STAR Marianas Air Inc. has filed a civil complaint in federal court against Marianas Southern Airways and its principal Keith Stewart, alleging violations of the U.S. Sherman Antitrust Act.
The complaint also named Southern Airways Express LLC and Marianas Pacific Express LLC as defendants.
Star Marianas, represented by attorneys Richard Richards and Mark Scoggins, filed the 25-page lawsuit on Tuesday.
The complaint alleged six counts of violations of the Sherman Act, which aims to increase economic competitiveness by outlawing trusts, monopolies and cartels.
Star Marianas is asking the court to restrain the defendants from establishing any similar agreements that unreasonably restrict competition and create a “conspiracy to monopolize the CNMI airline industry.”
Star Marianas also asked the court for damages in an amount to be determined at trial, and other relief the court may find just and proper.
Background
According to the lawsuit, on March 21, 2022, Marianas Southern Airways executed a sole source contract with the CNMI government for receipt of federal funds through the American Rescue Plan Act in the amount of $8 million.
Marianas Southern Airways accepted a sole-source procurement services contract from then-Secretary of Finance David DLG Atalig.
Beginning August 2022 until April 2023, Marianas Southern Airways existed as the main competitor to Star Marianas in the CNMI. Star Marianas said at the time, it was the primary provider of commercial passenger flight travel between Saipan, Rota and Tinian.
“Marianas Southern Airways, by executing said contract, entered into a predatory pricing scheme with the other defendants, to use ARPA funding to fix prices below costs in the markets served by Star Marianas with the intent of causing injury to Star Marianas’s business, and with the goal of running Star Marianas out of its free market business,” the lawsuit stated.
It added that the purpose of the contract was to “incentivize” Marianas Southern Airways to provide inter-island passenger and cargo service in the Marianas. “This incentive framework will take the form of an Initial Incentive Fund, a Flight Incentive Program, and Government Related Pricing,” the lawsuit stated.
Pursuant to the Flight Incentive Program, during the incentive period, Marianas Southern Airways agreed to provide at least 42 weekly departures serving Saipan, Tinian, Rota and Guam.
Marianas Southern Airways was also contracted to provide same-day connectivity flights to Saipan with United Airlines’ Honolulu-Guam flight.
Additionally, under the Flight Incentive Program, Marianas Southern Airways would offer reduced fares, as low as $99, from Saipan to/from Guam, to passengers as “a set-off and attempt to monopolize the CNMI’s airline industry, when the fare from Saipan to/from Guam cost between $229.00-$269.00, following the contract’s termination,” the lawsuit stated.
The contract also allowed Marianas Southern Airways to administer a Corporate Discount Program for official CNMI government travel on any flight operated by the airlines, the lawsuit added.
It stated that as a recipient of ARPA funds, Marianas Southern Airways “is obligated to comply with Congress’ stated purpose, federal rules, and regulations.”
“Because it accepted ARPA funds,” the lawsuit added, “Marianas Southern Airways was required to utilize received funds for its intended purpose, not as a means of creating unfair treatment within the several islands in the northwestern Pacific Ocean’s airline and air travel industry.”
According to the lawsuit, “Stewart alleged that the contract would reduce airfare, in turn providing benefits to travelers and help the CNMI economy…and stated that Marianas Southern Airways provided over 10,000 passenger flights and saved nearly $600,000 through reduced airfares.”
As result, the lawsuit stated, “Star Marianas specifically experienced approximately $100,000 per month reduction in revenue, a significant loss of passengers, with a total loss of revenue estimated between $1.5 million and $2 million.”
Variety was unable to get a comment from Marianas Southern Airways.
In February 2023, Gov. Arnold I. Palacios announced the termination of the CNMI government’s contract with Marianas Southern Airways. He said his predecessor, former Gov. Ralph DLG Torres, “overcommitted the Commonwealth and overpromised money we did not have then and do not have now.”
In April 2023, Marianas Southern Airways ended its operations in the Marianas.
