Aviation
Worries Over Virgin’s Pacific Plan
ASPA claims it’ll take away some regional airlines’ business
Shifts of major airline strategy and the entry of a new airline, Virgin Blue, will affect the Pacific Islands tourism market.
Flying domestically in Australia, Virgin Blue, half owned by an Australian company and half by businesses controlled by a British entrepreneur, Richard Branson, plans to operate flights from Australia and New Zealand into the South Pacific with Samoa, Vanuatu, Fiji, Tonga and Papua New Guinea as possible destinations.
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The airline, a low cost no-frills operator of Boeing 737 jets, is talking of Australia/Fiji fares that would be nearly half the fares quoted by Air Pacific, the Fiji national carrier, in which Australia’s Qantas has a 46% stake.
Virgin Blue says it can inject thousands more tourists into the region, a claim contested by the Secretary-General of the Association of South Pacific Airlines, George Faktaufon. He predicted it would do more than take a slice of the limited business of struggling Pacific Islands airlines.
Another worry was that any lowering of fares due to competition from Virgin Pacific would hurt the always financially sensitive position of nationally-owned regional carriers like Air Vanuatu, Solomon Airlines, Samoa’s Polynesian Airlines and Royal Tongan Airlines.
The governments of airline owning countries, including Fiji, felt forced to invest in them because of their previous reliance on foreign carriers they felt they couldn’t rely on to feed their vital tourist industries.
With the announcement in January by the United States carrier, United Airlines, that it will drop flights to New Zealand from March, Qantas, Air New Zealand and Air Pacific will be confirmed in their dominant roles as carriers of tourist traffic in the South West Pacific from North America, Australia and New Zealand.
Virgin Blue’s chief executive, Brett Godfrey, says it would like to operate from Australia to New Zealand. But it will not do so if Qantas buys 22 percent of Air New Zealand, as it proposes. Godfrey says such merger would mean it would have to fight “collusion” in fare fixing, scheduling and seat capacity.
Air Pacific’s announcement in January that it has applied to regulators in Australia, New Zealand and Fiji for permission to be regarded as a party to the planned Air New Zealand/Qantas deal was also attacked by Virgin Blue. Its commercial head, David Huttner, claimed the three airlines would stifle competition and keep fares high.
Air Pacific’s chief executive, John Campbell said the airline’s policy was a consequence of its Qantas shareholding of 46.34% and Air New Zealand shareholding of 1.94%.
Air Pacific really had no choice since regulators would regard it as linked to the shareholders in any case, but without authorisation for co-operation with them.
Air Pacific had “compelling reasons” for entering a formal tie but hadn’t yet discussed with the two other airlines what form any co-operation would take, he said.
The Fiji airline in December decided to invest about F$1300 million ((US$637 million) in leasing two 458-seat Boeing 747-400s from Singapore Airlines and the purchase of initially two 320-seat Airbus 330/300 with an option of two more.
The Boeings will go into service in April and June, operating daily to Sydney and four times weekly, growing to daily, to Los Angeles. The first A330s will go into service in 2005, initially flying to Melbourne, Auckland and Tokyo, later to Brisbane and then on new routes. Campbell said the investment was the equivalent of 65% of Fiji’s forecast 2003 GDP and the single largest individual company commercial decision in Fiji’s history.
“The certainty of growth in reliable passenger and freight service will allow current tourism and export business to expand and encourage investment from new investors,” he said.
