Sept. 18, 2002 – Airlines using V.I. airports can heave a sigh of relief — although it may be a short one. The Port Authority board voted Wednesday to defer increasing landing and passenger fees, temporarily.
The 35 percent increase in fees was to commence Oct. 1, the start of VIPA's fiscal year. The board voted to hold off the increase at least until its October meeting. Members asked VIPA staff to present further information about alternative financing possibilities to make up a projected $5.3 million deficit in the Port Authority's aviation division in FY 2003.
When Gordon Finch, VIPA executive director, met with airline officials Tuesday, he explained VIPA's position in increasing the fees. The airlines weren't buying what Finch had to say. (See "Raise fees and lose flights, airlines tell VIPA".)
The board spent Wednesday morning exploring other means by which VIPA could make up the deficit, in light of warnings the airlines sounded Tuesday about cutting back service to the territory. American Airlines said it would eliminate St. Croix mainland service "within 60 days" of a fee increase. American Eagle said it would cut its flights and staffs by half.
Finch presented a petition he said he had received Wednesday morning from Julia Carter, general manager of American Eagle on St. Croix. He said it contained 600 signatures of St. Croix residents asking VIPA not to raise the fees.
Carter said the petition was a "community effort." She said workers at Henry E. Rohlsen Airport started just last weekend to gather the signatures, which she said total 800 now. "We just went into the neighborhoods and got people to sign," she said. She stressed she was speaking as "an individual," and not in her position with American Eagle. "It's a community effort," she said again.
Finch and Bob Arthur, director of Landrum & Brown, the Port Authority's bond rate consultants, both expressed concerns about VIPA's standing in the bond market, should its aviation division show a deficit. Finch said a deficit would definitely hurt VIPA when it goes to the bond market for financing for its proposed Crown Bay project.
Asked by board members how VIPA's budget could be further cut, Finch said the only way would be to cut personnel. Actually, VIPA has had to hire more staff to comply with new airport security measures.
Finch later said forestalling capital projects could be a possibility, although one he didn't appear to endorse. "We could do that to shore up the aviation division for FY 2003, but it would be a one-time fix," he said. And the same deficit might have to be faced next year.
Arthur said although the territory's air traffic is down only 9.2 percent for FY 2002 compared with the national average of 14 percent, that still represents a drop of 76,936 passengers, which equals $1.5 million in revenue "we didn't receive."
In advising the board of its options, Arthur laid out a different scenario than he had presented Tuesday. Based on the airlines' warnings of fewer flights, "the equation has changed," he said.
So, he said, the board should consider that if it hikes fees, that may result in fewer flights, passengers and revenue for the authority, "less money for all."
Board member and Attorney General Iver Stridiron, who earlier was voted board vice chair, questioned Arthur about VIPA's arrangement with the signatory airlines. "If VIPA in unable to meet its debt, won't the signatories have to pay?" he asked.
Arthur said, "Then we both lose; there is no easy answer."
The signatory airlines signed an agreement with VIPA in 1989 to back up the Port Authority, should it suffer losses, to ensure that the V.I. airports can repay a $35 million bond debt. Arthur had said Tuesday that VIPA is $13 million in default on that debt and stands to lose its ability to issue bonds unless it raises the airport fees.
Stridiron seconded a motion by Leslie Milliner to defer the fee decision for further study but amended it to specify that the study be done by VIPA staff and presented at the October board meeting with recommendations on how the fees could be reduced.
Finch reminded the board that delaying the fee increases would throw VIPA's FY 2003 budget "out of whack."
Although Stridiron voted to defer action on the increases, he expressed several concerns. He said he was "troubled" by certain behavior of the airlines in the territory, adding, "I wish I could say that I thought the airlines shared the pain of the V.I."
At a time when the territory needs visitors, he pointed out, the airlines "decide to eliminate the senior citizen program." He had mentioned that on Tuesday to the airline representatives, who declined to comment.
Stridiron also said he is tired of publicity about St. Croix, which is thought of as the territory's "Achilles heel." The airlines "have us over a barrel with threats to pull out, and St. Croix always gets it in the neck," he said.
He suggested that the airlines instead be true partners and try customer stimulus programs for the territory. "They've lowered fares all over the states, but not here," he said. The distance from New York to California is vastly greater than to the territory, he said, but it costs more to fly from New York to St. Thomas than to California. "We should insist that they work with us and become true partners and share our work and our pain," he said.
Board members Kent E. Bernier, Leslie A. Milliner, Robert O 'Connor Jr., Dean Plaskett, Pamela Richards, board chair, and Stridiron attended the meeting. Wayne Callwood was absent.
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