Government prepared to inject more capital into flagging Samoa Airways
Finance Minister Sili Epa Tuioti says while the Government is trying to stem the flow of losses from Samoa Airways, it is prepared to inject more capital into its financially-troubled operations.
Losses from the airline's jet operations for the October to December quarter of this Financial Year exceeded $6.5 million, according to a Government report that has since been removed from the company's website.
("Other operations" were listed as bringing in a $1.4 million profit, offsetting those losses partially).
But with estimates that the global airline industry is facing a collective US$4 billion loss from the grounding of the Boeing 737 Max, it appears likely that the national carrier's financial woes could compound, but the Government says it is prepared to continue backing the airline.
“Obviously there is a need to inject additional capital just to ensure the continuity of operation," Sili said.
"They haven’t asked for another loan but we have to plan in the event that they do ask and we are in a position to provide the financial assistance.
“We have space to provide additional financing to make sure we stabilise the operation of the airline."
Sili told the Samoa Observer there is an independent Committee made up of the C.E.O. for the National Provident Fund; the Finance Ministry and the Unit Trust of Samoa overseeing the airline's finances.
“Their task is to independently verify the finances of the airline and we report directly to Cabinet.
"And we are trying to stabilise our leases and we are getting new staff such as commercial manager; Human Resources manager and finance manager.”
"We have had to scramble to secure a lease with another leasing company and we have settled with Malindo Air for now," said Sili.
“And it is one expensive lease; it is much more expensive than what we were to pay for the Max 9".
The Boeing Max models were grounded in March following crashes in Indonesia and Africa.
As a result airlines have faced huge knock-on costs, consultancies such as the British OAG have warned, from spiking costs of leasing replacement aircraft or cancelling pre-booked flights.
Samoa Airways had been scheduled to take receipt of a new Boeing 737-Max 9 in March for a period of five years. Estimates suggested that the lease rates could be between US$300,000 to US$500,000 a month.
The airline instead arranged for a "wet lease" of a replacement aircraft from Indonesian-headquartered Malindo Air, which includes the cost of a replacement crew and pilots. (The Government recently renewed its wet lease of a Malindo 737-800 for another six months).
Following the Boeing grounding, leasing rates for aircraft have spiked up to 40 per cent, according to a report in the Wall Street Journal.
The Minister confirmed the airline is up to date with its repayments to Unit Trust of Samoa of its $15 million loan acquired last year.
Sili said if the airline is operating at a loss but "the hotels and our people are economically benefiting from this, the Samoa Government will do everything we can to make sure the airline's operation is not halted.”