Aviation
Filling the Seats
Free Market Forces Don't Always Work In The Pacific
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The aviation industry in the Pacific region is a story that’s always in motion, always revising and updating itself on a daily basis. Even people in the industry have trouble keeping up with developments. Airlines in the metropolitan areas—New Zealand, Australia, Japan and the U.S.—are going through corporation-wide revampings. With the exception of Southwest Airlines, for instance, most of the major U.S. airlines are either in, or verging on, bankruptcy. This is a result of several main trends: the downturn in leisure ticket sales experienced by airlines worldwide after Sept. 11, 2001; the increasing costs for fuel and security; the cost inefficiency of the hub-and-spoke system used by many of the majors; and the increasing reluctance of business customers to pay the stiff fares that went unchallenged during the boom times in the late 1990s.
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The downturn in leisure travel has significantly hurt airlines serving the Pacific and, in some places, the only possibility for keeping Island countries connected for passenger, mail and freight service means resorting to government subsidy.
For many small countries in the Pacific, a national airline is an expensive necessity, since privately held metropolitan carriers will not serve islands where they can’t fill the seats with some combination of local travelers and tourists. In fact, the national airline in some countries—Samoa is one example—is often the largest item of national debt.
Among the metropolitan airlines serving the Pacific, both United Airlines and American Airlines are in deep financial trouble, and there is every likelihood of cuts in flights and destinations covered. Yet the Australian carrier, Qantas is doing well after gobbling up its Ansett competition. Virgin Airlines has been sniffing around the edges of the Pacific. They were reportedly interested in Ansett, but were outbid by Qantas. Virgin also has its eyes on Air New Zealand.
In Hawaii, Aloha Airlines and Hawaiian Airlines are duking it out for the U.S. West Coast routes to Hawaii, but at the same time they are trying to cooperate on the interisland business, where neither is making money. A proposed merger between the two came to nothing and now they would like to take advantage of new, post-Sept. 11 legislation that allows two airlines serving in the same U.S. state to cooperate with each other in terms of fares and schedules.
An Aloha insider said, “We just can’t both send planes to the same islands at the same time. We’d like to be able coordinate our schedules to avoid this kind of duplication.” Anti-trust law had prohibited such cooperation before. But the Aloha-Hawaiian application for cooperation has been stopped temporarily by the U.S. Department of Justice, which objected to the plan.
Meanwhile, Aloha begins serving the Cook Islands in December and that would bring it into the network of Commonwealth travel with Canada at one end and the Cooks at the other. Aloha officials say that they expect their Vancouver-Honolulu flight to generate the ticket demand they need to make a Cook Islands route profitable. In Micronesia, the Japanese, Chinese and Korean connection is vitally important for bringing in tourists. Air Nauru has been in discussion with officials in Majuro about a route that would include the Marshall Islands. Pohnpei’s state government has tried to convince Korean Airlines to make a stop-over on its was to Fiji. Guam is also happy to have Philippines Airlines restore its Manila-Guam route.
In Palau, businessman Alan Seid is talking up the idea of an Air Palau, perhaps by way of some relationship with Aloha Airlines, which would fly to Guam and the Philippines. Japan Airlines recently announced charter flights to Palau from Tokyo’s Narita Airport for three months beginning December 10. The Boeing 767 charter planes will accommodate up to 200 tourists for a six-day visit to Palau, and their 6-day stay will mean good spending opportunities for visitor activities on the ground.
Bringing tourists to the Islands is also the lifeblood of the Tahiti economy and keeping the planes coming from Paris has been a problem. One French airline, Air Lib, stopped flying to French Polynesia earlier this year. The government of French Polynesia has agreed to subsidize the Paris-Papeete flights of the French airline Corsair until next March, when the government’s own airline, Air Tahiti Nui, will take over.
Air Tahiti Nui was launched with backing from the French Polynesian Government as part of efforts to protect and promote Tahiti tourism. Tahiti Nui chairman Nelson Lévy says that by the end of the year the airline hopes to be flying four Airbus A340-300 aircraft, including providing extra services to and from Paris. Lévy says Air Tahiti Nui had so far an 80 percent capacity rate on the Papeete-Paris-Papeete flights, which have now been operating four months. The Tahitian airline flies to France, the United States of America, Japan and New Zealand.
Getting service to outlyers like Christmas Island has meant the government of Kiribati has to subsidize flights by Aloha Airlines from Honolulu.
On the ground, in other places like the Solomon Islands, problems with infrastructure and boycotts by government airport employees have meant disruption and cancellations of badly needed flights. The government of Niue, troubled by on-again, off-again air service, has just announced a 5-year agreement with Polynesian Airlines, the national airline of Samoa, to service a once-a-week flight between Auckland and Niue.
The economics of air travel is in flux everywhere in the world, and the Pacific is no exception. For small Island economies it looks certain that some combination of public subsidy and free market freight and leisure travel markets will continue in the mix for many years into the future.
