Air Pacific makes short work of coup in effecting big turnaround

By Graeme Kennedy

Friday 14th June 2002

JOHN CAMPBELL: Company still has an accumulated loss of around $F30 million

What a difference a coup makes - Fiji flag-carrier Air Pacific has made a $F38 million turnaround and is planning more fleet capacity to handle continuing passenger growth since the country's vital tourism industry was decimated by George Speight's brief civil takeover.

The Nadi-based airline made $F9.675 million for the year to March 31 compared with a $F38.5 million loss the previous year following the coup. Revenue was up 32.7% to $F353.4 million while expenditure rose 12.8% to $F343.8 million.

But chief executive John Campbell said that while the turnaround was encouraging, the company had an accumulated loss of around $F30 million over the past two years and reserves to finance growth and fleet replacement had been eroded.

"We are working on new fleet now and submissions from Boeing and Airbus are on my desk at the moment," Mr Campbell said. "But the critical element for small airlines such as ours is how to finance new equipment and we are looking at all the options. We need more capacity as the market recovers toward the record levels of 1999 when Fiji had 410,000 arrivals - the Visitors Bureau is forecasting 379,000 this financial year, so we are getting back to within 2% or 3%."

Mr Campbell said new aircraft were needed to replace the carrier's 747-200, which is leased from 47% shareholder Qantas for the Nadi-Los Angeles service, and its two 767s which are operated on Tokyo routes under "very expensive" leasing arrangements.

Qantas is retiring all its 200 Series 747s and the carrier had to start working now to have a new aircraft in commercial service before the lease expired in 2004, he said, while it sought less costly options to replace the 767s.

"It is also very inefficient and expensive to operate different wide-body types, with double the pilots, engineering and spares," he said.

Mr Campbell took the top job at Air Pacific almost a year ago after leaving the carrier as marketing director in 1987 and joining Qantas to work in a variety of planning, marketing and country management roles. His last position was Indonesia general manager for Qantas and Oneworld partner British Airways.

Post-coup visitor numbers had crashed to 270,000 when he returned to Nadi last year but he found the tourism industry had already done a lot of work toward recovery.

"The Fiji industry is amazingly resilient and no more so than in periods of adversity," he said.

"It recognised that the catastrophic collapse in tourist numbers had to be handled internally - there was no one from outside the country who was going to come in and sprinkle pixie-dust to make everything all right again.

"There was pressure for cuts to air fares and hotel rates but the industry came together as the Tourism Action Group which pooled marketing finances and information resources to keep overseas markets aware of the true situation. There was a lot of co-ordinated marketing activity, direct promotions and some price-driven fares and accom-
modation packages with good offers rather than a desperate price-slashing.

"It is effortless to slash 50% off an air fare or hotel room but hard to manage it back so the business is making a profit - it takes a terribly long time to creep prices back up and it has to be a process of managing it to get there.

"By June last year it was evident that tourism was starting to grow again and the industry was beginning to step up pricing."

New Zealand arrivals slumped to 48,800 in the year to March 2001 but had recovered in the following 12 months to 66,800 and is targeting 72,000 this year to match its 1999 record.

As the industry worked together toward recovery, Air Pacific developed strategies to cut costs as traffic was slowly rebuilt with international confidence that Fiji was a safe destination despite September 11 and the Speight coup.

"An airline has huge fixed costs," Mr Campbell said. "But when I arrived I was pleased to find that all pilots, engineers, aircraft and cabin crews had been kept on although they were working minimum hours and flying had been reduced.

"In a small country like Fiji there is not a pool of people with the skills an airline needs and if staff had been retrenched they would have had to go overseas to get work.

"A number of people did take voluntary unpaid leave, some to study, do alternative work or start a family, but they retained their jobs when things improved and kept their staff travel benefits.

"We are now working on future strategies - we have to consolidate on the recovery."

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