One of the worst nightmares people of this country woke up to when the borders were opened last year is the ridiculously high airfare to travel between Samoa and Auckland charged by Air New Zealand. 

As the only company monopolising the service between Apia and Auckland, Air New Zealand embraces the old adage of “the business of business is business” close to its heart. The financial outcome is devastating to the ordinary citizen of this country and in particular, the poor who wish to travel between Apia and Auckland. 

 It is important, however, to state clearly from the outset that this is not a fault of Air New Zealand. This is a matter of public policy choices of the Government of the day in its routine and strategic effort to address any problem plaguing members of its communities. Apparently, the Government is facing a problem of market failure in the form of a monopoly that controls the supply of aviation services between Apia-Auckland-Apia.

Economists that advocate the free market system as the optimal way to distribute goods and services believe that a monopoly is a form of market failure and it is bad for the people. It controls production and charges exorbitant prices in order to maximize its profit. Government intervention in the form of public policy is therefore warranted to correct the market failure.

In the case of the aviation market with respect to the Apia-Auckland-Apia route, it is imperfect because Air New Zealand is the only seller (monopoly) of such a route at the moment. Like in the case of a monopoly, Air New Zealand now enjoys controlling the output (available seats) as well as the price (airfare) in order to maximise its financial returns for the Apia-Auckland-Apia direct route. As a result, the people of this country and in particular the poor are suffering.

It is evident that the Government is facing the problem of market failure in the form of a monopoly and its intervention is critical at this stage to correct it. 

So how should our Government resolve the market failure? Few options are available to the Government. First, it has to provide a big aircraft through its company Samoa Airways to provide competition against Air New Zealand. While this option is most preferred, the announcement made by the Government that it would take a while for such action to take place due to the financial problems facing the company rules it out for the moment. 

The second alternative is for the Government to permit another airline to take the Apia-Auckland-Apia route in order to compete with Air New Zealand. That alternative is now in the government’s footsteps. This week, a delegation from Solomon Airlines is in Apia to discuss with the Government the possibility to allow Solomon Airlines to use the Samoa Airways license to cover the Apia-Auckland-Apia direct route. 

Should our Government endorse the proposal, it will be a win-win for all parties involved. Samoa Airways gets a share of the financial gain from Solomon Airlines for using its license. With the enormous financial debt the company is facing, any amount of revenue flowing from another source is of great help.

Solomon Airlines on the other hand benefits from the arrangement financially. Importantly, it becomes another regional airline with the potential to provide stiff competition against the big players in the market like Air New Zealand, Qantas and Virgin. The three companies have thoroughly enjoyed financial gains from the Pacific market for many years. It’s about time the region stands together to provide competition in the aviation industry for the benefit of its people.

The overwhelming benefit of this arrangement, however, is more seats and lower airfares between Apia and Auckland through competition between Air New Zealand and Solomon Airlines. People of this country and in particular the lower income families will breathe normally when asking for an airfare quote. 

With further analysis, there are many other reasons why the current administration should take Solomon Airlines' proposal with all due diligence. In essence, this Government was voted in because of their mantra to make a change for the better, for the people of this country. Obviously, the current situation with Air New Zealand monopolising the Apia-Auckland route is not a change for the better for the voters of this country, especially when the airfare was a lot lower and affordable under the previous regime.

The position of the current Government on leasing a bigger aircraft to serve the Apia-Auckland route is also well documented publicly when it took office. “Not any time soon” was the response and decision of the government. The proposal by Solomon Airlines, therefore, makes sense in filling the gap at the moment while Samoa Airways is recovering and building its financial capacity to be able to afford the leasing of a bigger aircraft in the future.

While the proposal from Solomon Airlines has logic, the decision by our Government is not easy. One of the strategic questions that will face the Government and in particular those at Samoa Airways is this: what happens when the government decides to lease a big aircraft to serve the Apia-Auckland route? 

For someone who believes in the free market principles, my initial reaction is that, the more the merrier. The more airliners that service the Apia-Auckland-Apia route the better it is for the people of this country and tourists/visitors.  

 Adam Smith, once wrote: It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest. At present it is not the generosity of Air New Zealand that is flying us to Auckland and back, but a regard for its own interest. And what is such interest; well, the business of business is business.