‘Airport car rentals’ fees exceed revenue’

Following the pullout of Japan Airlines in October 2005, the revenue of car rental companies at the Saipan airport plunged so low that their monthly rental fees exceed their monthly earnings, information from the Commonwealth Ports Authority showed.

As a result, the companies have petitioned the CPA to adjust their monthly payment terms in view of reduced revenues.

In a Feb. 16, 2006, letter to six airport car rental companies, CPA executive director Lee Cabrera affirmed that, based on its analysis, “car rental agencies [in recent months] were paying monthly rental payments that exceeded their monthly revenues.”

But Cabrera said that changing the monthly payment to 12 percent of monthly gross rental revenues—as requested by the companies—“would cause a substantial loss which CPA is not able to afford since we, too, are negatively impacted by JAL’s departure.”

To alleviate the problem “in a more equitable fashion,” Lee said that CPA is proposing to cancel the monthly minimum payment guarantee for the period from January 2006 to December 2006. Instead, they will be required a monthly payment equal to 50 percent of monthly gross rental for the same period.

Cabrera, in an interview yesterday, said that the rental companies are not amenable to the proposals.

“We continue to find solutions. This matter is pending discussion at the CPA board,” said Cabrera.

He declined to disclose exact figures but that, based on the existing agreements with the rental companies, they are to pay a monthly minimum rate to CPA.

He said there is a subsequent provision that allows them to pay the minimum guarantee if it is equal or more than 12 percent of the gross monthly sales.

If the 12 percent of the sale is more than the guarantee fee, then companies are to pay the 12 percent.

For instance, if a rental company has $30,000 in gross revenues and the guarantee amount is $1,000, then the company would have to pay the 12 percent rate because it is a bigger amount.

Now that revenues have declined due to JAL’s pullout, Cabrera said that car rental companies want the rates adjusted because their minimum guarantee amount already represents 40 to 60 percent of their gross sales.

There are six car rental companies operating at the airport: Budget Car Rental, Hertz, Islander, Avis, Alamo National, and Thrifty.

CPA’s audited records showed that in fiscal year 2003, car rental concession fees totaled $488,163.

In FY 2004, the amount increased to $565,283.

In the first three months of FY 2006, car rental fees totaled $143,255.