CPA extends airline incentive program

The Commonwealth Ports Authority has decided to extend the implementation of an incentive program that gives signatory airlines 50 percent discount on departure facility charge if they are able to bring their visitor traffic 15 percent above their current passenger haul.

At the same time, the CPA Board of Directors approved the adjustment to existing departure facility charge from the current $8 per passenger to $6.35 beginning Jan. 1, 2001. The new rate will be in effect until Sept. 30, 2001.

Board Chair Roman S. Palacios said the new rate reflects the financial outlook for the ports authority, which is currently servicing a multi-million bond floated in 1998 to support improvements projects at both air and sea transport facilities.

Mr. Palacios explained that extension of the Airline Incentive Program, which has been called for by carriers servicing the CNMI, will be retroactive to Nov. 1, 2000 and will stretch up to the end of the current financial year.

However, the CPA management pointed out that the current departure facility charge of $8 per passenger will remain in effect and will be adjusted to $6.35 beginning Jan. 1, 2001, which is higher than the pre-March 2000 level of $5.79 per passenger.

Mr. Palacios stressed that the new rate was agreed upon in consideration of the extension of the Airline Incentive Program until Sept. 30, 2001 and the agency’s current financial obligations including repayment of the $53 million bond floated in 1998.

CPA spokesman Travis Coffman said the Airline Incentive Program will also be extended to airline companies that are servicing new routes, including those recently launched like Mandarin Airline’s service to Taipei, Asiana’s Pusan route, and Japan Airlines’ Osaka and Fukuoka service.

Mr. Coffman said the CPA Board decided to extend the Airline Incentive Program and roll back the $8 departure facility charge to $6.35 due to presentations made by financial consultant Rex Palacios who noted that CPA’s actual revenue is higher than the projected yield.

Debt payment

The financial consultant’s presentation calmed fears that CPA could be compromising its ability to meet the requirements called for under its bond indenture if the agency would extend the implementation of the 50-percent discount program beyond Fiscal Year 2000.

Mr. Palacios said the adjustment of the airport facility charge per passenger will result to substantial savings on the part of the airline companies without adverse impact on CPA’s capabilities to meet its airport bond indenture.

The decision by the CPA Board of Directors came in the wake of pressing requests from foreign carriers to reduce airport charges and extend the implementation of the Airline Incentive Program.

Mainly because of recommendations by its United States-based financial consultants, CPA increased airport charges beginning March 1, 2000 in efforts to meet the requirements set by its 1998 airport bond agreement.

Mr. Palacios pointed out ,however, that only the passenger departure fee has been rolled back. Landing and deplanement fees, which were also raised in March 2000, will be collected according to their existing rates.

The decision also came following projections by airline companies plying the Northern Marianas route that passenger haul from major cities in Japan and South Korea is showing good promise of growth in the next months.

During a previous meeting between CPA officials and airline executives last week, most carriers disclosed an average of five percent increase in the projected number of passenger traffic to the Northern Marianas between now and the year 2001.

Continental Micronesia stressed it will maintain its current schedule with the deployment of four nonstop Saipan-Osaka flights per week starting February 1, 2001 to accommodate the expected influx of Japanese tourists during the summer.

Japan Airlines and Northwest Airlines both projected an increase of five percent in passenger traffic, while Asians Airlines anticipates visitor arrivals from Seoul and Pusan in South Korea to grow by a whooping 35 percent.

Saipan Station Manager Charlie Ling said Mandarin Airlines may be able to increase flights to Saipan when three new Boeing 737-800 aircraft purchased by its parent company, China Airlines, arrive in January and February of next year.

CPA would need at least $1.7 million in annual legislative appropriations in order to permanently reduce current airport charges which carriers claim make air transport service to the Northern Marianas more costly than in other destinations in the region.

The ports authority has actually suspended the implementation of the new rates from October 1999 to March 2000, pending pledges from the Legislature of annual government subsidy.

CPA has been urged to increase its current $0.85 landing fee at the airport to $1.40 per thousand pounds for signatory airlines. The financial consultants said this is necessary as this is one of the two options left for the Ports Authority to pay its bond by 2008.