Low Fares Drop

Trade

Winds

Island Airlines In

At Deep End

The Pacific Islands are facing their biggest marketing challenge since they accepted the importance of tourism to their economies, writes Rob Gwyther in Sydney. The prospect of being cast once again into the backwaters of the tourist tide by lower fares on trunk through-Pacific routes has thrown panic into the hearts of many Island tourism planners. The reality of today's situation, fortunately, was forced home some time ago by the new equipment which enabled end-market carriers like Qantas and Pan Am to begin overflying island stops.

The message was reinforced last year when the Australian Government went so far as to warn in advance that its pro posed new international avi ation policy would cause disadvantages to Pacific islands. The policy report recommended against Aus tralia attempting to ‘subsidise’ inter-island regional routes from its trunk operations to and from Australia.

It warned that Qantas should not operate direct flights to points which could not support ‘commercially viable’ traffic shared between the two coun tries’ airlines.

The report’s only concession was to allow Island carriers rights where there was a ‘genu-

ine need’ for new services to aid regional development.

The kneejerk response generated by such moves, and the overflying trend, was recog nised by Fiji’s new tourism chief, Fiji Visitors Bureau gen eral manager Malakai Gucake, in his first address to the indus try earlier this year.

He attempted to dispel the panic’ he found in Fiji’s tourist industry, over possible loss of

stopover traffic, by arguing

that Australia’s policy should work to Fiji’s advantage by strengthening its role as a tour ist destination. ‘Since 81% of our Australian visitors make Fiji their main destination, the new policy should work in our favour,’ he said.

His statement at once ident ified both the problem and a part-solution to countering the

attractions of competitive fares to destinations further away such as the US. He said Fiji

should become both more competitive in terms of its price and tourist lure, and must also look to new markets. But the eventual answer for other Pa cific countries could well be as varied as the visitors who presently visit their shores.

Main destinations such as Fiji, Papua New Guinea, and Tahiti have come to grips with the tourism issue long ago but each has the problem of facili ties which must now be kept utilised. Others, such as Tonga, New Hebrides and Western Samoa, are only now deciding where and when they want tourism. They are all finding out about the ‘how’.

The marketing challenge,

however, is common to all: to become more attractive desti nations in their own right as well as find new ways of tap ping the tourist dollar (or per

haps yen).

For instance, Fiji was handed a guiding beacon by its long-time supremo Paddy Doyle, whom Mr Gulacake replaced in January. Before leaving to run his own Fiji re sort, Mr Doyle called for new unity in the industry to im prove dealings with overseas travel packagers as well as overcome accommodation and image problems at home (the

recent rise in Fiji hotel prices is just one aspect).

Mr Doyle said countries whose tourist traffic was mainly stopovers faced a ‘lean time’ unless they became ‘des tination material’. He said Fiji’s visitor future under the new low fares lay more with the United States than with Aus tralia or New Zealand. From

the US, he said, there was a bet ter chance of getting both a lower fare and more traffic.

The US, he said, could stand up to 20 terminator flights a week. ‘A united Fiji tourist industry will be in a better position to press for more terminating

flights, plus a point-to-point air

fare with Fiji as one of the

points that is economically

comparable with the long-haul

fares now being touted.’

In saying so, he of course touched on the gulf between a country’s tourism aims and the ability of its airlines and indus try to carry them out. Air Pa cific has yet to prove itself an economic maverick, but it has

shown signs lately of becoming

much more aggressive in pick ing up the marketing gauntlet

since Qantas and Air New Zealand loosened their hold.

Air Pacific has negotiated strongly for its proposed ser vices to Hawaii, Sydney and Melbourne and has pinpointed ways of chartering larger air craft to get out and chase its own markets. Its success hinged on finding suitable aircraft to lease as both its finances and the lead-time on ordering new machines would delay replace ment of its BAC-llls until 1985, according to one source.

Because of the Australian Government’s preoccupation with other main routes, the vital question of a new bilateral

air rights agreement with Fiji has still to be tied up. The Fiji carrier hopes to start Sydney

and Melbourne flights some time after mid-year, and flights to Hawaii by year’s end.

It acknowledges, however that it will probably have to

change its opposition to

advance purchase air fares which are the basis of Aus tralia’s new lower rates. Fiji re jected Qantas proposals two years ago for an APEX fare to undercut the present SA3O6 return excursion fare because of its heavy dependence on package tour business and the fact that Fiji was still very much an ‘impulse market’ for Australians. They now concede there is ‘some room’ for a lower fare.

Mr Doyle estimated reopen ing of the Melbourne service alone would bring Fiji an extra 24000 visitors a year. (As a measure of the importance of visitor traffic, tourism last year earned Fiji SF9O million in rev enue plus $l2 million in foreign exchange, about half of which revenue stayed in the country. However, the fight for this business, as Air Nuigini, PNG’s national airline, has shown, can be played by some very hard rules.

Qantas showed how it

regarded bleating by disadvan

taged Islanders when its chair man, Sir Lenox Hewitt, produced figures to answer

criticism of its policies. They showed the airline’s Funjet traffic from Australia had risen steadily from 14000 in 1969 to 54543 last year, only dropping in 1977 because ‘Qantas pulled off the Brisbane—Nadi route in favour of Air Pacific’. It issued no forecasts for this year, how ever.

Air Niugini - in its fifth year one of the Pacific’s success

stories has fought hard to establish an extensive network which will soon include Port

Moresby-Hawaii. Recognising

that all its tourist eggs should never be in one basket, PNG has, like Fiji, established Japan. Australia and the US as key markets. The airline’s twin attack on these markets has

been to promote PNG heavily as an exciting frontier desti nation, as well as develop a route system to allow markets further afield to include the country as part of a wider circle-tour.

Thus Europeans and Asians can enter PNG via Indonesia or Japan and Americans via Hawaii, as part of circle itineraries which include Aus tralia and other destinations.

The same applies in theory to Australians visiting Hawaii or Asia, though again this

requires slick marketing to

overcome the temptation of cheaper direct fares. Because of

its geographical position, such

circle travel patterns are com paratively easy for PNG to

establish. They also recognise,

as many tour operators such as

United Touring International and Paradise Tours have predicted, that lower fares to one destination can help in stimulating overall traffic to a

region.

Americans, for instance, have long thought in terms of the ‘South Pacific’ as a desti nation rather than individual countries, and so are likely to travel accordingly.

The degree to which PNG succeeds will depend on its air line’s direction after present general manager Bryan Grey departs this month.

Tahiti, New Caledonia and New Hebrides on the other hand have relied on establish ing themselves as end desti nations. Tahiti has succeeded in attracting more Australians principally because of its Club

Mediterranee, and regardless of the fact that it lies on the South America trunk route.

But its fears of possible dilution from the new trans-Pacific fares to Hawaii and the US from Australia were shown by a recent visit to the island by six top Australian tour oper ators to discuss the need for lower fares from Australia.

New Caledonia, too, is reas

sessing its tourism promotion

under plans to concentrate on its main visitor-generating markets for future growth.

Noumea had a marketing bon anza with its casino and good quality hotels, but the New Hebrides is now planning to pick up much of this business by capitalising on the closure of the Chateau Royal hotel

(another lesson in tourism marketing!).

Pago Pago in American Samoa, meanwhile, has been thrust into the lucrative North American market more by luck than good management (thanks in particular to Con tinental Airlines). The ability of surrounding regions to capi talise on this depends largely on their own regional airline’s efforts to establish effective shuttle services to tap the Samoans’ stopover traffic.

Western Samoa-based Polynesian Airlines has a new Australian-built Nomad to op

erate 40-minute flights Apia-

Pago Pago, and hopes to win some American stopover visi tors, if only for short visits. The airline has also expanded its Auckland-Apia-via-Tonga ser vice to twice-weekly, adjusted its services to connect with Pan American flights, and intro-

duced 20% inter-island dis count fares.

So far Tonga has failed to provide the accommodation and facilities to enable it to tap the package-tour market or mature beyond its ‘exotic’

image. Apart from cruise ships calling it would be a waystop on most South Pacific itineraries. Tonga’s visitors bu reau. however, has become more active with increased pro motion and, like Solomon Islands and Cook Islands, is

starting to develop the

entrepreneurial talent needed to build tourist attractions.

Air Nauru has inaugurated a weekly Boeing 737 service be tween Tonga and Noumea, then on to Melbourne, at a time when visitors by air to Tonga have risen 10% in the past year.

The problems of Norfolk Island, meanwhile, were ident ified in a recent letter to a local newspaper as lower air fares, a new image and abandonment of uneconomical aircraft. The island’s other problem is to up grade its airport to take larger

planes.

Those islands on the South Pacific cruise circuit can take heart that lower international air fares show little sign of damaging the Australian and New Zealand cruise market.

The cruise market’s .confidence - now it has got rid of the

excess shipping capacity

around is symbolised by

P&O’s move to establish a

prestigious up-market liner,

the Sea Princess, as a per-

manent fixture alongside the Oriana, replacing the worn-out A rcadia.

At the time of writing Con tinental Airlines planned to begin its May 1 South Pacific services with low sector fares only from the US end. It was likely to apply the same low through fares as Qantas and Pan Am from Australia and haggle the sectors later. Thus it is heartening to see Air Pacific examining its charter costs to determine how it could com pete with Continental on the Honolulu-Nadi route. The low fares announced by Continen tal have not dampened the Fiji

Government’s enthusiasm for Air Pacific to fly the route.

Some in the airline business may harbour memories of American Airlines’ fate in the South Pacific and not be pre

pared to gamble again on their

future lying in the hands of the

‘big boys’. Continental Airlines

gave firm assurances that it was ‘an island hopper’ when its managing director (inter national) Frita Blayney, said tour packages would be com piled to utilise regional airlines like Polynesian and Air Pa cific.

He said Pago Pago was a ‘moral commitment’ and un likely to be dropped on any account, and both gateways would be heavily promoted in the US to bring real tourists.

The US carrier gave notice that the bulk of its tourist traffic

would be Americans rather than Australians.

But at the same time. Con tinental is likely to be very aware of the experience of American Airlines and control both its low-fare volume and stopover traffic carefully. It is aiming for an average seat kilometre cost of around six US cents and that means a tight rein on who and where its business will be. It may also re view its whole island strategy should it replace its older DC-10s with more efficient air craft, not dependent on island stops.

Hawaiian Airlines, too, is

taking a cautious approach.

The carrier has new rights be tween the US West Coast and Western Samoa also, but is likely to take at least a year of study before it takes them up.

The regional carriers will! thus need to think very care fully about plans to expandl

their route networks. It appears i unrealistic to expect them to I compete with Continental Air lines on sectors as they have neither the equipment nor expertise at present to make such services profitable. On the other hand Continental is by no means committed to lone-

term operation through Fiji,

and there is thus an inherent risk in reliance on outside poli cies.

There is no guarantee that

Continental’s island-hopping

will not see US tourists doing

more hopping than staying, with little tangible benefit for

the islands. Those who see Continental Airlines as a poss ible saviour in the present air line climate may well find them to be more of an un

balancing influence by merely

taking inter-island traffic away from the regional carriers.

Regional carriers’ future

long-haul operations also de

pend to some extent on Air New Zealand, which has its own problems with the Aus tralian policy. Air New

Zealand is well advanced in looking at ways to re-model its Pacific operations.

It is likely to see both an ag gressive inbound operation from the US and Asia, and strong regional operations, as ways of compensating for lost Australia/US rights. A possible lucrative Pacific round-circle fare, such as US/New Zea-

land/Australia/New Zealand, with Fiji and Tahiti stopovers outward and return, is one alternative foreshadowed by airline officials.

But, like Continental, Air New Zealand would seek to control the traffic from go to

whoa to make the operation vi able. Thus the regional carriers may well have to be content to remain just that.

The ultimate decision for the Islands in assessing their pos ition may well depend on which they rate highest: a healthy tourist industry, or an

active long-haul (though loss

making) national airline. It is

becoming increasingly clear

they cannot afford both.