$6.7M potential loss from Asiana suspension

Gov. Eloy S. Inos meets today with Asiana Airlines and the Marianas Visitors Authority to discuss a seven-day suspension of some Asiana Airlines flights over violations of safety rules, the potential impact of which is estimated at $6.7 million based on a load factor of 80 percent. The CNMI’s revenue loss from Asiana woes, however, could be offset by newcomer Jeju Air’s annual economic impact of over $122.9 million and the manner in which the Asiana flight suspension will be implemented.

The governor received from MVA managing director Perry J. Tenorio yesterday more details about the impact on the CNMI of Asiana Airlines’ flight suspension, among other things.

Press secretary Angel Demapan said the governor will meet with MVA and Asiana Airlines today.

Tenorio said yesterday that Asiana Airlines is currently providing 3,774 seats per week to the CNMI.

“The loss to the CNMI of this suspension will be about $6.7 million based on a load factor of 80 percent,” Tenorio said.

The potential loss is much more than what a lawmaker earlier estimated based on initial facts.

Rep. Ralph Yumul (Ind-Saipan), chairman of the House Committee on Tourism, said the suspension of flights and the impacts are “beyond the CNMI’s control.”

“However, I continue to wish that we won’t be penalized for Asiana Airlines crews’ actions. On the other hand, it could have been worse if the violations were not discovered and nothing’s been done to address it,” Yumul told Saipan Tribune, referring to safety that must be top priority for any airline.

South Korea’s Ministry of Land, Infrastructure and Transport announced last week a suspension of Asiana Airlines’ Incheon-Saipan flights for seven days for continuing with a passenger jet flight, OZ603, from Incheon to Saipan on April 19 despite discovering signs of engine trouble after takeoff.

A warning light came on, signaling a problem in one of the plane’s two engines.

Tenorio said the Korean government’s decision to penalize Asiana Airlines comes at a sensitive time as “transportation safety” has emerged as a priority in Korea following the sinking of the Sewol ferry in April.

The MVA managing director cited options being considered to cushion the economic impact of Asiana Airlines’ flight suspension.

“Although not yet confirmed, it is highly likely that the suspension dates will not be imposed consecutively and not during peak season or weekends to minimize impact on travel to the CNMI as a result of the temporary suspension of these flights. Asiana Airlines will negotiate the terms of suspension with the Ministry in July as it is expected that they will not dispute the Korean government’s action,” Tenorio added.

Yumul hopes that this would be the case, considering that the CNMI tourism is just beginning to recover.

Tenorio also cited Jeju Air’s recent announcement that it will become the second Korean airline to launch service from Korea starting on Oct. 1.

“This new regularly scheduled service by Jeju Air will bring an additional 68,985 seats to the CNMI per year with an economic impact over $122.9 million based on a load factor of 80 percent,” he said.

Tenorio also pointed out that Jeju Air is poised to step in and provide charter flights even before their inaugural flight in October “if Asiana’s flight suspension takes place during the summer, so that the CNMI is not left without air service from Korea during Asiana’s suspension.”

Korea is a major CNMI tourism market.

The flight suspension is an unprecedented sanction by the South Korean government, expected to cost Asiana Airlines some $3.9 million in lost revenue.

Asiana Airlines’ safety rules violation was in connection with a blockage in one of the engine oil filters in the twin-engine B767 jet carrying 253 passengers from Incheon to Saipan, a report from the Wall Street Journal says.

The ministry said under the rules, Asiana Airlines should have immediately landed at the nearest airport but they flew all the way to Saipan, putting hundreds of passengers at risk. The aircraft landed safely on Saipan after a four-hour flight.

The suspension could further tarnish the image of South Korea’s second-largest flagship carrier, following the crash of one of its aircraft at San Francisco International Airport in July last year.