Freedom Air needs $600K loan to stay afloat

  Freedom Air needs an additional $600,000 loan from the Commonwealth Development Authority to allow the inter-island carrier to continue its operations for the next six months, according to spokesperson Amjad Farhoud.

Farhoud told members of CDA’s Development Corporation Division board Friday that Freedom Air will use the money to procure airplane engine spare parts to avert the shutdown of its service in the CNMI.

Along with airline station manager Dennis Cruz, Farhoud said from the original loan proposal of $2.9 million, the CDA division only approved $900,000 in March this year.

He said the amount is not enough to cover the priority expenditures of the carrier including obligations to vendors.

Freedom Air’s attempts to seek loan assistance from private banks, according to Farhoud, were also unsuccessful due to lack of asset/collateral that would backup the loan proposal.

The carrier is said to have placed $6 million worth of collaterals for the $900,000 loan extended by CDA to the company which it utilized in immediate repairs of aircraft that resulted in the restoration of flights in Rota.

It was late last year when Freedom Air suspended and reduced its flights to Rota to give way for regular maintenance of its aircraft.

It was also forced to use seven-seater aircraft in lieu of 30-seater planes it formerly used and the switch negatively impacted the tourism industry on island. It also affected local travelers and medical referrals.

Because of the $900,000 loan from CDA, the carrier was able to bring back to normal Rota flights in March this year.

Last Friday, Freedom Air executives said it is again facing possible suspension of operations if no emergency loan will be provided to the company. Freedom Air has been servicing the Commonwealth for about 30 years.

To stay float in the next six months, Farhoud pleaded board members to consider approving the $600,000 supplemental funding request so it could scout and stock important engine spare parts that are usually hard to source out.

Farhoud said CDA initially referred Freedom Air to apply to the State Small Business Credit Initiative program for the additional loan assistance, but its application was junked by some banks because they are either not part of the program yet or the bank is not enthusiastic in entertaining an airline as a borrower.

“For now, we have dropped our Rota service from one flight a day to four days a week. Not because there’s no traffic, but because we want to take care of our equipment so they can last longer. We don’t have money to put up a new aircraft,” he told the board.

When asked how long the airline could stay afloat with its current finances, Farhoud responded that “it could be a matter of days, it could be weeks” depending on the company’s daily revenue that is now the only source of its operation.

He disclosed that if one of its vendors-such as an essential parts supplier-pulls the plug on Freedom Air, this will critically impact the business’ operation.

Meantime, CDA executive director Manuel Sablan and board member Marcie Tomokane disclosed during Friday’s meeting that CDA had extended the $900,000 loan to Freedom Air in March to give the company some breathing room for the next two years. CDA has yet to decide on the $600,000 supplemental loan request, however.

By Moneth Deposa
Reporter