Sablan: Hiked fees a damper on tourism

The expected influx of tourist arrivals on the island may not happen this year after the Commonwealth Ports Authority junked the proposal of the Aviation Task Force and the Marianas Visitors Authority to reduce by 50 percent the landing fees to lure new airlines provide service to the commonwealth.

“It is our best chance to convince the airlines to come here but we may just witness the death of our tourism economy,” said MVA board chairman Dave M. Sablan.

In fact, he said airlines have threatened to downsize operations by using smaller type of aircraft once the ports authority pushes through with the planned rate increase of airport fees.

Since last year, MVA and the Aviation Task Force have been trying to entice airlines and convince existing carriers to expand operations by offering a 50 percent cut in landing fees to survive the cutthroat competition in the tourism industry.

If CPA does not raise its fees, visitor arrivals in the CNMI must increase to 740,000 by the end of the year for the ports authority to earn the needed revenue to pay for its obligations.

The cash-strapped ports authority has proposed a 64 percent increase in landing rates and 38 percent hike in departure facility charge.

MVA board had asked for a week to finalize its own study in connection with the planned airport hike rate during a meeting last month. But Sablan later realized that he would need more time since he has to get a firm commitment from various airlines in connection with their plans to provide service in the CNMI.

However, the ports authority board said it has to get the authority’s tourism projections immediately since it has to inform the bond rating agencies immediately about its decision.

The bond rating agencies — Fitch IBCA and Standard and Poor’s — have imposed the rate increase as a condition before providing an investment grade rating for the $53 million bond one year before the flotation was carried out in March 1998.

Failure to get the bonds rated would result an increase in interest rate from 6.25 percent to 6.70. If it gets a bond rating, the interest rate may be pegged at 6.45 percent.

While recognizing that the ports authority has not increased its airport fees for the last 10 years now, the MVA board believes that this is not the right time to do so because officials are struggling to save the teetering tourism economy which has been battered by Asia’s financial crisis.

But if the ports authority does it raise its fees to meet debt service requirements and expenses, CPA will be in technical default of the bonds inviting a wide range of legal problems, said Carlos H. Salas, executive director.

When CPA issued the revenue bonds, one of the agreements was for the ports authority to produce annual net revenues equal to at least 125 percent of debt service every year.

For the past weeks, the ports authority has been consulting various airlines and government offices before carrying out the planned rate hike.