More economical to run than existing aircraft

Dev Nadkarni
Establishing convenient and economical air links in the Pacific islands region—particularly between the islands nations—has posed a problem for both airlines and islands governments for decades.

Long distances, low passenger load factors, the lack of smaller long range aircraft that are cost efficient to fly and other techno-commercial factors as well as intransigent attitudes to cooperation in both the government and the industry sector have all conspired to keep the idea of a Pacific islands regional airline a permanent pie in the sky.

European Union-sponsored Proinvest —‘Profit in the Pacific’ Conference in Vanuatu...brought together a range of professionals and investors of the travel, tourism and aviation industries. All Pics: Dev Nadkarni

Conferences and meetings over the decades have discussed the possibility over and over again but a viable commercial solution to the problem has remained ever elusive: the idea of a true regional airline has simply failed to take off.

In the meantime, many individual islands nations have been forced to fly single jet airlines¬—sometimes more on the rationale of public service obligation than purely commercial considerations.

This has inevitably resulted in several of them going belly up, or having their inventory re-possessed. The South Pacific’s aviation history is littered with the flotsam of failed airlines.

The European Union-sponsored Proinvest —‘Profit in the Pacific’ Conference in Vanuatu late last year brought together a range of professionals and investors of the travel, tourism and aviation industries.

The event, organised by the Bangkok, Thailand headquartered PATA (Pacific Asia Travel Association), presented yet another opportunity to discuss the possibility of a regional airline for the South Pacific. 

Underscoring the criticality of efficient and economical air links to tourist markets, Manchester-based aviation industry consultant John Grant warned potential investors in tourism projects in the South Pacific to “first think if aviation is sustainable before investing in the region.”

WAY FORWARD: He said the 67 commercial aircraft in the islands region needed to be better optimised.

John Grant	Ian Vanderbeek

One way forward for the region’s national airlines was to adopt the capacity purchase agreement model that has been so successful in the United States aviation market.

This would need several structural adjustments and national pride—often a major determinant in decision-making for government-owned airlines—would need to take a step back in the interest of commercial sense.

But aviation experts are far more optimistic about the possibility of establishing and flying a regional airline viably now than ever before because of a number of factors revolutionising the aviation industry as well as the larger travel industry in the past few years.

Among these are the leaner and meaner medium-range jets that are far more economical to run than existing aircraft that fly Pacific destinations, route rationalisations and greater cooperation between various sectors of the travel industry and individual national governments.

Sydney-based Ian Vanderbeek, Executive Director of ExpressJet Asia, said new regional jets were revolutionising the industry and opening new tourism markets where none existed before. He cited the example of new regional Chinese airlines that are successfully servicing regional routes with impressive growth rates using small jets.

He also said that some of these airline operators were spreading their wings outside China. There were reports that at least one of them was in talks with Air Fiji for a regional service using regional jets. “These are the kinds of jets that have a capacity of about 70 seats but are economical to fly even with a complement of just 34-36 passengers,” Vanderbeek told ISLANDS BUSINESS.

This is the type of inventory the region’s airlines need to invest in, he adds.

Brazilian aircraft manufacturer Embraer has seen this opportunity early and is aggressively marketing its new range of lean, mean regional jets across the world.

It has already delivered over a dozen to Virgin Pacific in Australia where the airline plans to add new regional routes progressively in the coming months.

It is a question of time when these aircraft find their way into the Pacific islands region, say some experts. China-based Hinan Airlines, a company backed by legendary international investor George Soros, reportedly has 50 new planes of the Embraer range on order.

Some of the industry watchers who attended the conference in Port Vila said a part of that inventory may be used in the operations of a new Pacific Islands regional airline.

New airline enterprises are increasingly integrating different aspects of the travel industry.

“Hinan is also into acquiring resorts and integrating them into their core airline business,” says Vanderbeek.

“It is possible that this model will be experimented with in the near term, particularly in the Pacific islands region using Fiji as a springboard.”

There is a real possibility that private airlines will dominate the regional airline industry in the future, says Vanderbeek and that government-owned airlines will simply be unable to compete with the new ways of doing business in the aviation industry.

VIABILITY: While Grant puts the number of regional jets required to launch a viable regional airline for the South Pacific region at 6, Vanderbeek says 10 would suit traffic needs better.

But in the meanwhile, Pacific islands governments need to cooperate better, say the experts. One instance of a long drawn-out delay is the ratification of PIASA (Pacific Islands Air Services Agreement).

Regional cooperation at the governmental level especially in an area like aviation is easier said than done. It might take a few years before the issues in PIASA that stand between some countries signing on the agreement are sorted out.

Other issues like security and freight handling would also need to be sorted out at the inter-governmental level. In the meantime though, it may be the hotshot new privately promoted airlines powered by their sleek fleets of economical regional jets crisscrossing the Southern Pacific that may finally get the idea of a true regional airline out of hangars and into the skies.