Suva, Fiji: New planes are in the air for national airline Air Pacific. And we’re not talking about the delayed arrival from manufacturers Boeing of the long-planned 787-9 Dreamliners.

Air Pacific management is proposing the airline as soon as possible replaces its veteran widebodied fleet of two Boeing 747-400s and one 767-300.

It is proposing 320-passenger Boeing 777-200ER (extended range) aircraft be leased from Singapore Airlines. This would be an interim measure until the high-technology Dreamliners finally arrive from Boeing.

The proposal comes as Air Pacific is buffeted by mounting financial losses and increasing competition from newcomers operating new planes.

If the move is approved by the airline’s board, the Boeing 777-200ERs would be introduced from next year. It would take that long to get all the required certification, plane preparation, and training completed.

Air Pacific managing director/chief executive officer, John Campbell confirmed this past week that he presented the concept at a board meeting this month.

Operating the 777-200ERs would be much more cost and competition effective than spending millions of dollars to upgrade the existing wide-body fleet, he said. These existing planes had reached the stage of their life where maintenance and upgrades would become expensive. Mr Campbell said switching to operating only one type of wide-bodied jet rather than current two would as well bring significant cost savings. It would also give the airline newer planes, with Singapore Airlines having a reputation for keeping its fleet in top condition.

The board had asked for several scenarios to be looked at, Mr Campbell said. He would present these to the board at its meeting next month. A decision might be made then.

The first of the eight Dreamliners Air Pacific ordered were to have begun flying from next year. But production problems at Boeing in the United States have hit all Dreamliner deliveries. They have pushed the first Air Pacific delivery back to 2015 – at the earliest.

Mr Campbell said under the new fleet proposal, the airline’s three Boeing 737s––two 800 series and one smaller 700 series––would be retained. They were in good condition, he said, and would be mainly used for short-haul flights.

The proposal comes amidst tough financial times at the national airline, and concerns raised by board members. Air Pacific’s loss for the financial year ending on the 31st of next month is expected to be much worse than projected.

Our sources say questions have been raised by board members representing both of Air Pacific’s major shareholders, the Fiji Government and Australia’s Qantas Airways.

They include over how Air Pacific’s management is countering the new competition from V Australia and Jetstar on its once-lucrative routes from Australia.

There are questions too about the airline’s cash-flow position, mounting losses, and the need to restructure because of this and the competition.

Mr Campbell confirmed an unexpected deterioration in figures in November–January but added that not just Air Pacific was affected.

For example, he said, on the Nadi route V Australia is reducing its Boeing 777-300ER flights to six a week, after launching in December with seven. In recent times it had already begun quietly dropping one of its Nadi flights.

Mr Campbell said Air Pacific is holding its market share against V Australia and Jetstar. But it had to cut fares to do this. This is where the main damage to revenue out of Australia is coming.

V Australia launched services to Nadi in December with an A$199 one-way fare. Air Pacific had matched that.

Then Jetstar had come out with a launch fare to Nadi of A$149 one way, including all taxes. Its Sydney-Nadi-Sydney flights start on the 29th of next month. “We compete very effectively with the low-cost model in terms of product. But in price that’s where our concerns lie,” Mr Campbell said.

Mr Campbell gave notice near a year ago that he would not be applying for renewal of his contract when this ends in June. He is reluctant to publicly discuss options his successor might take, and the likely adoption of new operating models.

But it is no secret that the Air Pacific board and Mr Campbell and his management team are looking at low-cost options. The likely new chief executive also has a background in such operations.

Scenarios could include Air Pacific moving to a mix of traditional full-service and low-cost seats on the same aircraft.

Under this some seats on a plane would be for passengers with full-service tickets. They would get the traditional free meals, drinks, inflight entertainment and baggage allowances.

Other seats on the same plane would be for passengers who bought low-cost tickets. They would have to pay extra on board if they wanted any of these inflight services. They could also have to pay more for their baggage.

But Mr Campbell stresses that the competition for Air Pacific is not just from the Australian newcomers on the Sydney-Nadi-Sydney route.

Fiji is competing globally

One example would be competition between the Delta/V Australia alliance and the Qantas/United Airlines alliance on trans-Pacific flights, driving down fares between Australia and North America. This could make it just as cheap for Australian holidaymakers to go to North America as Fiji.

Another example is the low-cost holidays North Americans can get in places like Mexico and the Caribbean.

“We’re having to price Fiji to compete,” Mr Campbell said of challenges facing the airline and Air Pacific’s role supporting national tourism development.

On the airline’s financial position, Mr Campbell said a major internal tightening up operation is being planned.
This would mean more rigid controls on capital expenditure, pay, and operating costs. But this would be done without compromising safety or services, he stressed.

On the airline’s current cash flow, he said:  “Well we’re cash positive … I wouldn’t want to give the impression we are running out of money. But we haven’t got the level of cash that either I or the board are comfortable with.”

All this, plus the likely appointment of Mr Campbell’s successor and the proposal for fleet changes makes the board meeting next month crucial for the airline. And its future directions.