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Recorded at CAPA Live October from Puerto Rico

South Pacific Aviation & Tourism in Focus: Leadership urgently needed amid unfolding crisis

The COVID-19 pandemic has placed enormous economic and health strains on South Pacific nations. Connectivity has collapsed and, with it, the lifeblood of many island economies, inbound tourism. Now 18 months into the crisis, and with no immediate end in sight, many challenges have become acute:

  • Regulation – many of the national civil aviation authorities are running low on funding, raising the spectre of who and how the region’s industry will be regulated into the future;

  • Infrastructure – low utilisation of airport and tourism infrastructure raises questions about the maintenance of equipment and the availability of resources to maintain a visitor economy when borders re-open;

  • Airline health – the region’s airlines are struggling with very low passenger demand. Cargo operations are a lifeline, but question-marks remain about the health of key inbound source markets and propensity for travel even when it’s safe to do so.

Strong leadership and decisive action involving targeted financial support is urgently required to ensure the region successfully navigates the remainder of this crisis.

Speakers:

  • CAPA - Centre for Aviation, Chairman Emeritus, Peter Harbison
  • Air Niugini, CEO, Bruce Alabaster
  • Association of South Pacific Airlines (ASPA), Director General, George Faktaufon
  • Solomon Airlines, Chief Executive Officer, Brett Gebers

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Transcript

Speaker 1:

And then Peter, you're welcome to start when you're ready.

Peter:

Okay, 15:07. Very warm welcome to CAPA Live for October, to our South Pacific friends, headed by George Faktaufon, who is the Director General of ASPA-Association of South Pacific Airlines, and with us also is Bruce Alabaster, who is Chief Executive of Air Niugini, and Brett Gebers, who is the Chief Executive Officer of Solomon Airlines. Gentlemen, welcome to CAPA Live to this discussion about getting tourism in focus from an aviation perspective and the need for leadership amid this, what we called an unfolding crisis. Well, hopefully, but crisis is unfolding. Anyway, good afternoon, gentlemen.

George:

Good afternoon.

Peter:

George let's kick off with you, from your lofty pinnacle in ASPA. There's a whole array of different issues here, which are all complex. They're all interwoven, many of them conflicting. Just give us a little roadmap as you see it out of this crisis for Fiji, particularly because that's where you are, but more generally for the region.

George:

Well, thanks Peter. I think we all know that air transport has been a challenge. Running airline in this part of the world for various reasons. First, we are so vastly scattered all over the Pacific and all flying over water. We have a very limited population base, so outbound traffic is very limited. So we bring people in and we spend the holidays and we take them out. So that has been the nature of air transport in the islands, and those who have the infrastructure for tourism, they have the opportunity to grow tourism, but not all the Pacific islands have this type of infrastructure ready for tourism. So that's a challenge we face. I think the pandemic has really caused a lot of [inaudible 00:02:10], not only for connectivity within the islands, but also for the economies of the islands and many of the small island states depend on, a transport not only for tourism, but for freight.

George:

As we know, we don't have dedicated freights in most parts of the Pacific. So we bring a lot of our essential goods at the belly of schedule aeroplanes . So when aeroplanes stop coming, we have all these issues confronting the islands. I think the pandemic has also given us an opportunity to do sit and relook at the way we provide air services within the islands and see if there's some opportunities for us to try and provide the services a more economical way than we are currently doing.

George:

But, I think that the islands have learned to survive. I think they will survive. How long it takes for tourism to come is the biggest question now. And I think the challenge for many of the Pacific Airlines is, we know the airlines themselves are running out of money. They need to have aeroplanes ready for resumption of services. Also, we have tourism infrastructure that need to be brought up to speed. So these are all the challenges that face us. I think we can see a state of recovery for incoming tourism, and I think that'll help not only the airlines, for the tourism plans to put their act together. So I think the major problem that we face is the problem of finance. I think that's a big issue for the airlines and the states. So I think it's very important for us to look at how we can help the states.

George:

As you know, majority of airlines state-owned. The states themselves will not have the money to sustain the airlines when borders subsume. So these are some of the things that 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.

Peter:

Yeah. And you used the [inaudible 00:04:38] there as well, which has obviously two big, particular connections here. One, with the economic and financial sustainability, the other one with obviously [inaudible 00:04:47] planet and they really don't go together. Do they?

George:

No, they don't, unfortunately.

Peter:

[inaudible 00:04:55] that's going to be costly. Well, I've got a few points from that George, thank you for that. That's a sort of nice overview. Just one last question too, obviously lot of this problem evolves from Covid. Where does Fiji stand at the moment? you've been through hell and back, I think.

George:

Fiji has been gearing for reopening by November. And they've been working towards this at least two months. They've allowed the vaccination throughout the country. They've sped up the vaccination rate. So at the moment we have about 76% of the eligible people in the country have been vaccinated, fully vaccinated, and the idea is to work towards 80% by at least end of October.

George:

So Fiji is basically ready for tourism. They started local tourism when borders opened two weeks ago. So a lot of the resorts have been open for the local people. So I think Fiji, is very much ready to receive tourists when borders are opening at the end of October, beginning of November. I think the question for us is, who is going to open with us. We are encouraged that New South Wales looks like opening their borders by at least mid-November, we are hoping the US will also open for us and then Singapore. New Zealand, we're not quite sure right now, but Fiji is ready. I'm not so sure about the other Pacific Islands. We know that Samoa has targeted 1st of January. And so is Kiribati, I'm not sure what's happening in Vanuatu, but Fiji is definitely ready.

Peter:

Right. Well, thank you for that. Just continue on the tail of that Bruce, Air Niugini, has really been suffering from COVID very dramatically just recently. How does that start to look as we go ahead one month, two month, three months?

Bruce:

Sure. So April, May June here, there was quite a significant surge after very little Covid in the run up to that. And again, PNG is like much of the developing world, quite a young population and PNG is a population of somewhere between 9 and 10 million. So from a population point of view, it's the giant in the Pacific, but around half populations are under 21 and probably 95 odd percent of the populations are under 50. So from a demographics it's relatively lucky in terms of Covid, doesn't exclusively strike older people, but it is easier if you've got a young population. There is very much a significant surge of Delta at the moment. Not much helped by independence weekend on the 16th of September, which saw crowds of 10 and 20,000 elbow to elbow without masks on et cetera. And not much help by the fact that the vaccination rates around 2% at the moment.

Bruce:

Yeah, exactly. So, there's evidence around the country of a surge, but equally, if you look across to India and Indonesia, the Delta surge there lasted around 10 weeks, that's quite a big peak. Four or five weeks into it and it drops off again for whatever reason. So we're sort of suspecting the same here. We're probably two weeks into it. So it's going to be a pretty nasty 8, 9 weeks ahead, but then hopefully coming out of it. Interestingly at the same stage, I'd argue that PNG is perhaps leading the world in many ways, in terms of it's inbound and outbound protocols travel. So if you travel internationally, we'll PCR test you at the airport, that's delivered in 45 minutes, you then go through to check in the international terminals quarantine zone. So there's no public in there, et cetera. So consequently, we actually happened out of PNG had a single passenger test positive in quarantine in Australia since July.

Bruce:

And that's principally thanks to Australian DFAT for helping with that. And my thanks to them. Likewise, coming in to the country, you do a PCR test within three days, you then arrive at the airport, your rapid test to go on arrival. If you are non-citizen, you have to be fully vaccinated to travel to PNG. And that's been the case for about two months, but assuming you pass the rapid test at the airport, there is no warranty. You simply go on your way. And that's a consequence of two issues. Tourism's never been big in PNG, but the resource industry is, and the Prime Minister's been very specific about opening the economy up, dealing with the health issues and the economy together, not sort of exclusively and where it's a reality that Delta is endemic in PNG, I think it's a harsh fact that one or two extra cases coming in from overseas, isn't going to make any difference.

Bruce:

So the economic costs of quarantine to the economy quite simply aren't offset against any difference it's going to make to this spread of Delta in PNG. The normal things, everybody wears masks on aircraft, catering suspended. And I saw in this morning's Australian that catering on an aircraft at the moment increases the chance of Covid spread by about 59%, which is an interesting statistic, [inaudible 00:10:55] suspended, hence enterprise are all over the place. So principally, very similar to most airlines, but probably, the key is being that PCR testing check and no quarantine on arrival anymore.

Peter:

Thanks, Bruce. It's very interesting leadership role is to some extent. As you said, domestically are you still operating full network?

Bruce:

Yeah. So interestingly, we've pretty much operated the whole network other than, there was a period last year where aviation pretty much was suspended for two weeks. We're running about 80% of the domestic network, probably 65%-70% of pre Covid loads. We've got 1737 that we have moved off the regional routes onto domestic, simply because it can't carry freight. And then our 2767, so we still do 6 Brisbanes a week, 1 Sydney, 2 Manilas, 4 Singapores and 2 Hong Kongs. And that's simply being underwritten by the fact that we affect freight in the valley.

Peter:

Yeah. And what is that freight?

Bruce:

It's actually interesting. We're moving quite a surprising amount out of Brisbane, up into Hong Kong and Asia. And that's just evidence of the lack of whole space direct that historically would've been there. And then interestingly, secondly, we've just recommenced Cairns flights this morning. So we have not allowed any passengers into Cairns, but we picked up eight and a half tonne of live seafood and live fish to go up to Asia. So that connects onto this afternoons northbound service.

Peter:

Right. Just one last thing on this very low level of vaccinations. There are two aspects to that out there. One is actually getting the vaccines. The second one is delivering them and obviously that's very difficult in PNG where you've got such topography issues and dispersal of citizens. What's the supply like at the moment? Are you looking a lot rosier?

Bruce:

Yeah. So there's no shortage of supply. It seems to be three issues. One is Facebook's pretty big up here with anti-vax messages, conspiracy theories. The second one is just the pure logistics of getting it out to locations and even simple things like a fridge flatline, Pfizer storage, but the key issue just seems to be apathy. For population that has issues with Malaria, Japanese encephalitis, Cholera, you name it. And most of the population lives in poverty. They just don't see for themselves, that Covid is an important issue yet and therefore the vaccination is actually important to them. That's probably actually the apathy towards getting vaccinated more than anything.

Peter:

That's interesting and very sad in many ways. Thanks for that Bruce. Brett, over in the Solomon's Paradise on earth, what's it like today?

Brett:

The vaccination rate is low, somewhere between 7% and 10%. The Prime Minister is due to make an announcement on Friday about the path out of this Covid lockdown situation that we have. And last I saw that we're talking about 90% vaccination rates. So it could be a long to time before we do get out of that situation through vaccination. And like Bruce said, Facebook certainly carried a lot of messages around about the problems of being vaccinated, including the fact that if you are vaccinated, you can't have children anymore. And the church is also quite big on anti-vax messages as well.

Brett:

So we've lost a few staff. It is compulsory for all state-owned enterprise staff and their families to be vaccinated. And we have had a couple of people who've just refused and have resigned. All of our Australian staff are vaccinated. 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, et cetera, but nothing's 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. So I think we're going to see a reluctance to open the doors too quickly. I sincerely hope that I'm wrong.

Peter:

Yeah, I sincerely hope you are too. George mentioned, that when all the dust settles, is the financial situation of the airlines... I mean, how do you see the outlook from that point of view?

Brett:

Well, I put on two hats. One hat is as per chairman along with George and the other one is from my own airline perspective. And on the 27th of March, 2020, we were [inaudible 00:16:15] to cease international flying and we did immediately and then sat back and looked at it and said, well, this is unsustainable. We've got to find a solution. And 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, including mail, et cetera. And that's been a lifeline as it has kept the Solomon Islands connected with the rest of the world and towards... I'd say probably about September last year, the government allowed us to carry a limited number of passengers into the Solomon Islands. And it's all based on the amount of quarantine facilities available. This year when Delta struck Australia, we weren't allowed to carry anybody into the Solomon Islands for a period of time. From July through to the end of August [inaudible 00:17:15].

Brett:

So these issues have had a significant impact on normal revenue. So what we've done is what other people have done including Bruce's team is to seek charters around the world and repatriation flats, and we've moved. They are all chickens and people and all sorts of things all over the world, construction engineers, vaccines, and that's kept us going. We've had limited grants from the government assisted by Australia's DFAT and MFAT from New Zealand. They've both been terrific, certainly have assisted us with the really important stuff like funding, training, et cetera. But the big problem of course, is the quarantine issues and trying to get people from the Solomon Islands to Australia for training has been hugely difficult and very, very expensive. So I would say that from the airline's perspective, we are okay. We have a way of keeping things going. The government is obviously concerned and remains available to ensure that we do remain in business around the South Pacific.

Brett:

I think the issues that we've just dealt with here are pretty much the same for everybody. Everybody had to stop scheduled flying in and without scheduled flying the revenue stopped, but the expenses didn't, you can't just simply hand an aeroplane back overnight and expect everybody to walk away and be happy. So leases had to continue, building leases, et cetera, had to continue that sort of thing. So that's where we are at the moment, I think. We will keep going, but for how much longer, I don't know. And the other factor that everybody seems to have ignored in the tourism sector is just how much of the tourism infrastructure has in fact survived this, not being used for the past 18 months. So there could be a significant amount of work and money required to get the tourism infrastructure up and running again.

Peter:

Thanks for that. I don't think any of us has got a particularly rosy view of the world at the moment, but certainly to kind of phrase necessity has been the mother of invention and you've certainly been creative in trying to keep the dollars flying through. George, let's go back to this issue of finances. It's not just this region, it's every airline in the world almost without exception, who's up to their eyeballs in debt or above that have a bumpy road ahead in terms of revenue anticipation. Again, partly because of the opening and closing of doors, but also because of customer expectations and concerns and willingness to be spending money and travelling again. It does seem to be a global cause that airlines are going to need something different. They're going to need, first of all, some oxygens and funding to keep through, however long it's going to be the next three or four or five or six months.

Peter:

But in this process, George, do you collectively as ASPA and from your point too Brett, do you see a collective voice coming from the Association Of South Pacific Airlines, to get a package or funding packages to support the airlines? And in that process, do you see the likelihood of some industry restructuring to something which is in the longer run more sustainable?

George:

I think the latter would be the most appropriate way to deal with this and you will find that the donors would be very reluctant to put money on individual airlines I think. That's my own personal view. I think they'd rather have a skip together and re-look at the way we operate, there are some airlines, Bruce's airlines is okay, Fiji Airways would survive, Brett would probably survive. He's got only one aircraft. So it's easier to manage. The [inaudible 00:21:47] would survive, but you can't say the same with the rest of us. If you look at [inaudible 00:21:55] who had two Embraer jets that they've now having to give away. [inaudible 00:22:03] had ordered additional two coming along the line. Now that's gone. So there's definitely a need for the rest of us to get together. Unfortunately, trying to get the governments and the airlines to agree on anything has been a major challenge for us.

George:

So what we've done, we've taken between Bruce, Brett, myself, and two other airlines. We've been looking at ways and means of closer collaboration amongst ourselves, because I think this is going to be the way for many of the other airlines in the region to survive. I don't think the status quo is a solution for some of them. And I think we will attract a lot more attention from donors, if we can demonstrate our willingness to sit down and relook at the way we operate. And I think the governments will welcome that too, but we agree that we need to get them involved throughout the process so that they take some ownership.

George:

So we've been talking to DFAT and MFAT and through [inaudible 00:23:31] so we are hopeful that there will be a project coming online for us to sit down, first as airlines... First of all, look at the way we are operating now and see if there are better options to deliver air connectivity that meets the needs of the states so that we can ensure that when flights resume, that there's no disruption with connectivity, particularly with small island states. I think these are the very vulnerable ones.

George:

So to answer your question, I think we need to do something. We can't hold onto the status quo. I don't think the status quo would work. In terms of finance, I think there is a better opportunity for donors to finance this type of collaborative ventures rather than putting money to individual airlines. So that's my personal view. And I think the pandemic with all it's ills had given us the catalyst to review the way we operate here. We've been trying to do this for years, as you know, Peter for the last 30 years, it hadn't worked. I think it has to work this time. This is a good opportunity to make it work. So personally, I have a lot of hope mainly because I know that many of the states though will not have the financial resources to continue to support airlines because they have other pressing needs to look at.

George:

And I think Brett, made a very valid point that if you look at the Pacific island region, more than half the countries, the PICs are Covid free. So the last thing they want to do is introduce COVID when borders reopen. So there will be a reluctance I think, mainly because they don't have the facilities. And if you are a potential traveller, when you need to go to many of this islands, you'd like to know what they have there in terms of medical facilities. So that's another challenge for particularly smaller island states. So these are some of the considerations that we need to be thinking about as we approach the resumption of International Air Service to these regions.

Peter:

Yeah, very interesting. Nicely put George and obviously it's integral to restarting tourists because that is the largest part of most of the nation's economies aside from certain exports, but tourism is critical and it's not going to happen without airlines. And to pick up on what you're saying, they say never waste a good crisis. There's never been a crisis like this before. And if we can't fix things this time, there's no chance ever.

George:

There's no chance ever, that's [inaudible 00:26:31]

Peter:

I think it's got to come from the islands themselves, rather than have some external body come in and say, these are the conditions under which we'll finance you. It's just, I think it's probably really important that you're proactive about this. Gentlemen, I've only got a couple of minutes left. Quick sort of word from each of you, Bruce and Brett. Bruce, what do you think about that? What are your feelings about some sort of collective understanding and mutual interest delivering something useful?

Bruce:

I think it's going to be required. I remember hitting New Year's Eve this year and saying, Thank God I've seen the end of 2020 and have to say 2021 hasn't been any better. [inaudible 00:27:14] said, we're about halfway through Covid and from an airline industry, I think that's probably right. PNG and Fiji have Covid... actually makes some decisions easier. You've got nations like Cook Islands, 96% fully vaccinated, and still unconvinced, despite the economy being driven by tourism, that they'll actually reopen.

Bruce:

You've got Samoa, Vanuatu, Solomons with relatively low vaccination rates, and no Covid. The big question has always been, how do you burst that bubble? What political right or might that's out there to have that courage, to burst the bubble at that point. And then, there's incredible challenges over the next year around travel.

Bruce:

So will people recognise the varying vaccines that are out there? Will they recognise the vaccination certificates? In PNG's case, it's a green piece of cardboard, unfortunately, probably, relatively, easily replicated if you're an anti-vaxxer, there's no database. And in fact, the US doesn't have a national database either. So I think we're probably at least a year or away from any seamless travel. If you want to go to Bali, eight days in quarantine, probably four Covid tests per person. So for a family that's $4,000 worth of Covid tests, plus eight days in, what does that mean for tourism? It just means low cost travel is dead probably for six to 12 months. Even if people want to travel. I think that's a simple, harsh factor. It's got to be that way. Because we're probably now half to two thirds of the way through the Covid crisis as an industry.

Peter:

That's a very challenging thought, isn't it? And I'd like to give you perhaps the last word, Brett, I've got it literally 15 seconds left. Last final thoughts, particularly on that sort of cheery outlook.

Brett:

Well, I remember CAPA meeting in Sydney in 2018, where we spoke of frictionless travel for passengers and travel now is anything but frictionless. So I think we are really going to have to put some serious effort into making it easy for passengers to travel. If we want passengers to come back into the world, we can't have retrospective imposition of quarantine, et cetera, just because somebody happened to be on an aircraft a week ago when you happened to be on it and you don't have any symptoms and now I have to go into quarantine, that sort of thing is going to put people off travelling for a long time to come. So we've got a lot of work to do in terms of making it easy for passengers to travel.

Peter:

At the end of the day. Yes, that's the key, isn't it? If they're not going to travel, then we can do everything, but that's the default position. Gentlemen, thank you very much for that. Obviously a lot of challenges ahead as we all have, but it's encouraging to see that you are being realistic and perhaps looking on this as something of an opportunity, if you can grasp it, then perhaps we could see something which is durable and sustainable, but thank you very much for being with us today on CAPA Live, enjoyed the conversation. Thank you.

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