STAR Marianas Air Inc. is requesting the Federal Aviation Administration to investigate the Commonwealth Ports Authority and enforce corrective measures.
SMA President Robert F. Christian, on Sept. 11, 2024, reported to the FAA’s Western Pacific Region Airports Division CPA’s alleged violation of non-discriminatory fee practices, lack of transparency and financial mismanagement.
In his reply on Oct. 10, 2024, FAA Compliance Program Manager Gabriel Mahns requested additional information regarding the allegations within 30 days from the date of the FAA letter.
Mahn also asked for copies of the court ruling that substantiates SMA’s concerns about CPA’s lack of transparency and regulatory adherence, as well as a clarification on specific details and a financial breakdown of fees.
Mahn wants to know which aspects of CPA’s financials are of concern and how these concerns constitute a violation of the airport rates and charges or airport revenue policies, or other relevant regulations or industry standards.
In his response on Oct. 17, 2024, Christian provided documents that, he said, outline CPA’s failures under the Airline Use Agreement, which “ultimately forced SMA to take legal action.”
Christian also provided information about CPA’s alleged deficiencies in relation to rules mandating documentation on cost allocations, FAA grant assurances, the Anti-Head Tax Act, and the FAA’s self-sufficiency requirement.
The documents provided by Christian included the CNMI Superior Court’s Sept. 27, 2023, order granting in part and denying in part SMA’s partial summary judgment for breach of contract.
Christian said CPA consistently failed to meet its contractual obligations by failing to provide required budgets and reconciliations.
He said CPA was obligated under the Airline Use Agreement or AUA to provide SMA with annual budgets and reconciliations detailing how costs were allocated. However, he said, over a period of 13 years, CPA failed to fulfill this requirement, leaving SMA unable to verify that fees were based on actual costs.
He said CPA also failed to provide fee assignments. The AUA required CPA to provide transparency in the allocation of fees to different cost centers, Christian said. However,
“CPA repeatedly failed to document how fees were assigned, particularly for indirect costs, raising concerns that SMA was being charged for services it did not use. This breach of the AUA ultimately forced SMA to pursue legal action against CPA.”
Christian also informed Mahn that after unilaterally terminating the AUA, CPA imposed a new fee-setting methodology designed to recover 100% of the costs that the agency assigns to the airfield and terminal cost centers. However, he said, this methodology fails to meet the compensatory fee-setting principles required under 2 CFR Part 200 that also mandates CPA to maintain auditable financial records and provide transparency in fee-setting methodologies.
As for CPA’s non-compliance with FAA grant assurances, Christian made the following allegations:
1) CPA’s imposition of fees for services not required by SMA, such as ARFF and security services, violates Grant Assurance 22 pertaining to economic non-discrimination. SMA operates smaller aircraft that do not require these services, yet CPA charges SMA for these services, leading to unjust cross-subsidization.
2) CPA’s failure to adjust fees or provide reconciliations violates Grant Assurance 24 pertaining to fee and rental structure, which requires that fees be compensatory and based on actual costs tied to services used by the airline. CPA’s unilateral fee-setting methodology does not meet these requirements.
3) CPA’s lack of transparency in how revenues are allocated raises concerns about compliance with Grant Assurance 25 pertaining to airport revenue, which requires that airport revenues be used exclusively for airport-related purposes. The absence of detailed documentation suggests potential misuse of SMA’s payments.
Christian said CPA’s unilateral imposition of a 100% cost-sharing methodology after terminating the AUA, combined with its failure to meet the compensatory provisions of the AUA and non-compliance with the rules, “has resulted in unjustly discriminatory fees that violate FAA grant assurances, the Anti-Head Tax Act, and FAA’s self-sufficiency requirements.”
Variety was unable to get a comment from CPA.
