Tuvalu News

AIR FIJI GOES REGIONAL TO SURVIVE

Island Business
February 4, 2006

Air Fiji is bent on removing itself from a quandary. After operating domestically in Fiji for 30 years, it has decided that its survival depends on going regional.

One prospect is the leasing of Chinese-built Y-12 Harbins to domestic airlines that now find it hard, if not impossible, to lay their hands on Twin Otters or other aircraft in the 15-20-seater category. Air Fiji is in business in Tonga, the Solomon Islands and Tuvalu. Vanuatu and Kiribati are other prospects.

By the end of February, says chairman, David Robertson it hopes to have a 30-40 seater aircraft as part of its fleet of Harbin Y-12s and Bandeirantes. But there could be a problem that could block it from operating with bigger aircraft to Labasa, one of its main Fiji revenue-making ports.

Air Fiji's difficulties stem from the fact that it is not a Fiji-controlled airline, although the Fiji Government is a substantial shareholder.

Half of the airline is owned by Aviation Investments, 50/50 percent owned by the Tuvalu Government and the China National Aero Technology Corporation, manufacturer of the Harbin Y-12. That left it open to the cancellation by the Fiji government of a licence to operate Fiji-Tonga flights with an Embraer Brasilia leased firstly for the Fiji-Tuvalu and Fiji domestic trunk route trips.

It lost the busy Tonga route when the Fiji government-controlled carrier Air Pacific decided to resume a Suva/Nuku'alofa service with its Boeing 737 jets.

“The Fiji government won't let us fly out of Fiji while letting Air Pacific in on our domestic routes, so where do we go?,” Robertson says.

“The only way we can go is to form associations in areas of the Pacific where we're welcome, We are particularly welcome in Tonga. So if we are going to go regional, we can go regional from there. If our strategy is to go regional, the fact that the Fiji government doesn't want us to go regional doesn't mean it can actually dictate to shareholders that desire.

“We just have to find a way around it and that's what we've been doing these last couple of years.” In Fiji, Air Fiji is now faced with the prospect of Air Pacific's planned return to domestic services it abandoned years ago. It is expected to buy another local airline, Sun Air, to be the basis of its local airline.

Robertson says Air Pacific last year wanted to buy 100% of Air Fiji, but shareholders didn't want a full sell-out. Last year Air Fiji became the 49% owner of Airlines Tonga, which it set up with a Tongan business, Teta Tours, after an airline controlled by Tonga's Crown Prince Tupouto'a failed to operate all the services required by its monopoly licence.

Airlines Tonga has been officially designated as a Tongan national carrier, Robertson says.

“We've applied to Fiji to fly back to Tonga under our own steam as we did before and to accept the joint venture with Airlines Tonga and Chatham Air. Chatham Air has rights to fly to Fiji, but when we applied we were denied rights already granted to another airline. We can only assume the rules are not an even playing field, but that won't stop us.”

New Zealand-owned Chatham Air operates cargo and passenger services between Niue and Fiji with a Convair.

Airlines Tonga has one Air Fiji aircraft operating to four destinations in Tonga and is due to receive a second, a 19-seater Y-12 Mark 4, in February. Last year, Air Fiji entered an agreement for the supply of technical and commercial services and aircraft and pilots to Solomon Airlines. Now one of its Bandeirantes is operating in the Solomons.

Robertson says the Solomons Airlines has asked to lease a Harbin Y-12.

Kiribati, the operator of a Harbin Y-12, has asked to lease a second one, Robertson says.

“We are hoping that because of our aeroplane manufacturer shareholder that we get access to their Y-12s on long lease. If we can make it work, we can on-lease. That makes sense to the board to take that new direction and lessen dependence on domestic operations here in Fiji and enlarge our operation without concentrating in one area.”

Robertson says the types under consideration for future use are the Dash 8, ATR 42, Saab 340, the Convair and an extension of the lease of the Brasilia.

A difficulty is that since the civil aviation department limits the use of the airport at Labasa, the largest town on the island of Vanua Levu, to Bandeirante-sized aircraft, heavier aircraft couldn't be operated to the airport, eventhough an ATR 72 was allowed to land there as a private aircraft on demonstration to Air Pacific. Nor could a heavier aircraft use the important northern ports of Savusavu and Taveuni.

“The problem is we would like an aircraft that could fly to Labasa, Taveuni, Rotuma and there's no such aircraft. We've been looking for a long time, Robertson says.

“There is no such aircraft in the world that can do all the things we would like it to do and fly to Tonga. We have to look at something that will do Nadi/Suva and Suva/Tuvalu. But we are still not sure that we can get it to Labasa.”

Air Fiji recovered profit in 2004 after a period of accumulating heavy losses. Revenue is well up and costs have been cut, Robertson says.

“The most important thing that has happened to the airline is signing an agreement with Pacific Blue. There is a lot of spin-off apart from commissions and sales-including their administration structure and whatever. We have a very close relationship with them now and I think it's going to grow in the future. To a certain extent, we have the same thing with Air New Zealand and Freedom Air.

“We've been in the domestic scene for 30 years. We do know a little bit about them. It's an entirely different situation to run an international airline. A lot of it does depend on scheduled flights linking up other flights within the region.

“That's why when you see us spreading into the region we're not going willy-nilly. We are going in on the basis of known flights of Pacific Blue and Freedom Air. We will take all their inward bound passengers and our flights will be scheduled to link up. We feel there is an area there where we can link up with new business that no one's doing at the moment. That's why we can't understand why the Fiji government won't allow us to fly from here to the region because what we are trying to do is not anything against Air Pacific. We are merely supporting the larger airlines.

“Air Fiji thinks that the package of services supplied to Solomon Airlines is also where the future lies. We believe that's where we can really do something-supply the whole package. Domestic airlines are mostly government owned and can't really afford the capital. So if they can lease, they're happy.

“We believe that quite a significant part of our business will be in leasing aircraft and in having separate profit centres in Fiji, Tuvalu, Tonga and the Solomons.”


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