SMA says new CPA rate computation forced them to stop flying

Star Marianas Airlines Inc., claims that the Commonwealth Ports Authority’s new method in assessing rental rates has made the company’s cost to provide air services not financially feasible and forced them to stop flying.

According to a letter from Star Marianas president Shaun Christian that was addressed to CPA, he said the recent change in CPA’s assessment of airport fees in line with the current economic conditions has forced them to stop flying and their resumption is dependent on CPA and the CNMI government.

“Under these conditions, SMA’s estimate of the cost of providing air services is not financially feasible. SMA therefore finds itself forced to stop flying, until fees assessed can be clearly determined and the rate structure is brought in line with the economic conditions that exist in the interisland market. Star Marianas is willing and able to resume its flight operations when the CNMI creates conditions that allow such services to be performed. Therefore, the length of time that Star Marianas suspends its flights rests solely with the government of the CNMI and its CPA,” he said.

Christian said the revised CPA regulations have created an impossible business environment for SMA or any airline to conduct operations between the islands of Saipan, Tinian, and Rota.

He explained that CPA represented that the new method of accessing rates would decrease fees for Star Marianas. However, he claims that the cost effect of providing inter-island travel was misinterpreted.

“The evidence offered by CPA confirms that under the new compensatory rate structure, SMA will be expected to pay a total of only $126,807 in fees at all three airports combined during the current fiscal year—and this represents a fee decrease, not a fee increase. In reaching this conclusion that fees would decrease, CPA omitted provisions that are included in Regulation 40.10.1 and made computations of the landing fees to be paid by SMA using the total number of landings per airport. When SMA submitted its October 2021 activity report, the CPA subsequently requested that SMA revise its report to include Landed Weights as opposed to just the number of landings. Therefore, since CPA bases the calculations of the fees and charges currently applicable to Star Marianas in accordance with provisions in Regulation 40.10.1 and based on Landed Weights calculation rather than total landings, the amount of fees to be paid are [over $230,000]. Thus, contrary to the earlier representations, the cost-effect of providing inter-island flight services has been misrepresented,” he said.

Star Marianas has since filed a complaint with the FAA and the U.S. Department of Transportation. The DOT determined that this was not a significant dispute and declined to exercise jurisdiction but referred the matter to FAA. The FAA has informed SMA that it is coordinating the request for assistance with the FAA’s Regional Office.

In a statement on its website, Star Marianas said its suspension of flights was due to “the risks presented by an unhealthy flight environment.”