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Collaboration needed for Pacific Island airlines ‘running out of money’

Analysis

After years of discussion, but a lack of progress, collaboration between South Pacific airlines has resurfaced as a serious option, following the economic devastation and loss of air connectivity caused by COVID-19 across the region.

The Director General of the Association of South Pacific Airlines (ASPA), George Faktaufon, told October’s CAPA Live event that finance was “the major problem” for airlines, as their owners, the region’s governments, prioritised scarce recovery funds.

“The airlines are running out of money,” said Mr Faktaufon. “The majority of airlines are state-owned. The states themselves will not have the money to sustain the airlines when borders reopen. We can’t hold on to the status quo. I think the pandemic, with all of its ills, has given us the catalyst to review the way we operate.”

Summary

  • Director General of Association of South Pacific Airlines says collaboration is needed for the region’s airlines to survive the financial crisis.
  • Financial support more likely for collaborative ventures than individual airlines.
  • New COVID infections, travel restrictions, and differing national responses and reopening timeframes seriously damage tourism, intra-Pacific travel, and airlines.
  • Freight, charters, and repatriation flights used to maintain international operations.
  • Medical and tourism infrastructure must be ready to support return of passenger flights.

“We’ve been trying to do this for years, but it hasn’t worked. It has to work this time.”

Mr Faktaufon said larger airlines in the region would survive the crisis, but many smaller operators were at risk. He said the most appropriate way to ensure airline survival across the South Pacific was a form of industry restructuring, rather than airline-by-airline solutions.

“Donors would be very reluctant to put money into individual airlines”, he said. “I think there is a better opportunity for donors to finance collaborative ventures.

“We’ve been trying to do this for years, but it hasn’t worked. It has to work this time. This is a good opportunity to make it work. Personally, I have a lot of hope, because I know that many of the states will not have the financial resources to continue to support airlines because they have other pressing needs to look at.

“So I think it’s very important for us to look at how we can help the states. We will have to work together amongst ourselves and with our states to see how best we can improve the sustainability of air services in the islands.”

“We’re probably at least a year away from any seamless travel”

Air Niugini Chief Executive Bruce Alabaster said his airline, one of the largest in the South Pacific, was now operating about 80 per cent of its domestic passenger network, with loads reaching 65-70 per cent of pre-pandemic volumes. But, like most other airline operators, he said international services were kept alive largely by freight.

He said the airline continued to operate two Boeing 767 aircraft between Port Moresby and Brisbane, Sydney, Manila, Singapore and Hong Kong, “and that’s simply being underwritten by the freight in the belly”.

“We’re moving quite a surprising amount out of Brisbane, up into Hong Kong and Asia”, he said. “That’s just evidence of the lack of hold space, direct, that historically would have been there.”

International passenger flights, however, remained some way off, despite a requirement for all passengers arriving in Papua New Guinea to be fully vaccinated and rapid PCR testing for all outbound travellers.

Mr Alabaster said different infection rates, responses to COVID, and vaccination rates through the Pacific Islands meant there would be “incredible challenges” to restoring passenger flights across the region.

“PNG and Fiji have COVID. You’ve got nations like Cook Islands, 96 per cent fully vaccinated and still unconvinced, despite the economy being driven by tourism, that they’ll actually reopen. And you’ve got Samoa, Vanuatu, Solomons, with relatively low vaccination rates and no COVID.

“We’re probably now half to two thirds of the way through the COVID crisis as an industry. But I think we’re probably at least a year away from any seamless travel.”

Papua New Guinea: weekly total system seat capacity, 2019-2021

Fiji: weekly total system seat capacity, 2019-2021

“The last thing they want to do is introduce COVID when the borders open”

The Chief Executive Officer of Solomon Airlines, Brett Geber, said his airline, also, had relied on freight, repatriation flights and charters to help compensate for the loss of passenger traffic during the pandemic.

“Without scheduled flying, the revenue stopped, but the expenses didn’t. We introduced a weekly cargo flight from Brisbane to Honiara, carrying everything from medicines to aircraft parts and car parts and all the other bits and pieces. That’s been a lifeline as it has kept the Solomon Islands connected with the rest of the world.

“I think the biggest issue that we face around the South Pacific is the fact that everybody kept talking about flattening the curve, buying time, creating appropriate ICU facilities, etcetera – but nothing has been done. So I think most islands in the South Pacific are going to struggle to provide appropriate medical care if COVID does arrive in their countries. We’re going to see a reluctance to open the doors too quickly.  

“The other factor that everybody seems to have ignored in the tourism sector is just how much of the tourism infrastructure has survived not being used for the past 18 months. There could be a significant amount of work and money required to get the infrastructure up and running again.”

ASPA’s George Faktaufon said more than half of Pacific Island nations were COVID-free.

“The last thing they want to do is introduce COVID when the borders reopen. There will be a reluctance, I think, mainly because they don’t have the facilities. These are some of the considerations that we need to be thinking about as we approach the resumption of international air services to these regions.”

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