Samoa Airways' $400,000 hotel debt revealed

Samoa Airways has an outstanding bill of more than $400,000 at Sheraton Samoa Aggie Grey’s Hotel and the hotel says the airline is not answering requests that it pay its debts. 

The outstanding bill dates back to rooms booked for foreign staff when the airline accommodated them in rooms at the Sheraton for the duration of a “wet lease” arrangement with Malaysian-headquartered Malindo Air. 

Samoa Airways rented a 737-800 aircraft and staff from Malindo last year, in an arrangement that was terminated this April. 

Their failure to pay the outstanding amount is the latest sign of trouble for the financially stressed airline. 

Earlier this week the Samoa Observer obtained financial statements that revealed the Government’s shareholding in the national carrier had fallen into negative territory of more than $11 million - an outstanding amount to creditors. 

But on Friday a spokesperson for the iconic hotel confirmed that it was among the airline’s outstanding creditors. 

“This arrear (debt) has been [there] a long time [ever] since Malindo left and we have been asking the Samoa Airways to make a commitment to pay us, even portion by portion but they never made that commitment,” the spokesperson said. 

The spokesperson confirmed the airline had made some payments towards their debts earlier on. 

“Yes they paid some money to us, but they still owe over $400,000,” the spokesperson said. 

“It is very difficult to recover [this loss] and we are at the stage of looking at closing but we have so many employees and we don’t want to lay off any people.  

“And we’re talking about 182 staff and we don’t want to get to that stage and we are just using what is left [from] our cash flow to sustain.”

Emails to the Airline’s Chief Executive Officer, Seiuli Alvin Tuala, and the Minister for Public Enterprises, Lautafi Selafi Purcell, about the debt were not answered as of press time. 

In April, Samoa Airways was given $1 million as part of the Government’s COVID-19 recovery stimulus package.

At the time, Lautafi said the assistance would be used to settle outstanding bills

“The airline has no money and that sum will help in paying bills, whether it's for staff wages then so be it,” said Lautafi back in April. 

Samoa Airways was forced to hastily arrange a lease agreement with Malaysian headquartered Malindo Airways last April after the airline was close to leasing a Boeing 737-MAX before those plans were dashed once the plane was recalled following two fatal plane accidents.

The national carrier was spending USD$1.47 million for each month of its lease, the Samoa Observer revealed last week.

(The lease was extended for another six months to 28 February 2020 at a discounted base rate USD$1.31 million a month last September.)

Under the terms of the lease, Malindo provided its own crew to operate the aircraft. When they were in Samoa, they stayed at the hotel.

The news of its outstanding debt comes as the airline says it is in the process of negotiating a new lease with a company based in Holland.

Last week the Samoa Airways revealed the extent of the airline’s financial distress when a copy of its 2018-19 Annual Report revealed the company’s accumulated operating losses had reached as high as $64 million. 

During the Financial Year under question losses reached $24 million. 

The Spokesperson for the Hotel told the Samoa Observer that efforts were made to meet with the C.E.O. to negotiate an amicable solution to the financial impasse but were unsuccessful. 

“[We] went to see the C.E.O. a couple of times [...] but maybe he is busy,” said the spokesperson. 

“But he needs to make a couple of messages [...regarding their arrears] but nothing [has been sent so far].” 

In other news likely to deepen the airline’s financial quagmire, the Weekend Observer can further reveal that a loan request of $15 million that had been submitted to the Unit Trust of Samoa (U.T.O.S.) this year was yet to be accepted. 

The Chief Executive Officer of U.T.O.S., Tevaga Viane Tagilima confirmed that no funds had been released to the airline following its request. 

“U.T.O.S. is still vetting the application, and therefore, the application is yet to [be] approved or otherwise. [We] haven’t made the final decision,” he said in an email on Friday.  

According to the airline’s annual report a previous loan was secured from the Unit Trust of Samoa for $15 million in May 2019. Seiuli is quoted in the report saying “the total loan from U.T.O.S. is $30 million of which only $20,000,000 has been drawn down and $5 million was then drawn down in July.”

The failure of the airline to secure further finance will deepen concerns about the airline’s ongoing viability. 

“The [airline’s] total liabilities exceeded its total assets by $11,258,751. The conditions indicate the existence of material uncertainty, which may cast significant doubt about the company's ability to continue as a going concern,” Jaslyn T. Mariner-Leota, the Assistant Controller and Auditor-General wrote in the Annual Report. 

Absent the ability to grow its revenue, secure new sources of capital or sell off its assets, the viability of the company was under question, the report found. 

“As a result, there is uncertainty whether the company will continue,” the report said.  

The Government says the state-owned airline is in the process of negotiating a lease for a new plane with a company based in Holland.