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A-G: Fiji Airways Unique Success For A Small National Carrier

I would like to give a ministerial statement on Fiji Airways, our national carrier, which of course is a limited liability company, in which the Fijian Government holds 51 per
21 Apr 2018 10:00
A-G: Fiji Airways Unique Success For A Small National Carrier
Fiji Airways

I would like to give a ministerial statement on Fiji Airways, our national carrier, which of course is a limited liability company, in which the Fijian Government holds 51 per cent shares which in recent times has become a true success story.

By way of information for the Honourable members of Parliament, the Fijian Government owns 51 per cent, Qantas owns 46.3 per cent, Air New Zealand owns 1.9 per cent, the Government of Kiribati owns 0.27 per cent, the Government of Tonga owns 0.27 per cent, the Government of Samoa owns 0.12 per cent and the Government of Nauru owns 0.08 per cent of Fiji Airways.

Its strong current financial position, the culmination of four successive years of record profit, is unique in the international aviation industry for a small national carrier.

In 2010, the Fijian Government undertook a number of critical reform measures aimed at providing the airline with a solid foundation, to enable it to return to profitability and to bolster our tourism industry.

In 2013, the Board of Directors and a new management moved away from the old “Air Pacific” identity and rebranded the airline “Fiji Airways”, to embrace the airline’s Fijian roots, heritage and also it being the national carrier.

As a result of a collaborative approach between its main shareholder, management and staff, Fiji Airways is now one of only a handful of national airlines which are profitable and indeed growing.

In 2011, Air Pacific which became Fiji Airways made the decision not to renew the lease on the ageing Boeing 767 aircraft, with the aircraft leaving service in January 2012, and to allow the leases on its two ageing Boeing 747 aircraft to lapse in July and November 2013.

The Boeing 767 aircraft was costing Air Pacific over US$500,000 (FJ$1.008m) a month in lease rental alone, significantly above market rates for an 18-year-old aircraft.

The Boeing 747s were each costing Air Pacific between US$400,000 (FJ$806,640) and US$500,000 (FJ$1.008m) in monthly lease rentals, again significantly above market rates for an aircraft that were 24-years-old on leaving the Air Pacific fleet which became Fiji Airways.

With four engines, the Boeing 747 fuel use was almost double that of its new twin-engine Airbus 330-200s, and with the Boeing size and weight, almost all other operating costs were higher, not aided by their advancing years.

The introduction of the Airbus A330-200s by Air Pacific in 2013, coinciding with the rebranding of the national airline to Fiji Airways, has saved the company millions of dollars with ownership cost of the new aircraft being below that of the old, and operating costs being materially lower.

Additionally, the new fleet has allowed a more flexible network growth plan using the right-sized aircraft, as opposed to flying a full aircraft in the peak, and an empty aircraft in the trough.

The transition from Boeing 767 and 747 aircraft to new A330-200s has given Fiji Airways’ customers, and the country, a world class product at a better cost.

The airline’s wide-body (long range, twin-aisle) jet aircraft fleet is currently made up of four Airbus A330 aircraft, three of which are the A330-200 series and the fourth a larger 300 series.

As announced a few days ago, that the airline will add two interim A330-200 series aircraft this year on a short-term lease for four years.

This will enable Fiji Airways to start new direct flights to Tokyo or Narita, Japan and increase frequencies (weekly flights) to existing long-haul destinations like Singapore and San Francisco.

The first three A330-200 series aircraft, which kick- started the entire fleet modernisation programme at Fiji Airways, were purchased with initial financing assistance from the Fiji National Provident Fund (FNPF).

It was a groundbreaking partnership between our national superannuation fund and our national carrier that paved the way for the fleet upgrade, and has brought healthy returns to Fijian citizens via FNPF.

Growing the fleet; jet narrow-body aircraft fleet

Fiji Airways’ narrow-body (short/medium range single-aisle) jet fleet is made up of five Boeing 737 New Generation (NG) aircraft, four of which are the 737-800 series and one 700 series.

In November 2016, Fiji Airways and the Fijian Government announced the selection of the state-of-the-art BOEING 737 MAX 8 aircraft to replace the existing five Boeing 737 NG aircraft, beginning in November 2018.

The airline will receive two 737 MAX 8 aircraft this year, with the remaining three to arrive in 2019.

This significant fleet upgrade will result in Fiji Airways having one of the world’s youngest aircraft fleet by the end of 2019. The commercial terms of the deal Fiji Airways brokered for these new aircraft are widely regarded by the industry as a landmark achievement; in fact, better than what most large airlines are able to achieve.

Fiji Airways followed a rigorous, thorough and transparent process to evaluate, select and negotiate the optimum solution for its narrow-body fleet replacement, and they negotiated hard to achieve the best result for the airline and the Fijian people.

The deal comprises a 12-year sale and lease-back financing package, involving Boeing, the aircraft manufacturer, GE Capital Aviation Services, the aircraft lessor, and CFM International, the engine manufacturer.

The tri-partite deal which simultaneously leverages the offers from the aircraft manufacturer, the financier and the engine manufacturer may well be a world first.

Fiji Airways will be the first operator of this latest technology, fuel-efficient aircraft type in the Pacific region, including Australia and New Zealand.

Fiji Airways will be the first to fly the 737 MAX 8s commercially to airports like Sydney, Melbourne, Brisbane, Auckland, Christchurch, Wellington, Nuku’alofa, Apia, Tarawa and Honolulu.

The MAX 8 has improved operating economics and offers fuel savings of 15 per cent compared to the previous generation of aircraft.

Its enhanced interior, featuring reduced cabin noise, improved lighting, more overhead cabin space and state of the art in-flight entertainment in both the business and economy class cabins, will be well received by Fiji Airways customers.

Jet wide-body Aircraft Fleet

Just like the rigorous and thorough selection and negotiation process for the 737 MAX 8s, Fiji Airways management has embarked on a campaign to evaluate selecting a wide-body jet aircraft type to augment or replace its Airbus A330 aircraft to meet its short and long-term growth requirements.

As Fiji Airways Madam Speaker plans for an 8 – 10 per cent growth in passenger numbers year on year, it requires aircraft which are new generation technology, with even greater range and payload capabilities.

Currently the airline is engaging both aircraft manufacturers Airbus and Boeing for a future wide-body aircraft solution, with the candidates being the enhanced Airbus A330 NEO (new engine option) or A350 models, or the Boeing 787 Dreamliner.

Fiji Airways will make a decision later in 2018 on its choice of wide-body aircraft. And I can tell you Madam Speaker, the A350 is a beautiful aircraft in this respect.

Turboprop (propeller) aircraft fleet

(operated by Fiji Link)

Looking locally or domestically though, it is also important to note that the fleet modernisation is taking place across the entire Fiji Airways Group, which includes the domestic carrier, Fiji Link.

The small domestic airports served by Fiji Link are best suited to propeller aircraft. Fiji Link operates three brand-new turboprop (propeller) ATR aircraft; two ATR-72 series and one ATR-42 series.

In August 2017, Fiji Link announced that it would acquire three brand-new Twin Otter Series 400 turboprop aircraft from manufacturer Viking Limited.

We are pleased to inform Parliament that the airline has now taken delivery of all three brand new Twin Otter aircraft.

We are also delighted to confirm today that Fiji Link will acquire a fourth brand new Twin Otter aircraft by September 2018, making Fiji Link the operator of one of the world’s youngest turboprop fleets.

This is yet another major milestone for our national carrier and a great product enhancement for all guests flying domestically within Fiji.

Fiji aviation academy

As allocated in the Budget, in a major development for Fijian aviation, in December 2017, Fiji Airways broke ground on the site of the future Fiji Aviation Academy.

This is a major initiative and undertaking by the national airline to open an aviation training facility in Nadi, complete with cutting edge aviation training equipment and infrastructure.

This includes three Simulator Bays which will house the three CAE Full Flight Simulators for the Boeing 737 MAX, the Airbus A330, and a third full flight simulator for an aircraft type to be determined later, once the jet wide-body augmentation or replacement campaign has been successfully completed.

So, for example, if we go for the Dreamliner then we will get a Dreamliner simulator, or if we go for the A350 then we will get the simulator for that.

In just 12 months from now, Fiji Airways and Fiji will have a world class aviation training facility, offering the highest standards of pilot training for Fijian pilots and indeed international students.

Phase one of the project will see the installation of the simulators for Fiji Airways’ own pilot training requirements.

Phase two will see the establishment of a flight school at the academy offering ab-initio pilot training for young students.

Phase three of the project will see the establishment of a cabin crew training facility at the academy.

Apart from the benefits and cost efficiencies for Fiji Airways’ own pilot training, because currently they have to go to Singapore and other places, the Fijian economy will also get a boost, with an influx of foreign students arriving in Fiji to use the academy facilities, as well as other services within the Nadi area, from hotels, to transportation and restaurants.

The Fiji Aviation Academy project will ensure Fiji Airways continues to maintain the highest levels of safety.

Both airlines, Fiji Airways and Fiji Link, have the highest safety certification for commercial aircraft – which is the International Air Transport Association Operational Safety Audit (IOSA). Fiji Link is the only domestic airline in Fiji to hold this certification.

Organisational re-alignment and people development

There is a number of organisational realignment that have taken place which I will come back to when I have some time left.

However, it is very important to note and I would like to talk about people development in Fiji Airways.

Fiji Airways is continuing to develop its people, with both management and staff undergoing extensive service and systemic leadership training.

Such training from the likes of world renowned service expert Ron Kaufman and his ‘Up Your Service’ organisation, is designed to ensure that customer service remains at the centre of Fiji Airways’ focus.

This is done by integrating modern customer service delivery and recovery tactics with our world renowned Fijian hospitality in the sky.

All Fiji Airways and Fiji Link cabin crew are Fijians, allowing both airlines to offer an authentic Fijian experience to guests the moment they step onboard.

Cabin crew remains one of the most sought after positions in Fiji by our young people.

Just by way of example, in 2017, Fiji Airways and Fiji Link held recruitment drives for Cabin Crew.

Over 3,000 young Fijians applied for 80 open positions. This clearly shows that it’s an airline of choice and indeed are seen as a good employer

In 2016, Fiji Airways hired 35 Cabin Crew, while Fiji Link hired six. In 2017, Fiji Airways and Fiji Link hired 22 and 4 Cabin Crew respectively.

In 2018, 80 more Fijians will join Fiji Airways as Cabin Crew, while eight will join Fiji Link. This means that within a span of less than three years, 155 Fijians have joined or will join both airlines to support the company’s growing operational requirements.

I am only talking about the flight attendants here; of course they require engineers etc.

Fiji Airways remains one of Fiji’s largest employers, with a total of 1,395 employees at present, the airline continues to generate more employment for our people.

In 2017, Fiji Airways hired 25 pilots, seven of whom are Fijians, whilst Fiji Link hired seven pilots, four of whom are Fijians.

Once the Fiji Aviation Academy I mentioned earlier on commences operations in 2018, it will allow Fiji Airways to accelerate the development of command-quality Fijian pilots and increase Fijian pilot intakes.

Currently, of the 260 total pilots across both airlines, 164 are Fijians and 96 are expatriates.

Given the paramount importance of safety in Fiji Airways’ operations and the quality of its pilots, one cannot understate the need for a considered and sustainable move towards increasing the number of Fijian pilots at Fiji Airways.

There has of course been various numerous salary increments over the company itself. One area that of course that is very important for us is the service delivery.

As you know that previously at times, Air Pacific used to be called ‘air pathetic’.

We obviously need to get rid of that persona or that cliché term that was targeted against Air Pacific. Fiji Airways of course as we know conjures up feelings of national pride.

After the introduction of ‘Work As One to Take the Next Step UP!’ after just one year of its service education programme, where more than 86 per cent of all staff underwent intensive workshops, the airline reduced its overall complaints by 65.87 per cent compared to 2016.

In this period, Fiji Airways increased guest compliments by 22 per cent while Fiji Link increased guest compliments by 74 per cent.

The overall Net Promoter Score (NPS), a measure of overall guest satisfaction to the point where guests become advocates, has increased by three percentage point.

This places Fiji well above the industry average.

The newly-opened Fiji Airways Premier Lounge which I am sure some of the members of this Parliament have enjoyed has been a huge hit with the guests, and it has an average 2018 NPS of 86 – the highest score the company has seen in its history.

Network and expanded partnerships

I would like to very quickly now talk about various other initiatives Fiji Airways has taken but firstly, just before that I would like to talk about the network and expanded partnerships.

Last year saw a significant growth in the Fiji Airways network – where its flies to, how often it flies and who it connects with.

Beyond the introduction of new routes like Adelaide and increases in weekly services to Singapore and San Francisco, Fiji Airways grew its partnership network exponentially.

This has been done through meaningful codeshare and interline agreements with existing and new airline partners.

Fiji Airways currently codeshares with 11 airlines and has 33 interline agreements.

Codeshare partners include Qantas, Jet Airways, American Airlines, Cathay Pacific, Alaska Airlines, Hong Kong Airlines, Jetstar Asia, Jetstar New Zealand, Solomon Airlines, Samoa Airways and Air Vanuatu.

As a result, Fiji Airways and Fiji Link now serve 108 destinations in 17 countries.

This means that in addition to flying to Australia, New Zealand, the USA, Hong Kong, Singapore, Samoa, Tonga, Tuvalu, Kiribati, Vanuatu and the Solomon Islands and now soon to be Narita, you can fly on the Fiji Airways designator code “FJ” to Canada, the United Kingdom, India, Japan and Thailand.

Fiji Airways will also shortly announce another major codeshare deal which will increase its reach even further into Asia, Mainland China and Europe.

These are the new and emerging markets that Tourism Fiji can target to grow visitor arrivals to Fiji.

Japan will be the newest Fiji Airways direct route starting on July 3 this year, which will facilitate huge growth in the number of Japanese visitors too.

Fiji Airways has recently signed a codeshare agreement with Singapore Airlines and SilkAir that will provide more convenient connections for customers travelling to Fiji from more than 20 destinations in Asia and Europe through the Singapore hub.

Under the agreement, Singapore Airlines and SilkAir customers can access Fiji Airways non-stop flights between Singapore and Nadi, including the airline’s third weekly seasonal service that was launched on April 4, 2018.

Of course they can also travel on codeshare flights between Nadi and three domestic destinations, including Suva, Labasa, and Savusavu.

Financial results outlook

I would also like to talk a little more about the finance side of things too.

All in all, 2017 was a milestone year for Fiji Airways.

In March, Fiji Airways announced its financial results for 2017. The Fiji Airways Group announced a record profit before tax of FJ$95.8 million, following which, the airline’s Board approved one of the largest staff profit-share payout in Fijian history.

Each staff member, from those who work on the hangar floor to those in the administration offices, received $4,400 as a profit share; Of course with the deductions in place.

All management staff received no less than $9,900 each.

Such positive developments are only possible through a collaborative approach between shareholders, management and staff.

And while 2017 was a good financial year, we are mindful that aviation is one of the most cut-throat industries in the world.

Fuel amounts to 30-40 per cent of an airline’s cost and volatile fuel price movements remain one of the biggest challenges for airlines.

Concluding statement

We obviously have been condemned for the past two years and the Opposition has continuously questioned the $18 million marketing partnership we have struck with Fiji Airways.

It is our national carrier, we need to provide support to it as and when required, as we did through our marketing campaign.

And, I am happy to announce also that as a result of that route now doing well, with increased frequency to Singapore, that $18 million is no longer required. It won’t be part of the Budget feature.

But the point is Madam Speaker, the point is, in their short political point scoring, they kept on harping on about it, not taking a long term view.

We took a long term view. We’ve consolidated Singapore. Singapore is not only about tourism numbers, it is also about positioning Fiji as the hub in the Pacific, whether for financial purposes, IT purposes, administrative purposes, international agency purposes.

That is one of the reasons why Fiji has the largest United Nations agency hub in the Pacific – because of its connectivity. All of these things interconnect, and I wish that they (opposition) realise that we need to carry out these initiatives in the initial period of this particular new route.

Of course Fiji Airways, through its corporate social responsibility has given $1 million to the Prime Minister’s National Disaster Relief and Rehabilitation Fund.

They also adopted the school after Cyclone Winston in Taveuni – Taveuni South Primary and Secondary School, both of which are remotely located.

They have planted 5,000 trees as part of their COP23 initiative that they have.

The reality is that I would like to once again thank all the staff of Fiji Airways and I would like to thank everybody who has contributed to their success and we wish our national carrier and indeed we need to be proud of our national carrier.

Feedback: maraia.vula@fijisun.com.fj

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