Thursday, July 26, 2012 | | bvibeacon.com | 50 centsThe light that comes from wisdom never goes out.

INSIDEBeacon Business..........................18

Vol. 28 No. 50 • 2 sections, 60 pages

Road Town, Tortola,

British Virgin Islands

© 2012, The BVI BEACON

Experts: Direct flightsnot a sure thingBy JASON SMITHjsmith@bvibeacon.com

Five scale model passenger air-planes sit in a neatly arranged rowabove Denniston Fraser’s desk atthe BVI Airports Authority. Onlyone of the models’ life-size coun-terparts currently flies here.

Three of the models representwide-body jets like the Boeing-767 that won’t be flying to theVirgin Islands anytime soon. Amuch larger version of anothermodel, LIAT’s 50-passenger tur-boprop DHC-8, takes off severaltimes a day from the 4,350-foot

Questionsremain aboutEIS runway extension

SPECIAL REPORT: AIRPORT PART 1

Runway see page 30

New labourpoliciesunveiled at HOAStamp duty report tabledBy CHRYSTALL KANYUCKckanyuck@bvibeacon.com

Among other business during aTuesday sitting of the House ofAssembly, legislators explainedplanned changes to labour policy,tabled the 2010 stamp duty re-port, amended two laws, chastisedthe media for “reckless” reporting,and chose a territorial song anddress. They are to continue theirsitting today.

Deputy Premier Dr. KedrickPickering, who is also the ministerof natural resources and labour,

Leatherbacks monitoredBy TODD VANSICKLEtvansickle@bvibeacon.com

As a boy Austin Freeman went with hisgrandfather to kill leatherback turtles for

meat and oil.“When trunk season come it had me ex-

cited. Even if we don’t catch, I still felt goodbecause I just liked to see them,” Mr. Free-man said. “It fascinated me.”

Nowadays Mr. Freeman, a senior BVI Cus-toms officer who is almost 50, spends his freetime recording and protecting the endangeredanimals that nest along the shores of Tortola.

Although he has been a volunteer withthe Conservation and Fisheries Department

for more than 20 years, he still struggles toconvince some people that he is protectingthe leatherbacks and not harming them.

According to Mr. Freeman, leatherbackhunting was a “tradition” in the Virgin Is-lands, but it is now fading away with hunterslike Mr. Freeman’s grandfather, who died inthe 1970s. They were known as “trunkers,” re-portedly because the Danes claimed the turtleresembled a large leather trunk. In manycases, beaches took on the name as well.

The oil that trunkers collected from theturtles was used for home remedies forasthma and other ailments and would sell for$35 to $200 a bottle, Mr. Freeman said. Themeat and eggs were eaten.

In the 1960s, Mr. Freeman rememberstrunkers showing off their catch at Josiahs Bay

to schoolchildren during a picnic-style settingwhere turtles would “provide plenty of food.”

“We used to catch it for medicine andfood, and now we are trying to protect it formy grandchildren so that [leatherbacks] don’tbecome extinct,” Mr. Freeman said.

In 1989 a moratorium on killing theleatherbacks was put into effect by the Ministryof Natural Resources and Labour. Around thesame time, Mr. Freeman started volunteeringwith the CFD, tagging nesting leatherbacks.

Currently only three people — Mr. Free-man and CFD officers Joel Dore and GaryFrett — tag the leatherbacks in the VI, ac-cording to Mr. Dore. The three men are theonly ones who officially monitor Tortola’s

From trunker to tagger

Photo: TODD VANSICKLEJosé Santiago replaces a coloured light bulb on the Ferris wheel on Tuesday afternoon atthe Festival Village Grounds. The ride is one of nine attractions that Coney Island offi-cials were preparing for the opening of this year’s Claudette “Boopie” Smith Festival Vil-lage slated for today. See story on page 16.

FESTIVAL TIME

Leatherback see page 36

HOA see page 28

INSIDE:

Festival ScheduleWeekend & Culture

— page 4

runway located a few hundred feetoutside Mr. Fraser’s office at theTerrance B. Lettsome Interna-tional Airport.

But it’s the plane shown in thefifth model, a miniature of the189-passenger Boeing 737-800,that the BVIAA managing direc-tor and other officials hope willmake frequent trips between themainland United States and theVI in the coming years.

Through statements in theHouse of Assembly, Deputy Pre-mier Dr. Kedrick Pickering hasmade it clear that the planningstages of the 2,500-foot runwayextension project are well underway: Residents have been con-sulted, the environmental impacthas been studied, and contractorswere recently invited to express in-terest in the job.

He added Tuesday before theHOA that his Ministry of NaturalResources and Labour is assem-bling teams to support the project.

“Our progress thus far looksgood and we are on target to com-mence ground-breaking by the be-ginning of 2013,” he said.

But despite the statements thatDr. Pickering and other supportershave made about the project, therehas been vocal opposition from somecommunity members. Opponentshave raised questions that they sayhave not been adequately answered:

• If the territory can even af-ford a multimillion-dollar runwayat a time of economic recession, isit a wise investment, and how willit be funded?

• If the runway is extended,will passenger demand be enoughto bring the direct flights from theUS and other countries that gov-ernment has promised?

• Will large jets be prepared toland on the runway despite thetechnical challenges consultantshave warned about? [See page 31]The plans

Dr. Pickering has treated theexpansion, which was promised lastyear in his National DemocraticParty’s manifesto, as an electionmandate. At the first of two publicmeetings on the topic, in March, hesaid he wasn’t there to discusswhether the project should be car-ried out, but how it should proceed.

And, standing before theHOA on June 29, Dr. Pickeringanswered that question, too: Heannounced that work would startafter the contractor or contractors

are chosen by December to ex-tend the existing runway about2,500 feet: about 2,000 east intothe sea and some 500 feet westinto Well Bay.

The runway portion of theproject should be complete by De-cember 2015, Dr. Pickering said.

The plans also include up-grades to other infrastructure: theairport “ramp” where jets will park;the passenger terminal; and thenearby parking lot, according to arecent government advertisementinviting firms to express interest inthe project. A new welcome centre,ferry docks and a fixed-base oper-

ator facility, which will service air-craft, are also in the works.

The expansion is designed toallow commercial jets to operate outof Beef Island. Currently, the largestplane operating there regularly isthe 70-passenger ATR-72. The ex-tension, Mr. Fraser said, would bedesigned to bring the Boeing 737-700, which seats up to 149; the Boe-ing 737-800, which seats up to 189;and the Airbus 320, which normallyseats about 150.

Technically, such jets are al-ready able to land on the existingrunway. However, when they areloaded with enough fuel to fly to

the US mainland, they become tooheavy to take off with a full pas-senger load, according to theLouis Berger Group, a team ofWashington DC-based consult-ants who were hired in 2007 toproduce strategic and master plansfor the territory’s airports.

The extended runway will alsobe long enough for some models ofBoeing-757, which can seat as manyas 240 passengers, although suchplanes likely would have to keepsome of their seats empty to stayunder their maximum weight limitto take off from Beef Island, Mr.Fraser, the BVIAA managing direc-

tor, said in an interview this month.He added that private jets,

some of which are reluctant to flyhere in poor weather becausethey’d like to see an additional 500feet of landing space, will also ben-efit from the expansion.

“They will have way more than500 feet; they will have 2,000,” Mr.Fraser said of the planned expan-sion, adding that it will mean thatthe private jets’ range will nolonger be limited by the length ofthe VI runway but by the amountof fuel they can carry.

Page 30 | Thursday, July 26, 2012 | The BVI Beacon Special ReportRunway from page 1

Runway see page 31

Virgin Islands leaders and airport managers have had to

work hard to keep up with planes ever since 1956,

when the first runway, a 1,800-foot dirt landing strip,

was cleared on Beef Island. Initially, agriculture generated

most of the airport’s traffic, but tourism soon took hold in the

territory. Future expansions designed to accommodate bigger

planes were studied and approved by successive govern-

ments, including the current one.

The BVI Beacon | Thursday, July 26, 2012 | Page 31Special Report

New passengersThough there are various tech-

nical challenges with government’splan, the Berger consultants’ find-ings suggest that it is feasible:Commercial jets could indeed op-erate out of an expanded runwayon Beef Island, according to the re-port.

But would they? The answer tothis question is less clear. Dr. Pick-ering has said that tourist demandis enough to motivate airlines tofly regular direct flights from citiesin the US and elsewhere.

He added that his governmentis in talks with several airlines thatmay consider such flights, includingtwo that are “gung ho” about the ex-pansion. But he has yet to publicisea study that supports his claimsabout demand, and he acknowl-edged that carriers haven’t yet madefirm commitments to fly here.

“The simple answer would beyes, but it’s not that simple. It’s aprocess,” he said during theMarch meeting.

‘More iffy’Thomas Tacker, an economics

professor at Embry Riddle Aero-nautical University, said enticingUS carriers to serve the VI marketis not a sure thing. Some airportdevelopers ink contracts with air-lines, expanding facilities for serv-ice guarantees. But in most cases,airlines decide where to fly basedon what makes economic sense forthem, Mr. Tacker said.

“If they don’t have that kind ofdeal, I’d say it’s somewhat moreiffy,” he said.

Mr. Tacker, who wrote thetextbook Introduction to AirTransport Economics, said thatwhen determining a new routeairlines first consider the popula-tion and the distance between po-tential destinations.

“Then they’ll mix in somevariables, such as, ‘Is this a populartourist destination?’ They mightlook at hotel capacity: ‘Is Disneythere or some other major attrac-tion?’” he said.

Then route planners look at adestination’s neighbours, he said.

“Of course they’ll also look at— if they don’t have service tothat city now — how far is thatcity from another city that theycan go to,” he said.

San Juan as a hubLately, the VI’s neighbours

have been getting considerable at-

Runway from page 30

Runway see page 32

But others saychallenges aresurmountableBy JASON SMITHjsmith@bvibeacon.com

In order for the runway expansionproject to be successful, officialshave to find funding, pick theright contractor and convince air-lines to fly here. But another chal-lenge could be technical.

Deputy Premier Dr. KedrickPickering announced in theHouse of Assembly on June 29that the Terrance B. Lettsome In-ternational Airport’s existing run-way would be expanded by 2,500feet, a $38 million project he pre-viously called Option Six.

But that decision to extend theexisting runway goes against theadvice of one consulting team,which recommended reorientingthe runway to the northeast, a $70million plan presented to the pub-lic as Option Four.

Challenges posedSimply extending the runway

along its current alignment isn’t agood idea, consultants with theLouis Berger Group wrote in amaster plan submitted to the BVIAirports Authority last year.

The consultants noted thathills surrounding Beef Island ob-struct the path of landing planes.Such obstructions generally aren’ta problem in good weather, be-cause pilots — although they typ-ically prefer to make a straight-indescent — are able to land using acurved path that keeps them a safedistance above the high terrain.But when visibility is limited orthe weather is bad, pilots prepar-ing to land have to be guided bythe plane’s instruments until theycan see the runway, according topilots interviewed for this article.

When an airport has certainnavigation equipment installed,jets such as the Boeing-737 canuse a “precision instrument” ap-proach when landing. The equip-ment supplies pilots withreadings of the plane’s horizontaland vertical location in relation tothe runway.

At Beef Island, however, the

hills that require a curved landingpath mean a precision instrumentapproach isn’t an option, theBerger consultants wrote.

Currently, the airport has theproper equipment to allow for a“non-precision instrument” ap-proach, which provides horizontalbut not vertical guidance, BVIAAManaging Director DennistonFraser said in a recent interview.

Five optionsOf 16 runway expansion op-

tions they originally considered, theBerger consultants narrowed thefield down to five, which they ex-amined in more depth. Two of thosefive reoriented the runway, and oneextended the existing runway by afew hundred feet but wouldn’t ac-commodate commercial jets.

“Two additional alternativeswere studied to extend the existingrunway [along its current align-ment]. However, due to the lack toprovide instrument approach forCode 4C aircraft [including jetssuch as the Boeing 737], these op-tions are not recommended,” thereport stated.

After reviewing the Berger re-port, the Airport DevelopmentCommittee, which consistedmainly of BVIAA employees, cre-ated Option Six. This option,which Berger never considered,also extends the runway along itsexisting alignment.

John Morrison, a former VIcargo pilot who has been criticalof the proposed runway expansion,said the lack of a precision instru-ment approach means that in badweather, jets will be unable to landat Beef Island and will be forcedto divert to a nearby airport. The

airlines may not tolerate the hassleand expense of a diversion, he said.

“They’re not going to do it.The cost is enormous. People aretalking about big jets, 300 passen-gers. You’d get stuck in St. Croixwith 300 passengers overnight orsomething,” he said.

Mr. Morrison said he remainssceptical that large jets would fly here.

“It’s not like the old baseballmovie: Build it and we will come.[The extended runway will] be abig old expensive white elephant,I think,” he said.

Experts unconcernedOther experts, though, believe

that the non-precision instrumentapproach will be sufficient.

After Berger completed itsanalysis, the aviation consulting firmRicondo and Associates contributedto the Runway Extension ImpactAssessment, which was completedin May. The consultants found that“due to the low occurrence ofweather conditions requiring preci-sion-instrument approaches, a non-precision instrument approach isconsidered sufficient during poorweather conditions.”

The Ricondo consultants addedthat they spoke with representativesfrom US airlines that fly the 189-passenger Boeing 737-800. Theairlines said that a type of non-pre-cision instrument approach knownas “area navigation procedures,”which uses navigation beacons,would be acceptable for their jets,according to the Ricondo report.

Dr. David Esser, a professor ofaeronautical science at EmbryRiddle Aeronautical University,said he doubts that the lack of aprecision instrument approach

would prevent airlines from offer-ing flights here.

“Given the type of climate youhave in the Caribbean, it’s not ascritical of an issue,” he said, addingthat cold and snowy airports in thenortheastern US would be moreaffected. Dr. Esser said that thetype of pilots the airlines hirewould have ample training and ex-perience to make a non-precisioninstrument approach.

“It’s not a safety issue,” he said.

GPS approachesAccording to Mr. Fraser, the

BVIAA director, bad weather af-fects VI airport operations “noteven 10 percent of the time.” Headded that when weather requiresit, pilots can also use GPS, thesatellite-guided location trackingtechnology, to guide a plane alonga pre-designated route.

“You fly to this GPS waypoint,and then this waypoint and thenthis waypoint and this waypoint,and hopefully then you can see therunway,” he said, tracing a fingeralong a printed approach chartthat guides pilots during landing.

Mr. Fraser said that he is notconcerned that the lack of a preci-sion instrument approach will pre-vent airlines from coming here.

“I would say no because thetechnology has evolved; more andmore aircraft are getting GPS ap-proaches,” he said.

A United Kingdom-basedcompany, Davidson Ltd., has beencontracted to design the extendedrunway’s approach chart, whichultimately will have to be ap-proved by Air Safety Support In-ternational, the territory’s regulator,Mr. Fraser said.

Consultant advises against usingthe existing runway alignment

Graphic: PROVIDED

The proposed expansion extends the runway along its existing alignment about 2,000 feet to the east and about 500feet to the west.

Special Report

tention from US carriers. JetBlue— whose executives met with Dr.Pickering last month as he tried toentice them to fly to the VI — hasadded 23 Caribbean destinationsto its routes in recent years. Theairline’s San Juan hub offers flightsto nine mainland US and threeCaribbean cities. The airline is in-creasing flights to San Juanmonths after American EagleAirlines announced in March thatit plans to cut its flights there.

Omer ErSelcuk, the presidentand CEO of the USVI-basedSeaborne Airlines, said he sees abright future for the city, and acontinued demand for smaller air-lines like his to move passengersfrom PR to the VI.

“San Juan is turning into a lowfare focus city area for a number ofcarriers,” he said, referring to Jet-Blue, Southwest Airlines andSpirit Airlines.

He added that those airlinesmay offer lower priced servicethan what larger airlines mightoffer on direct flights to the VI.

“What you’ll have is much lowerfares: The roundtrip fare will be 300bucks into [San Juan’s Luis MunozMarin International Airport fromthe US mainland]. It’s probablygoing to be about $700 or even $800into Tortola if you compare whathappened in the US Virgin Islands,because they figure that people willbe willing to pay for a non-stopflight and they’ll charge [exces-sively] for it,” Mr. ErSelcuk said.

Ultimately, though, enticingairlines to fly directly to the VImay depend on two factors:tourists’ demand for VI vacationsand the financial health of the air-lines themselves.

Mr. Tacker, the economist, saidhe believes that the coming yearsmay be better for the industrythan the recent past.

“Even now with the economykind of weak, they’re still doinghalf decently. I think the mergeractivity and the consolidation hasreally helped them, and they arepoised to do much better in thefuture,” he said.

Demand questionThe Berger study took a stab at

the question of passenger demand,but its projections included as-sumptions about the VI’s tourismproduct that now seem outdated.

According to consultants, the

Runway from page 31

Runway see page 33

But meetings heldBy JASON SMITHjsmith@bvibeacon.com

Speaking to hundreds of VirginIslands residents on March 27 atthe East End/Long Look Com-munity Centre, Deputy PremierDr. Kedrick Pickering said thatthe public meeting he was aboutto convene aimed to kill “threebirds with one stone.”

The meeting, his government’sfirst comprehensive presentationabout the proposed runway ex-pansion at Beef Island, served tofulfill the “public consultation” re-quirement of the 2004 PhysicalPlanning Act, he said.

Secondly, residents’ feedbackwould be useful to the consultantscompiling the project’s impact as-sessment, added Dr. Pickering,who is also the minister of naturalresources and labour.

“Thirdly, the government thatI am a part of promised to betransparent and open, and so pub-lic meetings are a part of our or-ganisation and a part of our modusoperandi,” he said.

In the four months since hemade that statement, his govern-ment has partially complied withhis promise. Dr. Pickering gavetwo detailed statements to theHouse of Assembly in twomonths describing the runwayproject’s progress. He and otherministers also addressed residents’concerns at public meetings andon the National DemocraticParty’s radio programme.

‘Private’ documentsHowever, officials have thus far

declined to make public two de-tailed studies about the expansion:the BVI Airports Authority Masterand Strategic Plan produced by theLouis Berger Group, and an impactassessment created by Kraus-Man-ning and a team of consultants.

The Berger study contains 342pages of technical information onvarious topics: the state of the exist-ing airport; the 16 runway expansionalternatives considered; passengerestimates; financial projections; andthe consultants’ final conclusions.

Berger’s conclusions included arecommendation against extendingthe runway along its existing align-ment, due to technical concerns.Dr. Pickering did not mention this

recommendation when he an-nounced in the HOA last monththat the runway would be extendedalong its existing alignment.

At the March 27 public meet-ing, Dr. Pickering suggested thata resident’s question about the ex-pected economic benefits could beanswered by the consultants’ stud-ies. And when she asked if the re-

ports would be made public, theMNRL minister seemed to implyan affirmative response.

“I don’t know that governmentwould want to keep this sort of in-formation private,” Dr. Pickeringsaid. “That’s the whole point ofhaving these consultations: so thatgovernment can stand and say,‘This is what the consultant saidwe could or could not do.’”

But weeks later, when this re-porter asked for a copy of theBerger study on May 4, Dr. Pick-ering declined to provide it, callingit a “private document” that maycontain proprietary information.The Beacon later viewed a copy ofthe report through another source,who did not wish to be identified.

Impact assessments Additionally, consultants pro-

duced the Runway Expansion Im-pact Assessment in May andturned it over to government. Im-pact assessments normally becomepublic documents eventually, butthis one hasn’t been released. Theassessment is still under review and“will be ready for public consump-tion” at an unknown future date,Ronald Smith-Berkeley, the per-manent secretary in the MNRL,said this month. That 134-pagedocument and its accompanyingappendices, a copy of which wasprovided to the Beacon by another

source, detail the expansion’s po-tential environmental, economic,cultural and social impacts.

A third document, the runwayexpansion’s “business plan,” couldshed more light on the project’s fi-nancial feasibility, but it hasn’t yetbeen completed, BVI Airports Au-thority Managing Director Dennis-ton Fraser said. Under the Protocolsfor Effective Financial Manage-ment signed by the VI and UnitedKingdom governments in April, an“appraisal and business case” mustbe produced and reviewed by Cab-inet before a decision is made toproceed with the project.

It is unclear whether the busi-ness case will eventually be madepublic. After returning this reporter’sphone call on May 4, Dr. Pickeringsaid that he wouldn’t give any inter-views about the project that weren’tbroadcast live via television or radiodue to concerns that his wordswould be taken out of context.

Since then, he did not respondto several phone calls and twowritten requests for an interviewabout the runway expansion.

Speaking before the HOATuesday Dr. Pickering said hisministry plans to appoint an infor-mation officer by Aug. 9, a posi-tion he said was “critical.”

“We need to make a real effortto keep the public properly in-formed as to our progress,” he said.

Photo: JASON SMITH

Residents weighed in on the runway extension during a meeting in East End on March 27. Two public meetings were heldabout the project, but consultants’ reports have yet to be released to the public.

Consultants’ reports not public yetPage 32 | Thursday, July 26, 2012 | The BVI Beacon

“I don’t know thatgovernment wouldwant to keep thissort of informationprivate. That’s thewhole point of hav-ing these consulta-tions: so thatgovernment canstand and say, ‘Thisis what the consult-ant said we couldor could not do.”

DR. KEDRICK PICKERING

Deputy Premier

Special Report

airport saw about 157,000 arrivals in2008. If the runway is not extended,their estimates suggest, this figurewould rise to about 269,000 by2030. If the runway is extended toabout 6,200 feet – some 650 feetshorter than the proposed expansion– the number of arrivals would in-crease to about 298,800 passengersby 2030, the study suggests. And an8,800-foot runway is predicted tobump the number up further to anestimated 308,900 arrivals.

To create their projections, theBerger consultants assumed that thenumber of passengers using the air-port would be dependent on thenumber of hotel rooms and charteryachts in the territory. According totheir projections, in 2007 there werea total of 1,875 rooms at hotels andvillas available for rent in the VI.Additionally, there were about1,000 yachts in the territory thesame year, according to the study.

In order to forecast roomgrowth, Berger examined fourmajor resorts that were in devel-opment as of 2008. Those projectswere slated to add more than 800rooms by 2030.

While two of the develop-ments — Oil Nut Bay and theScrub Island Resort — are func-tioning and capable of expansion,another — the 300-room five-starhotel proposed for Beef Island —was put on hold due to a legalchallenge. The fourth develop-ment, which was to add 200rooms at Smugglers Cove by2019, was scrapped in 2009.

Mr. Fraser, the BVIAA man-aging director, said he would likemore to be done to predict passen-ger growth when the airport up-dates its strategic plan. Revisedpassenger projections, he said,could be calculated by taking intoaccount factors such as vacation-ers’ demand to visit the territory.

“I think if you’re doing a fore-cast for something like this, youneed to look at it holistically; youneed to look at the whole picture.More than just the number ofrooms, I want to see what is thetrend, what is the pattern,” he said.

DevelopmentExisting rooms aside, others

argue that the airport expansionitself would help spur demand anddevelopment alike.

Since the mid-1960s, tourismhas taken off in the territory, rising

Runway from page 32

Runway see page 34

Consultant callsfor an analysisBy JASON SMITHjsmith@bvibeacon.com

Deputy Premier Dr. Kedrick Pick-ering may be spearheading theproposal to expand the runway atthe Terrance B. Lettsome Interna-tional Airport, but his govern-ment’s ability to execute theproject may be limited by what of-ficials in London think of it.

Undertaking a capital projectof this magnitude — $38 million,according to government’s esti-mates — has become more com-plicated since Premier Dr.Orlando Smith signed the Proto-cols for Effective Financial Man-agement with the UnitedKingdom in April. Under theagreement, which commits thegovernment to pass an “en-hanced” Public Finance Man-agement Act by next month,capital projects worth more thanabout $11 million have to gothrough a detailed planning, eval-uation and management process.

Specifically, the protocols statethat before contracts are signed, aproject must be “suitably ap-praised” to ensure that the terri-tory receives “value for money.”

The protocols also require of-ficials to produce a “business case”that explains the economic ration-ale for the project and includes a“robust cost-benefit analysis.”Cabinet then has to use thatanalysis in deciding whether toapprove the project.

Other studiesWhile the Berger report con-

sidered the feasibility of expand-ing the runway and theKraus-Manning assessment in-vestigated some of the potentialeffects, it is unclear whether eitherof those studies satisfies the pro-tocols’ requirements.

Denniston Fraser, the BVIAirports Authority managingdirector, said in an interviewthis month that a separate busi-ness plan has been drafted andMinistry of Finance officialsare currently reviewing it. At-tempts to reach Financial Sec-retary Neil Smith wereunsuccessful as of the Beacon’sprint deadline yesterday.

The protocols do not explicitly

give the UK government thepower to veto VI capital projects.But, because the territory is cur-rently in breach of the UK’s bor-rowing guidelines, officials have toreceive written approval from UKSecretary of State William Haguebefore taking out new loans.

Additionally, unless Mr.Hague gives his approval, the VIgovernment can’t borrow for anyproject unless it is forecast to“yield sufficient revenues to fundthe additional debt service costs,”according to the protocols.

US requirementsIn the United States, the Fed-

eral Aviation Administration re-quires airports that seek more than$10 million in FAA grant fundingto perform a cost-benefit analysis.

The agency doesn’t makethe decision to fund a projectuntil an analysis is complete,according to a statement fromthe administration.

The analyses, which are onlypart of the decision-making

process, help policymakers “focusattention” on whether a project’sbenefits are justified by their ex-pense, according to the FAA. Theagency considers passengers’ re-duction in travel time as a keybenefit of expansion.

“This reduction in travel timemay be in the form of a more effi-cient flow of people through theairport system or reduced passen-ger delay. To estimate these costsavings it is therefore critical thatthe [cost-benefit analysis] at-tempts to estimate current and fu-ture passenger demand,” theagency wrote in a statement.

Dr. Birney Harrigan wrote inthe VI project’s socioeconomicimpact report that the expansion’scosts and benefits can’t always bemeasured in dollars.

“Stakeholders’ common re-frain, ‘What are we giving up andwhat are we getting?’ deserves ananswer that calls for a cost-benefitanalysis to fully understand thevalue of the territory’s investment

in airport infrastructure,” shewrote in the report.

The “non-economic” benefitsand costs can best be assessedthrough future studies by aviationplanners, oceanographers, coastalengineers, ecologists and anthro-pologists, Dr. Harrigan wrote.

Planning processMeanwhile, the planning

process is moving ahead as well. Though a development appli-

cation has not been filed, ChiefPlanner Marva Titley-Smith saidthe Town and Country PlanningDepartment has been informallyworking with the Ministry ofNatural Resources and Labour toensure that the planning processis followed.

After a particular plan is de-veloped and submitted, Ms. Tit-ley-Smith said, the TCPD mayask for further studies to detailthe impact. The Planning Au-thority would ultimately need toapprove any expansion before itstarts, she said.

Photo: JASON SMITH

Premier Dr. Orlando Smith, left, signed the Protocols for Effective Financial Management in April along with GovernorBoyd McCleary and Henry Bellingham, the Foreign and Commonwealth Office’s minister for the overseas territories.The agreement with the United Kingdom requires the government to conduct a “robust cost-benefit analysis” beforestarting work on major capital projects, such as the airport expansion.

Questions remain about runway’s costs, benefitsThe BVI Beacon | Thursday, July 26, 2012 | Page 33

Special Report

to be the islands’ main source ofemployment and a key provider ofgovernment revenue. Its successand the perceived need to bringmore tourists motivated the 1999addition of about 1,000 feet to theairport’s runway. A 10-year “Na-tional Tourism DevelopmentStrategy” produced by the consult-ing firm Coopers and Lybrand in1996 called air access an issue that“needs to be addressed as a matterof priority.” A follow-up tourismreport published in 2006 by OysterGlobal Marketing echoed thatsentiment, urging government to“accelerate the extension of BeefIsland runway” and develop strate-gies to increase the number of seatsair carriers offered to the territory.

Russell Harrigan, the authorof the 2006 report and the currentBVI Tourist Board chairman, saidin an interview this month that heis not aware of any studies that es-timate the number of tourists whowould want to come to the VI ifdirect flights were available. ButMr. Harrigan, who is also theowner of the Beacon, added that hebelieves there is “absolutely noquestion” that airlines will be ableto find enough willing passengersto make direct flights to the main-land US profitable. He added thathe also feels it is possible to findenough new wealthy visitors to fillairline seats without resorting to a“mass market” strategy.

“When you look at the wealthcreation in the world, the amountof wealth that is constantly beingcreated, the question is how do weattract the segment of the marketthat we are looking for, which isthe high end,” Mr. Harrigan said.

New investment?The BVITB chairman added

that the organisation plans to rampup its marketing efforts in the com-ing years to encourage additionaltourists to visit. He also believesthere will be plenty of availablerooms for future visitors, predictingthat the expanded runway will en-courage a wave of new investment.

“[The expansion] is an ele-ment that will encourage investorsto put cement in the ground,” Mr.Harrigan said.

David Johnson, the developerbehind the Oil Nut Bay Villacommunity in North Sound, Vir-gin Gorda, said he believes thatthe expansion will bring enoughinterested passengers from com-mercial and private jets to create a

10-month tourism season.“It can’t be an if. The airport

has to be expanded to sustaintourism in the BVI. The rest ofthe world has adapted to thechanging tourism market,” he saidin a March interview.

Mr. Johnson hopes to eventu-ally build 88 villas on ONB’s 300-acre property, though the projectcould take several years. Currently,seven are built or under construc-tion, but the development’s affili-ation with the recently built YachtClub Costa Smeralda, an offshootof a Sardinia, Italy-based yachtclub, is beginning to garner inter-national visitor interest in NorthSound, Mr. Johnson said.

Residents’ concernsBut some VI residents feel that

the increased visitor numbers couldalso bring major environmentalproblems and other negative conse-quences that could be detrimentalto the territory’s tourism industry.In order to gauge the runway ex-pansion’s potential socioeconomicimpact, a consultant, Dr. BirneyHarrigan, was hired by governmentto conduct multiple interviews andfocus groups with residents, busi-ness owners and others.

“While some BVI stakehold-ers question whether expandingthe runway is the best way for-ward, others argue that the gov-ernment needs to proceed withcaution without destroying one ofthe territory’s beautiful natural re-sources, Trellis Bay,” the socioeco-nomic impact report states. “Thecapacity of the marine and terres-trial environments needs to bestudied very carefully and withsome urgency, especially becauseof the increased pressures from theinflux of visitors and workers thatwill result if the goal of a larger

runway is realised.”

Funding Questions have also been

raised about how the project willbe funded in a time of economicuncertainty, when the territoryowes tens of millions for othermajor capital projects that havefaced delays in recent years.

But during the March publicmeeting in EE/LL, Dr. Pickeringtold residents he had been receiv-ing calls from prospective finan-ciers “almost on a daily basis.”

“They see the BVI as a greatinvestment and the potential forthis airport as being tremendous,”said the deputy premier, who didnot identify any of the potentialfinanciers. “So there’s no shortageof interest as far as the financingand the financing availability.”

Speaking before the HOATuesday, Dr. Pickering said that hehopes five to 10 contractors willhave expressed their interest in theproject by next week. The govern-ments of Canada and China havealready made submissions, he said.

The initial studies have beenfunded and about $2.3 million inairport development fees has beenset aside, Mr. Fraser told theStanding Finance Committee ear-lier this year. However, the expan-sion’s estimated $38 million costwill have to be raised throughloans, Dr. Pickering said in March.

This cost could be increased byseveral million dollars if certain envi-ronmental mitigation measures areput in place to preserve water circu-lation in Trellis Bay, according to theKraus-Manning impact assessment.

Any new borrowing would beadded to government’s debt bur-den at a time when the existingrunway is not yet paid off. Accord-ing to the 2012 budget estimates,

about $13.7 million in loans re-lated to the 1999 runway and ter-minal expansion are still owed tothe BVI Social Security Board andthe Caribbean Development Bank.

Financial feasibilityProject opponents have also

challenged the accuracy of gov-ernment’s $38 million cost esti-mate, citing substantial overrunson other capital projects. But Dr.Pickering has downplayed the ex-tent of the financial commitment.

“I will hasten to add that, basedon revenue projections … we ex-pect that the airport will be able topay for its own development,” Dr.Pickering said in March.

The Berger study, however, in-cluded a series of forecasts thatsuggest that several of the expan-sion options government consid-ered would actually lose money.

Berger forecasted the net pres-ent value of five runway expansionalternatives using the cost esti-mates and passenger projectionsthe firm developed. Net presentvalue is a type of financial analysisthat compares the projected rev-enues and expenses of a projectwith its development costs. Forfour of the five expansion optionsstudied — all except for a shorterextension that wouldn’t allow thecommercial jets the governmentseeks to attract — Berger calcu-lated negative net present values,indicating that the future cashflows produced by the expansionwould also be negative.

Berger, however, did notanalyse the particulars of the op-tion currently on the table —“Op-tion Six,” which was created afterthe Berger study by the VI’s Air-port Development Committee —and government has not publicisedany detailed financial analysis.

Still, even if the runway doesn’tpay for itself as promised, it couldbring other perks. Mr. Johnson, theONB developer, said he considershis company to be in a “strategic al-liance” with the VI government be-cause a portion of eachmultimillion-dollar sale of land atONB generates tax revenue.

“The government stamp dutyfrom Oil Nut Bay will pay off thenew runway,” he said.

Hen or egg?But even if funding can be

found and other details ironed out,questions will likely remain aboutthe project. Historically, worriesabout the merits of runway expan-sion are not new.

On April 12, 1969, 40-year-oldHamilton Lavity Stoutt, then twoyears into his term as the territory’sfirst chief minister, stood before asmall crowd gathered at Beef Islandto inaugurate the newly paved3,600-foot runway. Mr. Stoutt saidthat it was “almost redundant” forhim to repeat that the VI was com-mitted to “a course of tourism.” Butfirst, policymakers had to settle aquestion, he said: “Which camefirst: the egg or the hen?”

“Should we proceed fromthe demand side or from thesupply side?” he asked. “Shouldwe provide decent access and sostimulate additional hotelrooms, or should the provisionof hotel rooms force the provi-sion of access?”

This article, the f irst of a two-partspecial report on the proposed runwayexpansion, investigated the project’slikelihood to achieve its goals. The sec-ond part of this report will explorethe project’s potential environmental,social and economic impacts.

Runway from page 33

Photo: TODD VANSICKLE

Deputy Premier Dr. Kedrick Pickering said this week that he expects construction to start early next year on the runway extension at the Terrance B. Lettsome International Airport.

Page 34 | Thursday, July 26, 2012 | The BVI Beacon