Air Vanuatu’s Plans for Reconnecting Vanuatu
As Vanuatu prepares to reconnect to the rest of the world following the government announcement of border opening on 1st of July, there’s a lot of speculation about what this will really look like and how ready we will be. A vital part of this reconnecting for us as an island nation, is about our national airline Air Vanuatu. In this modern world, flying has become second nature for most of us. All our international students, labour mobility workers and business connections these days rely on international flights. So, the airline connections are critical to the country. Currently the only other international airlines that have confirmed to fly into Vanuatu starting in July, are Air Fiji and Air Calin. So for at least a while, the responsibility for the majority of our flight reconnections sits firmly with Air Vanuatu.
The national airline announced its international flight schedules a month ago and today announced a sale for Vanuatu based travellers wanting to travel overseas also. Both actions give a clear sign that Air Vanuatu is supportive of the border opening and committed to making this a success. However, it’s important to realise that Air Vanuatu is not alone in making this happen; being a fully government owned entity, means there is a share of responsibility that lies with the government. The airline/government relationship influences many aspects including the all-important financing. Every airline, no matter where it is in the world, needs to operate with a robust financial plan and have access to financing, especially after the pandemic travel closures and the resulting decline in airline revenues globally. Financing is critical to a re-start. So, what’s happening with the financial viability of Air Vanuatu? We’d like to report that everything is firmly in place and there’s nothing to worry about. However, the reality is that the government has made assurances that it will stand by Air Vanuatu, the exact financial details related to this have not been released. The most senior people in the government finance teams and the airline’s CEO are still working out the finer details. The board of Air Vanuatu is made up of government leaders and their influence in ensuring that the necessary commitments are timely and relevant, is now crucial.
One area that has strongly influenced Air Vanuatu’s financials recently is the significant growth of the air cargo business. Air cargo can be anything from mail, private parcels, business essentials, computers, perishable food and much more. Because of COVID-19 related shipping delays, and changes to all the transport schedules generally, the national airline has stepped in and offered services to deliver more international cargo and a lot more domestic cargo across the islands also.
“We’ve seen enormous demand for the new cargo services” says Lynda Fred Sewen Air Vanuatu’s Cargo Manager. Some examples she gives is an increase in the last 18 months of over 25% in the uplift of cargo. This includes, for example, recent flights that carried 2.5 tonnes of food items for Au Bon Marche. Vanuatu businesses are working hard to maintain stock levels and to achieve this they need to rely more on air cargo. The airline has done well to keep up with the demand and has adjusted its services to make sure it is able to carry the extra loads. This includes putting on special charter flights to deliver items to the islands. Air Vanuatu acknowledges the governments’ directive to increase agricultural production in the country, and the airline is positioning itself to support agricultural export demand to markets in Australia and New Zealand over the coming months.
Another area that has brought in incremental revenue to the airline recently is the charter business. Air Vanuatu has operated 89 charter flights carrying 15,781 customers in the past 16 months. The charter flights offer groups the convenience and flexibility of traveling on dates that they choose and increases capacity beyond the regular schedules. The airline is also able to offer domestic and international charters and has a variety of aircraft to suit different loads. This is one of the advantages of being both an international and domestic carrier and provides economies of scale. The growth in cargo business and the successful expansion of charter flights are two examples of how the airline has adjusted to the current situation and found ways to sustain incomes during the COVID-19 pandemic.
Another important factor for all airlines is the cost of fuel. The pandemic and other global pressures have seen fuel prices increase dramatically. The global price for crude oil during 2019 hovered around USD$53 to $59 dollars per barrel. Now the price is well over USD$100 and international analysts predict this to increase imminently. Airlines use a lot of fuel, so they can’t keep ticket prices low when the fuel prices keep going up. Like any airline in the world, it’s expected that Air Vanuatu will increase ticket prices in line with these global fuel price increases. So maybe it’s a good time to book their sale airfares now.
A big question being asked of Air Vanuatu is what is the plan moving forward with regards to planes? It’s no co-incidence that the CEO and Managing Director of the airline is an engineer. Safety is the priority of the airline above all else. This is not something that is taken lightly and so the condition and types of aircraft is a serious matter. There has been a lot of speculation about leasing of existing planes and what exactly the plans are for new planes. Let’s get some facts clear and directly from the CEO and Managing Director Mr Finau. “Our strategy is to maintain regular domestic and international flight schedules and to also continue to expand the charter and cargo services, as well as to increase new pacific connections. To do this, we need to expand the fleet of aircraft” he says. When asked what planes this would require, he explained that the purchase of two additional Twin Otters have already been confirmed and that they will be in service for Vanuatu domestic flights in late 2022. He also explained that there will be a second ATR purchased before the end of this year. In addition, Air Vanuatu has presented the shareholders with a business case for the purchase of a second Boeing 737. Mr Finau acknowledged that flight schedule changes have been a regular occurrence and that this is damaging to the airline’s reputation. He says the planned expansion of the fleet will solve a lot of these issues and improve the airlines’ ability to maintain flight schedules and deliver better quality services to its’ clients.
The airline is not the only government entity vital to this border opening. In Vanuatu there are two primary government bodies responsible for the success of the tourism sector; the Vanuatu Tourism Office - responsible for the country’s destination marketing and the Department of Tourism -responsible for the product development, standards programs, and policies. Both organisations play a vital role in the tourism re-launch. To achieve economic benefit to Vanuatu, our country needs to be the chosen destination for tourists amongst the pacific competitors. This means basically, tourists need to know what Vanuatu has to offer and choose us as a destination. The airline continually works side by side with these two organisations and especially for our international competitive positioning, is reliant on the good work of the Vanuatu Tourism Office. Responsibility doesn’t stop there, another entity key to the aviation success is Airports Vanuatu Limited responsible for the condition and operations of the airports and runways. And of course, there’s also Civil Aviation, not to mention the private sector too. These government organisations in tourism and aviation have made a commitment towards a government endorsed “Aviation Access Strategy” which aims to support the re-opening of air connectivity through commercially viable business models. So, basically, there’s a whole team of different organisations who need to work well together to make this international re-launch a success.
When asked how the airline knows they are on track for the re-launch, Mr Greg Wilson the Chief Commercial Officer shared some encouraging numbers about the international flight bookings. He confirmed that the airline has already received close to 10,000 international bookings since launching the international schedule less than a month ago. This is a very positive sign. Mr Wilson says that with clear messaging on the entry requirements to Vanuatu for tourists, the airline is confident that bookings will continue to rise.
So, what about the rumours about staff and morale at Air Vanuatu that have recently been reported. In response to this, the airline has made it clear that this is an internal human resource matter. They added that they will take care of any staff concerns responsibly and these will be managed internally by the management and HR team. Just like any airline, Air Vanuatu needs to carefully balance the desires of the customers, the staff, the safety of its operations and the realities of making sure they survive economic tough times until incomes recover. This is a delicate balancing act for every business in the tourism sector.
The continuing COVID situation also adds an ongoing element of uncertainty. Vanuatu has coped amazingly well with the outbreaks to date, but no one can predict exactly how the pandemic will end or what surprises the pandemic may still have in store for us. The government has announced quarantine free travel from July 1st and a set of guidelines including tourists needing vaccinations and to lodge their travel insurance to be approved, before they get permission to fly. This may be complex for travellers to manage and could make tourists choose other pacific islands for their holidays. The Ministry of Health have worked tirelessly during the pandemic and have implemented and co-ordinated well and need to be acknowledged for this. However, with only approximately a month to go until borders open, the tourism sector needs to be confident that they will quickly implement this critical re-entry condition. The airline has assisted by providing very generous re-booking terms and conditions. Anyone with international travel booked prior to the COVID-19 border closures can use their existing tickets until the end of 2023 and those who book new tickets now can make changes if conditions change. These measures support the flexibility that is needed to give travellers confidence to book. There are more details on the re-booking policies on the Air Vanuatu website.
Summarizing the situation, from the information shared by Air Vanuatu it is clear that the airline understands the critical role they play in the border opening and that they are putting in place sensible plans to get ready and deliver the right services. For the tourism re-launch to be a success, it’s also critical that the whole tourism sector work together fast, effectively and with the right support from the government.