Sudden Saipan Air Cancellation Dismays CNMI Government

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Partner company allegedly backed out at last minute

By Emmanuel T. Erediano & Raquel C. Bagnol

SAIPAN, CNMI (Marianas Variety, June 27, 2012) – The cancellation of Saipan Air’s inaugural flight ruined the Fitial administration’s plan to lift the austerity measure in the next fiscal year, according to Press Secretary Angel A. Demapan.

Saipan Air, for its part, says it may take its partner, Swift Air, to court for backing out of their deal.

Rep. Ramon S. Basa, Covenant-Saipan, said the House leadership has been counting on the Tan Holdings airline so that the Commonwealth Healthcare Corp.’s request for subsidy can be considered in the fiscal year 2013 budget.

In an email to Variety yesterday, Demapan said Gov. Benigno R. Fitial and Lt. Gov. Eloy S. Inos were hoping that "there was a high possibility to restore government work hours to 80 per pay period.

But after Saipan Air announced it will postpone the launching supposedly scheduled for July, Demapan said the likelihood of bringing government employees back to 80 hours "has been greatly diminished due to this latest development."

He said the anticipated economic impact of additional visitor arrivals that would be brought in by Saipan Air was one of the items under consideration in the administration’s revenue projection for the upcoming fiscal year.

Basa, who chairs the House Committee on Ways and Means, said Saipan Air’s announcement "is not welcome news."

CHC is asking for a $10 million subsidy in the next fiscal year.

Basa noted that the defunct Department of Public Health used to get $38 million from general fund, but when CHC was created as a public corporation it received $5 million only.

He did not explain why the Legislature allotted that amount, knowing that it was just "a drop in the bucket."

But Basa said the Legislature can no longer push for bills that will raise taxes because the business community will endure more hardship.

"That will put us in a more difficult situation," he added.

Legal options

Saipan Air is exploring all legal options after its partner, Swift Air, which was supposed to provide the airplanes, backed out, claiming "financial incapability" among its reasons.

Steven P. Pixley, chief legal counsel and spokesman for Tan Holdings, told reporters yesterday that they received a cancellation notice from Swift Air on Sunday evening — one week before the official launching scheduled for July 1.

"Tan Holdings…negotiated with Swift Air in good faith and paid $1.26 million in security deposits. Swift Air promised to have the planes delivered in time for the July 1 operations," Pixley said.

"Tan Holdings…invested heavily and we got the email on Sunday from Swift Air informing us that they are not financially capable of going on with the operations," Pixley said.

He said this is now being investigated by the authorities.

"Basically, Swift Air did not perform its side of the contract and we have to postpone our operations. This development is a legal matter now and we are exploring our legal options," Pixley said.

Swift Air was supposed to deliver three airplanes to Saipan Air for its operations — two Boeing 757’s and one Boeing 727.

Pixley said Saipan Air is preparing to file a complaint against Swift Air in the U.S. District Court for breach of contract, for the NMI for fraud, and misrepresentation.

He said Tan Holdings made two wire transfers to Swift Air — $900,000 on April 9 and $360,000 on May 29, 2012.

Pixley said last week, there were already concerns about finances so they pressed Swift Air to meet the launching target.

He said they were later notified in the notice of termination of contract that Swift Air could not acquire certification from the Federal Aviation Administration.

Pixley said Saipan Air is totally owned by Tan Holdings and the CNMI government is not a part owner.

He said they may have to find another partner but there are no definite decisions yet.

Saipan Air hired several employees who are now undergoing training, but Pixley said they now don’t know what will happen to these personnel.

Last month, Saipan Air was launched in China and Japan and Pixley said tickets had already been sold in Japan and China.

"Again, this is a developing issue and we don’t have any decisions yet. My client [Tan Holdings] is devastated with this development," Pixley said.

According to its website, Swift Air is "one of the premier aircraft managers and operators in the United States with many years of experience operating a diverse fleet of business and personal jets. "Founded in 1997, Swift Air headquartered in Phoenix, Arizona "owns and operates a fleet of 737 airliners and other jets available for charter for corporate, family or group travel."

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