Sea Passion Group, the firm that operates Palau Pacific Airways (ED, Koror) and Sea Passion Hotel in Palau, has confirmed the carrier will cease all operations next month in light of intense competition as well as China's decision to shun the Pacific island state diplomatically.

Founded in 2014, Palau Pacific Airways operates a single B737-800, chartered from Slovakia's Air Explore (ED, Bratislava), to run regular passenger flights between Palau and Hong Kong Int'l.

However, according to the Island Times, the group said in a letter to the Palauan Congress that some competitors, who only operate during peak seasons, have reduced their prices to “unmaintainable levels simply to gain short-term market share.”

It said that when PPA first started flights four years ago, the average market price per round-trip ticket was around USD800 with annual loads of approximately 30,000. However, as of this year, fares have plummeted to USD300 while loads for the first six months of the year have dropped to 14,000.

The latter it attributed to China's decision to remove Palau from its Approved Destination Status list in November last year, likely due to its continued recognition of Taiwan/Republic of China. As a result, with Chinese travel agencies no longer willing to market the islands or its resorts, Chinese tourism has cratered.

“As the situation in China continues to deteriorate, the vicious market pricing by our competition has also made Palau a low-price destination and also extremely difficult to be competitive and hard to recover from,” the statement read.

Sea Passion Group and Air Explore have since confirmed to the Island Times that Palau Pacific Airways will indeed cease all operations from August 31 onwards.

“Yes, our last flight would be on August 31. 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,” Chiu Shao Yen, the General Manager of Sea Passion Group, told the paper.

According to the ch-aviation capacity module, Koror is served by United Airlines (Guam Int'l and Manila Ninoy Aquino Int'l), Lanmei Airlines (Macau Int'l), Asiana Airlines (Seoul Incheon), Korean Air (Seoul Incheon), China Airlines (Taipei Taoyuan), and JAL - Japan Airlines (Tokyo Narita). In the wake of Palau Pacific Airways' announcement, China Airlines has said it will two more weekly flights to Palau.