Change of thinking on Samoa Airways priceless
The Government’s decision to essentially suspend Samoa Airway's international jet operations reflects how deep management issues have been at the airline for so long.
That it has judged the $180 million fee for breaching its lease of the aircraft as more financially efficient than continuing to have it operate says a great deal in itself.
The penalty for breaking the contract is a bitter pill to swallow. But it is high time that the Government faced up to some unpalatable truths about the airline’s viability instead of making decisions based on prestige and national pride.
The latter line of thinking has been at the core of the previous Government’s thinking on the national carrier and what brought the nation to the edge of bankruptcy in the early 1990s.
It clearly continued to prevail to this day, as Prime Minister Fiame Naomi Mataafa explained in her decision to scratch the lease.
Despite incurring hefty costs and carrying considerable debt, the airline was doing nothing to generate revenue. It was a blackhole for taxpayers’ money.
“The Government is aware of the rising loans from the airline not only for this aircraft but previous aircraft,” she said about a report on the airline submitted to Cabinet.
“Cabinet sees that there is no guarantee on the profitability of the lease aircraft.
“Like any other business it takes time to create revenue to set off expenses but with the uncertainty from COVID-19 we have seen there is more uncertainty in terms of revenue [from the lease] and the mounting expenses.
“The best thing to do is to stop all expenditures and organise how we can deal with this problem.”
This is the kind of economic reasoning that had for years been missing in major Government decisions about spending the people of Samoa’s money.
Questions about Samoa Airways were simply swept under the rug, such as why they were continuing to pay the business’ head, Seiuli Alvin Tuala, some $300,000 a year to manage an international airline that, at its peak, had one (borrowed) airplane in its fleet.
Or why the Government had agreed to enter into a new lease agreement so soon after the closure of international borders brought on by the COVID-19 pandemic and the collapse of international travel.
Opposition leader and former Prime Minister Tuilaepa Dr. Sa’ilele Malielegaoi became (particularly) enraged at reports from this newspaper on the subject of the airline’s increasingly precarious circumstances.
He railed especially against a story in this newspaper two years ago that revealed that for the October–December Quarter of the 2018-19 Financial Year the airline’s jet operations ran at a $6.64 million loss.
Knowing what we know now about the airline being worth less than the sum of its parts and the volume of debt it had racked up looking back on that story almost seems like it belongs to a more innocent time.
But for Tuilaepa it touched a nerve. The curtain had been drawn back on his failure to secure what was obviously one of his Government’s largest preoccupations.
He took to the airwaves to rail not only against this newspaper but the spectre of curtailing press freedom (ignoring the fact that the report had been obtained by this newspaper but spotted by a sharp eyed reporter browsing an obscure corner of a Government website).
"Their notion is that they have the right to publish these figures and they forget the impact it has on the airline,” he said.
“These are the types of issues that we don’t really tell anyone about, but the Samoa Observer are the ones slandering the efforts of the airline and jeopardising the Government’s proposals.”
As figures continued to seep out about the airline’s financial troubles and its effective bankruptcy, Tuilaepa dispensed with rage in favour of bravado.
“So what if the losses accumulate to $100 million?! The [airline] is to cater for our people,” Tuilaepa said.
That is quite a thing to hear a Prime Minister say.
Last month, the former Minister for the airline and Opposition Member, Lautafi Selafi Purcell said the Human Rights Protection Party had never intended for the airline to make a profit.
“It’s [in] the wider context of profitability of the aircraft that benefits the country in terms of social benefits to the tourism sector, accommodation…,” he said.
The figures on which this kind of ambiguous Government modelling is based are almost rubbery.
What was the cost-benefit analysis that found that if tourists were transported here by other airlines? When the opposition responds, as we expect it will, to Fiame’s decision to nix the lease we invite them to release it so that its integrity may be put to scrutiny.
The triumph of reason over ideology and wish thinking in such decision-making is a change worth more than any figure quoted in this article.
This week’s announcement represented a big financial hit but Samoa has long been paying a very high price indeed for the ambition of creating a national carrier by any means necessary.
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