Performance report for Pacific states zeros in on Samoa Airways losses
Pago Pago, AMERICAN SAMOA — Losses of over $50 million tala for Samoa government-owned Samoa Airways were outlined in the 2023 Benchmarking and Performance and Building Climate Resilience enterprises report for Pacific states which zeroed in on Samoa Airways’ losses recorded over the years.
Samoa Airways provides air services between Samoa and American Samoa including flights to the Manu’a islands.
The Samoa State-owned company was established in 2017 using the Polynesian Airlines corporate shell, according to Aviation.com.
The international arm is marketed as Samoa Airways and commenced operations in November 2017; in the 3 years since, it has accumulated losses of $51.5 million tala.
Cumulative losses have wiped out shareholders’ funds, which, by June 30, 2020, were at $17.9 million tala.
The report says this is not the first time the Samoa government has owned an enterprise that is operating an international air service.
Polynesian Airlines flew internationally until 2005 and was also loss-making—cumulative losses from 2002 to 2004 totaled $48.6 million tala.
In its final year of operation, the airline’s annual losses equated to 20 percent of the government’s budget.
In 2005, the government signed a joint venture with Virgin Australia to establish Polynesian Blue, which was 49 percent owned by the government, 49 percent by Virgin Australia, and 2 percent by private interests.
While Polynesian Blue’s accounts are not publicly available, it paid the government a $5.7 million tala dividend in 2016.
A post-transaction assessment was undertaken by the International Finance Corporation, which noted a 130 percent increase in inbound seat capacity, indirect tax collection from additional tourist arrivals of $1.86 million tala, and a positive fiscal impact of $6.9 million tala in the period 2005–2009.
From 2005 to 2017, Polynesian Airlines only flew domestic and American Samoa services but was profitable, earning an average 6 percent return on assets over that period.
The government’s experience with Polynesian Airlines shows the risks associated with airline ownership, in particular when facing international competition. The decision in 2018 to acquire a B737 MAX, the measles epidemic, and coronavirus disease (COVID-19) in 2020 created significant adverse consequences for Samoa Airways.
The government would have been partially shielded from these consequences if it stuck with the joint venture.
In June 2022, Samoa Airways formally ceased servicing international routes except to American Samoa.