now with these smaller aerodromes is what I call reverse public-private partnership, where the private entity owns the facility, the government steps in to assist in improving it and then hands it back to the owner to operate in a contractual arrangement.

How is the aviation industry in Jamaica changing as a result of the country’s in-depth plans to become a global hub for logistics and one of the four international nodes for that sector?

Our current business model for air traffic has been pushed mainly by tourism over the decades — however, we are now looking at the next horizon and want to propel our aviation industry beyond catering just to tourism.

Jamaica is strategically and geographically placed within the region and, by extension, the world. People in the international maritime sector will tell you about the advantages of Jamaica from a shipping-logistics standpoint — we are saying the same is true for aviation. Take the Vernamfield Aerotropolis development that will include an aerodrome, plus international air cargo and logistics services alongside warehousing, industrial and manufacturing facilities, as an illustration.

That is where this new horizon is pointing to — you are talking about aviation traffic at the mega-scale, needing a lot more real-estate footprint, needing a lot more variety of services, looking at not just moving traffic in and out of Jamaica but making Jamaica an international logistics hub and central distribution zone that links traffic between South America, Africa, Europe, North America and Asia.

In addition to businesses based at the site, Jamaica’s new special economic zones, including the Caymanas Economic Zone and the Gansu Industrial Park and Special Economic Zone in St. Elizabeth that China’s Jiuquan Iron and Steel Company plans to invest over $3 billion in, need substantial infrastructure, too. Vernamfield will be able to service that.

The Vernamfield project will be a new city in it own right and it is beginning to take form for development and implementation. It is a huge investment, so consultation, analysis and due diligence is currently being done in order for the project to be able to go out to the investment market.

In the meantime, AAJ has started preliminary work. The project is located at a former military base with three of five runways and we are about to rehabilitate the main north-south runway to reactivate aviation activities on the site. While we are doing that, we are embarking on procuring and securing all the lands in that area to cover some 4,700 acres overall in time. That will be the government’s stake in this investment.

How attractive is the Jamaican investment climate at the moment and do you see any areas within aviation or logistics that offer specific opportunities for Japanese investors?

As we make our own strides in aviation, Jamaica has generally become a really significant attraction site for investments. A lot of investors in various industries are suddenly reaching out Jamaica, which is now seen on the world stage as being active and ripe for investment. The opportunity here in Jamaica is enormous.

There is no doubt that Japan and Jamaica have a longstanding relationship and there is an opportunity here for that synergy to be deepened.

For example, Japan is known for its manufacturing prowess and just-in-time methodologies. These will be vital for many of the processes we are implementing here when it comes to logistics. And just imagine the potential that exists for a major assembly site in this country for Japanese cars and spare parts.

I think that there are enormous opportunities for this kind of collaboration to take place. We are optimistic about the future and welcome investors to join the prosperous future that lies ahead for this country and for businesses.