Updated study puts price on cheaper Saba, Statia flights

GREAT BAY--An updated economic study has placed a clearer price on plans to make flights between St. Maarten, Saba and St. Eustatius more affordable, concluding that financial assistance aimed specifically at residents would cost government far less than subsidising every passenger.

A direct subsidy available only to residents of Saba and St. Eustatius is estimated to cost between €2 million and €3.7 million annually, depending on the amount provided for each ticket.

Limiting the support to three subsidised tickets per resident each year could reduce the annual cost by a further €500,000 to €1 million. A general subsidy available to residents, visitors and other travellers could cost as much as €7.5 million annually.  

The findings give greater financial detail to the discussion over improving regional air travel following the Dutch Senate’s July 7 approval of legislation creating the legal basis for a Public Service Obligation, commonly known as a PSO, on air routes within the Kingdom.

The legislation creates the legal authority for government to establish service requirements on the routes, but does not by itself introduce cheaper tickets, secure funding or immediately begin a PSO. The law is scheduled to take effect on a date to be determined by royal decree.

The study, prepared by SEO Economic Research for the Dutch Ministry of Infrastructure and Water Management, examines what the different forms of government support could cost and which passengers should qualify.

It reaffirms the conclusion of an earlier 2023 study that the market conditions on the Saba-St. Maarten and St. Eustatius-St. Maarten routes justify government involvement.

Both are small routes with limited passenger volumes, but they provide residents of Saba and St. Eustatius with an essential connection to St. Maarten and its healthcare, transportation, commercial and public-service networks.

Current Fares Considered High

The report concludes that the cost per kilometre of flying from Saba and St. Eustatius to St. Maarten is considerably higher than on comparable small-island routes elsewhere.

To bring prices closer to the subsidised fares paid by residents on similar routes, the study estimates that support of between €120 and €200 would be required for each Saba return ticket.

For St. Eustatius, the estimated assistance would range from €100 to €210 per return ticket.

Six scenarios were examined, varying the subsidy amount, whether the assistance would apply to residents only or all passengers, and whether the number of subsidised tickets would be unlimited or restricted to three per person annually.

The study found that a higher subsidy would produce lower fares but increase government expenditure. Restricting the assistance to residents would reduce the cost, while placing a limit on the number of subsidised tickets would lower it further.

Most eligible residents would not be negatively affected by a three-ticket limit, according to the researchers, provided the limit is not set below the number of annual trips normally made by most residents.

The results show that targeted assistance would improve affordability for the people who rely most heavily on the connections, while avoiding the higher cost created by subsidising tourists and other non-residents.

A general subsidy without a ticket limit would create a stronger increase in demand. Government would then have to support more passengers and potentially additional flights, pushing the annual cost towards the upper estimate of €7.5 million.

PSO Could Protect Schedule and Fares

The report distinguishes between a direct passenger subsidy and a PSO.

A subsidy would reduce the amount paid by eligible residents, but would not guarantee the number of flights, the times at which they operate or the continued availability of the service.

A PSO would allow government to set requirements covering minimum flight frequency, specific schedules, maximum ticket prices and other service conditions.

However, the study warns that government would have to accurately determine how much service is needed. Setting requirements too high could result in government paying for unnecessary capacity, while setting the maximum ticket price too low could produce more demand and substantially increase subsidy costs.

The report leaves open the possibility of combining the two instruments. A PSO could guarantee the schedule and frequency, while a separate resident subsidy could make the tickets more affordable.

Flights Recover, Costs Increase

The market update found that the number of flights and available seats on both routes had returned to approximately pre-pandemic levels by 2024.

Up to four daily connections were regularly offered, and passenger numbers increased as more flights became available. However, the percentage of occupied seats did not increase and remained at approximately 70 percent.

Ticket prices rose by an estimated five to 10 percent, while airline operating expenses increased because of higher wages, fuel costs and the greater number of flights.

The researchers found little opportunity for the airline to achieve major savings by expanding the service. Company expenses such as overhead are allocated to the routes based on the number of flights, meaning that many costs increase as additional flights are added.

Airport Charges Less Direct Option

The report also considered lowering airport charges, but found that this would provide less certainty for travellers.

Reducing the charges could lower the airline’s operating expenses, but there would be no guarantee that the full saving would be passed on through lower ticket prices. Part of the benefit could be absorbed by the airline through its pricing.

The study noted that charges connected to Princess Juliana International Airport make up a substantial share of the ticket cost on the two routes. Because the airport is owned by St. Maarten, the Dutch government appears to have limited authority to directly reduce those charges.

The report does not select one final policy or identify a confirmed source of funding. It instead gives the Dutch government a clearer financial picture of the choices now available.

The findings favour assistance focused on Saba and St. Eustatius residents, possibly with an annual ticket limit, rather than a broad subsidy that would also cover tourists and other passengers.

The remaining decisions include the amount of assistance per ticket, who would qualify, how many trips would be covered, whether a PSO would also be introduced and where the annual funding would come from.

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