CONTINENTAL TO CPA: Market demand dictates flight frequency

The sharp reduction in tourist arrivals to the Northern Marianas was not caused by the elimination of all nonstop Continental Micronesia international flights to Saipan but by more pressing economic factors, airline executives told the United States Department of Transportation.

In its response to the protest filed by the Commonwealth Ports Authority to the DOT, Continental Micronesia president Bill Meehan said the grave slowdown in the number of Japanese tourists to Saipan has, in fact, forced the airline to streamline its operations on the island.

Mr. Meehan pointed out that the Continental Micronesia’s decision to drop all nonstop flights to the CNMI could have been an opportunity for other foreign carriers servicing the islands to expand their operations if there was a demand for more airline seats.

“When the demand for nonstop Saipan-Japan flights requires additional nonstop service, one or more carriers will be able to provide it,” said Mr. Meehan and airline legal counsel R. Bruce Keiner Jr. in their response filed before the federal transportation department.

At present, Northwest Airlines and Japan Airlines currently provide nonstop service between Tokyo and Saipan, while JAL regularly flies between Osaka and Saipan.

Other Japanese and U.S. airlines could provide nonstop Saipan-Japan service if they determine that market demand in Japan requires nonstop air transport services.

Standing pat on its application to renew certificate of authority to continue treating Guam and Saipan as co-terminals, Continental Micronesia said CPA’s contention that the DOT set conditions on the route authority contradicts airline deregulation and U.S. efforts to open the international skies.

Continental Micronesia cited a provision in the Federal Aviation Act which prohibits the transportation department from requiring particular airline schedules.

Federal international aviation policy guarantees that carriers be provided with unrestricted opportunities to develop types of service and systems based on their assessment of market place demand.

Continental Micronesia quoted the policy: “Service opportunities should not be restricted in any manner…so that carriers may provide levels of service commensurate with market demand.”

In their signed letter to the DOT, Mr. Meehan and Mr. Keiner emphasized that the U.S. has given nonstop Saipan rights to countries in bilateral air agreement throughout Asia, mostly without restrictions.

“Although Saipan already receives nonstop Japan service, many more additional airlines hold authority to offer such service if marketplace demand justifies such service,” they stressed.

Also, Continental Micronesia reported that the airline’s Tokyo-Saipan traffic increased by five percent on the second year of its connecting service to and from the city through Guam while its nonstop Nagoya and Osaka-Saipan flights declined by over 5,000 passengers during the same period.

The airline company added traffic on its nonstop Fukuoka-Saipan flights declined by 51 percent. “With nonstop roundtrip flights between Guam and Saipan timed to connect with Asia-Guam flights, Saipan has excellent access to passenger traffic from Japan and other points throughout Asia.”

Continental Micronesia now offers 55 weekly flights between Guam and eight points in Japan as well as 18 weekly flights serving five points in other Asian countries and Australia.

However, CPA argued that Saipan lost at least 64 percent of the total air transport services received by the Northern Marianas in 1997 due to the decision of Continental Micronesia to abandon all direct international flights to the island last year.

Government statistics disclosed Continental Micronesia reduced its services to Saipan by 64 percent between 1997 and 1999, bringing only 74,000 passengers into the CNMI last year.

In 1997, Continental Micronesia had more than 700 direct Japan-Saipan flights each year. The carrier does not currently have even a single direct flight between Saipan and Japan.

Initial results of the study, conducted by CPA financial consultant Rex Palacios, noted that Continental Micronesia’s passenger haul dropped by 23 percent from 166,000 to 127,000 during the period covering calendar years 1996 and 1997.

In 1998, the volume of passengers brought in by the carrier to Saipan is lower by 23 percent compared with the previous year’s level, from 127,000 to 98,000.

The figure dipped further by 25 percent last year, totaling only 74,000 passengers by end-December 1999.

Marking a first in CNMI history, CPA wrote the U.S. Department of Transportation decrying Continental Micronesia’s treatment of Saipan and Guam as co-terminals which CNMI officials claimed has adversely impacted CNMI’s tourism industry.

The ports authority is asking the transportation department to recognize Saipan as a separate destination from Guam, each deserving its own independent service by Continental Micronesia.