THE federally funded sole-source contract between Marianas Southern Airways and the CNMI government was signed at a time when there was an emergency declaration and there was no airline service to Rota and Tinian, MSA President Keith Stewart said in an interview Friday.
At the time, he added, “people couldn’t go to dialysis by plane anymore — you had so many medical issues that were going on….”
The $8 million contract, moreover, was signed by Attorney General Edward Manibusan and certified that all CNMI regulations were followed, Stewart said.
“It was done completely above board,” he added.
In addition, Stewart said the contract stated that “the funds identified below [$8 million in account number AR88990002] are available and have been committed for funding of this contract.”
More important for passengers, however, the contact allowed MSA to reduce its airfare significantly, he added.
In effect, he said, instead of paying the prevailing $169 airfare from Saipan to Guam, for example, the passenger pays $99 only.
In the first six months of its service, he said MSA had flown 10,000 passengers who saved over $600,000 in airfare.
Stewart said “ultimately…funds ended up going back into the community indirectly by not paying as much on your airfare.”
On Thursday, Gov. Arnold I. Palacios announced that he had terminated the contract because there was no funding for it.
He also questioned “the fairness and wisdom of issuing such a lucrative agreement to a new private venture when an existing competing vendor was already providing the same service and was not offered a similar opportunity,” referring to Star Marianas Air.
Sole reason
According to Stewart, however, “I can’t speak on behalf of Star Marianas, but the reason we are even in the interisland airline service is because an airline stopped providing service and basically putting lives in…jeopardy. This is the sole reason we’re in it. We are…losing money — we’re not making money on this.”
It is not a “lucrative” contract, he added. “It’s really a contract that allows us to be able to get here…with brand new planes, with equipment and to get things…up [and running]. And even with the incentives, we’re not there [yet].”
“We’re still losing money,” he said. “So it’s not like there’s a great…basket of gold or anything else that’s sitting at the end of the rainbow here. The only reason we stepped in is because the community needed somebody to step in. And why didn’t someone else? I don’t know…. But you could check with Star [Marianas]…. I believe that the reason they stopped service is because, I’ve heard, that there was some issue with [the Commonwealth Ports Authority] and monies were owed, but I don’t want to speculate on exactly what that is. There is a reason and really the other airline is the reason that we’re even here.”
Looking back, he added, “if I knew that this would have happened, we would have never started the airline.”
Nothing unique
Stewart said it was then-Gov. Ralph DLG Torres who “reached out to me, asking…if we were interested in helping out or if we could help out” as “there was no airline service to Rota or Tinian.”
“Nothing went on that was… unique,” Stewart added. “There was an emergency issue. And what the administration at that time was doing was…ensuring that there would be another airline here…[to] provide service…. I was told at the time that other airlines were also approached.”
He said the certifications that were in the contract “allowed us to move forward, purchase brand new aircraft,” and bring in Florida-based Southern Airways, one of the largest commuter airlines in the U.S.
“So it’s extremely disappointing that the governor…canceled the agreement,” Stewart said.
“When you look at island destinations or any islands, the first thing you need to create [for the] economy is traffic and air service. And so…shutting down or…canceling this contract…we think [is] going to be a big mistake,” he added.
He said the contact, by reducing airfare, benefits travelers and helps the economy.
As for using ARPA funds for the contract, Stewart said, “If you look at what ARPA funds are for, they are for [reviving] the economy after Covid, and frankly, I can’t think of any business in our community that could better utilize ARPA funds than the airline industry in order to promote tourism, getting people to travel again, create [jobs]…. So I’m not exactly sure what happened here. I’m sensing it might be more political than anything, but unfortunately, it’s going to be the people who will be hit the worst.”
Stewart said “if the community wants this airline, please let the governor know, please let your elected leaders know. Get your voices heard.”
He said Governor Palacios had scheduled a meeting.
“I would tell the governor that if ARPA has really ran out, then let’s figure it out,” Stewart said. “There are so many other ways to skin the cat. We want to figure it out — we want to come out with a solution.”
Statement to the media
MSA issued the following statement late Friday afternoon:
“In December 2021, our islands lost airline service at Rota and Tinian. The administration issued an emergency declaration and, due to our ongoing efforts to start an international airline in Saipan, MP Enterprises (MPE) was one of several companies who were called to see if we could help. MPE was not working to start an inter-island airline, but we decided that the need was too great to ignore.
“MPE was thankful that America’s largest commuter airline, Southern Airways, agreed to partner with us. The new joint venture, Marianas Southern Airways, submitted a proposal to the government in January, and after a couple months we were issued a contract in March 2022.
“The contract was signed by the Director of Procurement, Secretary of Finance, Governor and the Attorney General. It certified that all CNMI procurement regulations had been followed and that the funds were identified, available, and committed. The contract even included the government bank account number where the funds were on deposit. MSA relied on this information. Where did the funds go? A copy of this contract is on our Facebook page for anyone to see.
“We moved forward in good faith, invested more than $12,000,000 in brand new aircraft & other startup costs, employed 40 staff across four islands, and were purchasing more aircraft to increase frequency among all airports. Never in the history of the CNMI had an airline committed a fleet of brand-new aircraft to our islands. Without the government’s support, MSA cannot continue our same level of service. Since August, we have flown over 10,000 passengers and saved travelers nearly $600,000 through our reduced airfares.
“Our most recent project was to commence a locally based international airline here in Saipan to assist in the revitalization of our tourism industry. We would like to ask why would an international airline begin services here if the government does not meet its commitments?
“We will soon be forced to decide if/when our flying will end. We hope it will not happen and that we can reach an agreement with the Governor. If no agreement is reached, cancelled flights will be refunded, and we will re-locate our aircraft to destinations where government’s partner with companies and then stick to their contracts. The CNMI could soon be back to a single airline, with no market competition, little frequency, and no alternative should another cessation of services occur. No new airline will likely ever again come to the CNMI in light of the Governor’s decision.
“We thank the people of the CNMI for the opportunity to serve you. Marianas Southern Airways has been doing all we can, and we’re very sorry the Administration has opted to breach the Commonwealth’s contract and end our service. Untold efforts by hundreds of people, and untold millions of dollars already spent will have been wasted.
“If you would like MSA to stay, please reach out to the Governor and tell him that inter-island air service is too important to lose!”
Marianas Pacific Express President Keith Stewart holds a copy of the contract between his company and the CNMI government during an interview Friday in his office at Paradiso Hotel in As Perdido.
