COMMENTARY – The ongoing debate over Lulutai Airlines has sparked intense discussions across Tonga, with economists, aviation and tourisms experts weighing in on the government’s role in operating the national carrier.
Despite differing perspectives, one consensus has emerged: the government should not be in the business of running an airline.
From financial mismanagement to operational inefficiencies, the risks of state-run airlines far outweigh the benefits, and the evidence against such ventures is overwhelming.
Tonga has already witnessed this with the collapse of Royal Tongan Airlines, which cost the government an estimated $30 million, but they never learned.
After this government-backed venture failed in 2004, numerous reports have consistently indicated that the Tongan government should never operate an airline.
Tourism Expert Semisi Taumoepeau
In a 2016 journal article, Tongan researcher and tourism expert Dr Sēmisi Taumoepeau observed that many Pacific Island airlines, including Tonga, struggled with financial sustainability, with several ultimately declaring bankruptcy.
Taumoepeau identified multiple structural challenges contributing to these failures:
- The region’s geographic remoteness and vast distances between islands and airfields
- Limited market size and low passenger volumes
- Exorbitant operational costs, particularly for aircraft leasing and maintenance
- Tonga’s restrictive policies, like the Sunday flight ban
- High airport fees and charges
- Consistently low passenger occupancy rates in relation to the available seating capacity.
- Airline routes that do not generate enough revenue to cover operational costs, making them financially unsustainable.
- Regional airlines are very sensitive to economic fluctuations and high oil prices.
Taumoepeau said most Pacific airlines pay major expenses such as aircraft leasing, spare parts, maintenance costs and fuel in the strong US currency, but their earnings are in very soft currencies in the region. A direct result is a very low-profit margin for Pacific Airlines, he said.
IMF report
A 2021 report by the International Monetary Fund for Pacific Airlines is consistent with Tonga’s troubling airline situation.
IMF said financial losses and weak profitability have been long-standing concerns for several Pacific airlines.
It said governments have struggled to monitor and contain the risks from national airlines, reflecting inadequate governance frameworks, a lack of oversight capacity, and a lack of transparency from the airlines that undermine the ability to assess potential risks.
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It also raises issues with transparency and accountability in running national carriers.
It also warned that transactions between the government and the national airline should be disclosed in the annual budget and quarterly budget reports.
Audited financial statements of the airlines need to be published more timely, it said.
Former Auditor General
Former Prime Minister Pōhiva Tu‘i‘onetoa was an auditor of the Royal Tongan Airlines before it was collapsed.
In an interview with Kaniva Tonga in 2020 before the Lulutai airlines was launched he recounted the millions loss in the Royal Tongan Airlines and in Real Tonga which was partnership with the government from 2013 – 2019.
Tu‘i‘onetoa told Kaniva News that, based on his experience studying the financial aspects of previous airlines, any new airline operating in Tonga would likely go bankrupt soon.
Tonga repeats the same mistakes
Despite glaring warnings in both IMF reports, Taumoepeau’s analysis, and Tonga’s former Auditor General’s warning, Tongan officials have ignored these critical findings, perpetuating the same preventable crises.
The former Hu‘akavameiliku administration faced persistent criticism for Lulutai Airlines’ opaque financial management, particularly for failing to disclose its fiscal records.
During a recent press conference he called to address current government allegations about Lulutai’s finances, the former Prime Minister failed to present audited financial statements as evidence. While claiming the airline could repay its Retirement Fund loan, he provided no documentation to support this assertion.
The former Prime Minister’s claim that Lulutai was well-positioned to repay its loan is akin to claiming that an aircraft incurs no additional expenses beyond flying; it simply takes to the skies and generates enough revenue to cover the loan.
Taumoepeau’s findings indicate that there are instances when the plane can’t fill all its seats, highlighting one of the challenges local airlines face in achieving financial viability. A recent example that underscores this issue was when the Lulutai Twin Otter returned from Ha’apai earlier this month carrying only one passenger, only to discover that the runway lights were not functioning.
Drive by political ambitions
Meanwhile, Public Enterprises Minister Piveni Piukala revealed that the Twin Otter aircraft purchased with the loan requires a major mechanical overhaul next month. Aviation experts estimate repair costs could exceed US$2 million. The Minister further revealed the government has poured approximately $40 million into Lulutai Airlines since its 2020 launch, warning that this entire investment, including the Twin Otter aircraft, is now essentially worthless due to persistent mechanical failures.
The expert warnings are particularly critical for Tonga, as its democratic framework and constitution have demonstrated significant weaknesses. These structures are too fragile to support risky business ventures, exacerbating issues of non-transparency and a lack of accountability.
It is evident that the Tongan government’s insistence on involvement with the airlines was primarily motivated by the political ambitions of individuals seeking personal gain and prestige, with blatant disregard for the financial burden placed on taxpayers.
A striking example is former Prime Minister Pōhiva Tu’i’onetoa, who, despite openly admitting that any domestic airlines was economically unviable and would “lead to bankruptcy,” proceeded with the establishment of Lulutai airlines solely to appease his Cabinet allies—particularly former Minister of Aviation Sāmiu Vaipulu, who championed the proposal. This decision appears to have been a transactional move to secure political support, notably from Vaipulu, who backed Tu’i’onetoa’s rise to the premiership.
Tonga should take the advice of experts seriously and refrain from participating in the airline industry. It would be prudent to leave this sector to private enterprises such as Fly Niu airline, which had done it successfully before being forced out of the kingdom in 2004.
