CPA to DOT: Exclude Chinese, HK airlines

Citing the CNMI’s ailing economic situation, Commonwealth Ports Authority board chair Kimberlyn King-Hinds has asked U.S. Department of Transportation Secretary Elaine Chao not to include Chinese and Hong Kong airlines from DOT’s order disapproving scheduled flights by Chinese airlines going into and out of the CNMI.

In her letter Friday to Chao, King-Hinds highlighted the potential devastating impact of the DOT order on not only CPA but the entire CNMI economy.

“I cannot overemphasize the fact that the resumption of flights is critical to the economic sustainability of both CPA and the CNMI,” she said on behalf of CPA and the CNMI government.

She noted that both Chinese and Hong Kong air service carriers generate 45% of CPA’s aviation revenues and 26% of CPA’s total revenues. These airlines include Beijing Capital Airlines Co. Ltd., China Eastern Airlines Corp. Ltd., Sichuan Airlines Co. Ltd., Hong Kong Express Airways Ltd., and Hong Kong Airlines Ltd.

Last Wednesday, DOT ordered the suspension of all flights by Chinese airlines into and out of the U.S. after Beijing failed to allow American carriers to resume services to China. DOT’s action takes effect June 16. That may still change though. Reuters reported over the weekend that DOT plans to issue a revised order in the coming days that is likely to allow some Chinese passenger airlines to continue flight services.

When asked for comment about this development, King-Hinds said over the weekend that they heard such reports but that they have not seen anything official.

In her letter to Chao, King-Hinds said CPA revenues are needed for the agency to meet its financial obligations, including its federal obligations under the CARES Act as well as its obligations under its Airport Revenue Bonds Indenture. CPA received $22.75 million from the “Grants-in-Aid for Airports” fund under the CARES Act. As a condition to receiving these funds, CPA is required to continue to employ at least 90% of the number of individuals employed as of the date of the enactment the CARES Act.

King-Hinds pointed out that if Chinese and Hong Kong air carriers do not operate in the CNMI, CPA will likely need to lay off or furlough more than 10% of its employees. She added that CPA’s Airport Revenue Bonds Indenture requires that CPA maintain a certain minimum debt service ratio.

“Without the revenues generated by Chinese and Hong Kong air carriers’ operations, CPA will be in serious risk of breaching that obligation,” King-Hinds said.

Due to COVID-19 pandemic, CPA has experienced a dramatic reduction in visitor arrivals from China, Korea, and Japan. King-Hinds said these declines have already led to a drastic and immediate decline in airport revenues. This has forced CPA to employ austerity measures, such as the reduction of work hours to 64 hours bi-weekly. She expressed concern that this DOT order will only exacerbate CPA’s and the CNMI’s ailing economic situation.

King-Hinds asked Chao for assistance in preventing further economic distress and to clarify DOT’s order. She said this order will be effectuated by requiring all the affected Chinese carriers to reduce their level of scheduled passenger frequencies to zero.

Prior to the suspension of international flights at the Francisco C. Ada/Saipan International Airport due to COVID-19, Sichuan Airlines Co. Ltd. operated “scheduled charter” flights, she said, which means that Sichuan Airlines followed a set schedule, provided an established number of flights per week to the CNMI, and individual passengers did not directly book tickets for these flights but rather obtained tickets through tour companies or travel agencies.

King-Hinds wants Chao to clarify whether DOT’s order will prohibit Sichuan Airlines Co. Ltd. and other Chinese carriers from operating these “scheduled charter” flights to the CNMI. She said if these airlines are required to obtain prior approval by DOT, CPA is seeking information regarding the approval process, including whether CPA’s and the CNMI’s economic need for these carriers to operate will be considered by DOT.

King-Hinds also asked for clarity as to whether air carriers based in Hong Kong are also affected.

DOT said in a statement last Wednesday that U.S. carriers have asked the Chinese government to be allowed to resume passenger service beginning June 1, and that the Chinese government’s failure to approve their requests is a violation of their Air Transport Agreement.