The Dutch government has started preparations to amend the Caribbean Netherlands Aviation Law to make it possible to implement a Public Service Obligation (PSO) for flights between St. Maarten, St. Eustatius, and Saba if this proves to be desirable in the future.

The decision on whether to implement a PSO for air traffic between the three islands has not been taken as yet as this is still in the investigation phase. But in order to facilitate a PSO, the law needs to be changed, Dutch Minister of Infrastructure and Water Management Mark Harbers informed the Dutch Second Chamber of Parliament in a letter on Tuesday.

“This law change should make it possible to, when further assessment shows that this is the most realistic instrument, actually be able to make the choice to implement a PSO. This law proposal can be brought into procedure shortly,” Harbers stated. Aside from this legislation trajectory, consultations are held with stakeholders about whether and how a PSO proposal can be concretely drafted. This includes the question to the stakeholders about how they can financially support a PSO. A PSO would bring down the ticket prices and set the frequency of flights, which all cost money in the format of subsidies.

The actual implementation of a PSO will most likely require a structural financial government contribution and for this, no financial means have been allocated in the budget of the Ministry of Infrastructure and Water Management.

The minister explained that in December 2021, the Second Chamber received an evaluation of the Dutch government’s participation in WINAIR. In this evaluation, it was concluded that the shareholder concept was not the most suitable instrument to secure the interest of the Dutch State.

“That interest is the accessibility of the Dutch public entities Saba and St. Eustatius. It was reported that there would be an assessment of a PSO as an alternative instrument to guarantee this interest in a sustainable manner,” Harbers stated.

A PSO is an instrument with which the government can set conditions to airlines on a specific air transport route with regard to four issues: the maximum ticket price, the minimum flight frequency, the capacity and continuity.

“The instrument enables the government to guarantee a minimum supply when the market has proven unable to meet the demand that needs to be served from a social perspective,” the minister stated.

A report of SEO Eco-nomic Research titled “Impact of PSO Windward Islands, effects for Saba and St. Eustatius” showed that the market on the routes between St. Maarten, Saba and St. Eustatius complies with the characteristics for implementing a PSO, namely a small market, there is no room for multiple airlines and alternative modalities don’t offer a full-fledged substitute.

According to the report, PSO air transportation would have a limited impact on the demand for ferry services, because the modalities are not interchangeable one-to-one.

The report indicated that for both Saba and St. Eustatius, flights are important to comply with the demand for transportation to and from the hospital and medical services, educational institutions, commercial services, and connections in the interest of employment.

SEO investigated several scenarios for a PSO design with a variation in possible conditions regarding the maximum ticket prices and flight frequency and in-corporated price flexibility in this exercise.

SEO looked at a variation of two to five flights per day and a maximum ticket price range of US $40 to 85. The annual government contribution needed for the scenarios was estimated in the range of $3.8 million to $7.6 million.

Minister Harbers referred to the Multilateral Protocol Liberalization Air Transport in which the governments of the Netherlands, Aruba, Curacao and St. Maarten made agreements about the market of air transport in the Caribbean part of the Kingdom.

In the protocol, the countries agreed that the market for air transport is in principle free. The protocol offers the countries of the Kingdom the possibility to implement a PSO when this proves necessary for the economic and/or social development of one or more of the islands.

The Daily Herald