CPA tackles extension of airline incentive program

The Commonwealth Ports Authority is hoping to complete its financial analysis by the end of the month to determine whether it could extend the Airline Incentive Program which expired in October, Executive Director Carlos H. Salas said.

Mr. Salas said the discount program has been in place for more than a year now using airport rates that are over 12 years old. CPA has adjusted airport charges beginning Nov. 1, 2000 as required by its bond rating agencies.

The CPA Board of Directors is expected to deliberate on what should be done to address the concerns raised by CNMI signatory airlines on the new airport charges during a special meeting today.

CPA must be extremely cautious in its finances and make sure it continues to meet the debt service coverage ratio as required by the March 1998 bond indenture, said Mr. Salas in a letter.

He added signatory airlines have already raised concerns over CPA’s rates which are structured to also pay for the deficits incurred in operating airport on Tinian and on Rota.

“We have submitted a financial analysis to the Legislature regarding the issue of subsidy and the amount needed from our lawmakers to subsidize Tinian and Rota operations,” he pointed out.

CPA can set the rates on Saipan that is true rate for international carriers to operate at the Saipan International Airport only if it is able to obtain government subsidy for Rota and Tinian operations, he added.

“A subsidy would definitely help in lowering airport fees,” according to the ports authority official.

Board Chair Roman S. Palacios previously noted that CPA is already looking at the ports authority’s financial situation to determine whether the agency can hold back the implementation of the new airport charges which became effective beginning this month.

He added that as soon as the CPA completed preparing a financial analysis of its revenues and expenses, as well as debt payment responsibilities, agency officials will meet with representatives of airline companies.

He added that the issue will be discussed and decided by the Board of Directors once a review of CPA’s financial condition is completed. “It all boils down to whether our level of revenues can continue funding our operations without adjusting airport charges.”

Northwest Airlines last month asked CPA to extend the implementation of a discount program beyond fiscal year 2000, citing the benefits it reaped for both Saipan signatory carriers and the Northern Marianas tourism industry.

Northwest is the first among the five Saipan signatory airlines to have requested for the extension of the CPA’s Airline Incentive Program, which was a major factor behind the carrier’s decision to upgauge its aircraft on Saipan beginning October last year.

The Airline Incentive Program was a significant player that paved the road for Northwest’s decision to upgauge from a DC-10 to a Boeing 747 in October 1999. The increased capacity has resulted in more passenger arrivals on Northwest this year versus 1999.

CPA’s airline incentive program offers 50 percent reduction on arrival and departure fees for each additional passenger above a historical median passenger load factor plus 15 percent.