Japan disasters result in 40-percent loss for CPA

The earthquake and subsequent tsunami that hit Japan in March has resulted in a 40-percent loss in airport revenue for the Commonwealth Ports Authority, according to executive director Edward Deleon Guerrero.

He said the loss was mainly due to trip cancellations from the CNMI’s main tourism market two months ago, and he believes the lost revenue would be difficult to regain due to the economic challenges facing the travel industry.

The Marianas Visitors Authority earlier disclosed that a total of 2,640 tourists from Japan cancelled their vacations to the Commonwealth as a result of the earthquake and tsunami on March 11. This cancellation brought an immediate $6 million negative impact to the islands’ economy.

These cancelled trips for both Asiana Airlines and Delta Air Lines covered the period from March 11 to the end of June 2011.

Deleon Guerrero declined to specify the cash amount of these losses.

He is optimistic, though, that the rough spot is over. He said airport revenue is starting to pick up again because of new flights offered by Sichuan Airlines and Fly Guam.

CPA had projected to earn over $16 million in combined revenues in fiscal year 2011. For the airport division, the agency had projected to collect $10.695 million while seaport activities were expected to bring in an additional $6.614 million.

“We lost about 40 percent of our revenue because of the March tsunami in Japan. But with the coming in of Sichuan and Fly Guam, we’re hoping to regain at least two-thirds of what we lost from Japan. CPA also instituted a very tight expenditure plan so we’re optimistic that we can sustain the losses,” said Deleon Guerrero.

According to CPA comptroller Derek Sasamoto, the agency’s financial stability was challenged by the Japan disaster.

“The March 11 disaster in Japan really changed our fund situation drastically. [The impact] is very significant and right now, we have trouble meeting our bond ratio for the airport because of that. But if our negotiations with the Federal Aviation Administration works out, then we should have no problem in meeting the required ratio. But it all depends on those negotiations,” said Sasamoto.

The comptroller was alluding to the disagreement with an independent auditor over the application of regulations and definition of reimbursement and classification of revenues, which could only be rectified by the FAA.

The required debt service ratio for both airport and seaport is 1.25. Seaport—which is currently at 1.36 ratio—has been consistently meeting this requirement. The airport failed last fiscal year. Its current debt service ratio is only 1.06.