SMA may cease operations

The CNMI’s sole inter-island air service, Star Marianas Air Inc., may cease operations unless CNMI leaders intervene in its long-ongoing battle with the Commonwealth Ports Authority over its fee structure.

In a letter issued by SMA board chair Robert Christian to members of the CNMI leadership yesterday, SMA intends to terminate its scheduled air service in the CNMI by Oct. 15, 2024 should nothing be done about CPA’s current fee structure (or means of collecting fees).

The letter was sent out to Gov. Arnold I. Palacios, Tinian Mayor Edwin P. Aldan, and Rota Mayor Aubry M. Hocog. In addition, the letter has since circulated around social media.

“Star Marianas Air, Inc. hereby provides notice of its intent to terminate all scheduled air service to/from the airports in Saipan (PGSN), Tinian (PGWT), and Rota (PGRO), effective Oct. 15, 2024, if a resolution to the current fee setting dispute with the Commonwealth Ports Authority (CPA) cannot be found. This difficult decision is driven primarily by the unsustainable airport fee structure imposed by the CPA, which renders continued service economically unviable,” he said.

Ultimately, Christian said he is urging the CNMI leadership to engage with the CPA and facilitate a dialogue to establish a transparent, equitable, and sustainable fee structure that ensures the continuation of vital air service to the community.

“We believe that immediate intervention is necessary to address this issue and ensure that our services can continue without disruption. We are prepared to work collaboratively to find a resolution that benefits all parties involved. Thank you for your attention to this critical matter,” he said.

Saipan Tribune reached out to CPA and in a statement from CPA board vice chair Antonio Cabrera, he said CPA is not asking for a lump-sum payment from SMA, just that SMA make payments.

“We are ready and willing to talk,” said Cabrera.

Some of the concerns Christian detailed in his letter were non-compensatory fees, disproportionate financial burden, unpredictability and lack of control, and impact on essential air service.

Addressing its concern regarding non-compensatory fees, Christian said CPA’s current fee methodology fails to adhere to the fundamental principle of compensatory fees.

“The broad definition of ‘Maintenance and Operation’ (M&O) expenses, lack of detailed cost allocation, and ambiguous treatment of common use areas result in fees that do not accurately reflect our actual usage of airport facilities and services,” he said

As for concerns regarding disproportionate financial burden, Christian explains that as the sole airline operating at Tinian and Rota, SMA is disproportionately burdened by the airport’s costs.

“The pricing structure, designed for multiple airlines with varying sizes, is inequitable in our situation. Furthermore, the lack of transparency in cost allocation raises concerns about cross-subsidization, where we may be paying for services primarily benefiting larger airlines that are not currently operating at the airport. This is particularly evident in the inclusion of Airport Aircraft Rescue and Fire Fighting fees at airports where we operate aircraft that do not require such services, effectively subsidizing ARFF costs for marketing purposes or for other airports like Saipan, where larger aircraft necessitate these services,” he said.

Christian also notes in his letter CPA’s alleged unpredictability and lack of control.

“The CPA’s authority to make mid-year adjustments and conduct year-end true-ups, without clear criteria or airline input, creates financial uncertainty for our operations. The lack of transparency in these processes further exacerbates our concerns about the fairness and reasonableness of the fees,” he said.

Lastly, Christian states CPA’s fee structure impacts on essential air service.

“Both Tinian and Rota airports serve communities that rely on our air service for essential transportation. The current fee structure jeopardizes our ability to continue providing this vital service, potentially isolating the community and hindering economic development,” he said.

Although it’s a tough decision, Christian said SMA remains steadfast in its commitment to providing safe and reliable air service to the airports in the CNMI.

“We are not seeking subsidies. However, the current fee structure, which is both opaque and unpredictable due to decisions made by the local government, creates unacceptable risks that jeopardize our ability to operate sustainably. This arbitrary and capricious fee structure is a direct result of CPA’s actions and decisions,” he said.