South Pacific – Cooperation and collaboration is key in a challenging market

Transcript

Simon Elsegood:We're here to discuss the South Pacific, particularly how we can use collaboration and cooperation and better communication between airlines and their various partners— government, tourism, industry— and between themselves to really enhance aviation in the region. Before I start, I'd just like to share a little bit of background about South Pacific aviation. So the South Pacific covers about a quarter of the world's surface area, but all countries combined have a population of less than 50 million. So roughly the population of Algeria or Spain in area. And the population of Australia? a huge area. So the operating proposition for airlines and their importance for countries in the South Pacific is fundamentally really, really different to what we think about in much of the rest of the world. So I might move straight in and Gary, I might get you gentlemen to introduce yourselves and tell us a little about your home airline. And your your country.

Yann Genay:Okay. Hello everybody. It's okay. Yeah. Ian, executive manager to the CEO and CEO of Air Canada. Air Canada is Air Caledonia International. Been in the airline for more than thirty years, so I'm an old guy of the company. Air Canada is so the international carrier of New Caledonia. We have a fleet of two three thirties nine hundred. And 2 A320neos. We operate 10 destinations from Nouméa-Tontouta Airport covering from Pacific like Vanuatu, Fiji, Wallis Islands up to Tahiti on the east part of Pacific. Then of course Australia and New Zealand, historical routes Sydney-Brisbane and Auckland-New Zealand. And on the long haul, we have Singapore since 2022, and we just started a very amazing operation, which is Numia Bangkok-Paris, Roissy-Charles de Gaulle. I will tell you a bit more later. Thank you.

Gary Seddon:Gary Seddon, Chief Executive Officer, Air Niugini. I just want to say thank you to CAPA and the organizing committee, and also to to the beautiful city of Cairns for the opportunity to present Air Niugini here this morning. Um, Air Niugini has had an association with Cairns for some 50 years, um, so very, very proud to be here. Um, we are a 52-year-old organization. We're a little bit older than the country. Papua New Guinea is celebrating 50 years of independence this year. We are predominantly a domestic operation serving cities outside of Port Moresby. We also fly to, to Asia— Singapore, Hong Kong, Manila— and then down to Australia as well. We fly to Cairns, obviously Brisbane and Sydney, and then other Pacific Islands including Fiji, the Solomons, and Philippe?

Philippe Busson:Hi, good day everyone. I'm Philippe Busson. I'm the Chief Strategy and Operating Officer of a small airline named Air Caledonie. It's a domestic airline who recently last year became a regional international airline. So we're based in New Caledonia operating mainly domestic from the main city, Nouméa, flying over small islands. And so last year we opened routes to to Port Vila in Vanuatu. Basically, I'm also part of an executive committee from an association, Association of South Pacific Airlines, and focusing mainly on collaboration and cooperation of all the South Pacific airlines within commercial operation, any subject. So thank you for having us today.

Simon Elsegood:No problem. So I just want to touch on the importance of aviation for your sort of your home countries. Gary, I might start with you. Air Niugini is one of the big players in the South Pacific, largest island and one of the most significant populations. Can you tell me sort of what it is that you are striving to do as a national carrier and a nationally owned carrier?

Gary Seddon:Sure, Simon. Well, look, um, Air Niugini is a state-owned airline, has been since its inception. That means that we have both a community service obligation as well as a commercial objective to achieve in our day-to-day operations. We fly to parts of the, the country which are, are commercially unviable to deliver, but have indirect economic and social benefits to that community and that part of the country. So we maintain and continue. I think it's probably fair to say for most operations around the South Pacific, whether private or nationally owned, that that responsibility of social and economic growth rests very much on the shoulders of, of the national carrier or, or carriers. In, in PNG, aviation has been critical for country development for, well, nearly 100 years, whether it's for exploration, whether it's for straightforward and simple air transport services. The, the same that persisted in the 1930s when The gold explorations of Edie Creek and Errol Flynn and all of that still very much persists today. You can't travel outside of Port Moresby by car to get to the next— or to get to the next bigger city. You can only fly. And so a competent, reliable, and accessible air transport service is critical to not only economic GDP growth, but also social development and sustainability.

Yann Genay:Right.

Simon Elsegood:So, Yann and Philippe, you guys are both based in New Caledonia, and you're sort of a one-two punch of regional domestic and international. How do you collaborate together? You're both sort of state-owned airlines, but slightly different ownership models? I believe. Do you want to talk about how you work together?

Philippe Busson:Yeah, yeah, sure, sure. So we have 2 different companies and we have no, no specific connection today, but our— both of us, our main shareholder is the government of New Caledonia, as many of the airlines in the South Pacific, and we have, have different development model and business model. I will let Jan more specifically talk about Air Calin, but on— I refer to what said Gary. It's roughly the same on domestic market in New Caledonia. We are specifically a good actor for connecting communities within the island. And as Gary said, it's like social services, basically. How do we collaborate? We have lived in different worlds. But also within the same world. I mean, we have the same type of regulation. We are under the European regulation. We have operating different aircraft. We are operating in different airports. So we have planned with the incentive of the government to work more closely together. So basically within a few months, the domestic airline will move to the international airport to be close by to the international one. So domestic, international at same place. We are working on developing some strategies, some strategy in terms of synergies, mutualization, collaboration. That will take a bit of time, but definitely we have to work more closely together within New Caledonia to help the development of the country. We have been hit as many other airlines during the COVID period, not going back to this period, but recent, more recently, mid of '24, we have also lived a difficult time with civil unrest, which is impacting both of our businesses. And we had to be creative, innovative, and develop some more agility. And definitely the agility goes by collaboration and cooperation. So we are focusing on this right now, and with the help of the government, who is the owner. And I hope that within months and maybe years, we will be more interactive.

Simon Elsegood:Thank you, Jean-Marc. You're talking about agility in the face of sort of crisis. We all lived through COVID, but all 3 of you guys have had some difficulties in the last year, really.

Gary Seddon:Yeah.

Simon Elsegood:Jan, you made a pretty big pivot last year around your network plans in the face of a bit of civil unrest. Do you wanna talk about what you did and what led and how that decision sort of played out?

Yann Genay:I'll just go back firstly, if you don't mind, to your first question. Air transport is vital for the Pacific. It's definitely vital for all of us, whatever New Caledonia, Tahiti, Solomon, PNG. We, I mean, we cannot rely on boating for everything. And so Air Calin was created 42 years ago. To connect New Caledonia to the region first in order to bring people visiting New Caledonia as a tourist, and of course offering the local population the ability to travel overseas. I just recalled to everybody, New Caledonia is a small place, 260,000 people, so it's, uh, it's not a huge destination that connecting to the world like a big hub in some of the places like in Australia. Regarding the cooperation, and Philippe told you, the main thing that will happen, and this is really a symbol, is that they are moving to the international airport. I don't know if you visited Nouméa, some of you, but you know that the city is in the south end of New Caledonia and the airport is about 40 km out of the city. Domestic airport is, is in the city. By bringing back, bringing Air Caledonie domestic And regional operations fully in Tontouta, we're going to connect very easily for passengers. That will be the number one synergy. Now moving to the second part, you're right. So I think we'll go back maybe in the discussion with all of you regarding the COVID how COVID showed to all of us how important to have a reliable airline. In New Caledonia, there was nobody for 2 years.

Philippe Busson:Yeah.

Yann Genay:Only Air Canada domestically, Air Canada was linking to the world, bringing the medicines, the doctors, the support, keeping the people traveling. I'm sure you had the same, Gary, in PNG. Then we had— this is amazing about aviation, but you know, as somebody said, it's always cycles, ups, downs, ups, downs. After recovering from the COVID in '23, unfortunately we had a a bit of a civilian unrest in 2024, which really shuffled the cards. And this is where I want to showcase 2 words I think that are the definition of the small Pacific carriers: resilience and agility. Because the plan— I mean, in 2023 we are going back to business normally and Tourism growing again, difficulties with Japan. Everybody noticed that after COVID, Japan market was not coming back. And in our development strategy up to 2027 and onward, we were supposed to open Paris route with a new aircraft, which was a 350 from Airbus design. So this was already planned, acted before the crisis. With this crisis, in one day we lost all the tourists. 50% of the business of Air Calin. The same, I think, for you, Philippe. And we had to change. So we said, what would we do? If we keep like that, we're going to die. The only remaining business is the Paris route because there is a strong link between France and New Caledonia with business. Public service, students, or whatever. So what we had to decide is that in order to get cash in and keep the airline running, what we were supposed to do by 2027, we are going to make it in 5 months by December. And this is why in December 2024, we launched the Nouméa-Bangkok-Paris route in order to capsize more of the business from Nouméa-Paris, because before it was only Singapore. So this is really the big change of strategy which happened since this event.

Simon Elsegood:Thanks. Now you mentioned new aircraft. I believe there's quite a bit of fleet activity happening. Air Kalingin has some A350s on order and Air Niugini has some A220s and some 787s, I believe. So we've— I've spoken a bit this week about delays and difficulties related to that. So how are your fleet updates progressing? Gary, maybe I'll start with you.

Gary Seddon:Yeah, Simon, thanks. So we have our first A220 arriving next month, September. Very exciting. It will coincide with the arrival— with the independence celebrations. It's the first time that we've welcomed a new jet onto the fleet, so the company is understandably both excited and anxious for its arrival. It will— we've got 11 in total arriving over the course of the next 3 years. It will replace the, the, uh, Fokker 70 and Fokker 100 aircraft that have largely been the backbone of our domestic and, and, and regional network. Uh, the A220 is a remarkably versatile aircraft. Um, we join the region here. Qantas, uh, are operating them now. Uh, Korean are also operating them. Um, so and, and there are about 1,000 of the aircraft operating around the world. So we are, uh, joining a, a, a credible, uh, fraternity of, of aircraft operating. We, we believe that it'll be able to expand our, our, uh, our, our, our network, uh, not only in terms of, uh, of new destinations, but also in terms of frequency as well. To be able to operate an aircraft, uh, that, uh, will service our domestic network as well as our international provides a level of versatility that previously we haven't enjoyed. But welcoming new fleet also presents challenges, and so we must ensure that airport infrastructure is appropriate, that we're not, as a fleet, confined by the infrastructure, but largely we use it as a means to be exploited and developed, notwithstanding the importance of aviation to, to the Pacific Islands. We're replacing 65% of our fleet over the course of the next 4 years, so it's, it's an almighty task, but nevertheless a necessary one. We need to be able to take advantage of efficiencies and productivity that new fleet provides. We're also very keen to energize our sustainable aviation strategies and in keeping with a robust climate advocacy and climate strategy program endorsed by the government.

Simon Elsegood:Our—

Gary Seddon:Go on. I'm not sure what that was. We're obviously keen to ensure that, uh, that our aircraft bed down, um, uh, as appropriately as possible. But just to your, to your point with regards to, um, uh, you know, delays from OEMs and the like, well, you know, our, um, our airline is certainly very sensitive, uh, to, um, to, to deliveries, and, uh, we've been thankful that the OEMs themselves, both Airbus and Boeing, have been incredibly generous with their with their time and resources to ensure that an organization like ours is able to, to take full advantage of the investments that's being made in fleet.

Simon Elsegood:And Air Kélin has a couple of A350s coming.

Yann Genay:Yes, just to summarize, because we, we've been lucky because just before COVID we entered the A330neo and we ordered the A320neo. So it means we were already on a renewed fleet and we are very happy to say that today we are operating 100% modern, fuel efficient, and very good aircraft. And the A350 was only the next step because of the Paris strategy. So today we are doing Paris with the A330. So you are right. We have A350s on orders with our friends of Airbus over there. And the first one, Maxime is going to be promising that is arriving on December 26th. So on time, definitely, my friend. And the second one in 2028. And exactly what Gary said, the fleet renewal, even if you do it regularly, it's always a challenge because the A330 and the A320neos are fantastic aircraft. But when you move to the A350, you move to an upper generation. It's another next step. So it's going to be a bit of a challenge for the airline also to integrate this kind of specific aircraft, which is really the latest generation.

Simon Elsegood:Thank you.

Yann Genay:But this is a plan.

Simon Elsegood:So speaking on that, I've noticed that, Gary, you've been sending a lot of staff all over the world for training— Mirabel, France, Australia. On the theme of collaboration, is there— I know it's a small market, it's a small population— is there more opportunities to do training in the South Pacific by airlines Cooperating, getting together, co-locating bases somewhere, you know, an independent kind of neutral operation? Anyone?

Gary Seddon:Uh, well, look, absolutely. Yeah, I, I think it would be crazy to say no, there isn't. Um, we, I, I think on the outset you, you, you, you mentioned this with the size and scale of the Pacific in terms, but, but then the population. Um, we have to, uh, collaborate in, in, um, in areas of, of training, but also in the areas of MRO and spares and, and the likes. Um, you know, Papua New Guinea, uh, is 440,000 square kilometers, 10, 11 million people, 850 different languages. Um, but we are potentially 5 days away from a spare supply. So if we have an AOG, which we are incredibly sensitive to, Our aircraft is on the ground not for hours but for days. When you invest a few hundred million dollars on fleet, you cannot afford to have aircraft on the ground for days. So training, yes, we've been sending our pilots to Mirabel. In fact, actually, Captain Beverly Paake was our first Papua New Guinean pilot.

Simon Elsegood:Wow.

Gary Seddon:She was also— she also received her command as well with distinction. And so incredibly proud moment for us earlier this year. We've been sending cabin crew to Zurich. We've been sending engineers to Singapore and they've been doing their OJT, their on-the-job training with QantasLink in Canberra. And we are incredibly proud of that.

Yann Genay:Thank you.

Gary Seddon:We're incredibly thankful and certainly beneficiaries of collaborations with the likes of Qantas, with the likes of certainly of Airbus as well. We need to be innovative in these areas. I think in the same way, and I was saying this earlier today, in the same way that Sir Tim Clark, you know, reached out to John Lay in Airbus and said we need to innovate a way in which to secure all these A380s, Airlines like Air Niugini, Air Kaledonia need to be able to rely on OEMs and partners to innovate more because the cost of our business weighed against the criticality of its, of its success, um, will rely heavily on innovation.

Simon Elsegood:Right. Um, Philippe, I might roll back to something you mentioned, which is regulation. And regulatory relations. And as you're an ASPA representative, so you guys in the South Pacific have to deal with multiple different regulatory regimes. You've got the EASA, FAA, Australia, and New Zealand. How do you harmonize between airlines if you want to cooperate?

Philippe Busson:That's a very, very good question. That's a question that goes back also to collaboration. I would like to highlight that we all need to collaborate and to be more more cooperative within South Pacific because we are facing the same challenges. Some airlines are renewing their fleets, so they have specific issues, but we need all the collaboration. How do we do that? First of all, and Gary said that he's working with QantasLink, etc., we have to focus on harmonization of the fleet also. If we operate same aircraft type, It's much more easy to collaborate. But we have also to look on standardization. And that goes back to the regulation. So we, for example, in terms of collaboration, of course, we work with Air Calin, as I said, and there is the same shareholder behind. But we also work with Air Tahiti, for example, in French Polynesia, who is operating ATRs and is under EASA regulation. We work also with Air Vanuatu, who is operating ATRs, et cetera. Why? Because the regulation is very similar. We can't impose to have the EASA regulation or the FAA or the CASA, but there is some ways to get more standardized regulation to be able to share staff, to share parts, to also to share fleets sometimes, because we have most of the airlines in the Pacific, if they have small fleet, they have seasonalization also in their traffic. So it's things that we are working.

Yann Genay:It's—

Philippe Busson:some people will say, oh, it's an illusion, collaboration in the South Pacific. I don't think it's an illusion. I think it's a requirement. But also we have to have a strategy and implementation. What we have done in ASPA, we are focusing on one model aircraft, which is the ATRs, because there is plenty of ATRs in the South Pacific. And also we have proceeded via what we call the snowball effect, meaning a strong bond between Air Caledonia and Air Tahiti.

Simon Elsegood:Yeah.

Philippe Busson:To work together first. And as soon as the system is working properly, then other airlines can join. So developing, as we said, spare parts in common, MRO center. We are talking about, is there any place in the South Pacific that we can implement a center of maintenance? We are talking about a 5, 6, 10-year plan. But also training with the flight simulator on ATRs with the help of ATRs with the help of CAE or others. It's something that has to be built within the Pacific and taking into account common or commonality in terms of regulation to be able to have much more supports locally. But really the implementation is snowball effect, 2, 3 airlines at the beginning, the one that is easy to do, so same regulation, and then we can grow the crew, the, the team to have much more collaboration within the Pacific.

Simon Elsegood:Thank you. One of the difficulties that's also been mentioned in the conference has been cybersecurity, IT, and that sort of thing. Is there room for airlines to collaborate there?

Yann Genay:Definitely.

Philippe Busson:Definitely.

Yann Genay:I think there are 2 things. For me, and I think it's not only me because lots of people are sharing that, airline business is of course competition for passengers and the market and things like that. But aside security, safety, which is shared by everybody, there are 2 things that airlines must collaborate on, is cybersecurity and sustainability. Because we share the same, for one, threat, which is damaging the small or the biggest. And sustainability, I don't know if we are going back to this subject later.

Simon Elsegood:Mm-hmm.

Yann Genay:But a lady from the panel yesterday very clearly mentioned, don't forget that South Pacific islands will be the first victims of the problems of the climate. Of course, we happen here in Australia also.

Philippe Busson:When you look at some little islands, even in New Caledonia, we are already witnessing it.

Yann Genay:We can see the damage. And this is where the airline and the small airlines have to work together. And this is also a call to the big guys, because don't forget that for you, most of you guys, Australia, New Zealand, you are the big guys for us. And we are really sending a call that we have to work with these places for sustainability. But for cybersecurity, definitely, we have to share, we have to be discussing.

Simon Elsegood:I'll comment that Australia is now taking climate refugees from the South Pacific. There's now a specific visa from Vanuatu That allows a certain number of people to settle in Australia because of the rising sea levels.

Gary Seddon:Yeah.

Simon Elsegood:So with that sort of in mind, you guys are on the front line. Can you draft off the big airlines? You know, can you follow along in their wake, or is this something that you guys need to do on your own, or is there a sort of middle ground there around sustainability? Fleet's obviously really important, but we've heard about SAF, we've We've heard about book and trade, all those sorts of things. So where's the solution lie there?

Yann Genay:If you don't mind, I just— I think you have a good point. The first thing is to have a modern fleet and to have, of course, people helping you finance. I mean, if the company is strong enough, you— this is some of the South Pacific airlines, they are quite well positioned. If you look at Fiji Airways, Air Tahiti Nui, And of course, PNG and New Guinea with a new fleet coming in. But the second one, you're touching about SAF, because we know that SAF is the only solution to decarbonize. But we don't have to dream. It would be impossible for the South Pacific airlines and countries to produce, sell SAF. And I think there is here a kind of political, ethical, global thing is that South Pacific carriers, maybe the same in the Indian Ocean or Caribbean, should be— I won't say prioritized, but at least taken into account that when Australia— I talk about Australia because Australia is going to move to SAF production— you have to think about the little guys around, that they can access to it affordably. Don't forget that we are small airlines, very fragile. I mean, you know that the economics of an airline worldwide is a very small benefit. So for us, as Gary mentioned, flight disruption in a Pacific line like us, it can be a disaster for a few days. And we're talking about small fleets. If I've got one aircraft AOG, I've got— I've lost 50% during 2 days. So we are financially small guys. But sustainability, there is no choice. We have to do something. And I think that's the key. But we cannot do it alone. We need the support from anybody— airlines, governments, and regulators. And this is really a call of— and this is where ASPA also is working on. This is where we have a thing. So it's really a big issue.

Philippe Busson:And if I just can add something on the ASPA, the focus also on ASPA, of course, the government, as said Yann, is all the stakeholders, all the actors within the aviation and One is really important, and we are working on ASPAT to involve, is the tourism bureau development offices.

Gary Seddon:Yeah.

Philippe Busson:They are the one that benefits from transport in terms of tourism, and it's really something that they have to focus on the sustainability. Someone yesterday, I think in the panel, were talking about that. It's really, really something important, and it's everyone all together. If we work all together on that, we will be able to reduce the impact within the South Pacific area.

Simon Elsegood:Okay.

Gary Seddon:I think we have to be practical and pragmatic as well. Um, you know, I operate a— well, together with 2,000 people, operate an airline in, in, in a country, in an environment where just normal fuel is, uh, is challenging to secure. Um, and, and, and let's not even talk about the cost of it. Let's just, let's just talk about getting the 250,000 litres I need of it of it each day, and then across the region as well. Um, there are parts of my business at the moment I'm having to sacrifice payload in order to take, in order to take fuel, uh, to get back.

Philippe Busson:Ukraine.

Gary Seddon:Um, and then you add the weather, so we have a bit of weather in the Pacific. Um, so, so, you know, what, what slim margins, uh, we were talking about earlier on in the day, uh, are eroded heavily over the challenges that you have in your day-to-day operation. So when we talk about SAF, yes, we need to talk about SAF because of the implications and consequences, but we also need to be very pragmatic. Now, to your first point, Simon, about could you, could you take advantage of the, of the wake of the larger carriers? Well, well, yes, but, but a lot of those discussions and, and decisions are mandatory as well. So if I want to borrow money from an export credit agency, I must ensure that I have a credible ESG strategy that is not only funded and resourced but deliverable, you know, across the business, which for an organization like mine can be challenging, but nevertheless necessary. I think that, you know, We then, if you undercut that with the challenges of cybersecurity, and, you know, on the back of collaboration, if you want successful collaboration and if you want collaboration to work, you must ensure that you have appropriate cybersecurity liability insurance and so on, which requires then further investment and resource. We need to sit down and have a a discussion about collaboration, but it needs to take into consi— it needs to be done in the light of the South Pacific.

Simon Elsegood:Yeah, exactly.

Gary Seddon:Because again, criticality of aviation balanced against what is, what is appropriate and what is achievable, um, it really needs to be core to the discussion.

Yann Genay:Yeah.

Simon Elsegood:Well, thank you very much, gentlemen. We've run out of time. I could probably go on and hear from these guys for another 2 hours. But I would like you— could you put your hands together, please, for the panel?

Philippe Busson:Thank you very much.

Yann Genay:Thank you.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.