High fuel prices derail Air Saipan

High fuel prices have derailed Air Saipan Ltd.’s plan to begin charter services soon, even before it could actually launch charter flight operations.

Air Saipan vice president for international marketing and corporate development Craig Champion disclosed that a major stakeholder who had pledged a substantial amount of investment has pulled out from the venture, primarily due to high fuel cost in the region.

“Air Saipan directors would like to advise a delay in the launch of the airline,” Champion said. “One investor in the airline, pledging some $3 million cash, has pulled out of the venture due to this reason.”

Champion said the company’s officers would study the situation within the next two months, remaining optimistic, however, that Air Saipan could launch its charter services by mid-year. It had wanted to begin operations during the first quarter.

High fuel cost earlier prompted Japan Airlines to downsize its operations in the Pacific, completely pulling out flight services between Saipan and Japan beginning October 2005. This has had a paralyzing impact on air capacity to ferry in the CNMI’s premier tourist market.

The pullout of JAL instantly resulted in a decline in the overall tourist totals visiting the CNMI. The most recent visitor statistics released by the Marianas Visitors Authority show that only 23,624 Japanese tourists came to the islands in February—21 percent lower than February 2005’s 30,040 Japanese visitors—which significantly pulled down last month’s visitor total by nearly 20 percent compared with the same period last year.

Air Saipan wants to tap into the Japanese market to take up the slack, disclosing plans to begin charter services between Japan and Saipan and eventually tapping other tourist markets, including Korea, China, Hong Kong and even Australia.

“We truly want to bring an airline to Saipan but must have the capital or guarantees to ensure that we succeed for the long term, not just for six to 12 months,” Champion said.

He said the pullout of one major stakeholder, whose identity he did not disclose in the company’s press statement, has put the remaining shareholders in a tough position.

He added, though, that Air Saipan has been in discussions with other parties who could fill in the loss of investment due to one investor’s pullout.

“The airline founder, Dean Mills, stated he would like a minimum of $10 million in guarantees, cash and letters of credit to make the airline work based on the current climate and the pullout of 30 percent has put the shareholders in a tough position,” Champion said.

Champion also assured that the company remains committed to implementing the project, quoting Mills as saying: “If we can secure bankable guarantees from local companies, that is if we fly they will buy seats, backed by bank guarantee, then we are ready to go!”

The company earlier disclosed that it would charter Boeing 757 aircraft from U.S.-based company, which would be emblazoned with “tropical colors” and the word “Saipan.” It has been communicating with the Commonwealth Ports Authority to comply with regulatory requirements for charter flight operations.

Air Saipan’s representatives have also informed the CPA of its plan to secure an Air Operating Certificate from the U.S. Department of Transportation to eventually become a full-fledged airline, according to CPA executive director Lee Cabrera.