Cabo Verde’s economy maintained strong momentum in 2025, with real GDP expanding by 6.3%, supported by record tourism arrivals, stronger private consumption and improved fiscal performance, according to the World Bank’s latest Cabo Verde Economic Update.
Expanded international flight capacity helped drive visitor numbers to record levels, reinforcing aviation’s importance to an economy in which tourism accounts for approximately 25% of GDP. However, the report finds that the strength of Cabo Verde’s international air connectivity has not been matched by its domestic aviation network, where limited capacity, operational volatility and high fares continue to restrict movement between the islands.
Titled Unpacking the Inter-Island Connectivity-Growth Nexus, the report examines Cabo Verde’s macroeconomic outlook, progress in reducing poverty and the reforms required to strengthen resilience and broaden the country’s economic base. It identifies inter-island connectivity as a binding constraint on productivity, market integration, tourism diversification and inclusive development across the archipelago.
“Cabo Verde’s 2025 results show what is possible when macroeconomic discipline is matched by private-sector dynamism. The next step is to turn today’s tourism-led rebound into broader, more resilient growth by fixing the fundamentals that connect the archipelago — reliable, affordable inter-island transport. Improving connectivity will lower costs, integrate markets, and ensure that more Cabo Verdeans across all islands can benefit from growth”, said Indira Campos, World Bank Group Resident Representative for Cabo Verde.
Strong International Aviation Growth Masks Domestic Weaknesses
Cabo Verde’s international aviation market has expanded substantially in response to growing tourism demand, particularly from Europe. The report nevertheless identifies a widening divide between the country’s international connections and its comparatively fragile inter-island network.
Domestic aviation has experienced repeated changes in operators, small fleet sizes and persistent operational difficulties. The domestic market has not yet recovered to pre-pandemic activity levels, while limited seat availability has contributed to high load factors and unmet demand.
Delays and cancellations remain common because operators have limited spare aircraft available when technical or operational disruptions occur. Domestic service frequency between city pairs has also contracted in recent years, reducing opportunities for same-day travel and limiting flexibility for business passengers, residents and visitors.
Responsibility for domestic airline services shifted between several carriers from 2017 to 2025, with domestic capacity served by four operators over an eight-year period. TACV temporarily managed services before Linhas Aéreas de Cabo Verde began operations in April 2026.
The report records domestic air services across seven islands and identifies Cabo Verde Airlines, the commercial name of Transportes Aéreos de Cabo Verde, and the newly established state-owned LACV as the principal state-linked operators involved in the market.
The World Bank considers the dual-airline structure inefficient for a country with a small and thin domestic market. Dividing resources between two state-owned airlines can duplicate functions, increase operating costs and weaken integration between international flights and the domestic feeder network.
TACV’s declining market share has also reduced its ability to function as an international hub carrier and provide onward feed into the inter-island system.
Seven-Airport Network Transferred to VINCI Airports
Airport infrastructure is considerably more stable than domestic airline operations following the concession of Cabo Verde’s national airport network to VINCI Airports.
Under a 40-year concession operationalised in 2023, responsibility for managing, operating, financing and modernising the country’s seven airports was transferred to the international private operator.
The network comprises four international airports:
- Amílcar Cabral International Airport on Sal
- Nelson Mandela International Airport in Praia, Santiago
- Cesária Évora International Airport on São Vicente
- Aristides Pereira International Airport on Boa Vista
The three domestic airports are located on São Nicolau, Fogo and Maio.
According to the World Bank, the concession has introduced professional airport management, performance-based standards and access to international financing. Airport infrastructure is consequently regarded as a comparatively stable platform within Cabo Verde’s transport system, while airline economics remain the principal constraint on expanding domestic air services.
The concession also contributed directly to Cabo Verde’s fiscal performance. Payment of the final instalment of the airport concession fee was equivalent to 1.7% of GDP and helped the country record its first overall fiscal surplus since 2007.
Tourism Remains Concentrated Around Two Islands
Weak domestic connections are limiting Cabo Verde’s ability to distribute tourism activity more evenly across the archipelago.
Approximately 95% of tourism investment is concentrated in Sal and Boa Vista, while the all-inclusive model accounted for 84% of visitors in 2024. Concerns about the reliability of inter-island transport mean that tourism packages rarely include multi-island itineraries, reducing the economic benefits that aviation could deliver to other islands.
Unreliable schedules increase the operational risk faced by tour operators and hospitality businesses. Limited connectivity also restricts labour mobility, making it more difficult for companies in rapidly growing destinations to recruit specialised personnel and seasonal workers from elsewhere in the country.
Air transport is particularly important for time-sensitive passenger travel, tourism, urgent freight, medical journeys and high-value or perishable goods. Maritime transport remains essential for bulk cargo and lower-cost mobility, but cannot provide the speed, frequency or predictability required for many business and tourism movements.
The World Bank consequently argues that air and maritime policy should be planned as an integrated system rather than as separate transport sectors.
TACV Remains Cabo Verde’s Largest Transport SOE Risk
Although Cabo Verde’s public debt declined to 100.7% of GDP in 2025, the report warns that state-owned enterprises continue to expose the government to substantial financial risk.
TACV remains the single largest source of fiscal exposure within Cabo Verde’s transport SOE portfolio. The airline recorded negative EBITDA, EBIT and net results in 2024 and accounted for approximately 68.6% of the total negative equity impact across the state-owned enterprise portfolio.
Guarantees associated with TACV represented 25% of guaranteed SOE debt in 2025. When guaranteed loans attributed to NEWCO are included, the proportion increases to 37%, equivalent to approximately 3% of GDP.
The airline remains dependent on government support and has not yet achieved operational self-sufficiency. By comparison, the report states that Aeroportos e Segurança Aérea, the country’s air traffic control company, is no longer considered a major fiscal risk.
Cabo Verde’s state continues to hold overlapping positions in aviation as owner, funder, policymaker and market participant. The World Bank warns that this structure blurs the distinction between commercial decisions and public-service responsibilities, weakens competitive neutrality and increases fiscal and governance risk.
Monopolistic ground-handling arrangements and the incomplete adoption of regulations for different categories of aviation activity are also identified as barriers to private-sector participation.
Opening the Market to Smaller Aircraft and General Aviation
The report proposes a more flexible aviation market capable of accommodating smaller commercial aircraft, helicopters, general aviation operators and specialist services suited to thin inter-island routes.
Activity-specific regulatory regimes for these operators remain underdeveloped. Combined with the dominance of state-owned airlines, this may create the perception that private operators face an uneven competitive environment and have limited scope to enter the market.
The World Bank recommends adopting and implementing an aviation regulatory package that has already been prepared. The framework would establish proportionate requirements for small commercial aircraft, rotorcraft, general aviation and niche services rather than applying rules designed primarily for larger scheduled airlines.
Such an approach could allow operators to match aircraft capacity more closely to demand on thinner routes, extend air access to underserved islands and reduce dependence on a single operating model.
The report also recommends modernising the legal and regulatory frameworks governing aircraft leasing, registration and financing. Easier access to leased aircraft and commercial funding could support fleet renewal, improve aircraft availability and reduce the operational vulnerability created by very small fleets.
Competitive Public Service Obligations Proposed
For routes that are socially or economically necessary but cannot be operated commercially without support, the World Bank recommends reforming Cabo Verde’s Public Service Obligation framework.
Rather than allocating supported services administratively or linking them to state ownership, aviation PSOs should be competitively tendered, time-limited and governed by route-specific requirements.
Contracts should specify minimum frequencies, capacity, timetable reliability and measurable service standards. Public compensation should be linked to performance, with transparent monitoring and sanctions where operators fail to meet their obligations.
The report also recommends separating airline commercial performance from PSO compensation. This would make it clearer which services require public funding, how much support is being provided and whether the operator is delivering the agreed public benefit.
Fare regulation should balance affordability with commercial viability. In a thin market such as Cabo Verde, tightly controlled fares without predictable and targeted compensation could discourage new entrants, weaken service quality and increase long-term reliance on government support.
Aviation Reform Positioned as an Economic Priority
The World Bank recommends that Cabo Verde:
- Monitor LACV’s operational performance, financial sustainability and service reliability.
- Define state-owned airlines as providers of last resort while permitting parallel entry by appropriately sized private operators.
- Introduce segmented regulations for small aircraft, helicopters, general aviation and specialist services.
- Establish competitive and time-bound PSO tenders with route-level performance indicators.
- Strengthen economic regulation, data publication, entry screening, route monitoring and market analysis.
- Modernise aircraft leasing, registry and financing frameworks.
- Separate commercial airline performance from public-service compensation.
- Coordinate aviation and maritime planning through an integrated national connectivity framework.
These reforms would address a domestic aviation market in which the main constraint is no longer the availability of airport infrastructure, but the reliability, affordability and commercial structure of the services operating between those airports.
With growth projected to moderate to 4.8% in 2026 before stabilising at approximately 5.1% over the medium term, the report positions aviation reform as central to converting Cabo Verde’s international tourism growth into wider economic opportunities across the archipelago.
Improved inter-island air services could support multi-island tourism, strengthen labour mobility, connect businesses with domestic markets and extend investment beyond Sal and Boa Vista. Without those improvements, the country risks maintaining a strong international gateway network that does not provide sufficiently reliable connections between its own islands.
