Feb. 10, 2003 – While acknowledging the plight of the airline industry, with several major carriers facing bankruptcy, the Port Authority's executive director, Darlan Brin, said Monday: "We don't want to file for bankruptcy, either."
The remark came at a press conference Brin called to defend VIPA's 25 percent increase in airport landing and passenger fees, which went into effect Feb 1. The increases prompted immediate protests from the national airlines serving the territory, most of which threatened to cut back service, and from the public and the local tourism industry. (See "More airlines object to VIPA fee increases".)
Criticism has been particularly harsh about the rate hikes coming at a time when neither the territory nor the airline industry is in a healthy financial condition. Nonetheless, Brin said Monday, the authority has no choice but to raise the rates, so as to offset a currently projected deficit of about $5 million in the Port Authority's Aviation Division for Fiscal Year 2003.
Brin said he is greatly concerned about the airlines' announcements of probable cutbacks in service to the territory. "We do have concerns; we are very concerned," he said. "As a matter of fact, I am arranging a meeting with each carrier individually before the meeting later in the month where they can submit their comments."
He said he called the press conference "in view of the issues raised by specific interest groups and the public."
The airlines will pay about $3.47 more per passenger for the balance of this fiscal year, he said, noting that this is less than 1 percent of the average price for round-trip travel between the mainland and the islands.
Brin also pointed out that a $3 per passenger "facility tax" the authority had been charging the airlines expired on Dec. 1, 2002. Therefore, he said, the actual increase in cost to the airlines per passenger for the new rates comes to 47 cents. He said he didn't know if the airlines adjusted ticket prices after the facility tax was dropped on Dec. 1.
Cost-cutting measures imposed
In addition to raising rees, the Port Authority is cutting back expenses, Brin said:
– There is a hiring freeze.
– Except for critical positions, there is no new recruitment.
– No company vehicles are to be driven after hours — "including my own," he said.
– No overtime will be authorized unless it is critical.
– There will be a slowing in capital projects.
– Staff travel to Puerto Rico and the mainland has been cut back.
Brin has not replaced himself in his former position of chief planner, and he isn't going to. "I am wearing two hats now," he said.
He said the authority had to add extra security personnel in the face of Friday's nationwide heightened terrorism alert. However, these employees are either from VIPA's own force, or from other agencies, which VIPA has to pay. He said the authority has applied for and received a grant from the Law Enforcement Planning Commission to help with added security measures and personnel. VIPA also is applying for a marine security grant, he said.
Last October, the VIPA board voted to postpone any increases in airport landing and passenger fees for six months and adopted a slimmed-down FY 2003 budget of $75 million. The board called on VIPA personnel to reduce travel expenses and get along with less in the way of materials and supplies in order to make up a $5.3 million shortfall in its earlier spending plan.
Brin told the Senate Finance Committee on Feb. 4 that the authority's FY 2003 budget also anticipates that all VIPA funding for capital projects will come out of an estimated $7 million surplus in the Marine Division.
In his report on VIPA finances to the senators, Brin said that because of budget cuts already implemented and the loss of $1.5 million in FY 2002 because of waiving cruise ship fees on St. Croix, the "authority cannot commit to any additional cost item, whether from inside or outside of the authority."
As he did at the Jan. 29 Port Authority board meeting announcing the fee increases, Brin again on Monday pointed out that per its signatory agreement with the airlines, VIPA is not allowed to make a profit on aviation revenues. Any surplus must be returned to the airlines; at the same time, the carriers have agreed to absorb any aviation losses that VIPA may experience.
"We have every legal right to increase fees," Brin said.
"Fees were decreased by $3 million in 2001," VIPA attorney Don Mills said at the Jan. 29 meeting.
The new rate increases break down as follows:
– Landing fees, to $3.13 from $2.50 per 1,000 pounds.
– Arriving domestic passengers, to $3.24 from $2.59 per person.
– Arriving foreign passengers, to $10.19 from $8.15 per person.
– Departing commuter passengers, to $8.70 from $6.96 per person.
– Department pre-clearance passengers, to $9.63 from $7.70 per person.
Legislators have their say
Sen. Lorraine Berry has voiced sharp criticism of the increase in fees, saying on her weekly radio show that it could be "one more nail in the coffin courting fiscal demise." She suggested the government subsidize VIPA through funds from the Public Finance Authority or the Internal Revenue Matching Fund. (Brin said the authority would be very solicitous of any funds.)
Sens. Raymond "Usie" Richards and Louis Hill attended the Monday press conference.
Richards, a vocal critic of the fee increases, said he is concerned about the negative effect they will have on St. Croix, notably on the American Airlines direct flights to the island from the mainland.
Hill said he plans to meet with officials of some individual airlines to "get their point of view." "It's a delicate situation," he said. He also said he will look into whether the $7 million surplus in VIPA's Marine Division could be tapped to offset Aviation Division losses.
Brin said at the Jan. 29 board meeting that all funding for VIPA capital projects will come out of the estimated $7 million.
On another matter, Brin was asked Monday about a published report of a cruise ship having to wait in the harbor a few days ago for a harbor pilot. Joe Cranston, VIPA special assistant, said the matter had nothing to do with personnel cutbacks, contrary to the report.
"There are always two harbor pilots on duty," Cranston said. "This was a scheduling problem. Two were on duty and only one showed up." He said VIPA is not cutting back on harbor pilots.
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