TINIAN Mayor Edwin P. Aldan is urging Star Marianas Air Inc. Chairman Robert F. Christian to reconsider his decision to terminate SMA’s interisland services on Oct. 15, 2024.
In his response to Christian’s notice of intent, Aldan said it raised “significant alarm within our community.” The mayor said the termination of Star Marianas flights between the islands “will have a profound impact on the Tinian economy and the livelihoods of our residents.”
He noted that Tinian is home to over 2,000 residents who rely heavily on Star Marianas Air for their daily commute, including accessing essential services such as hospitals, businesses, and government and judicial institutions in Saipan.
The termination of Star Marianas services would not only disrupt these vital connections, but also jeopardize the well-being and economic stability of Tinian families, the mayor said.
“I look forward to your positive response and am hopeful that together we can find a path forward that benefits all parties involved,” Aldan told Christian.
Misdirected
In his response, Christian said Star Marianas fully understands the seriousness of the situation and shares the mayor’s concerns about maintaining essential air services for Tinian.
But “we believe the issues you have raised are somewhat misdirected,” Christian said.
He said the primary challenge Star Marianas faces is not a lack of willingness on their part to continue providing vital air services, but “the unsustainable fee structure imposed by the Commonwealth Ports Authority.”
He said these fees make it economically unviable for them to operate under the current conditions.
“Our decision to consider suspending services stems directly from…CPA’s actions and fee assessments, which are not aligned with the principles of compensatory fees. The current fee methodology lacks transparency, detailed cost allocation, and a fair treatment of common use areas, all of which result in charges that do not accurately reflect our actual usage of airport facilities and services,” Christian said.
CPA’s practices, he said, “impose a disproportionate financial burden” on Star Marianas, jeopardizing its ability to sustain operations.
Given the critical importance of air service to the community, Christian said they believe that a more productive approach would be to address these fee structure issues directly with CPA.
“We suggest organizing a discussion involving the Governor, the Tinian Legislative Delegation, the Tinian Municipal Council, and…CPA to work towards a fair and transparent fee structure that ensures the sustainability of essential air services,” Christian said.
Non-profit entity
In a follow-up letter to the mayor, Christian pointed out that CPA is a public entity responsible for managing airports in the CNMI, and its board members and employees do not invest their own money into the activities they oversee.
The funds for building and improving airports come from the federal government and other external sources, he added.
Christian said that as a non-profit entity, CPA’s primary role is to manage federally funded airports to ensure they meet regulatory requirements set forth by federal aviation authorities. CPA must provide suitable airport facilities that comply with aviation regulations, facilitating safe and efficient air travel, Christian said.
For its part, Star Marianas is a private airline funded entirely by its stockholders and creditors, without federal funding, he added. “It must generate an adequate return on its investors’ money, justifying the risks taken with their investments. Its operations adhere to numerous safety standards and regulations, ensuring the provision of safe and reliable air services to the public,” Christian said.
Unlike CPA, he added, Star Marianas’ ownership structure includes stockholders and a board of directors with a vested interest in the airline’s financial health and success.
The fundamental differences between CPA and Star Marianas, Christian said, “create inherent conflicts, particularly regarding the management of airport fees and services.”
He said CPA has sought to increase fees and impose charges on airlines such as Star Marianas without adhering to guidelines set for federally funded airports.
CPA’s actions, he added, suggest it has an “entitlement” to revenue generated by private enterprises like Star Marianas. This contradicts CPA’s role as a manager of federal funds, which mandates adherence to federal policies for fee assessments on private enterprises, Christian said.
As a privately funded airline, Star Marianas relies on fair and transparent airport fee management to sustain its operations, he added. Excessive or unjustified fees imposed by CPA jeopardize the airline company’s financial stability, he said.
Christian said investors expect a reasonable return on their investments, but management’s fiduciary responsibilities are “undermined by…CPA’s attempts to divert funds through non-compliant fee assessments.”
To resolve these conflicts, Christian said it is essential to address the roles and responsibilities of both CPA and Star Marianas.
“CPA must recognize its role as the manager of federally funded airports, strictly adhering to federal guidelines and policies for fee assessments, while Star Marianas must ensure compliance with all safety and operational regulations while seeking a fair return on investment for its stakeholders,” he added.
He reiterated that a productive discussion involving the governor, the Tinian Legislative Delegation, the Tinian Municipal Council, and CPA is crucial. “This will help develop a fair and transparent fee structure supporting sustainable air services,” he said.
Ensuring that CPA’s fee structures are compensatory and justifiable will help maintain the viability of airlines like Star Marianas, which are “vital for the connectivity and economic development of the CNMI,” he added.
Christian said CPA should provide clear and transparent breakdowns of all fees and services, ensuring they are directly related to the actual use of airport facilities by the airlines.
Avoiding cross-subsidization and unjustified charges will help build a more collaborative and supportive relationship between CPA and Star Marianas, he added.
By addressing these fundamental differences and focusing on their respective roles, CPA and Star Marianas can work toward a mutually beneficial resolution ensuring the continued provision of essential air services in the CNMI, Christian said.
Last week, CPA issued a letter to Star Marianas demanding the payment, “in 30 days,” of $1.2 million in “outstanding debt.”
