STAR Marianas Air is accusing the Commonwealth Ports Authority of coercing airlines into complying with “non-compensatory fees,” describing it as “egregious behavior” that cannot be tolerated.
Although Gov. Arnold I. Palacios has said that his administration is working on something mutually acceptable for the government and SMA, CPA Executive Director Leo Tudela sent SMA a second demand letter as a matter of “procedure,” asking the airline company to pay its
“$1.2 million in outstanding debts.”
In his letter to CPA Board Chair Jose C. Ayuyu on Monday, SMA Chair Robert Christian “formally and unequivocally objects to the unethical and coercive tactics” employed by CPA, saying “it is abundantly clear that the CPA, in coordination with its legal counsel and consultants, has engaged in a deliberate scheme to bypass federal fee-setting regulations, coerce airlines into compliance with non-compensatory fees, and subvert the principles of fairness mandated by the Federal Aviation Administration.”
Ayuyu declined to comment since he just received Christian’s letter late Monday afternoon. He said he needed to read and understand what the letter is all about.
In his letter, Christian said CPA’s requirement that airlines must accept all its rules and regulations, including the fee-setting methodology, upon issuance of a letter of authorization or LOA, “is a blatant act of coercion designed to eliminate any opportunity for airlines to negotiate or challenge its terms.”
He said by linking operational access to this acceptance, CPA has “created a scenario in which airlines are left with no choice but to accept its demands or risk losing access to critical airport infrastructure. “
Christian said “this is not only coercive but represents an abuse of regulatory power and authority.” He cited FAA Order 5190.6B, Chapter 18, which, he said, explicitly mandates that non-compensatory fee-setting models must be mutually agreed upon.
CPA’s approach, he said, “forces airlines to accept terms under duress, thus, flagrantly violating FAA requirement.”
He said CPA’s insistence that airlines automatically accept these terms upon receipt of the LOA, without any opportunity for review, negotiation, or objection, “is nothing short of a violation of the FAA’s regulatory framework.”
According to Christian, “It is increasingly apparent that the CPA, its legal counsel, and its outside consultants are colluding to impose a fee structure that not only circumvents federal regulations but also serves their mutual financial interests at the expense of the airlines.”
He said the issuance of a rate book that “lacks transparency and bundles arbitrary costs, combined with the unilateral imposition of terms through the LOA, is clear evidence of a coordinated effort to force airlines into accepting inflated and unjustified fees.”
Christian said CPA’s consultants, who have “consistently provided flawed and misleading advice under the guise of ‘industry standards,’ are complicit in this effort. Their role in crafting a rate book that is deliberately opaque and lacking in detail further supports the conclusion that this is a calculated effort to obscure the true costs being imposed on airlines. Moreover, the fact that CPA’s legal counsel has facilitated this process by drafting and enforcing regulations like NMIAC 40-10.1 only underscores the degree to which this collusion has been institutionalized.”
Two years ago, the previous CPA board changed the rate methodology for aircraft operators, following the recommendations of Ricondo & Associates Inc., which advised the board that the debt service ratio requirement of 1.25 would not be met unless additional revenue was generated or expenditures were reduced.
For Christian, CPA’s actions “represent clear violations of several FAA regulations on economic nondiscrimination, fee and rental structure and an FAA order pertaining to oversight and accountability.”
Christian also accused CPA of using tactics that demonstrate “a clear and calculated effort to subvert the FAA’s compensatory fee model.”
He said by using the LOA process as a tool to force compliance, CPA is attempting to “legitimize non-compensatory fees without following the established federal process of mutual agreement.”
“This is an abuse of power, and it is evident that the CPA, its legal team, and consultants are fully aware that their actions violate FAA guidelines,” Christian said.
He said the rate book CPA uses to justify these fees lacks the required transparency and fails to provide an adequate breakdown of services and associated costs. CPA’s continued insistence that this rate book reflects “industry standards” is misleading, if not fraudulent, he added.
The rate book includes services and charges for facilities that are either not used by airlines or are grossly inflated, with the clear intent of imposing a non-compensatory fee structure in violation of federal law, Christian said.
SMA is demanding CPA to take the following actions:
1) Immediately halt the coercive use of the LOA process to force airlines into accepting CPA’s fee-setting methodology.
2) Provide full transparency in its rate book, with a detailed and itemized breakdown of all fees and services in line with the compensatory fee model.
3) Initiate a formal negotiation process with airlines regarding any non-compensatory fee structures, in compliance with FAA Order 5190.6B.
4) Discontinue the use of any practices or regulations that involve collusion with consultants or legal counsel to obscure the true costs being imposed on airlines.
Christian said “failure to take these actions will result in immediate FAA complaints, litigation, and a coordinated effort by the affected airlines to seek full regulatory and legal remedies.”
In July, SMA notified the governor, Tinian Mayor Edwin P. Aldan and Rota Mayor Aubry Hocog that the airline would stop its inter-island flights effective Oct. 15, 2024, due to the “unsustainable airport fee structure imposed by the Commonwealth Ports Authority, which renders continued service economically unviable.”
About a month later, SMA announced Tuesday that it was rescinding its notice of intent to terminate its air services to Tinian and Rota “after a constructive meeting” with the governor, Lt. Gov. David M. Apatang, and their legal counsel.
