SMA wants gov’t to intervene in dispute with CPA

Star Marianas Airlines has asked Gov. Arnold I. Palacios to intervene in its ongoing dispute with the Commonwealth Ports Authority regarding airport usage fees.

SMA president Shaun Christian wrote Palacios last Tuesday, stating that government’s intervention is needed in their dispute with CPA, as SMA believes that CPA’s actions in this matter are “unprofessional, vindictive, and counterproductive” to its mandate of developing the ports to their fullest potential.

“We believe that your administration’s involvement can help resolve the sustainability issues surrounding interisland flights and prevent another transportation crisis,” said Christian.

When sought for comments, CPA chair Kimberlyn King-Hinds said that SMA is entitled to its opinion, but they are not facts.

“SMA is entitled to their opinion but they are not entitled to their own facts. The history of this dispute is well-documented and reported by the media multiple times. This matter has been in front of the federal District Court and reviewed by the [Federal Aviation Administration] where none of the claims they are alleging has been found to be true. That is a fact. What’s also a fact is that they owe millions. This matter is now before the Superior Court,” she said.

In addition, King-Hinds said SMA can continue to take shots at her as CPA’s board chair and she will gladly take all the punches in this matter.

“If this is to personally malign me, as I am directly referenced as board chair, take your best shot. Because if this is the blowback that I have to keep dealing with for doing what’s right for the people of Tinian, and most especially my brothers and sisters on Rota who are suffering the most, I’ll take all the punches,” she said.

SMA, in its letter, accused King-Hinds of actively seeking to drive SMA out of business in the CNMI.

“This perception arises from the chair’s apparent prioritization of establishing control over the airlines using the ports rather than addressing the level and quality of services provided to the public,” the letter stated.

In its letter to Palacios, SMA also gave a brief overview of the ongoing dispute, stating that in August 2021, CPA unilaterally terminated the longstanding Airline Use Agreement that had been in effect for many years. The AUA outlines the methodology for assessing Airport User Fees.

In place of the AUA, CPA implemented a new method for calculating user fees and charges that took effect in fiscal year 2022.

“We strongly believe that the CPA’s unilateral termination of the AUA was a retaliatory response aimed at Star Marianas. This action was triggered by Star’s disclosure of the CPA’s overcollection of $3.1 million in fees from passengers under the federal Passenger Facility Charge program. Furthermore, Star was compelled to take legal action to ensure the CPA’s compliance with the terms and conditions of the AUA, including the mandatory disclosure of financial data as required by the agreement. Unfortunately, STAR had no other viable alternative but to pursue legal measures given the circumstances,” said the letter.

The AUA fee calculation methodology, which had been in place since SMA’s relationship with the CPA began in 2009, was designed to incentivize airport users while holding the CPA accountable for its fiscal management of the airports, the letter stated.

“However, the CPA board cancelled the AUA just 30 days before the start of [fiscal year] 2022, immediately after SMA reported the CPA’s shortcomings in the PFC program to the FAA. As a result, the FAA sanctioned the CPA for non-compliance with the PFC program, leading the CPA to withdraw its request for additional PFC fees imposed on travelers,” SMA added.

SMA claims that instead of the AUA, the CPA implemented fee increases under the newly revised CNMI regulation and these increases were not only unnecessary but also appeared to be aimed at punishing SMA by raising its costs to unsustainable levels while simultaneously offering significant discounts to a new interisland carrier.

“The CPA’s scheme, supported by the former administration, included a contractual requirement for the new airline to offer passengers ticket fees well below market prices, with the losses subsidized by the CNMI government. Furthermore, the new airline received a 75% discount on the CPA’s fees in addition to $8 million government subsidies provided for covering those fees and other costs. The revisions made to the regulation were hastily approved by the CPA board and did not comply with numerous federal guidelines,” SMA alleged.

SMA alleges that this situation led to an “impending crisis” for the current administration and therefore intervention is warranted.

“If no action is taken, interisland travel will become unsustainable, and international travel will be adversely affected. United Airlines has already increased flight prices between Saipan and Guam, and SMA continues to challenge the validity of the regulation at great financial cost. Unfortunately, the CPA has disqualified itself from participating in the establishment of a fair fee structure that promotes transportation due to its own actions,” said the letter.