P.M. Tuilaepa and the government must proceed with caution
A story titled “Govt. outlines financial centre, air traffic focus” published on the Sunday Samoan of 5 February 2017 made for some very interesting reading.
The story was based on an interview Prime Minister Tuilaepa Sa’ilele Malielegaoi had done with Brian Caplen of The Banker Magazine where he highlighted the government’s plans to develop the Samoa International Finance Authority (S.I.F.A) and to grow Polynesian Airlines international portfolio.
The interview is worth revisiting.
First Prime Minister Tuilaepa assured of efforts to tackle money-laundering concerns to ensure S.I.F.A. will continue to play a critical role in Samoa’s development.
“Of course, the centre has been facing many problems with the Organisation for Economic Co-operation and Development [O.E.C.D.] zeroing in on money laundering control and we were on the grey list for a short time,” he said.
“But we have been to the international committees for [advice and oversight on] the control of money laundering.”
“The money that the financial centre gets has been very useful to help with the funding of our budget but mostly it helps in the sponsoring of our sports.”
Tuilaepa insisted there is nothing sinister about Samoa’s financial centre.
“The essential thing the O.E.C.D. is after is to have disclosure of information on the activities and to ensure there is no money laundering passing through the centre. Ours is one of the most reputable centres.”
Well that’s a good reassurance, isn’t it? Let’s wait and see.
In the meantime, Tuilaepa had more on his mind. He revisited the issue of Polynesian Airlines operating international flights.
“We are now looking at the possibility of having our own planes again.”
“Our joint venture is coming up for review and the feeling is generally that, subject to a review, we should fly our own planes once again [internationally].” (Polynesian Airlines got into financial difficulties and stopped flying internationally after the downturn that followed the terrorist 9/11 attacks of 2001.)
“This would give a real boost to tourism because it’s quite possible that Virgin will still fly its planes in if we terminate our joint venture so that would mean extra flights and more tourists.”
“We would have to proceed very cautiously and restrict flights to the more profitable routes of New Zealand and Australia. It was when we flew to the US that we began to face problems. That’s where we should enter into a co-share with other airlines.”
At the end of the day, Prime Minister believes more flights will bring in more visitors.
“As it is now, both Virgin and Air New Zealand are deliberately controlling the flights into Samoa to ensure that fares are raised as high as possible,” he said. “The fares from here to New Zealand are extremely expensive and they are doing that by limiting the flights.”
Now both Virgin Australia and Air New Zealand vehemently reject the claim. In fact last week the General Manager of Air New Zealand’s local office booted the claim to touch.
Still, the thought that the government insists on revisiting the old Polynesian Airlines with the idea of returning it to a fully fledged international operation is chilling.
We’ve said it earlier and we will say it again. This is could either be the most brilliant idea the government has come up with for a while or it could be the craziest thing it has done yet.
We should not forget that the last time Polynesian Airlines was operated in a similar manner – although on a much grander scale – the country was nearly bankrupted. At one point when the airline had gone from one Boeing aircraft to a four-Boeing fleet, its debt had ballooned to “over $50 million” in aircraft leases.
It was then that the risk of bankruptcy became very real and all the taxpayers of this country ended up shouldering the burden.
And yet it appears that history is about to repeat itself.
We know from the last time Polynesian Airlines operated international flights that there was a lot of corruption then. In fact, it was the prickly combination of corruption and mismanagement that dragged the airline to the mess it had found itself in. That was then.
Has anything changed since? Sad to say, there is not a lot to be confident about when it comes to the government’s track record in dealing with corruption. So what guarantee do we have that this new Polynesian plan will not end up down the same path?
The point is that we are struggling enough as a nation. We don’t want the people of this country suffering anymore than they already are.
With the economy in dire straits and our debt level skyrocketing beyond the ridiculous, we prefer to err on the side of caution and stay far, far away from taking unnecessary risks.
We again take this opportunity to urge the government to consider the following issues. Firstly, if the government persists, Polynesian will soon be competing directly with Virgin Samoa and Air New Zealand. We will have three carriers servicing the same routes going after the same ‘fickle market share.’
That’s good for competition, you might say. But how can Polynesian Airlines sustain it? Who will pay all the costs necessary as it tries to find its feet? And for how long?
Keep in mind that the bigger competitors have the advantage and they will do everything in their power to force the smaller guy out of business.
Secondly, there is nothing to stop Virgin Australia from flying to Samoa under an open sky policy. When that happens, you will again have Polynesian Airlines taking on Air New Zealand and Virgin Australia who are already an alliance by the way. Who do you think is going to win there?
Logistically, Polynesian Airlines does not have the marketing power and the pull the big networks and Airline Alliances such as Virgin and Air New Zealand have.
Moneywise, who has the millions to pay for the set up costs? We say this because we are under no illusion that this will cost millions of tala of taxpayers money.
Think of the cost for pilots, crew members, training, housing, transport, salaries and wages, start-up marketing costs, offices in New Zealand and elsewhere, aircraft parts, maintenance and more. Think of the volatile fuel costs.
And with the deal with Solomon Airlines, the government will no doubt be asked to front up a guarantee and this will not be a few thousands.
We’re talking millions again. Now here is what history has taught us. When Polynesian Airlines last ventured into international flights, it made losses in the millions and taxpayers ended up paying dearly for it. It nearly bankrupted this country.
We cannot afford that again.
The word for the government today is caution with a capital C.
Have a restful Sunday Samoa, God bless!