MACS could begin inter-island service as early as December

Should the Commonwealth Economic Development Authority grant J&P Holdings (CNMI) LLC a qualifying certificate—essentially to waive certain local taxes for J&P Holdings, its subsidiaries, and its owners—Micronesia Air Connections Services could start providing regular inter-island air service as early as December.

A long standing CNMI investor, J&P Holdings, owned by John and Paula Stewart, has decided to branch out from air cargo, charter, scenic flight, and skydiving services by establishing a new airline in the CNMI focused on safe and reliable inter-island travel as well as direct air service from Saipan to Guam.

J&P Holdings’ endeavor comes at a time when inter-island travel faces uncertainties due to ongoing legal battles between the Commonwealth Ports Authority and the CNMI’s sole inter-island service provider Star Marianas Air.

However, providing this kind of service is no easy feat as it would cost upwards of $8 million to cover the costs of acquiring planes alone (specifically nine 9-seater planes, with plans to expand into 19-seater planes).

According to J&P Holdings tax attorney Tina Azarvand, to ensure the airline’s viability and sustainability, the company has applied for a qualifying certificate with the CEDA for abatement and rebate of certain CNMI taxes.

Essentially, the certificate would waive certain taxes MACS would need to pay to the local government for a certain number of years.

A public hearing on the application is scheduled for Nov. 6 at 5pm at the Marianas High School.

Azavand explained that the qualifying certificate’s benefits extend beyond just helping the new airline (MACS) and its parent company (J&P Holdings). Her trickle-down economics explanation contends that the certificate helps MACS avoid financial losses in its early years, when startup costs are high, and profits are low. This financial support enables J&P Holdings to invest in new aircraft, pay landing fees, and take on the risks of providing air service.

The lawyer states that the initial tax benefits to the company would then flow down through increased tourism to revitalize the CNMI’s COVID-impacted economy “leading to higher hotel occupancies, increased car rentals, more restaurant dining, and greater overall visitor spending throughout the community, resulting in incidental tax revenue increases for the CNMI.”

“J&P Holdings aims to provide safe and reliable air service for the Marianas. For that to happen, they would have to invest in new planes on top of landing fees. It would take a long time before they see any real profit from this. This essentially incentivizes the company to provide this service and to take on the risks that come along with providing passenger aviation services in the absence of the Essential Air Services Act,” she said.

In addition to this, with MACS in operation, the CNMI’s tourism industry—its sole economic driver—could further recover as MACS would be providing direct service from Saipan to Guam.

Most importantly, with MACS in operation, the people of Tinian and Rota will have another option in terms of inter-island travel as MACS would bring in much needed competition which in turn would mean lower fares.

MACS intends to offer competitive fares for flights between Saipan and Tinian, Rota, and Guam. Final fares will depend on landing fees and the outcome of the qualifying certificate. MACS will also provide discounts to locals, seniors, and veterans.

Azarvand shared that should MACS be granted a qualifying certificate, the airline could begin operating as early as December of this year.

Members of the community are encouraged to join the upcoming public hearing on MACS’ application.