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Aviation expert sees tough future for Samoa Airways

Samoa Airways may not have more funding options if the Government is unable to give it another million dollar boost in six months.

So predicts Aviation Economist, Benje Patterson, in the wake of Virgin Australia entering voluntary administration this week.

In a major supplementary budget tabled in Parliament this month, the Government of Samoa set aside $1 million for Samoa Airways to pay their bills and stay afloat during the regional shutdown resulting from COVID-19.

Minister of Finance, Sili Epa Tuioti, said the budget was for the next three to six months and Samoa’s situation would be reviewed again in time, with a possibility of another round of assistance (not limited to the Samoa Airways package). 

Reacting to the $1 million announcement, former head of Polynesian Airlines (Samoa Airways’ predecessor), Papalii Grant Percival, said the airline would more likely require that amount per month to survive. 

“The airport is closed, revenue is practically zero but expenses have not declined,” he said.

“A million is just the first draft, they will have to give [Samoa Airways] a couple of millions every month because they still have debts to pay, people to employ, and the Government is saying they want to maintain full employment.”

But Mr. Patterson told the Samoa Observer that as international donors and multilateral organisations come to the table with finance facilities, grants and loans for countries struggling to cope with the pandemic, commercial operations like airlines may fall outside the scope for donor funding.

“I don’t think there would be an immediate appetite among multinational organisations to invest directly in airlines themselves,” he said.

“Funding partners would be extremely reluctant to allow a Government to invest in an airline if it was for commercial purposes but an airline does fulfil a much broader role… It’s not just humanitarian but also economic, business development and connecting people.”

He said a donor would most likely only let Governments use funding for an airline if it would prevent the country from being cut off from supplies or dramatically affect its sustainable development. 

“But if there were other options that were already being supported in other ways and were likely to remain viable in the long term it’s not likely that a funding partner would throw more money for commercial reasons only. 

On Tuesday, Mr. Patterson said Virgin’s collapse and possible end would put Samoa Airways in a stronger position in the region with less competition for regional flights and more demand for the routes to Australia.

But Virgin’s problems are Samoa Airways’ problems too.

“Aircraft are expensive to own, whether that is paying loans down on the aircraft, whether it is paying for leases you committed to, and the reality is at present there are just not enough passengers flying around and not enough air freight to make airlines sustainable,” he said.

“At some point it is likely for most airlines to rely on Government or some other deep pocketed investor to come in and back them long term. “

Samoa Airways has been approached for a comment.

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