CPA okays extension of incentives to Northwest • But ports authority board gives airline company six months to upgrade aircraft

The Commonwealth Ports Authority board yesterday gave a conditional approval to the request of Northwest Airlines to extend its airline incentive program by seven months, hoping the company would bring in more tourists into the Northern Marianas.

However, failure to meet the three conditions by January 2000 means that the incentive program would still end on Feb. 29, 2000.

Carlos H. Salas, CPA executive director, outlined the following requirements which the airline company must meet:

• Change of aircraft from a DC10 to a B747 anytime between now until January;

• Submission of the traffic forecast from the current period to October 2000; and

• Provided that extension of such incentive does not jeopardize the airport’s debt service.

The decision to extend Northwest’s request was arrived at during a special board meeting yesterday. Four board members were in the meeting, which was not attended by CPA Board Chairman Roman S. Palacios who is on leave.

Salas explained the ports authority will still press for a meeting with Martin Gross, Northwest general manager for the Philippines and Micronesia, to clarify once and for all the airline’s plans in the Northern Marianas.

In a move to boost traffic, CPA granted a 50 percent cut in departure and arrival fees to all signatory airlines servicing the CNMI to revive the ailing tourism economy. The incentive took effect on March 1, 1999.

But by March 2000, the ports authority will implement new airport rates as it is under pressure to generate the much-needed revenue to meet debt service coverage.

The CPA management has expressed concern on the effect of extending the package of incentives since it is already short of meeting the 1.25 debt service ratio coverage of the $20 million airport debt.

“In the event Northwest’s plan does not push through, the ports authority will not lose any revenue,” said Roman Tudela, board member and finance committee chair, as he proposed the granting of conditional approval.

Judge Jose Dela Cruz, counsel of CPA, warned the board that the ports authority would be in technical default if it failed to raise the needed money to pay back its debt.

At the same time, board members agreed that in case such incentive would be granted to Northwest, other airlines servicing the Northern Marianas should be given the same extension period to prevent any complaints of discrimination.

Airlines will be able to avail of the incentive if they could provide an additional 15 percent increase in the total number of passengers that they bring into the Commonwealth.

CPA will compute the grant of the incentive using the first six months traffic in fiscal year 1998 as the base.

Northwest said it is planning to replace its current DC10 aircraft to a B747 in anticipation of the influx of visitors this summer. In a letter to CPA, Gross warned that the B747 will be assigned to other competing Northwest Airlines’ regions, which are simultaneously pushing for an upgauge of their aircraft if the ports authority fails to make a decision.

Upgrading the DC10 to a 371-seater Boeing 747 would translate to additional 49 passengers.