Air Timor: Government policy, suspected corruption 'destroying' East Timor's only airline

By Anne Barker – ABC News

Why would a nation seek to sabotage its only local airline in favour of two foreign carriers that are ranked among the "least safe" airlines in the world?

It sounds incomprehensible. But East Timor's Government stands accused of actively trying to "destroy" the country's only carrier, Air Timor, effectively giving Indonesian airline Sriwijaya and its budget subsidiary, NAM Airlines, a monopoly on routes to Indonesia.

Air Timor this week axed its once-lucrative flights between Dili and Bali, and is preparing to sack most of its local staff in Dili.

The future of its other international route, between Dili and Singapore, is uncertain. The airline blames government policy and suspected corruption for its woes.

"In one year, government policy has destroyed us," former Air Timor chief operating officer Ed Turner wrote in a scathing statement posted online.

"A government decision in late 2015 to grant NAM Airlines rights to fly from Denpasar to Dili meant the route was in total overcapacity.

"There were so many seats available compared to market demand that the three airlines could only achieve 50 per cent or less load factor.

"Airlines usually need 70 per cent to break even. Airfares dropped to $US70 [$94] — far below normal market prices.

"NAM Air resorted to dumping its passengers onto Sriwijaya flights on low-capacity days to stop the losses. Air Timor resorted to raising capital to cover the huge losses running at $US10,000 [$13,400] per day."

Air Timor warned a three airline-market was unsustainable

Only a year ago, Air Timor posted its biggest profit yet of almost $US1 million ($1.3 million), and had $2 million in the bank.

The company was expanding its international operations, preparing to launch flights to Darwin and was on track to begin local domestic flights.

At the time, it claimed it was the largest private employer of local Timorese workers and had a clearly defined goal to become East Timor's flag carrier.

A year on, Air Timor is struggling to survive, with overall losses of more than $4 million.

Mr Turner said Air Timor had repeatedly warned the Government allowing three airlines into the market was not sustainable, based on existing demand — but the warning fell on deaf ears.

Instead, a series of government decisions actively favoured Sriwijaya and NAM airlines, and served to damage Air Timor.

For example, East Timorese aviation law stipulates aircraft must be no more than 20 years old but last April, Transport Vice-Minister Inacio Moreira asked Air Timor to replace its 18-year-old aircraft with a new A320 Airbus.

Air Timor complied and was told the same rules applied to Sriwijaya and NAM Airlines, whose aircraft were 22 years old.

Mr Turner said in September Mr Moreira cancelled NAM Airline's operating licence, but inexplicably two months later he renewed the licences for both Indonesian carriers, and approved rights for them to fly aircraft up to 22 years old — an agreement Mr Turner said was illegal.

When he asked the Vice-Minister for an explanation, he said he was told it was "a government decision".

'Laws are not laws in East Timor'

Then in December, the Government suddenly announced it would not renew Air Timor's lease on office space at Dili Airport — six months into the lease — after the airline had spent two years waiting for approval to establish a flight operations office and recently spent $130,000 setting it up.

"Air Timor is extremely critical of Vice-Minister of Transport Inacio Moreira because laws are not laws in East Timor," Mr Turner said.

"He has permitted NAM and Sriwijaya to operate aircraft up to 22 years old and manipulated the laws to favour foreign airlines. This is against the national interest of the nation.

"After 12 months of hard work we reached profitability on the Denpasar route in December.

"But now that the Government has renewed NAM for 2017, further losses will occur. Consequently we have to close this route. The Timorese public is now left with a monopoly — one company controls the route, operating 22-year-old aircraft."

Sriwijaya Air was ranked last year among the 10 "least safe" airlines in the world, according to an annual survey by AirlineRatings.com.

Both Sriwijaya and NAM Air are banned from flying in Europe.

Air Timor's aircraft are leased from Citilink — Garuda's budget carrier — and Silk Air — owned by Singapore Airlines. Both are approved to fly in Europe.

A ban on Citilink was removed last year after it upgraded its aircraft and safety performance.

Moreira vows to 'destroy' Air Timor

Relations between Air Timor and the East Timorese Government have soured to the point that the airline's president, former East Timor president Jose Ramos-Horta, recently wrote to Prime Minister Rui de Araujo.

Dr Ramos-Horta accused Mr de Araujo's Government of involvement in Air Timor's downfall, and specifically accused Mr Moreira of corruption.

In response, Mr Moreira called Air Timor's directors to a meeting last Sunday where he expressed disappointment at the letter and allegedly vowed to "destroy" the airline.

"I will fight to the end, I am clean and have nothing to hide, and I will now make sure that Air Timor will be destroyed," he is recorded as saying, in minutes from the meeting, which the ABC has obtained.

Mr Moreira challenged the airline's directors to take him to East Timor's anti-corruption commission.

Mr Turner, when asked why Mr Moreira would seek to destroy East Timor's only airline, said: "It all goes back to the fact that Air Timor has never been involved in corruption or paying people in the country."

"Air Timor has been emphatic that we won't get involved with anything untoward," he said.

"That is the principle we laid down to set the company up."

Asked if corruption was the only way for a company to get ahead in East Timor, Mr Turner declined to comment.

He said Air Timor's board of directors would have to decide whether to take up Mr Moreira's challenge and lodge a formal complaint of corruption with the anti-corruption commission.

The ABC has sought comment from Mr Moreira or East Timor's Transport Ministry.

So far, no-one in the East Timorese Government has been willing to answer questions from the ABC.

Editor's note: An earlier version of this story incorrectly attributed a statement by Transport Vice-Minister Inacio Moreira to East Timor's Prime Minister Rui de Araujo. That statement, in the article's key points, was "I will make sure that Air Timor will be destroyed".

Photo 1:  Air Timor has been forced to axe flights from Bali to Dili, the East Timor capital. (Reuters: Lirio Da Fonseca)  

Photo 2 Air Timor: A series of Government decisions have served to damage Air Timor. (Supplied: Air Timor)