Koninkrijk.nu reports that The Netherlands is in favor of a public service obligation for the air transport between the Windward Islands of Saba and Sint Eustatius with Sint Maarten. This obligation imposes conditions on the frequency of flights and the ticket price. This is the outcome of an evaluation of the policy participation of the Dutch State in Winair.
Since the constitutional reform of the Kingdom in 2010, the Netherlands has owned 10,000 shares in the airline Winair, based in Sint Maarten. That’s 7.95 percent. The rest is in the hands of the country of Sint Maarten.
Before the state reclassification, the shares were wholly owned by the country of the Netherlands Antilles. The shares were acquired for free, but have a face value of $560,000.
Policy participation in Winair serves the central public interest, namely the accessibility of the BES. Transport must be sufficiently frequent and tickets to fly to and from the Caribbean Netherlands must be affordable. Travel times, waiting times and transfer times are acceptable in such a regime.
However, according to the report, the interpretation of share ownership does not contribute to better safeguarding the public interest. Policy participation can be divested – as soon as other instruments to safeguard the public interest are in place. This requires a political decision.
The same applies to the choice to deploy a public service obligation or another instrument, according to the Minister, according to the Minister of Infrastructure and Water Management.
Aviation guarantees this interest as a modality. It itself can choose to intervene in the air transport regime that is based on a remote government, for example to correct market failures. In addition, public law instruments can be set up to efficiently safeguard this interest.
Public Service Obligation
With a public service obligation on the routes between Sint Maarten and Saba/Sint Eustatius, there will be a possibility to set conditions for the level of ticket prices and the frequencies of the flights. Airlines in the Kingdom could also compete on the routes mentioned, on which Winair now has a monopoly.
In order to make a public service obligation possible, an institutional basis must first
be included in the BES Aviation Act and resources must be allocated for it. The minister will be able to inform the House of Representatives in the autumn of 2022 about the results of the exploration of the public service obligation.
Two measures that may not structurally safeguard the public interest on Saba and St. Eustatius, but which may contribute to improved connectivity in the Caribbean region, are the relaxation of the establishment requirements, and investigating, in consultation with the other Kingdom countries, whether seventh freedoms in any form can bring solace to the Kingdom. The seventh freedom is the right to transport paying cargo between two foreign states without entering one’s ‘own’ state.
It can also be considered whether a public service obligation can contribute to safeguarding interests other than ‘Accessibility BES’. Such as the priority use of aircraft for emergency aid, or patient transport in the event of a crisis.
Winair has become financially healthier since 2010, but under normal circumstances incurs an annual loss of one to two million dollars on the routes from Sint Maarten to Saba and Sint Eustatius. With 30,000 passengers per island annually, the demand is too low, the operational costs and route charges are too high to run a profitable operation.
Winair compensates a part of this with the flights to Sint Barths. This operation is profitable in itself. However, leaving the planes on the ground costs more than seeking a small compensation in operating the routes desired by the Netherlands. The price mechanism, therefore, does not work optimally.
Hurricane Irma in 2017 and the COVID-19 pandemic have also pushed the solvency ratio and shareholders’ equity into the red. Without support, the company is likely to go bankrupt in the short term.
For that reason, the Netherlands granted a mortgage loan of three million dollars to Winair in December last year so that the company can continue to operate as a business. An additional $1.5 million will be added this month.
According to the minister, increasing the mortgage loan to Winair should be seen as an interim solution for the short term, pending an instrument with which it can guarantee accessibility in the long term.