EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

Box A. Box A13 : Troubled Times for Tongan Airlines
Royal Tongan Airlines (RTA), formerly Friendly Island Airways, was the national carrier of the
Kingdom of Tonga until 2004. Owned by the Tongan government, it operated both national and
international services. The airline’s international routes linked Tongatapu with Sydney, Auckland,
Nadi, Apia, Honolulu and Niue, and included code-shared flights with Air Pacific and Air New
Zealand. Inter-island air services linking Tongatapu with ‘Eua, and the Ha’apai and Vava’u island
groups ran daily except for Sundays, a strongly enforced day of rest and religious observation in the
island nation. Service to the outer-island Niua group was infrequent, due to the small population and
lack of demand, with flights leaving only around once per month.
The airline acquired its first aircraft, two Twin Otters, in 1989. After this, services were increased
through leasing aircraft. This included a 737-300 aircraft from Air Pacific, to maintain international
services to New Zealand, Samoa and Fiji, an HS 748 aircraft from Mt Cook Airlines, to fly on the route
via Vava'u to Nadi in Fiji, and a Hawker Sidley S748 Twin Otter for twice weekly service to Niue. A
Royal Brunei Airlines Boeing 757 was chartered in November 2003, and used for the “Tongan Sea
Eagle” route to Hawai’i, inaugurated in January 2004. This service was stopped suddenly in April 2004
when the aircraft was returned to its owner.
The repossession signaled the beginning of the end for RTA, which had been in financial difficulty for
some time and was chiefly reliant on significant governmental support from public funds to remain
aloft. Such support had allowed the airline, in spite of critical financial shortfalls, to extend its services
in November 2003. Fuel suppliers, other airlines and travel agents, in recognition of the airline’s poor
credit status, had begun insisting on cash payments in the months prior to the Royal Brunei aircraft’s
repossession, but significant amounts were still owed - a debt unable to be met by the Tongan
government, which had recently suffered another financial disaster when the king loaned US$42.7
million to his court jester, who lost it on ill-chosen investments.
In May 2004, domestic operations of RTA were also brought to a halt, and the government appointed a
liquidator to close down the airline’s operations, acknowledging its severe financial problems.
Severance arrangements for hundreds of Royal Tongan employees were negotiated, and compensation
paid to international passengers stranded by the airline’s sudden demise. The government began
exploring the possibility of private sector participation to ensure Tonga retained dedicated, locallybased
airline links with the outside world, in line with the economic reform program launched in 2002
emphasizing the development of the private sector and the creation of a level field for entrepreneurial
competition. However, negotiations in this area appear to have failed and the nation is now reliant on
international services from outside operators.
Domestic services were restored in June 2004 when Peau ‘o Vava’u, run by New Zealand company Pion
Air operating in affiliation with a local counterpart, was granted a license to operate daily flights in its
two 70-year-old DC3s from Tongatapu to Vava'u and Ha’apai. The busy routes attracted a number of
contenders to operate the service, including local company FlyNiu Airlines, owned and operated by
former staff of RTA. FlyNiu was also granted a license to operate on the Vava’u and Ha’apai routes in a
Dash 8 leased from Air National of New Zealand, but in a controversial decision six weeks later the
Ministry of Civil Aviation announced that only one airline would be allowed to operate domestically,
and both airlines would have to reapply for this license. Several members of Tonga's Royal Cabinet
were forced to resign after opposing the idea of the monopoly airline, but little surprise was expressed
when the Prime Minister awarded the sole license to Peau ‘o Vava’u, an airline in which his brother, the
Crown Prince, has a half-share. The controversy has illustrated that, despite plans for reform, the
aviation industry in Tonga is still very much under governmental control.
Source: Matangi Tonga (www.matangitonga.to)
153