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Last Updated: Thursday, 29 April, 2004, 11:23 GMT 12:23 UK
Cash crunch grounds Tonga airline
Royal Tongan Boeing
The kingdom lacks the cash to bail the airline out
The one plane in Tonga's state airline has been repossessed, as a financial crisis grips the South Pacific kingdom.

Some 500 passengers were stranded after Royal Tongan Airlines' Boeing 757 was impounded by the government of Brunei.

Tonga, whose 100,000 people are spread across 169 islands, has a notoriously fragile economy.

Its finances were damaged in 2002, when a state fund - managed by the court jester - lost millions in unwise overseas investments.

Earlier this year, the jester and the kingdom settled an acrimonious court case over the affair.

Grounded

The financial situation at Royal Tongan Airlines is not clear, but reports indicate that its cash flow has dried up, and that suppliers have been insisting on cash payments.

Tonga
For a while, it tried to claim that the Boeing was grounded with a wing defect; now, it merely says that international operations were suspended "because of concerns regarding the economic viability of the service".

Domestic flights, which are run through a fleet of smaller aircraft, remain unaffected.

Some of the 500 stranded passengers have secured seats on Air New Zealand, which offered a special fare back to Sydney.

And Royal Tongan said that it was making alternative arrangements for the 1,300 passengers who have booked flights to the islands in the next three months.

Hit by a storm

The closure of the service will be a further blow to the archipelago's economy.

Tonga
Tonga's economy is vulnerable to external shocks
Tonga currently earns two-fifths of its national wealth from remittances - money sent home by expatriates, mainly in Australia and New Zealand.

The big hope is tourism: the islands get some 50,000 foreign visitors a year, and hope to double that figure by 2010.

This year, however, the economy has been hit by the storms that have ravaged many South Pacific islands.

The jester investment scandal cost the government the equivalent of a year's tourism earnings, and eradicated the financial cushion that could have been used to bail out the airline.

Tonga-watchers are on the look-out for political instability amid reports of the ailing health of the 85-year-old King Taufa'ahau Tupou IV, who enjoys near-absolute power.


SEE ALSO:
Tonga court jester 'to pay $1m'
19 Feb 04  |  Business
Tongan court jester faces trial
11 Aug 03  |  Business
Tonga sues over jester's huge losses
11 Jun 02  |  Asia-Pacific
Tonga's jester has last laugh
06 Oct 01  |  Asia-Pacific
Country profile: Tonga
01 Nov 03  |  Country profiles


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