GOVERNOR Ralph DLG Torres has made a commitment to subsidize Star Marianas Air Inc. for Commonwealth Ports Authority fees and charges, but SMA said it is “not interested” in saddling CNMI taxpayers with such a “burden.”
For more than a year now, CPA and Star Marianas have been engaged in a dispute over airport fees and charges.
About two weeks after the U.S. Department of Transportation dismissed Star Marianas’ complaint, SMA suspended its flights “due to the risks presented by an unhealthy flight environment.”
In a letter Thursday, Star Marianas president Shaun R. Christian told CPA Executive Director Christopher Tenorio that SMA “is willing and able to resume its flight operations when the CNMI creates conditions that allow such services to be performed.”
He said “the length of time that Star Marianas suspends its flights rests solely with the government of the CNMI and its CPA.”
Attached to the letter is CPA’s calculation of fees, which Christian said “grossly misrepresents” the cost of providing inter-island flight services.
Under such conditions, he added, the cost of providing air services “is not financially feasible.”
Responding to Christian’s letter, CPA Board Chairwoman Kimberlyn King-Hinds said “it is the board’s goal and priority to amicably resolve CPA and SMA’s dispute over the new rates methodology through a series of consultations with you in the immediate future.”
In the interim, with the goal of immediately resuming inter-island air connectivity, King-Hinds told Christian that “the governor has given his commitment to fully subsidize all fees and charges, assessed to SMA from CPA, for the remainder of FY 2022, provided that SMA agrees to reduce the cost of travel to the islands of Tinian and Rota.”
The governor, she added, “is committed to finding a way to permanently lower the cost of inter-island travel.”
She said the governor agrees with CPA that the long-term solution to this issue is for the CNMI to avail itself of U.S. DOT’s Small Community and Rural Air Service programs.
“It is my hope that you consider this proposition and deem it a good faith effort to finding a pathway moving forward that is mutually beneficial. As this is of urgent concern and one that would greatly benefit the people of Tinian and Rota, please contact me as soon as possible. We look forward to working together to resume inter-island air service,” King-Hinds told Christian.
In response, Christian said, “While SMA did not make the decision to stop operations lightly because of the substantial impact on the traveling public and SMA’s finances, it is not interested in saddling the CNMI taxpayers with the burden of subsidizing SMA’s operations.”
Christian said Star Marianas “is capable of managing its own business affairs.”
He said if CPA is willing to engage in meaningful, structured discussions, Star Marianas is also willing to engage in such discussions and work toward restoring inter-island air service.
Christian said Star Marianas desires to resolve any disputes “informally and efficiently.”
“However, in view of recent events, such as the abrupt termination of the prior agreement between CPA and SMA and the implementation of new rates and fees without prior consultation, SMA has doubts about the sincerity of CPA’s offer to conduct such negotiations in the near future and in good faith,” he said.
Not about money
Christian pointed out that “the core dispute is not entirely about money.”
Therefore, “the proposal to subsidize SMA’s operation with either CNMI taxpayer funds or federal funds is not an appropriate solution.”
He said Star Marianas “has never sought to avoid the payment of its fair share of properly determined and allocated costs as an aeronautical user of the CNMI airports. There are clearly defined policies and guidelines established by the Federal Aviation Administration as to how fees should be established. In the opinion of SMA management, such guidelines were not followed when the current CNMI regulations found at §40.10.1 were amended to establish the new fees.”
These issues, Christian said, are not new. “Prior to the new methodology that CPA implemented, SMA raised similar concerns as to the previous Airport Use Agreement (‘AUA’). Protracted discussions and negotiations did not lead to a resolution, forcing SMA to bring those disputes to the CNMI Courts.”
In addition, he said, Star Marianas requested CPA to delay the implementation of the new fees to give the parties an opportunity to discuss them and fully explore what their impact would be on the airline’s operations. That request, Christian said, was denied by CPA.
“This [recalcitrant] attitude then forced SMA to file a complaint with the Department of Transportation due to the limited amount of time permitted for the filing of such a complaint from the implementation of the fee structure. In CPA’s responses to the DOT complaint, there were admissions that certain errors exist in the newly amended CNMI regulations. Unfortunately, the DOT decided not to handle the matter because it determined that the dispute was not sufficiently significant for it to exercise jurisdiction but referred the matter to the FAA instead,” Christian said.
Mediation
Christian suggested that Star Marianas and CPA engage in mediation “in order to make a meaningful progress.”
He noted that CPA, a public corporation, “has previously refused to fully disclose its financial information despite repeated requests by SMA as a condition of the Airport Use Agreement.”
“It would seem axiomatic that any member of the taxpaying public should have the ability to view how a CNMI public entity is spending taxpayer funds. But even more pertinent where SMA is trying to properly evaluate whether the rates and charges CPA is proposing are reasonable in relation to CPA’s costs for providing the facilities and services utilized by SMA,” Christian said.
He reiterated his company’s desire to resolve any disputes with CPA informally “but in an appropriate and structured format that involves a neutral third party. Therefore, in order to make meaningful progress there must be a commitment by both sides to engage in mediation within a definite time frame in the near future.”
Christian noted that in 1978, the U.S. Congress passed the Airline Deregulation Act, the intent of which was to deregulate the airline industry in the United States.
“Deregulation meant the end of control over such areas as fares, routes, and market entry of new airlines. The removal of federal control was not intended to transfer those regulatory powers to local governments. Therefore, the CPA’s proposal to dictate the airfares that an air carrier charges is clearly beyond the authority of CPA,” he added.
