Aviation
Rockin’ To Palau Air’s Tune
Alan Seid Takes on Continental Micronesia
Alan Seid is used to taking risks, creating controversy, and ignoring his critics. Over the past several years, the Palauan businessman has spearheaded the construction of Palasia, one of the largest hotels in Palau, broken ground on Palau’s first-ever golf course, launched an on-line Internet gambling scheme, and made an unsuccessful bid for the Palauan vice-presidency. But Seid’s latest venture may be his most audacious yet—the creation of a Palau-based airline. With an anticipated launch date of June 2003, this new carrier—Palau Rock Island Air—will provide the first meaningful competition to Continental Airlines in Micronesia. If Palau Air succeeds, it could bring about sweeping changes in Micronesia that extend far beyond additional air routes.
Although Seid, the airline’s president and founder, envisions Palau Air evolving into a major presence in the Pacific, he plans to start slowly. For the first two years of its existence, Palau Air intends to lease a 737-300 aircraft, and fly a limited route (Koror to Guam with a stop in Yap twice a week; Guam to Koror with stops at Chuuk, Pohnpei, and Kosrae twice a week; and from Manila to Koror and on to Guam twice a week). In addition, Palau Air will run charter flights from Japan to Palau. Once the airline has established itself, Seid hopes to add a second plane, turn the Japan charter flights into regular routes, fly from Guam to Honolulu, and possibly even add direct flights from Palau to Sydney and Palau to Cairns, Australia. “We don’t need to grow by leaps and bounds to be successful,” Seid said.
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ALAN SEID Age: 45 |
| POSITION: Chairman, Board of Directors Micronesia Investment & Development Corporation (MIDCORP) | |
| PREVIOUS EXPERIENCE: No formal business experience prior to starting MIDCORP, a Palau-based development company with investments in hotels, a golf course, banking, airlines, agriculture, aquaculture and information technology. Seid is a former member of the House of Delegates of the Olbiil Era Kelulau, Palau’s Parliament. He served as chairman of the Committee on Ways and Means. Unsuccessful candidate for Palau vice president in 2000. | |
| FAMILY: wife, Sophia, and five children – Ilana, Sumang, Desree, Alan Seid, Jr., and Millenna Dibuk | |
| PASSIONS: avid spear gun fisherman |
To circumvent many of the obstacles facing new airlines, Seid has forged two key alliances—with Aloha Airlines and Japan Airlines (JAL)—to make Palau Air more viable. Aloha will in effect manage the airline. “Without Aloha, we would not pursue this,” Seid said. The Hawaii-based carrier will hire all Palau Air employees—from the CEO to the pilots and flight attendants to mechanics and baggage handlers. Palau Air can also tap into Aloha’s worldwide reservation system, and can count on Aloha to negotiate the web of U.S. Federal Aviation Authority regulations on its behalf.
The pact with JAL will incorporate all Palau Air flights into JAL’s reservation and marketing system, and will allow Palau Air to coordinate its flights to and from Guam with JAL’s connections there. This arrangement allows the fledgling airline to access JAL’s network of dedicated travel agents, a significant competitive advantage. “This will provide us an instant market to Japan,” Seid commented. “We anticipate that Japan will be Palau Air’s bread and butter marketplace.”
Seid hopes to avoid a price war with deeper-pocketed Continental. Nevertheless, at least at the outset, Palau Air will cut fares 10 to 20 percent below Continental’s rates. Ultimately, however, Seid believes that Palau Air’s success will hinge on growing the market of visitors to Palau, rather than in poaching Continental’s passengers. “We are planning on 20 to 30 percent of our business coming from competition with Continental and 70 percent to come from new business,” he said.
This “new business” means increasing the number of tourist arrivals to Palau. Seid does not see this as a significant hurdle, anticipating that Palau Air’s links with Aloha and JAL will enable it to bring in 20,000-30,000 additional tourists in its first year alone, boosting total tourist arrivals in Palau to close to 100,000 annually. This prospect has most tourism-related businesses in Palau smacking their lips in anticipation. “This is a delightful situation,” said Manua Chibana, the acting manager of West Plaza Hotels, a group of five small hotels in Palau. “With open competition in the airlines, people will have more opportunities to come to Palau.” As a result, Chibana’s chain could improve on its 50 percent occupancy rate from last year.
But not everyone is enthusiastic about the prospect of more visitors. Ron Leidich, the founder and president of Planet Blue Kayak Tours, worries about the impact on Palau’s fragile environment. “Increasing the number of annual visitors may seem appealing at first glance,” Leidich said. “But have we put in place the infrastructure to serve them? Is our overburdened sewage system ready to accommodate more waste stressing the water quality of the harbors? Will we simply send more divers to the already crowded dive sites? Will we take more fish from our already depleted reefs?”
For Seid and the financial forces behind Palau Air, however, building the airline-and the tourist economy to support it-is a win-win proposition. “This is the first time that island people and their governments can have their own airline.” Seid is proud of the fact that $225,000 of the initial $5 million capital for Palau Air came from “island people: from taxi drivers to school teachers, who invested small amounts.” He also stresses that Palau Air has had strong financial support from the governments of Micronesia. Palau has committed $1 million to the venture, and Yap, $500,000. Kosrae is planning to invest $500,000 as well. “We have more potential investors than we need,” Seid said. “Right now, we have to choose the investors that we want.”
