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HomeNewsArchivesFewer V.I. Flights Put $4M Dent in Port Authority Revenues

Fewer V.I. Flights Put $4M Dent in Port Authority Revenues

Sept. 3, 2008 — A cutback in flights to and from the territory coupled with a downturn in the U.S. economy will cut into the V.I. Port Authority's projected revenues for fiscal year 2009 by $4 million, keeping the agency's budget at about $66.7 million, according to VIPA interim Executive Director Kenn Hobson.
As an autonomous government agency, VIPA receives no money from the General Fund, but relies on its own internally generated funds, money from the federal government and bond proceeds to sustain its budget and cover capital improvement projects. Revenues garnered through port fees and leases are expected to total about $50.2 million in FY 2009 — $3.5 million less than what was projected for FY 2008, Hobson said during Wednesday's Finance Committee meeting on St. Croix.
Another $16 million — a combination of federal funds, money collected through the federally approved passenger facilities charge and $1 million in Garvee bond proceeds — is expected to make up the remainder of the budget, he said later.
Increased costs over the past year — including spikes in the cost of employee benefits and utilities — have left VIPA with a $4.7 million net operating loss, Hobson added. Despite efforts made by the agency to cut back on expenses, the FY 2009 budget tries to keep VIPA's expenses in line with the drop in revenues, with the agency cutting out salary increases across the board for employees, and eliminating all vacant positions. VIPA will no longer be shouldering 100 percent of its employees' health insurance costs — they will instead pay an 80 percent employer contribution, while employees will take over the remaining 20 percent — and will be looking at ways to become more energy-efficient, he said.
For FY 2009, VIPA is keeping an eye on the airline industry, as cutbacks in flights will cut another 20 percent — about $4 million — from the agency's projected aviation revenues, Hobson told senators.
"It is anticipated that the total emplanements for FY 2009 will be decreased significantly unless there is a drastic turnaround with the airline fees and fuel costs," he added. "This is not good for the overall economy of the Virgin Islands. With reduced traffic all of the authority's fees will be affected. Concessionaires will receive less revenue resulting in reduced fees paid to the authority, and the airlines will pay reduced fees due to less passengers and reduced landings."
In May, American Airlines announced a reduced flight schedule that is expected to go into effect this month. Daily American Eagle flights from San Juan to St. Croix and St. Thomas will now be shaved down to three, while flights from St. Thomas to John F. Kennedy Airport in New York have been reduced to once a week, Hobson said. Daily flights from St. Croix to Miami have been cut back to five times per week, he added.
While some of the flights are expected to be back in rotation for the winter season, VIPA's biggest issue is the permanent drop in American Eagle flights back and forth from the territory and Puerto Rico (See "American Airlines Agrees to Restore Flights This Winter.")
"American has indicated that the high cost of flying means these cuts are permanent," Hobson said. "Representatives of other airlines indicated that service cuts were possible from their firms, but they have made no announcements at this time."
On a more positive note, Hobson said that FY 2009 projections show a two to three percent growth in revenues on the marine side, largely due to increased cruise ship calls to the territory.
VIPA's FY 2009 budget is broken down as follows:
— $17.9 million in salaries and associated fringe benefits (down $132,994 from FY 2008);
— about $2.6 million for repairs and maintenance (down $14,701 from FY 2008);
— a little more than $1 million for materials and supplies (up $95,258 from FY 2008);
— $6.1 million for utilities (up $575,328 from FY 2008);
— $3.4 million for professional services (down $224,306 from FY 2008);
— $524,333 for travel and transportation (up $131,922 from FY 2008);
— $3.6 million for insurance (down $50,731 from FY 2008);
— $2.4 million for financial and other expenses (up $937,727 from FY 2008);
— $3.6 million for debt service on bonds floated to pay for the construction of the Crown Bay Commercial Center and the build-out of other port facilities;
— about $26.2 million for VIPA's capital projects program; and
— nearly $600,000 for equipment.
Senators and VIPA officials also discussed the need to expand the territory's airports to allow for more "amenities" for passengers, cleaning up the bathrooms at local marine terminals and adding more hotel rooms on St. Croix for visitors.
Present during Wednesday's meeting were Sens. Terrence "Positive" Nelson, Usie R. Richards and Ronald E. Russell.
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Sept. 3, 2008 -- A cutback in flights to and from the territory coupled with a downturn in the U.S. economy will cut into the V.I. Port Authority's projected revenues for fiscal year 2009 by $4 million, keeping the agency's budget at about $66.7 million, according to VIPA interim Executive Director Kenn Hobson.
As an autonomous government agency, VIPA receives no money from the General Fund, but relies on its own internally generated funds, money from the federal government and bond proceeds to sustain its budget and cover capital improvement projects. Revenues garnered through port fees and leases are expected to total about $50.2 million in FY 2009 -- $3.5 million less than what was projected for FY 2008, Hobson said during Wednesday's Finance Committee meeting on St. Croix.
Another $16 million -- a combination of federal funds, money collected through the federally approved passenger facilities charge and $1 million in Garvee bond proceeds -- is expected to make up the remainder of the budget, he said later.
Increased costs over the past year -- including spikes in the cost of employee benefits and utilities -- have left VIPA with a $4.7 million net operating loss, Hobson added. Despite efforts made by the agency to cut back on expenses, the FY 2009 budget tries to keep VIPA's expenses in line with the drop in revenues, with the agency cutting out salary increases across the board for employees, and eliminating all vacant positions. VIPA will no longer be shouldering 100 percent of its employees' health insurance costs -- they will instead pay an 80 percent employer contribution, while employees will take over the remaining 20 percent -- and will be looking at ways to become more energy-efficient, he said.
For FY 2009, VIPA is keeping an eye on the airline industry, as cutbacks in flights will cut another 20 percent -- about $4 million -- from the agency's projected aviation revenues, Hobson told senators.
"It is anticipated that the total emplanements for FY 2009 will be decreased significantly unless there is a drastic turnaround with the airline fees and fuel costs," he added. "This is not good for the overall economy of the Virgin Islands. With reduced traffic all of the authority's fees will be affected. Concessionaires will receive less revenue resulting in reduced fees paid to the authority, and the airlines will pay reduced fees due to less passengers and reduced landings."
In May, American Airlines announced a reduced flight schedule that is expected to go into effect this month. Daily American Eagle flights from San Juan to St. Croix and St. Thomas will now be shaved down to three, while flights from St. Thomas to John F. Kennedy Airport in New York have been reduced to once a week, Hobson said. Daily flights from St. Croix to Miami have been cut back to five times per week, he added.
While some of the flights are expected to be back in rotation for the winter season, VIPA's biggest issue is the permanent drop in American Eagle flights back and forth from the territory and Puerto Rico (See "American Airlines Agrees to Restore Flights This Winter.")
"American has indicated that the high cost of flying means these cuts are permanent," Hobson said. "Representatives of other airlines indicated that service cuts were possible from their firms, but they have made no announcements at this time."
On a more positive note, Hobson said that FY 2009 projections show a two to three percent growth in revenues on the marine side, largely due to increased cruise ship calls to the territory.
VIPA's FY 2009 budget is broken down as follows:
-- $17.9 million in salaries and associated fringe benefits (down $132,994 from FY 2008);
-- about $2.6 million for repairs and maintenance (down $14,701 from FY 2008);
-- a little more than $1 million for materials and supplies (up $95,258 from FY 2008);
-- $6.1 million for utilities (up $575,328 from FY 2008);
-- $3.4 million for professional services (down $224,306 from FY 2008);
-- $524,333 for travel and transportation (up $131,922 from FY 2008);
-- $3.6 million for insurance (down $50,731 from FY 2008);
-- $2.4 million for financial and other expenses (up $937,727 from FY 2008);
-- $3.6 million for debt service on bonds floated to pay for the construction of the Crown Bay Commercial Center and the build-out of other port facilities;
-- about $26.2 million for VIPA's capital projects program; and
-- nearly $600,000 for equipment.
Senators and VIPA officials also discussed the need to expand the territory's airports to allow for more "amenities" for passengers, cleaning up the bathrooms at local marine terminals and adding more hotel rooms on St. Croix for visitors.
Present during Wednesday's meeting were Sens. Terrence "Positive" Nelson, Usie R. Richards and Ronald E. Russell.
Back Talk


Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.