Southern Airways to pursue legal action vs Torres admin if bank account has no funds

Tinian and Aguiguan Mayor Edwin P. Aldan testifies before the Senate Public Utilities, Transportation and Communications during a public hearing Wednesday. Also in the photo are Rota Mayor Aubry Hocog, next to Aldan, PUTC members, Marianas Visitors Authority and Commonwealth Ports Authority officials, and Marianas Southern Airways vice president William Giles. (FERDIE DE LA TORRE)

Southern Airways chair and chief executive officer Stan Little has informed Gov. Arnold I. Palacios that they would pursue legal action against the Torres administration if Palacios will be able to verify that the account relating to their $8-million contract with the CNMI government has no funds.

Little pointed out in his letter to Palacios dated March 1, 2023, that their contract even went on to specify in which bank and in what account the funds for the project were already appropriated and held.

These came to light last Wednesday at a public hearing conducted by the Senate Public Utilities, Transportation and Communications Committee to address problems related to the CNMI’s interisland travel.

Southern Airways, largest commuter airline in the United States, is a partner of Marianas Southern Airways, which was one of the airline providers that appeared at Wednesday’s hearing, when MSA vice president William Giles read a portion of Little’s letter before the committee.

In the letter, a copy of which was obtained by Saipan Tribune, Little suggested to Palacios to have a member of his staff verify the amounts in a certain account number. Should there be no funds in that specific account, Little requested the governor to let them know as that would be a material misrepresentation of the contract and that they would pursue legal action against the Torres administration.

He further stated that should there no funds in this account, he hopes that Palacios would direct Attorney General Edward Manibusan to conduct a criminal investigation.

Palacios terminated the government’s $8 million contract with MSA last Feb. 23, citing a lack of funding. Manibusan had approved that contract.

In response to a question by Senate President Edith E. DeLeon Guerrero (D-Saipan) if he could share the bank’s name in that account, MSA vice president Giles said “actually no” as this was Little’s request letter to Palacios.

Giles said that, based on what is in the contract, it says the funds are certified and they’re certified to be in this account. “That’s what he (Little) was referring to,” Giles said.

Little also suggested forcing Star Marianas Air to pay the back taxes and fees it owes the Commonwealth Ports Authority and use those funds to support an airline that can meet the realities of the current marketplace.

Aside from proposing to Palacios to rescind his termination notice immediately and pay $918,000 in invoices that have been billed thus far, and then issue a public statement of support, Little proposed to the governor to pay 50% of the invoice amounts within the next five days, and they will continue operations for 30 days while they negotiate a new long-term arrangement.

Little’s other proposal is for the governor to pay the entirety of the contract up front, and that they will commit to 24 months of uninterrupted flying instead of the contracted 18 months.

Should a mutually beneficial conclusion not be reached by March 10, 2023, Little said they will be forced to terminate scheduled service and begin the process of dismantling their infrastructure.

In response to DeLeon Guerrero’s question about the March 10 deadline, Giles said there was not even a response from Palacios.

“Absolutely we don’t want to stop [operations]. That’s the last thing we want to do,” Giles said.

DeLeon Guerrero said the March 10 timeline was not met, Little’s offer was not taken, neither option was taken, and termination of convenience damages will be filed.

“So I want to take this [Little’s] statement as a potential lawsuit against the Commonwealth government for the termination of the contract,” DeLeon Guerrero said.

Giles said that’s Little of Southern Airways’ statement and not from him.

Little further stated in his letter that he is sure that Palacios’ advisors have told him that the aviation industry is watching this termination of contract closely, since no other government in the world has taken such an action.

“Perhaps the timing of the withdrawal of Asiana from the CNMI was just coincidental, but other airlines will take note and likely pursue all other viable options before taking a chance on the CNMI in the future,” he said.

Little said predictability is the prime factor in route planning in the airline industry.

“I hope that we did not completely miscalculate what we believed to be a highly predictable risk/reward venture,” he said.

Giles said he is still waiting for some response from the CNMI government.

“It didn’t have to be the governor, I don’t suppose but it would have been nice if it was the governor,” Giles said.

Giles said he is not sure who could make the effort to contact someone, whether it’s Palacios or whether it’s the senator’s own behalf just to talk to.

“Because no one talks to us. It’s been two weeks and no response,” he said.

Giles said he hopes that the people think they’re a benefit to the community and want them to stay, that someone at least will talk to them. “Because otherwise it’s just saying that you guys don’t care and that won’t be a good thing,” he said.

Giles noted that 30 of their employees are locals.