Air Seychelles CEO Interview: The impact of COVID-19 on an island nation

Transcript

Richard Maslen:

Hello, I'm Richard Maslen, and I'd like to welcome you to this latest session in the April 2021 edition of CAPA Live. The Seychelles, a thousand miles from anywhere, an archipelago of islands, the epitome of luxury and tranquility, home to thousands of picture-postcard memories, unspoiled by mass terrorism. It sounds too perfect, and that ultimately, is the struggle. Maintaining the tropical treasure, it's been tough for national carrier, Air Seychelles, where limited traffic flows have consistently impacted its operation.

As an island nation set in the Indian ocean, the Seychelles is reliant on international air travel. As such, it's not an exaggeration to say that when air travel stops, so too, does the local economy. According to the United Nations World Tourism Organization, the COVID-19 pandemic has resulted in around a 20 to 30% contraction of the tourism sector. For nations such as the Seychelles, where the tourism sector accounts for around two thirds of GDP, that impact can have devastating economic consequences. The Seychelles whose revenue from tourism actually fell 61% last year because of the effects of COVID-19 pandemic, which cut tourist arrivals by around 70%. These are certainly some important discussion points, and I'm delighted to welcome Remco Althuis, CEO of Air Seychelles to CAPA Live. Hi, Remco. Thank you for joining us today.

Remco Althuis:

Hi, Richard. Very nice to make your acquaintance. Thanks for having me.

Richard Maslen:

No problem. I'd like to start today by taking a little trip back to a little distance in time to BC, before COVID. You arrived at Air Seychelles in 2018, and were actioning a transformation plan for the airline. Can you highlight the reasoning behind this and what progress you've been making?

Remco Althuis:

Well, before 2018, Air Seychelles was operating two Airbus 330s on long-haul routes to Paris and also to China, to Hong Kong, to Dusseldorf. We also used those aircraft to Johannesburg, for instance. And we really needed to make changes because the airline was in bad shape, it was losing a substantial amount of money. So maintaining the long-haul network was just not possible. Therefore, we needed to look at every aspect of the business, come up with a transformation plan, and then implement that, and part of the transformation plan was to, the decision to stay out of the inter-continental market. So we had to give up long-haul flying, the Paris route and also the other international routes. Give back the A330s and then look at what would then be the right size of the company going forward. Focus on the regional network. Geographically, Seychelles is in a good position between India and Africa, and therefore, we needed to come up with a fleet vessel with aircraft, where we could have a maximum potential for the markets we wanted to operate in.

Richard Maslen:

How is that progressing along? Because you've been quite successful in changing the airline, the dynamics of it quite considerably. And you'd made a couple of years progress with that before COVID struck. So what was the situation were you in when the pandemic began?

Remco Althuis:

Well, actually we were in very good shape. But we've given ourselves five years for the transformation, so until 2022. Basically, from August 2019, to until February of last year, we were actually ahead of the transformation plan by about 12 to 16 months. We had one neo that came in August 2019, and the next one just came in just before COVID, actually, we picked it up in Hamburg in March of last year, and then the team immediately had to go into quarantine. But the airline was actually in good shape relative to the transformation plan.

Richard Maslen:

But it's quite a fundamental change for the airline, the routes to London, Paris, especially, these were mainstays of the airline when it was flying, French market is quite a key market for the Seychelles. Was it quite difficult to make that decision or were the numbers so compelling there was no other choice?

Remco Althuis:

No, it was very hard obviously. I mean, France, Germany, the UK, Italy, those four countries, that's about 60% of the source markets for Seychelles. But yeah, we are a holiday destination and therefore, also seasonal, and people always think, "Well, then there must be plenty of demand," but I always explain it. Now, on your peak weekend before Christmas, where you pick up customers from France, and the aircraft going there is not very full. So to basically, sustainably, on an annualized basis, fill these white buddies, is quite hard. And clearly, what has changed is that, with the coming up of the Middle East carriers and hubs in our proximity, Dubai and Doha, Abu Dhabi, to a lesser extent, Nairobi. If there's no demand for a daily Paris flight, which there isn't, then clearly airlines that are able to feed traffic into their hub and then they have a frequency advantage, and that makes it a lot more difficult for a smaller operator like Air Seychelles.

So on frequency, you lose out. You can't afford to fly daily, there's no market for it. And so everybody that offers a one-stop over their hub, because they can collect the traffic has an advantage there. And Seychelles is quite a liberalized market, meaning that there's a lot of airlines that can come and fly there, which has been good for the economy and the visitor arrival numbers. But it has a risk for the national airline obviously, and that's a difficult dilemma to weigh, and for us, we had no other choice, but to pull out of the long-haul markets.

Richard Maslen:

Obviously, like I said, in the introduction about the importance, you're an island nation, air transport is an essential provider of trade for the Seychelles. Suddenly, we get hit by this pandemic that nobody saw coming, and literally overnight, connectivity to the Seychelles is closed off. So before we go on with a little bit more about the airline, I think it's quite important for us all to understand a little bit about how the Seychelles was impacted by COVID, and where you stand now, which are your, one of the few countries that's actually got to the light at the end of the tunnel?

Remco Althuis:

Yeah. Well, I mean, 2020, for Seychelles as a tour destination actually started off very well, also for Air Seychelles. So the first quarter now, especially January and February, were well ahead of the previous year. But to give you an idea, we had in a normal year, oh, sorry, 2019, about 385,000 visitors. The first quarter of last year, 89,000, and the second quarter, 225 visitors. Then it slowly ramped-up to about 21,500 for the last quarter.

So overall, the year, like you said in your introduction, the visitor numbers have dropped about 68%. So massive, massive impact. So, yeah, it came to a grinding halt and nobody came. All the airlines stopped because there was just no demand. Then that left us, as the national carrier to establish critical lifelines for the country, yeah, and so we had to pick up critical goods, and medicine, and also PPE. So everything that you need for COVID, managing the pandemic. We also brought critically ill [inaudible 00:08:26] to hospitals in Sri Lanka and India. We exported fish. We even picked up fishermen because there's a tuna fleet base in Seychelles, and so we picked up fishermen in Spain and in West Africa. So the company really had to change overnight because of establishing the critical role, because the country was impacted so much that all the flying stopped.

Richard Maslen:

So, what's the situation now, because obviously, I understand that your vaccination program is perhaps been one of the most efficient in the world, and are the Seychelles open again now?

Remco Althuis:

Yeah. So the Seychelles opened on the 25th of March, and you saw an immediate, immediate, positive effect. So the first three weeks of March, we had 1,000 visitors and then in the last 10 days, about 4,000. So yeah, the flights that kept or that still flew became quite full. So the loads filled up, and right now, yeah, business is picking up quite considerably, I would say, probably an average of 500 arrivals per day, which is about half of what it was in 2019. But a lot lot better obviously than February. February, there were 700 visitors coming for the whole month, that's of 23 and eight, obviously, yeah. But it's quite good.

Richard Maslen:

That's obviously, really positive to show that that sentiment for travel is still there. But obviously, there must still be quite considerable restrictions given so many government lockdowns across the world. This meaning that although people can travel from the Seychelles, that the valuable tourism arrivals that you require are still blocked from leaving their home countries.

Remco Althuis:

Yeah. We were lucky or were lucky, in November 2019, we started flying to Tel Aviv. So we, as Air Seychelles, it's in the range of the atmosphere 28 neals. So we started to establish that market. Then we had a bit of a taste of what the pent-up demand looked like. Because in November of last year, Israel was allowed, and we immediately saw a huge amount of visitors coming from Israel. So for December, for instance, 60% of the visitors who came to Seychelles in December, came from Israel. So the source market mix right now is very different from what it was or has been historically.

So, the new markets are Israel, the UAE, obviously, that because of the connections on Emirates and on Etihad Airways. Then Russia is an important source market. Aeroflot started to operate from Moscow to Seychelles last Saturday for the first time with the 777, and they're going actually to a double weekly flight. So, yeah, the source market mix is very different. But it's good to see that where people are allowed to travel, the pent-up demand is enormous. So you see the bookings really jump up very, very quickly.

Richard Maslen:

Well, you've actually highlighted a little bit there about changing passenger demographics, different markets. Is there anything else you're seeing in terms of times for bookings? How has the market changed since before COVID?

Remco Althuis:

Well, if you look at it quarter by quarter. Because we have domestic network, as we fly to some of the other islands, and we can compare year on year what the booking intakes look like. So I am not concerned at all about quarter four, for instance, because we can already see that the world assumes or thinks, hopes, but the traveling will be safe. So basically, October, November, December, that looked very similar to a normal year. Clearly, short-term, there's a bit of, I would say, a hit and miss, but for instance, if you look at Israel, and how it reopened. The airports, first, there was restrictions in Tel Aviv, Ben Gurion Airport, about the number of people that they wanted to come back. But that has now been abandoned. So for, basically this quarter, the bookings are still extremely late. So you add a flight and then if the circumstances are okay, people come immediately.

Also, there are markets that are approaching us, for instance, we will operate charters to Bucharest at the end of April. So from Central European cities and markets, what you now see is that tour operators are trying to lock in destinations for quarter two and three, especially June until September. That they can sell right now because of the uncertainty, I mean, there's clearly hope that you can go anywhere in July. But it doesn't seem very realistic. So markets that are now ready to accept customers because they're currently open, and then the expectation is that they will also be open for quarter three. And now tour operators from those countries are locking in flights with us, because they're trying also, of course, clearly get their hands on accommodation.

So, for instance, on the Bucharest side, we started with three, just to give it a trial because we never had flights from Bucharest before. For the end of April, and then they come back to us and say, "Well, this is actually selling pretty well, can we get more for July, August?" Already, also looking at December. So, yeah, demographically, and source markets are changing depending on the situation in the home countries. Another thing, we have a few customers still coming in from France as always, but not yet the numbers that we've historically had. At least, not short-term.

Richard Maslen:

That's really encouraging and it's all about adapting. But obviously, to be able to adapt, the Seychelles has been really, really positive, and has really seen the need to get things moving and get the country open again. Now, what kind of role does Air Seychelles play with the government to sort of ensure that the destination is ready for arrivals?

Remco Althuis:

Well, I think, so we have a tourism stakeholder meeting, which basically, we have representatives from the Seychelles Tourism Board, from the Ministry of Tourism and Foreign Affairs, Transport. As well as the Seychelles Hospitality and Tourism Association, so these big hoteliers. Even now, sorry, I forgot Public Health Authority, obviously, a very important stakeholder. Since the start of the pandemic, we have gotten together every week or bi-weekly to talk about the possibilities. Our role, I'm a participant in the meeting, is to provide basically, feedback on what I'm explaining to you, and so what do forward bookings look like, what markets do we see, what trends do we see. And since we are also the ground handler at Seychelles International Airport, we also get requests from other airlines, so like we have lots of brochures, and say, "We need a quote for a 777 turnaround."

So we feed that information back and say, "Well, this is actually how the market is moving. What can we do?" And that's what it means, and also the Tourism Board then uses their resources on the ground to shift focus to those markets on the marketing and social media side. That's basically how we do that collectively. Since we are a small country, it's actually quite easy to do, in the sense that it's a dozen people that get together and to discuss these things, and then the lines to implement them are quite short.

Richard Maslen:

So now, looking at a little bit more detail, as we said about the airline. You just ascend the wide-bodied aircraft, you made a focus on operating domestic feeder flights around the islands, and a single old equipment for regional flights. You selected the A320neo, why was that aircraft the one of choice for you?

Remco Althuis:

Well, we were an Airbus 320 operator before. So obviously, back in 2018, we looked at both the Boeing 737 MAX and the neo. But clearly, because we were an Airbus operator, annuity aircraft, and also hats, and the flight operational support and experience, that machine was ultimately the winner of that decision.

Richard Maslen:

Now, obviously, as well with the neo, you now have the new developments of the A321XLR, LR, however, there's lots of different terms for these two types of aircraft now. That gives you an opportunity to perhaps get back into long-haul flying, but with a lesser capacity that's more suited to the demand in the Seychelles. What's your view? I know you stated publicly, previously, of an appeal with these aircraft. Is that still the case now in the new world that we're in?

Remco Althuis:

I mean, it's an excellent aircraft. There's no doubt about it, I mean, it's not flying yet, but on the drawing board, it looks fantastic. And looking at the experience that we've had during COVID, which I alluded to, so picking up people in Bilbao and West Africa. And obviously an excellent art, but would allow us to fly to Moscow nonstop and Singapore and Bangkok and Cape town and Rome and all the cities that we are developing short-term on the charters, the Bucharest, the Warsaw, and those places. So, yes, I think we'll see a fantastic new shift for the industry when that comes into markets. It will obviously, expectedly, be followed by other aircraft from other manufacturers. But, to me, it is now, okay, first lets get back in shape, get the house a bit in order, and then we can take a decision on that at a later stage.

You're right. And you would have the opportunity to fly somewhere with a lot lower risk-cost price than you would have on a wide body like an A330 or an A350. But we totally have to assess the market. Would we be able to fill it consistently from all the markets that we could potentially reach? But given where we are and given where our demand comes from, it would make sense at a later stage, but definitely not short-term.

Richard Maslen:

Obviously, in the short-term, you're relying on your partnerships. You have the partnership with Etihad Airways which has been a key part. Obviously, Etihad Airways, were a significant shareholder in your business but I understand that there's a few changes happening with that at the moment. Can you explain what the situation currently is?

Remco Althuis:

Well, I think everyone following the industry knows that Etihad is changing its strategy. And so their partner strategy is no longer being pursued, and as part of that, they're divesting their stakes in other airlines. Etihad has been a very supportive shareholder in Air Seychelles for about nine years now. The shareholders are having conversation about basically the way forward, and it could very well mean that Air Seychelles will divest their shareholding, and then that the government of Seychelles will become 100% shareholder of the company.

Richard Maslen:

Okay. So that's still just a discussion point at the moment, there's nothing been formalized about it as yet?

Remco Althuis:

It's being formalized as we speak. So it's happening right now.

Richard Maslen:

But obviously, relationships with airlines like Etihad Airways will remain an essential part of your vision moving forward. And codeshares and interline agreements with these airlines will be essential in bringing passengers into the Seychelles. What's your view on partnerships and how do you think they will develop in the coming years?

Remco Althuis:

Well, we've had codeshares with South African and Air India on Mumbai, South African on Joburg. We have interline agreements with quite a few carriers that sell our domestic seats. So, future sales are often sold by the big airlines like Emirates and Qatar Airways and some of the others. Air France, when they used to operate here was an interline partner. So I think we will continue to do that going forward. I mean, in our industry, having a partner with a distribution network that has more reach than your own is always a good thing. So we will undoubtedly continue with that strategy. And just based on, say the network, March, work with them on route-specific agreements.

Richard Maslen:

Let's look a little bit, I'll detail narrow it at your A320, is that the equipment you have on them, the seating arrangement, what is that currently? Are you thinking about changing it in any way because of the way that the market has changed?

Remco Althuis:

Well, an important part of our specification for the neo has to do with weight. We are very isolated, so we're 2,000 kilometers east of Africa and 4,000 kilometers south of, well, 3,200 kilometers south of Oman. So it really very isolated. And our first ultimate airport is on the north of Madagascar. So the alternative is Nosy Be, that's an hour and 45 minutes away. That means that any aircraft landing in Seychelles has to carry fuel to be able to make it to Nosy Be in case of bad weather. And that meant that for us, in our specification, we've tried to specify the aircraft to make it as light as possible. For instance, one of the choices that we made is, well, we put in 12 business class seats and 156 economy. So, hey, it's 168, it's not the most because you could probably put in 180, 188, if you really want to squeeze it.

But it's also a lot more than what we had, because we used to have 16 business and 120 economy. So we added 22 seats. But one decision that we took is to not have in-seat screens to save weight. So if you basically take out the seat screens and the routers, you can save several hundreds of kilos of weight on every flight. And for us, that is important to be able to maximize the range. Instead, what we put in is streaming boxes. So we have boxes with IFE, because we also knew that a lot of people bring their own devices, their iPads and telephones. So we have content available, they can, on a Wi-Fi on the aircraft and then they can watch that. But it saves us a huge amount of weight.

But we're still a full-service carrier. We have meals, we have beverages, alcoholic beverages under normal circumstances. So we're still a full-service carrier, but just looking at our geographic situation to ensure that it's basically a win-win. That we maximize on our possibilities and also on the customer service part. And that from the look and feel, we very much wanted it to immediately feel that you're going to a sunny destination. So we have very colorful bulkheads. We have the most beautiful livery in the world, I think everybody would agree to that. Also, the colors of the flag in our tail and then with the birds are also a part of the color scheme inside the cabin. We have RATS, more reddish colours for the business class, more blue and greenish for the economy class. But yeah.

Richard Maslen:

That sounds really good. The journey begins as soon as you board the aircraft, which is quite important for luxury destinations. You touched on technology now, obviously, the topic of CAPA Live this month, is about airlines in transition, and technology, and development. There're other trends you're seeing, and obviously, there's a move more to contact-less in through the journey because of COVID. But that was, perhaps, technology was already there developing that, but now it's become more important. Are there other areas where you're seeing technology make some significant changes to how you're thinking?

Remco Althuis:

Well, like I said, for in-flight entertainment for us, that is hugely important to still have the capability to offer entertainment. But at a very, let's say, economic, for the airline, so both on weight, and also the amount of content that you to offer. So our flights are the maximum flight duration is six hours, and therefore you don't need to have a huge catalog of entertainment. For us, the other pieces that are like you were said on the ground handling process, using technology, but also technology under the hood, so to speak. So, and basically what you use for planning and analyzing enterprise resource optimization. So we've looked really, a part of the transformation since 2018, has been a lot about technology. Because aviation being a global industry, even if you are very isolated and basically in a country that is quite small. But you need still, of course, need to be aligned to what is globally happening on technology. We're definitely not a front runner on blockchain or any of that.

But, for instance, to give you an idea, anybody coming to Seychelles right now will have to upload their documents and their PCR tests and all these things on the Health Travel Authorization platform. And that's something that the country very successfully introduced very, very quickly. So you have to go online, do all these documents. We also have to have connectivity with that system so that people can basically assess using a QR code, whether the data is valid, and actually has been viewed and reviewed by the Public Health Authority. So there's a lot of that that is happening, and I think the pandemic is only driving and increasing the speed to market of all these technologies.

Richard Maslen:

Another thing with technology, I'm here in a beautiful coastal place in the Northeast of England, shivering in April, because the weather here is so bad. And I look at the picture on your wall behind you, of the beautiful Seychelles. I've been there twice, quite fortunately, so I've seen it first-hand. There's a big phenomenon now of work from anywhere with offices keeping people away while the pandemic's been, and seeing the benefits of that. Is there no better place to work from, perhaps, a place on a beach close in the Seychelles?

Remco Althuis:

I don't think so. No. [inaudible 00:29:37] to invite anybody to come enjoy the safety, and also had a beautiful environment, the beaches. There's fast internet, I mean, lets hope so, that's definitely not an inhibitor at all. No. I would really invite anybody to come to Seychelles. Short-term, or maybe later in the year to enjoy the country and its hospitality. The cradle spirit, as we call it.

Richard Maslen:

Well, Remco, I might take you up on that, and hopefully, many others will. Thank you very much, where we're unfortunately run out of time here. It's been delightful talking to you this morning, and I look forward to us catching up in the future.

Remco Althuis:

Me too. Thank you very much, Richard. And looking forward to talking to you again. Thanks.

Christine Sroba:

CAPA Live March, took a deep dive look into restoring travel in an environmentally sustainable and responsible way. Airlines around the world have used the downtime caused by COVID-19 to re-evaluate their carbon footprint with many announcing a commitment to net zero carbon emissions by 2050.

Peter Harbison:

Finding a balance between survival of the world and survival of the aviation and travel industry. Finding that balance is not an easy equation. One, is an existential threat and the other one is a threat to our existence.

Eamonn Brennan:

One year before-hand in 2019, CO2 was growing at twice the rate in Europe of traffic. So if traffic is growing 3%, CO2 was growing 6%. This just shows you, that where we're in a position in Europe to give direct routings, because there's no traffic, you can really get CO2 down, and just really shows why you need to think of a single European sky.

Barbara van Koppen:

The best way to move forward is to implement those measures, actions that truly contribute to fewer CO2 emissions. So in that respect, fleet renewal, and the use of SOAP are simply key for our future strategy.

Christine Sroba:

If you missed any of these sessions, they'll be available for our CAPA members via the news alerts and available on our CAPA TV website. So keep watching, and don't forget to share your thoughts on social media with the hashtag #CAPALive.

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