Polynesian Airline debts: $300 million or $100 million?
The Government has hit back at reports carried in this newspaper recently about the amount of debt previously carried by the predecessor to Samoa Airways, Polynesian Airlines.
This newspaper has recently reported that the airline's former head, Fauoo Fatu Tielu, who ran the airline from 2006 to 2014 inherited debts as high as $300 million before running them down.
The airline objected to the figure in a Thursday press release, lamenting this newspaper’s contentment to rely on “news that lacks credibility, unverifiable facts, and a lack of understanding of the aviation industry.”
And indeed, in a letter to the editor published today Fauoo Fatu Tielu corrects the record that his comments at a recent event for the Fa'atuatua I le Atua Samoa ua Tasi (F.A.S.T.) party, for which he is now a candidate were mistranscribed and used the term debt where accumulated losses should have been.
“The figure of $300 million was supposed to be changed to “$100 million in Accumulated losses,” the former C.E.O. writes.
According to Fauoo the accumulated loss at June 30, 2006 was $59,903,876 - but only for the operating company called Polynesian Limited.
At the time, he says, there were two other companies which had their own accumulated deficits: Polynesian Airlines Investments Limited with an accumulated deficit of $7,330,519 and Polynesian Airlines Holdings Limited with accumulated deficits of $129,657,174 - both at June 30 2006.
And far from bringing the figure down to zero Fauoo’s focus on running the airline profitably brought its accumulated deficit down to about $31 million by the time he left in 2014, he told the Samoa Observer.
But in his letter he notes he left the airline with some $12 million in cash or funds as part of his turnaround on the national carrier.
But his letter also raises a question: how high did Polynesian Airlines’ debt rise in the course of Samoa’s history?
It’s a difficult question to find concrete answers to but one which the history books suggest significantly imperilled Samoa’s economy.
But in earlier years the issue of the national carrier’s debt was even more significant.
The Airline registered a collapse in 1992, generating debts of more than $200 million, according to a report for the Commonwealth Secretariat and United Nations Research Institute for Social Development 2012 by economist Desmond U. Amosa.
The report noted that the state-owned airline at the time was equivalent to almost 50 per cent of the government’s total budget for the fiscal year 1992/93.
In 1999, the airline's debt still wasn't diminishing as it jumped from $121,667,429 in 2018 to $125,109,142 as stated in the Polynesian Airlines (Holdings) Ltd.'s audited financial statements for the year ended 30 June 1999.
The company incurred a loss of $3,441,713 in 1999 compared to $5,043,976 in the 1998 financial year.
But another former Polynesian Airline Chief, Papalii Grant Percival, told the Samoa Observer that between 1989 and 1992 that he left the airline before its debt woes began.
"We started with no advance from the Government and used funds that had accumulated in Polynesian Airlines Investment Limited under my stewardship as the Civil Aviation Consultant," he responded to questions from this newspaper,” Papalii said.
"We did not borrow any money and used cashflow. That was in 1993 so not sure what happened but when I left there was no debt and our budget forecast a very profitable year. So I really do not know what happened."
According to the succeeding C.E.O. report in the Polynesian Airline Annual Report for the year ending June 30, 2014 - which coincided with Fauoo’s retirement - the net profit after tax for the year amounted to $2.4 million.
This marked the eighth consecutive year the company has achieved a profit since its international jet operation was taken over by Polynesian Blue, which was later rebranded, Virgin Sāmoa in November 2005.
"The other previous seven years had profits of $1,575,232; $1,109,012; $3,883,722; $4,813,564; $2,459,899, $4,064,677 and $2,036,424 respectively – a total of $22,375,014 in eight years," the annual report reads.
Thus, in Fauoo's eight years as Chief, Samoa Airways accumulated a total of $22,375,014 for 8 years or an average profit in excess of $2.7 million per year.
In comparison, eight years before Fauoo took charge, the airline at the time was incurring an average loss in excess of $10 million per year according to Fauoo’s letter.
In his letter, Fauoo explained how he tackled the uphill battle of debts, counter the competition against two competitors from American Samoa at the time and raced against the selling of the Fagalii Airport land.
"So as you can see, the comment by the Prime Minister that there was no competition is rubbish," Fauoo wrote in a letter to this newspaper's Editorial Board.
"It took me many months to convince him to reopen Fagalii but he said nothing until I invoked God’s name in at least two Board meetings.
"His comments of incompetency when you are making profits makes you wonder what term he would use for someone making losses."
(The Prime Minister had earlier diminished Fauoo’s achievements by noting that as the operator of a monopoly airline it would have been nearly impossible not to make a profit).