Cuts Cause Rethink Over Polynesia Blue Air Deal

Planned changes for Samoa’s air services have prompted a strategic rethink by airlines and governments in the South Pacific. The pending demise of Polynesian Airlines’ international jet operations in favour of Polynesian Blue, a recently announced joint venture between the Samoan government and Virgin Blue, means other airlines are eyeing consequent opportunities in the region.

Aviation industry sources suggest Polynesian Blue will not provide a twice-weekly service via Niue as its Samoan government-owned predecessor has done for the past three years. The revamped airline may also cut Tonga and Honolulu from its schedules.

In what was the third official start up date announcement this year, Samoa’s Prime Minister Tuilaepa Aiono Sailele Malielegaoi has revealed that Polynesian Blue would begin flights between Samoa, New Zealand and Australia as from the end of October.

Aware of the likelihood Niue is about to lose its sole scheduled international service, the tiny island’s Premier, Young Vivian, is adamant his government wants a regular jet link with New Zealand.

Niue, he says, is not interested in having just a feeder service between Apia, Samoa’s capital, and his island of 1200 people.

In his view, a feeder service using a turbo-prop Dash 8 aircraft, possibly available through Polynesian’s yet to be named domestic arm, could represent the death knell of Niue’s sorely pressed tourism industry.

The lack of a direct New Zealand-Niue link would have serious implications for economic development.

Officials of New Zealand’s Ministry of Foreign Affairs have been talking with several airlines possibly interested in providing air services between Tonga, Niue and Auckland. Airlines said to be considering such options are Fiji’s Air Pacific, Air New Zealand, Qantas and Virgin’s Pacific Blue.

The flagged transfer of Polynesian Airlines jet services to Polynesian Blue has thrown up some tough issues for the Samoa government, its flag carrying airline and the airline’s staff.

Industry analysts expect that about 150 employees, some of them long serving, will lose their jobs. Most of those lost will be in Samoa but Polynesian also has about 40 staff in offices in New Zealand, Australia, Hawaii and Tonga. Many of them are expected to be affected.

All of Polynesian’s 15 or so jet pilots are expected to be offered contracts with the new airline but they will have to shift to Polynesian Blue’s Auckland base and be prepared to fly for both Virgin Blue’s subsidiary Pacific Blue as well as Polynesian Blue.

It is also understood that only about a third of Polynesian’s cabin crew can expect to obtain positions in Auckland with the new airline. Polynesian Airline’s Apia-based turbo-prop pilots, and most of its engineering and ground handling staff however, appear likely to keep their jobs.

Ticket sales by credit card over the internet is one of the prime reasons why Virgin Blue can offer attractively cheap fares. The cut price airline’s management may have been surprised to learn during their prolonged negotiations with Samoa over the merger that the vast majority of Samoan fare-paying-customers are not computer savvy.

In true Pacific Way style, they prefer to pay cash face to face with an airline or travel agent. With this aspect in mind, it is understood the merger parties have agreed to retain Polynesian Airlines sales counter staff to provide a service for Polynesian Blue.

The thorny question of redundancy packages is believed to be foremost in the minds of Polynesian staff, management and the Samoa government. It is understood that officials are working through the issue.

The industry analysts suggest the Samoa government is caught between “a rock and a hard place”. They say that, in common with other Pacific island states, it had to do something to reduce the financial risks of supporting a national carrier.

Regardless, the government still stands to lose millions of dollars even after the joint venture proceeds as negotiated.

The joint venture arrangements involve the return of Polynesian Airlines’ sole Boeing 737-800 aircraft, which is said to be a hugely expensive exercise. The longer it takes to return it to its owners, the bigger the debt the government faces.

Other hurdles the government almost certainly has to overcome are the associated costs of concluding support maintenance and spares arrangements for the Boeing aircraft.

One industry economist said an oft neglected effect of such deals involved the impact of job losses and reductions for some local business generated in Samoa by its home-based flag carrier.

The so-called ‘trickle-down’ effects from reduced taxes and duties, reduced consumption expenditure and the like, result in a leakage of government and private sector revenue – much of it moving offshore.

The economist suggested the Samoan government should consider all such losses would be more than offset by its reduced financial exposure to a highly volatile and costly business.

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