Samoa Airways' turbulent path

By The Editorial Board 24 November 2020, 10:50PM

One would need a heart of stone not to feel at least some national pride at seeing new images of a Samoa Airways plane in full flight bearing the national carrier's colours.

The pictures of the new 737-800 were captured in Amsterdam by an avid plane spotter who placed them online. They ran on the front page of Monday’s Samoa Observer (“Spotted: Samoa Airways’ new aircraft”.)

The plane’s name is Manuma and it was manufactured six years ago by Boeing. 

The plane was leased from a company in Norway, Minister for Public Enterprises, Lautafi Fio Purcell, told Parliament earlier this year shortly after the Government terminated its “wet lease” with Malindo Air.

It is not known when the new lease was entered into but it was originally scheduled to land in Samoa in July before difficulties related to COVID-19 delayed its arrival.

Last week Lautafi told this newspaper that due to the new upsurge of COVID-19 cases in Europe new plans had to be made for the planes’ arrival at Faleolo International Airport.

The Minister even appealed to the sense of national pride when noting that this plane, understood to have been leased from Fokker Techniek M.R.O., a Netherlands-based manufacturer would be staffed with Samoan personnel.

That compares to the previous lease with Malindo, under which the plane was staffed by pilots and air stewards from the Malaysian-based company.

"A plane that can [be secured under a] dry lease agreement so our [own people can be utilised,” he told the Samoa Observer last week

National carriers can be symbols of national pride. But ultimately they are businesses and matters for the head - not the heart.

It’s unclear when the lease agreement for the new aircraft was entered into. 

Samoa Airways did not return requests for comment from the Samoa Observer on Monday.

But in June the Prime Minister, Tuilaepa Dr. Sa'ilele Malielegaoi, said that the Government would be moving with speed on the matter and securing a new aircraft by June.

Given that international travel has ground to a halt and Samoa has closed its borders the question must be asked: why was the Government so quick to secure a new aircraft?

Lautafi has boasted of the fact that the new lease agreement is much more cost-effective than the previous arrangement under Malindo. 

We have no reason to doubt him.

But we are still none the wiser about when this new plane is expected to touch down in Apia.

Nor when it does what function it will serve in a country that has closed its borders to tourists.

It seems highly possible that we will not see this new plane land on Samoan shores until next year.

And, given it is decked out in Samoan Airways colours, it’s a reasonable assumption that the lease agreement has been active for some time now. 

It seems highly likely that we have been paying leasing costs for a plane that we simply have not been using.

Details are hard to come by.

But in November of last year, the International Bureau of Aviation released research that suggested that leasing a ten-year-old 737-800 would come at a cost of in excess of USD$200,000 this year.

But this was before COVID-19 struck and international air travel all but ground to a halt. The figures were calculated at a time when the Boeing MAX model was off the market, leaving airlines scrambling to enter into often unfavourable lease deals to keep themselves in the air. 

To give the Government their due even if we presume the going rate for a 737-800 is now half or one-quarter of that rate this still raises some serious questions. 

The Government is yet to have provided us with no insight into their thinking or why it was so urgent that Samoa Airways lease an aircraft at a time when international travel has fallen to unprecedented lows and the national borders remain closed. 

What we do know is that the airline has been performing abysmally financially.

A 2018-19 Ministry of Public Enterprise report noted that Polynesian Airlines Limited, the ultimate holding company for Samoa Airways, was the worst-performing of all the Government’s state-owned enterprises.

The national carrier’s expenses rose by more than three-quarters from about $65 million in 2018 to about $115 million in 2019. 

More striking, though, was the bottom line. 

In 2018 what was a net profit of about $15.8 million became, in 2018, a net loss of $21.7 million in 2019. 

This year’s results will make for interesting reading and so too will whether entering into a lease arrangement hastily contributed unduly to the airline’s costs. 

Perhaps demand for leasing aircraft has dropped so low during the COVID-19 crisis the Government has been able to negotiate a payment holiday, avoiding leasing fees until the aircraft returns to Samoa. 

But the airline business is infamously expensive; kitting out and storing an aircraft at a major airport comes with bills of thousands of dollars a month. And this comes at a time when the national economy is in freefall. 

Samoa, of course, has a history of throwing good money after bad in the airline business and having it affect the national economy. 

The former Chief Executive Officer of Polynesian Airlines, Fauo'o Fata Tielu, is running in the forthcoming election as a candidate for the Faatuatua i le Atua Samoa ua Tasi (F.A.S.T.) party.

During his tenure at Polynesian Airlines, the former C.E.O. famously turned $100 million in accumulated losses into cash funds in excess of $12 million. 

The Prime Minister dismissed these achievements suggesting it would be impossible not to turn a profit when running a monopoly enterprise even if “asleep” or “incompetent”.

We do not think that Fauo'o’s business acumen should be dismissed so easily.

And as recent figures show, even before the global pandemic struck, Samoa Airways was already registering a loss in the tens of millions, belying the Prime Minister’s comments.

Fauo'o told the Samoa Observer last month that Samoa Airways will “bankrupt the Government”.

We hope that this prediction does not materialise. But it is a timely reminder that running an international airline is a financially precarious game.

* This story has been updated to correct the financial position of Polynesian Airlines under Fauo'o Fata Tielu tenure. 

By The Editorial Board 24 November 2020, 10:50PM

Trending Stories

Samoa Observer

Upgrade to Premium

Subscribe to
Samoa Observer Online

Enjoy unlimited access to all our articles on any device + free trial to e-Edition. You can cancel anytime.