Domestic airlines search

for new horizons

By Sophie Foster Hildebrand

BECAUSE of sufficient supply in the domes tic carrier market, new markets must be sought by local airlines to stay afloat.

According to lan Collingwood of Sunflower Airlines, in 1999, the company will buy an additional Shorts SD33O for ser vices within Fiji and for possible regional opportunities.

“We see excellent opportunities for more frequency between Nadi, Suva and Labasa and expect the market will welcome the use of bigger aircraft on these routes.

At the same time we are looking at diversification and have interest in a number of entities operating in Fiji’s travel and avi ation sectors.

“In the longer term there are opportunities to expand services to a regional geography.

In this respect we are well placed to develop services from Fiji to our more immediate neighbours, particularly where eco nomics deter wide body jets from operating,” he says.

Fiji’s domestic market, though small, is highly competitive. It is shared between Sunflower Airlines and Air Fiji.

“Sunflower has a stronger hold on tourism related traffic while it would appear Air Fiji is more focused on locally gener ated traffic. Either way there is a large duplication of service including aircraft type, routes, fares, timetables and so on,” he says. While no comment could be obtained from Air Fiji, Collingwood says for any new competitor to enter the market, the most obvious barrier to entry is set up costs.

“Given the low returns and high risk involved, it is unlikely that any investor would see opportunity in setting up another air line in Fiji. As it is the industry is reporting marginal load factors which suggests there is a problem of over capacity (or too much supply) in the market.

There are very specific terms laid out in relation to the pro vision of an airline operators licence. Realising these require ments is also time consuming and difficult,” Collingwood says.

What is worrying for the industry is that the ‘break even’ point for domestic carriers - the amount of passengers/cargo needed on an aircraft to meet the actual costs of operating that aircraft is not being met on some routes.

“Any new/potential entrant would have to look at this and other factors when considering setting up in Fiji.

At this stage none of the routes in Fiji are performing much over break even with many of them realising a loss. Given this it would seem that there is more than enough supply in the market which doesn’t leave much room for new competition”.

While Air Service Agreements have placed a possible ceiling on private sector airline growth, Collingwood believes that the general public has benefited from increased competition with improved service, more frequency and better value (direct and indirect).

But while the competition may have stimulated new traffic in domestic market, Collingwood says the challenge is to find a balance between market share objectives and reinvestment. ■