THE Senate Committee on Public Utilities, Transportation and Communications on Wednesday met with officials of Marianas Southern Airways and Star Marianas Air to discuss their “issues” with the Commonwealth Ports Authority and the administration.
Also attending the meeting were members of the CPA board of directors and other CPA officials, as well as Tinian Mayor Edwin P. Aldan and Rota Mayor Aubry Hocog.
The committee’s chairman, Sen. Paul A. Manglona, said the issues facing the two airline companies need to be addressed as soon as possible “because our people are struggling to travel between our islands.”
Senate President Edith Deleon Guerrero, for her part, said the meeting was a “great opportunity” to have a candid and open conversation with the service providers regarding the CNMI’s inter-island transportation issues.
Fair agreement
First to speak was William Giles, vice president of Marianas Southern Airways whose $8 million sole-source contract with former Gov. Ralph DLG Torres was terminated by Gov. Arnold I. Palacios due to lack of funding.
Giles echoed MSA Chief Executive Officer Stan Little’s letter to Palacios, saying that the contract was “a fair agreement” with bipartisan support that was approved by then-Governor Torres, then-Finance Secretary David DLG Atalig and the Office of the Attorney General.
He said in exchange for investing on brand new aircraft for the islands, developing infrastructure and spending a huge amount of human capital, MSA would be paid a monthly incentive for every flight flown.
Giles said they were “trying to find…ways to improve the economy of the CNMI” by providing the “most effective air travel that would benefit the residents of the CNMI in the biggest and most efficient way.”
He said they are still willing to look at ways to address the issues and “contribute to the same goal” which is to build a better CNMI.
He said he was “hoping that everyone can set politics aside particularly at this point in time…in focusing on transportation systems that could carry us to the next couple of decades.”
Quoting Little’s letter to Governor Palacios, Giles said as a result of an emergency declared by the former governor “we were identified as the only potential and qualified partner to provide stability for the air service needs of the islands.”
He said they traveled to the CNMI in January 2022 and met with the prior administration and members of the Legislature as well as CPA.
They were told that no one wanted to rely on one service company that could cease connecting the islands, and that the CNMI needed an additional airline.
Giles said MSA is hopeful that “we’ll soon issue a positive joint statement to the public and not only instill confidence in the local people that they will never again be stranded [and] feeling helpless [because of] the whims of [a] single aircraft operator. And perhaps, even more so, send a message to the rest of the world, not just the aviation community, that the CNMI is open for business and welcomes economic investment.”
He added, “I hope we can find a satisfactory solution to all, especially to those residents that will be affected the most.”
Difficult relationship
Star Marianas Air President Shaun Christian told the senators that SMA “had a difficult relationship with CPA.”
Christian said its ongoing issues with CPA are now before the Superior Court. The matter was already discussed with the Senate sometime in 2021, Christian said, but unfortunately, “it kind of didn’t really go very well.”
He said shortly after a hearing in the Senate in 2021, CPA notified SMA that it would cancel their airline use agreement, and would impose new fees under a different methodology which would drastically increase the price of inter-island travel, Christian added.
He said CPA admitted that it made multiple mistakes in the implementation of regulations, and so Star Marianas was left with a situation where it had no regulations to comply with.
“We were left in a very difficult situation. When those things came out, we made the decision to temporarily suspend our scheduled passenger operations. We did not suspend on-demand or air taxi flights in order to hopefully get [the issue] to a level where we can get it resolved,” he said.
When Governor Torres issued a state of emergency, Christian said the U.S. Department of Transportation contacted Star Marianas and asked what was going on.
“And we kind of explained the situation and they, DoT, asked us if we would be willing to resume flights. We said we would. We understood that there was a 45-day requirement that would be necessary for us to serve flights again and DoT decided to waive that, and we resumed operations under the understanding that the governor’s state of emergency would give some sort of relief so we could try and figure out how to move forward with issues we found in the regulations and try to amend the situation,” he said.
“That’s pretty much where Star Marianas is at,” he added.
CPA Board Chairwoman Kimberlyn King-Hinds told the senators that the issues Star Marianas raised are before the court and CPA will not be directly addressing them.
She said she thinks “the proper forum is in front of a judge.”
CPA Executive Director Christopher Tenorio urged the senators to support the collaboration between the CNMI government and business leaders in crafting a grant application for a small-community air service development program which would help the Commonwealth address air service and airfare issues.
He said the grant application requires the support of the entire community.
He added that it is also crucial to note that CPA’s revenue drastically decreased beginning with Super Typhoon Yutu and was amplified by Covid-19’s impact on the tourism industry.
CPA “is stuck between a rock and a hard place” when it comes to taking on additional airport expenses, he added.
“Taking on additional airport expenses will lead to an increase in airport rates which could potentially drive away interested airline partners and further compound the problem,” Tenorio said.
Acting Commerce Secretary Joseph Rios said his department “promotes, encourages, and fosters business activities, entrepreneurship and advancement in the CNMI economy.”
However, he said, “I don’t support unfair business practices by subsidizing one competing interest over the other.”
He said Commerce wants to encourage competition. “Favorable or preferential treatment by our system of governance must not be the standard…. What this boils down is, one, a termination of a possible unethical sole-source contract; and two, an airline who had temporarily [ceased] much needed inter-island service for our patients.”
He added, “Now we have both airlines running at a higher rates. Not necessarily an ideal rate but nonetheless [they] provide needed access to flight services. Everyone here can be in agreement the economy needs both airlines. But at what price?”
Sen. Paul A. Manglona asks a question during a meeting with Star Marianas Air, Marianas Southern Airways and the Commonwealth Ports Authority in the Senate chamber on Wednesday.
