Airline's response misses the point
On Wednesday on these pages, we wrote about the wisdom of leasing a new Samoa Airways plane at a time when the country was on the precipice of a possible economic depression.
That piece appears to have struck a nerve with the national carrier.
In a front-page story in Thursday’s Samoa Observer, they came out swinging, accusing this newspaper of inaccurate reporting (“Samoa Airways still negotiated aircraft lease: management”).
The airline’s complaints were so numerous that it would be difficult to respond to them individually.
But we would politely suggest they might have retreated into technicalities instead of answering the broader point raised by the editorial: why should a country entering economic freefall go to the expense of leasing a plane now when international travel has all but ground to a halt?
Firstly, Samoa Airways denied at all that it had begun to incur costs leasing the aircraft.
Taken together with pictures of a Samoa Airways plane decked out in full company livery in full flight this explanation does not pass the laugh test.
“The lease is still under negotiation with the lessor and information surrounding the agreement cannot be divulged due [to] its confidentiality. It would be reckless and damaging to do so,” an airline spokesperson said.
“The airline confirms there are no payments for the aircraft while it sits on the ground in the Netherlands.”
As this newspaper noted at the time it was a “reasonable assumption” that a lease agreement of some kind had been entered into and that the airplane was incurring costs as it was preparing to be leased from the Dutch company.
The Dutch airline specialists Fokker Techniek, specialise in refitting airplanes for commercial airlines before delivering them to their home markets for use.
Unless the company operates as a charity, it seems highly implausible that no costs have been incurred to prepare Samoa Airways’ new 737-800 named Manuma before it reaches our shores.
Of course, the business practices of Fokker Techniek - and we did enquire after them - could mean that no money changes hands until the plane is returned to Samoan soil.
That, again, is something Wednesday’s editorial accounted for, noting that details about the lease were so opaque that every possible eventuality had to be accounted for.
“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,” we wrote in these pages on Wednesday.
But there is no need to become mired in such technicalities. It is obvious services have been rendered by the Dutch aircraft company and the taxpayer will need to foot the bill for them at some point.
The larger bill for the lease, too, will soon kick in.
The Prime Minister, Tuilaepa Dr. Sa'ilele Malielegaoi, said on Wednesday that "preparations are underway to bring the plane into the country."
How much the taxpayer will need to pay for this new plane we do not know for sure.
But in August the M.P. for Anoama’a East, Fonotoe Pierre Lauofo, told Parliament that the monthly cost of the aircraft lease would be $678,000.
He might be right; attempts to secure confirmation from the airline have been unsuccessful.
But Samoa Airways’ press release seems intent on evading the question raised by our editorial: Why should we be paying such costs at such a time?
Why should the Government enter into a lease agreement at a time when demand for international travel has dropped by an unprecedented 65 per cent, the national borders have been closed and the threat of the coronavirus now looms large over the country.
We have not received a satisfactory answer.
The airline said a leased plane would be used to support repatriation flights from New Zealand, Australia and Fiji.
Has the airline done a cost-benefit comparison against chartering planes for such flights compared to leasing an entire aircraft outright?
The reason for Samoa Airways to operate a jet of this size was to cater to tourists.
The Prime Minister’s comments and the kitting out of the plane with our carrier’s colours suggest the plane’s arrival is imminent in Samoa, even if the airline says that the lease is still being negotiated.
If this agreement is around the corner we must ask why we are finalising negotiations at a time when the global travel market is in a position of unprecedented uncertainty and downturn.
Would it not be smarter to enter a lease agreement at a time when international travel returns to pre-coronavirus levels? Or at least until the national borders are open and the threat of incoming coronavirus subsides?
The backdrop for the questions about these costs is the fact that Samoa is in the middle of an economic storm that the Central Bank has privately warned the nation’s commercial banks could well materialise into a depression.
The airline has explained none of this.
Of course, national airlines in Samoa have a troubled history of mismanagement, including when the carrier’s predecessor’s fleet ballooned to over $50 million in aircraft leases and advances to staff members.
That drew a warning from the Treasury to stop uncontrolled spending lest the airline bankrupt the country.
That appeared to be a case of a company with a culture of not paying thought or respect to those who ultimately own the airlines: the Samoan people.
But we can’t be entirely on the front foot when it comes to the airline’s criticism of our reporting.
They complain of continued claims that losses of about $300 million were turned into profit of $12 million under the stewardship of Fauo’o Fatu Tielu.
That figure is not supported by records and was the result of a reporting error, as can be seen on the front page of today’s edition and on the letters page.
Fauo’o makes clear in a letter to the Samoa Observer that in the eight years before he took over as the airline’s Chief Executive Officer the airline’s losses were “in excess of $80 million or an average loss in excess of $10 million per year.”
But regardless of his financial performance, he did not inherit a debt of $300 million as we misreported. How the airline’s finances had fared before this era, we don’t have records.
But in 1998 the airline’s accumulated debt was announced to be in excess of $125,000,000, this newspaper reported at the time. Reports even further back suggest that the airline's unadjusted debt reached $200 million or half of the national economic output in the early '90s.
And if Samoa Airways and the Government are not careful, we could well be looking at a case of history repeating itself. Of course, we hope we are wrong. But until they prove it, our watchword should be caution.