SIMPSON BAY:--- A recent study commissioned by the Princess Juliana International Airport operating company, PJIAE, concluded that the airport and the companies operating at the airport perform considerably less in terms of revenue generated from non-aeronautical sources than is the average norm regionally and internationally for an airport of its size.Non-aeronautical sources of income include rentals, concessionaires, and food and beverage, and related areas.
The study by the firm NACO/InterVISTAS, with the approval of the Supervisory Board of Directors, pointed out that compared to airports of similar size in the region, the airport duty free shopping sales per departing passenger is low. This, according to the study, seems to be because the airport is impacted by the duty-free sales island-wide.
"In terms of airport revenue, SXM is performing average compared to larger airports in the region and substantially lower than global airports in different categories," the report stated, indicating that the "most obvious reason for the difference is the agreement on effective concession rates, which seems to be at the low end of the scale."
The study further stressed that in general, the average effective concession rates as percentage of gross revenue paid to the airport is low and not in consonance with the industry standard.
"Naturally, PJIAE wants to bring its non-aeronautical revenue in line with the industry standard, while partnering with the concessionaires so that they too could improve their performance," said Regina LaBega, managing director of PJIAE.
"In other words, if the concessionaires make money, PJIAE also will make money. That is what the partnership we are seeking is all about with the new strategy," said LaBega.
"One of the ideas we are working on is to make the airport a tax-free zone, which will give departing passengers an added incentive to shop at the airport," LaBega added.
She continued: "Following the recommendations of the study, and taking advantage of the fact that several of the contracts of the concessionaires would expire at the end of June, we had embarked on a series of discussions with the concessionaires, a number of whom are delinquent for a long period of time with their rent payments and other fees to PJIAE."
The managing director said the main thrust of the discussions was to ensure that the concessionaires were brought on board with regards to PJIAE's plans to implement a new strategy that would increase the bottom line for the companies operating at PJIA, while improving revenues for the airport as well.
"The current situation whereby several tenants owe PJIAE a total of over 20 million dollars is quite unsustainable for any company," LaBega stated.
"After six years of operating at the airport, it is evident that PJIAE has been more than lenient and understanding enough. In fact, the joke out there is that if you want to do business without paying rent, go to PJIA. No company worth its salt would condone such a huge accounts receivable for such a long time. It is a situation which management, and the Supervisory Board of Directors agree cannot continue any longer."
"What PJIAE is doing now is embarking on an improvement of the entire shopping area, with better layout, décor and lighting, which will make passengers more disposed to spend. For this to happen, we need a transition period, which has been discussed with the concessionaires," LaBega explained.
She said during the one-year transition period, the concessionaires that want to continue operating at the airport would be given an opportunity to remain there and even expand their product line.
"The Majority of our concessionaires and tenants have been exemplary in the way they have conducted their business with PJIAE. They are not in default with their rent and other payments and have maintained a high standard both in their products and services," said LaBega.
"Some of our concessionaires and tenants have already expressed their excitement at the potential and possibilities the new approach will offer them. We appreciate and thank them for their contribution to the success of PJIAE and look forward to continuing doing business with them for a long time," LaBega added.
Do i taste some sugar coating here? Not very sweet at all.