Continental, NWA fail to ink airport accord

Continental Micronesia and Northwest Airlines failed to sign the Commonwealth Port Authority’s new airport user agreement before the Nov. 30 deadline, CPA said.

During a board meeting Thursday, CPA executive director Clyde Norita said that both airlines had asked for another extension.

“But we’ve extended the deadline since July. Other airlines were able to meet the deadline,” said Norita.

He said that when he came on board, the extension deadline to beat was Oct. 30, from Sept. 30.

“I extended again the Oct. 30 [deadline] to Nov. 30. We’ve informed them that effective Dec. 1, they will be charged a non-signatory rate at the airport,” said Norita.

A non-signatory airline pays a much higher rate when using the airports.

It was not fully known why Continental and NWA chose not to sign the agreement.

Both airlines earlier registered their objection to the CPA-initiated air service expansion proposal with the U.S. Department of Transportation, which aims to allow foreign air carriers to fly to the CNMI.

In particular, Continental Micronesia, Northwest Airlines, along with the United Airlines, have opposed the petition to grant Japanese, Chinese, and Australian airlines unilateral access to the CNMI, warning that it would jeopardize ongoing U.S. negotiations with these countries. The CNMI’s petition remains pending at the federal department for action.

Norita said the following airlines have signed the new user agreement: Asiana Airlines, Cape Air, Taga Air, China Southern Airlines, and China Eastern Airline.

The new airline agreement does not increase airport rates, although this was recommended by a financial consultant. The new agreement, however, includes a language that allows CPA to raise the rates by informing the airlines 30 days in advance.

Norita earlier said that CPA is trying to avoid increasing the rates amid the reduced air seats in the CNMI.

“We are looking at cuts internally to avoid raising the rates for the airlines, he had said.

Faced with declining revenues due mainly to the pullout of Japan Airlines in 2005, the CPA was earlier advised to revise its user agreement with airlines to increase the rates.

Ricondo & Associates said this would allow CPA to recover from its financial slump and meet all its obligations, especially its bond payment. CPA is currently under a negative bond rating for its lack of resources to meet debt service coverage.

Ricondo & Associates said that airline cost per enplanement in the CNMI is much lower than Guam.

In fiscal year 2004 and 2005, it said that enplanement costs were calculated at $11.63 and $11.52, respectively. In FY 2006, it is set at $11.09.

In Guam, the cost per enplanement in FY 2004 was $16.66.

Since CPA has been avoiding raising the rates over the years for fear of further flight service cutbacks, “airlines have not paid the true share of their requirement,” Ricondo & Associates said.

The financial consultant had suggested that CPA negotiate a replacement air agreement that could include a formularized rate-setting methodology that ensures airlines will pay the cost of the facilities occupied or used.