A CNMI flag carrier continues to be a pipe dream following Saipan Air's decision yesterday to cease operations after its supposed partner, Swift Air LLC, reneged on its promise to deliver an aircraft a week before the airline's inaugural flight.
“Unfortunately, the economic reality of restarting operations following the postponement of the original launch date presents an insurmountable obstacle,” said Saipan Air counsel Steven P. Pixley.
In a statement issued at 5pm yesterday, Pixley announced that Saipan Air made the difficult decision to cease operations effective immediately.
Pixley also disclosed in an interview that the company has filed a complaint with the Federal Bureau of Investigation to investigate Swift Air LLC and its officials for alleged criminal activity against Saipan Air's mother company, Tan Holdings Corp.
Pixley said that Swift Air's recent filing for bankruptcy in Arizona has prevented Tan Holdings from filing its earlier planned civil lawsuit against the off-island firm.
Once a bankruptcy case is filed, it stops all legal proceedings and, according to Pixley, this changed the whole landscape of the situation.
For now, he said, Saipan Air is pursuing efforts to seek the help of law enforcement agencies for possible criminal activities by Swift Air. Besides the complaints filed with the FBI, company lawyers in New York are also working on the matter, Pixley added.
He said Saipan Air is looking at potential criminal activity of Swift Air officials and the company is analyzing its legal status and rights under the bankruptcy case at this time. He believes they have a “strong case” against the company and its officials.
“So we're focusing now on individuals who own this entity and protecting our rights in bankruptcy proceedings.”
He hinted that Saipan Air is looking at suing Swift Air officials in their individual capacities, which bankruptcy laws may allow.
In the meantime, Pixley said that Tan Holdings looks forward to working with the community in other business opportunities to enhance the CNMI as a destination of choice.
Saipan Air, he said, acknowledges the hard work and effort expended by its staff and travel partners toward building the first locally based air service.
Swift Air terminated its contract with Saipan Air on the evening of June 24, citing reasons that Pixley described as “bogus.” He said Swift Air cited its failure to obtain certain Federal Aviation Administration certification for terminating the contract.
However, Pixley said they discovered that Swift Air didn't pay the vendor who is responsible for conducting the inspection, so no certification was issued. He added that following receipt of the termination notice, Saipan Air immediately conducted a teleconference with its officials, but things did not work out.
Pixley said they also discovered that Swift Air issued an internal email advising its personnel that Saipan Air was the one that terminated and breached the contract.
“Swift Air posted an internal memo that says we breached and terminated the contract, which is more evidence of fraudulent conduct,” he said.
Based on the list of creditors holding the largest unsecured claims against Swift Air, Saipan Air discovered that cases and claims have been filed against the company. Pixley revealed that Swift Air was also found having some tax liabilities with the Internal Revenue Service and a Florida-based company filed a $900,000 lawsuit against Swift Air for nonpayment of aviation fuel. These and others, he said, are exclusive of the list of creditors in the bankruptcy filing.
Millions of dollars in damages
Pixley said that Saipan Air incurred millions of dollars in damages from this debacle. In addition to the $1.26 million wire transfers to the off-island company, a large amount was also spent preparing for the business.
Among these expenses are the major renovations made to the Fina Sisu Terraces for the airline's crew and personnel, the establishment of a new office at the Francisco C. Ada-Saipan International Airport, and the hiring of personnel for the anticipated operation.
Saipan Air hired 23 flight attendants who were on training when the decision to postpone the launch was made. Saipan Air's sister company, POI Aviation, also hired 35 additional workers in preparation for the business.
When asked about the company's plan for these personnel, Pixley said: “We're working on that now, we're trying the best we can to these people. It's a very difficult situation and again, this circumstance is beyond our control.” He said there is a process going on for the affected personnel.
Additionally, he said tickets have already been sold in both China and Japan for the flights. He gave a conservative estimate of losses incurred in excess of $2 million.