Tue. Nov 19th, 2019

Palau to face US$2-M Monthly Loss Over Airline Crisis

Palau may face an income shortfall of up to $2 million each month after the country`s largest tourist airline, Palau Pacific Airways, announced that it will indefinitely suspend its operations and terminate the lease of its only airplane. Economic pressure from communist PRC Chinese authorities, who are enforcing a blacklist banning mainland Chinese travel agencies from sending tour groups to Palau, is believed to be factor that may have contributed to the airline’s decision.

In a statement to the Island Times, Chiu Shao Yen, the General Manager of Sea Passion Group, the company that operated Palau Pacific Airways, confirmed that the airline’s last flight will be at the end of August, and that the company would no longer refer to itself as an airline. He said “Yes, our last flight would be on Aug 31st. All of our air-charter operation team and employee would be dismissed. We’re not intend to lease another aircraft or run another charter flight in a near future. Please refer us as Sea Passion Group instead of Palau Pacific Airways.”

Palau Pacific Airlines leased its sole aircraft, a modern Boing 737 plane based at Palau International Airport in Babelthuab, from Air Explore, a leasing and aviation services company based in Bratislava, Slovakia. Air Explore`s Ground Operations Manager, Julius Sedlacek, confirmed to the Island Times that the lease of the aircraft would indeed be coming to an end next month. He stated “Let me inform you, that [the] lease contract between AirExplore and Sea Passion Group will be terminated on 31st AUG 2018. As per our information Palau Pacific Airlines / Sea Passion Group suspends flight operation since this date indefinitely.”

Chiu Shao Yen also told the Island Times that the airline`s suspension of operations will cost Palau an estimated 2 million US dollars in lost tourism revenue each month, as Palau Pacific Airlines transported roughly a quarter of all tourists arriving and departing Palau each month. He explained “We cannot estimate how many jobs will be affected, but we’re carrying about 2000-3000 tourists to Palau every month, which is about 25% of the monthly tourists visiting Palau. Which means there would be about 2 million USD loss monthly to the government and enterprises in Palau.”  Regarding financial losses to Palau as a result of Palau Pacific Airlines suspension of operations, the Office of the President of the Republic has not commented on this issue.

Official records relating to visitor arrivals do indeed confirm that Palau Pacific Airways, which offers charter routes to Hong Kong and other destinations, is the consistently country`s largest carrier of incoming visitors, and did, as Chiu Shao Yen stated, carry roughly a quarter of all visitors coming to Palau.

In June, the latest month for which data is available, Palau Pacific Airways transported 2099 out of a total of 8176 incoming visitors, which adds up to more than 25% of the total.  In each and every single month between January 2018 and June 2018, Palau Pacific Airways flew more visitors into Palau than any other airline, operating from anywhere. In January Palau Pacific Airways brought 2288 out of 10465 visitors in total, in February 3542 out of 12418, in March 1985 out of 11024, in April 2217 out of 10337, and in May 1893 out of 7561 in total.

Since January, Palau has been charging every incoming tourist a 100 US$ Pristine Paradise Environmental Fee, either included in the price of airtickets or paid at point of entry.  Extrapolated from the number of visitors brought into Palau by Palau Pacific Airways in the past six months and assuming visitors that would have been brought by Palau Pacific Airways to Palau would not travel to this destination otherwise, statistical analysis carried out by the Island Times would indicate that Palau`s state treasury would face a shortfall in excess of 2.5 million US$ each year just in terms of missed payments of that 100$ per person entry fee alone.  Of course, this entrance fee is the very smallest part of the average tourist’s holiday spend in Palau: Hotel accommodation, taxi, boat or car rental, diving gear and instruction, food and drink, souvenirs and tour guide fees are all a much bigger part of any tourist’s holiday budget. Thus, it is credible that Palau may face serious financial implications and lost revenue from the demise of Palau Pacific Airways.

Competition from other destinations and trends in the tourism market were undoubtedly a factor in Palau Pacific Airways’ demise. After all, it is not the first airline to pull out of Palau in recent time. Delta Airlines, a globally recognised airline brand, pulled out of the Palau market in May, as part of a wider set of regional route cuts that also saw the airline pull out of the US-ruled  Commonwealth of the Northern Mariana Islands. At the time, a Delta airlines official was quoted by Marianas Variety, a local newspaper in the territory, as reportedly putting the route cutbacks down to regional market factors such as “unsustainable pressure, including lower demand”.

However, it is also highly likely that economic pressure, exerted by Xi Jinping`s Communist Party-run People`s Republic of China, played its part in the airline`s decision to suspend its operations. While there is no indication that the Airline has come under any direct, personal pressure from Chinese officials, the communist PRC authorities have been ratcheting up pressure on the Palau tourism market in general. Palau has not been on the list of approved destinations for group tours from mainland China for years, but there are strong indications that the communist state has recently begun enforcing this prohibition on group tours in a much more draconian way.

Global Times, a PRC state-owned newspaper that has the firm backing of Xi Jinping`s Communist Party, reported for the first time in November 2017 that “leading” travel agencies in mainland China had dropped tour packages to Palau, as well as to the Vatican State in Rome, as a result of significant fines imposed by the authorities.  The newspaper reported “Several leading travel agencies in China said Thursday they have dropped travel packages to Palau and the Vatican after at least two agencies were fined for violating the tourism department’s policy of doing business with nations not on the Chinese citizens’ travel list. The Vatican and Palau have no diplomatic relations with China”.  Indeed, the Republic of Palau does not recognise the communist PRC authorities in Beijing on the mainland as the legitimate rulers of China. Instead, since the late 1990s, the Republic of Palau has recognised the Republic of China, based mainly on the Island of Taiwan, as the sole legitimate Chinese state, in line with the policy of the Vatican and that of more than a dozen states around the world who do likewise. The Republic of China has been praised for being a functioning multi-party democracy at a time when communist authorities on the mainland have faced vast international criticism for imprisoning dissidents, undermining religious freedom and persecuting the Uighur as well as Tibetan ethnic minorities. The Republic of China maintains close and deep ties with Palau, and has contributed many millions of US$ in development aid and technical cooperation to Palau.

Chiu Shao Yen, Sea Passion Group`s General Manager, made clear that being included in the approved destination list for Chinese citizens would be a significant factor that would enable Palau to regain a bigger market share in mainland China. He stated “I believe [that the] addition of Palau to the approved travel destination list in China would help the China market to come back.”

The Island Times attempted to contact the International Press Centre of the Ministry of Foreign Affairs in Beijing with questions. However, a reply was not received by the time of going to press. (Colin Cortbus)