But garment industry faces closure

Haidee Eugenio
The economic disaster brought by 182,000 in lost airline seats annually as a result of Japan Airlines’ pullout from the Commonwealth of the Northern Mariana Islands (CNMI) in October 2005 still lingers.

But the recent surge in the number of charter flights and additional regular air services to the islands has been bringing in high hopes. 

Northwest Airlines resumed its flights from Osaka, Japan, to Saipan on December 21, which allowed the opportunity to fill 182 seats to the CNMI daily.

A charter service also came into the islands out of Japan at the end of December.

Another major airline, Asiana Airlines, launched a Busan-Saipan flight, in addition to the daily service out of Seoul, Korea, late in 2007.

Two Russia-Saipan charter flights in December resulted in a whopping 156 percent increase in arrivals from Russia—from only 252 in December 2006 to 654 in December 2007. 

The Russian tourists’ average stay of 12 days on the islands and their spending habits while on vacation make them very attractive to the CNMI, a US flag territory in the Western Pacific.

This year promises additional regular and charter flights to the islands. 

On January 11, China Eastern Airlines resumed its twice-a-week flights from Shanghai, China, to Saipan. China Eastern Airlines, which uses Airbus A300 aircraft with a seating capacity of 262, now flies every Friday and Monday from Shanghai to Saipan.

In February, 12 charter flights arrived in the CNMI—four from Guanzhou and Beijing in China; four from Sapporo, Sendai and Toyoma in Japan; and four from Incheon in Korea. 

The February charter flights were expected to bring in 2400 guests to the islands. Japan remains CNMI’s major tourism market at nearly 75 percent, followed by Korea.

The charter flights brought exciting news to the Marianas Visitors Authority (MVA), the CNMI government’s main tourism agency, since February is historically a low travel season.

Confidence: According to MVA, the charter flights give travel agents confidence to sell charter packages during this time.

“Having an additional 2400 guests in the CNMI in February will certainly help our ailing tourism industry,” MVA managing director Perry Tenorio said in a statement.

“With the lack of an appropriate amount of regular air service, the charter business helps the tourism industry by providing additional guests to the islands.”

Even neighbouring Guam welcomed an inaugural flight from Shanghai, China, on February 9 with 143 passengers via Continental Micronesia.

CNMI Press Secretary Charles P. Reyes Jr. told ISLANDS BUSINESS the commonwealth is “seeing an increase in flights”—courtesy of Asiana Airlines, Northwest Airlines and Continental Micronesia—on top of charter flights from China and Russia, among other destinations.

In April, a subsidiary of one of the biggest travel and tour companies in Japan will be bringing in 40 charter flights to Rota

This is expected to welcome 8000 tourists to the island. Rota is one of three major islands of the 14-island chain that is CNMI.

Governor Benigno R. Fitial personally went to Japan to meet with executives of Kinki Nippon Tourist Co. Ltd. (KNT), a subsidiary of Kintetsu International, one of the largest Japanese travel and tour companies, for the formal announcement of charter flights to Rota. 

KNT has chartered Continental Airlines to bring in the new Rota flights.

“The Japanese tour company is banking on the increasing popularity of ecotourism or environmental tourism among Japanese travellers,” Fitial said in a statement. 

“KNT will bring in 40 annual charter flights to Rota. The flights are expected to bring in some 8000 tourists to Rota in about a year.”

But whether these additional flights will finally cure CNMI’s ailing tourism industry is everybody’s guess, given the disastrous impact on the islands of Japan Airlines’ pullout in 2005—barely a few years after recovering from 9/11 and the SARS scare, coupled with skyrocketing fuel prices and competition from other tourist destinations.
Northwest Airlines, Asiana Airlines, Continental Micronesia and smaller airlines have been stepping up to the plate by introducing new routes, adding regular air service frequency or bringing in charter flights.

But their overall impact on CNMI’s tourism industry barely fills up the void left by Japan Airlines.

For example, despite the charter flights during the first month of the year, arrivals posted a growth of less than one percent (or 0.1 percent)—from 38,047 in January 2007 to 38,119 in January 2008.

But the government says this is better than not having any positive change at all.

Moreover, arrivals posted an 11 percent drop in 2007. MVA data shows only 389,261 arrivals in calendar year 2007, from 435,494 in 2006.

The 389,261 tourists in 2007 still pales in comparison to the 535,224 who visited CNMI in 2004, before Japan Airlines pulled out its Saipan flights in October 2005.

The 2007 arrivals were also far lower than the 506,846 in 2005.  Still, the 2005 arrivals posted a 5.3 percent decline compared to the previous year because of Japan Airlines’ pullout from Saipan.

For the entire 2007, visitor arrivals posted gains in only three months—February, November, and December—due to the resumption of some regular flights and the launching of charter flights.

“We look forward to the opportunity for growth out of Japan with the resumption of the Osaka flight,” MVA managing director, Perry Tenorio said.

“Although we still have fewer seats coming out of Japan than we did, the resumption of the Osaka flight does allow us the opportunity to increase our Japan arrivals as we head into calendar year 2008.”

September was the worst month with a 22 percent drop in arrivals—from 34,203 in 2006 to only 27,238 last year.

In a general membership meeting of the Marianas Visitors Authority, board chair Jerry Tan said CNMI is projected to welcome 468,286 tourists in 2008.

He said the 20 percent increase in tourist arrivals for 2008 is due to the continued growth of its Korean market and an expected rebound of the islands’ primary market of Japan.

Tan also sees China and Russian markets to post growth this year.

Japan Airlines was flying at a high load factor when it decided to stop regular flights to Saipan, the capital of CNMI.

Despite efforts by the CNMI government and private sector to ask Japan Airlines to reconsider its decision, the airline made the official announcement on July 29, 2005.

Three months later on October 4, 2005, Japan Airlines cancelled its daily DC-10 flights from Narita and daily Boeing 767 flights from Kansai, Japan.

The Hotel Association of the Northern Mariana Islands described Japan Airlines’ withdrawal from Saipan as “the end of an era,” after serving the area for 30 years.

The airline cited several reasons for the pullout, including low profits on leisure passengers, low net pricing, Saipan’s crisis sensitivity, high operating costs, and the carrier’s selling off of its old DC-10 and Boeing 747 planes, which are used on the CNMI routes as part of Japan Airlines’ restructuring.

With Japan Airlines’ pullout, the government projected a US$80 million to US$100 million loss across the community based on a projection of a 45 percent decline in the number of Japanese tourists.

Moreover, a study by Economist.com in June 2005 said CNMI stands to lose as much as US$216.2 million in economic output annually when Japan Airlines stops its operations.

CNMI’s tourism industry has a total economic impact of US$733 million annually. It directly and indirectly employs about 6200 people in the CNMI, with an annual payroll of about US$70 million.

Before Japan Airlines decided to stop its regular air service to CNMI, about 400,000 tourists from Japan arrived in the CNMI every year, representing nearly 75 percent of the islands’ tourism market. 

In February, Governor Benigno R. Fitial said he would never give up on the Japanese tourism market.

The Saipan Chamber of Commerce, the umbrella organisation of business groups in CNMI, is cautious about its economic outlook for 2008.

Its president, James T. Arenovski, said that while 2008 offers “some rays of hope” for its economy, the islands are a long way from recovering from the impact brought about by Japan Airlines’ pullout, as well as the closing of several garment factories.

But while there is hope for tourism with additional regular air services and charter flights, CNMI’s other major industry—garment manufacturing—is already on its way out with only eight factories remaining in operation on Saipan from a peak of 34 in 2000.

Most of the remaining seven garment factories are expected to announce closures in the next few months due to stiff competition from other Asian countries, now also exporting to the United States, as well as the second 50-cent minimum wage increase in the summer.