Published on November 12, 2007
TS107: WEEK 4: TS107: WEEK 4 AIR TRANSPORT TS107: WEEK 4: TS107: WEEK 4 DEVELOPMENT OF AVIATION IN FIJI 1. Fiji holds strategic position between North America, Asia and Australaisia. 2. Possesses the most modern and busiest airport. 3. First flight made around the island in 1920 - non-existence of airstrips. TS107: WEEK 4: TS107: WEEK 4 4. 1928: First international flight took place - the “Southern Cross” landed at Albert Park, en route to Australia from America. 5. 1930 - first domestic air service. 6. Fiji Airways formed. TS107: WEEK 4: TS107: WEEK 4 7. 1939 - Plans for airstrip began at Nadi - imminence of World War 11. 8. A small strip completed. 9. World War 11 in the Pacific region in 1941 - bombing of Pearl Harbour. 10. Airstrip enlarged. TS107: WEEK 4: TS107: WEEK 4 11. 1939 - first civilian flight to Fiji took place - arrival of a Pan American flying boat. 12. 1946 ; first commercial flight by Pan American airways ( stopover ]. 13. NadI Airport was getting international attention. TS107: WEEK 4: TS107: WEEK 4 14. 1950s - development of Nadi International Airport. 15. Harold Gatty founded Fiji Airways (later to become Air Fiji). 16. 1955 - first BOAC jet landed at Nadi. 17. 1959 - first jet aircraft landed. TS107: WEEK 4: TS107: WEEK 4 18. Tourism expanded - investment in hotels and other tourist-related business took place. 19. 1960s - Nadi became the centre for regional and trans-Pacific services. TS107: WEEK 4: TS107: WEEK 4 HISTORICAL PERSPECTIVE 1. About 40 years ago Qantas bought all shares of Fiji Airways -renamed Air Pacific. 2. Formed a political instrument in partnership with Air New Zealand and British Airways TS107: WEEK 4: TS107: WEEK 4 3. Designed to prevent other people from running them. 4. Air Pacific was supposed to be a regional airline. 5. To give it regional flavour, the “big three” brought in Fiji, Western Samoa, Tonga, the Solomons, Nauru and Kiribati. TS107: WEEK 4: TS107: WEEK 4 6. It was believed that one regional airline would be more efficient, cheaper, and powerful. 7. Idea did not work. 8. Former colonies became independent. 9. Independence bred a desire for each liberated country to operate its own airline. TS107: WEEK 4: TS107: WEEK 4 10. Nauru declared aviation indepence in 1972 - birth of Air Nauru. 11. Since then, other South Pacific countries are operating their own airlines: Kiribati, Tonga, Samoa, Cook Islands, Vanuatu. TS107: WEEK 4: TS107: WEEK 4 12. Now majority shareholders in Air Pacific are Qantas (51%) and Fiji Government (49%]. 13. With about 5 million people, few Pacific Islanders can afford air travel and many islands only attract people going home and foreign aid experts. TS107: WEEK 4: TS107: WEEK 4 14. South Pacific is not the place to run a profitable airline. Proliferation of airlines makes no economic sense. 15. Need for one regional airline. 16. Nationalism cannot be entirely blamed for airline proliferation. TS107: WEEK 4: TS107: WEEK 4 17. Few people would go to Kiribati because of its isolation. 18. An airline is a must in such circumstance. Only government will invest in an airline. 19. Almost all tourists come to Fiji by air. TS107: WEEK 4: TS107: WEEK 4 20. Only two airlines connect Fiji to overseas tourist markets : Air Pacific and Qantas. 21. Prior to 1987, about twelve international airlines services Fiji including Air India, Air Chile, Continental, British Airways, Japan Airways, Ansett. TS107: WEEK 4: TS107: WEEK 4 22. To tap the foreign markets, Air Pacific has to stretch its legs - to Los Angeles, Vancouver, Hawaii, Japan, Australia, New Zealand. 23. Airlines carry fee paying passengers and freight.. TS107: WEEK 4: TS107: WEEK 4 24. Island nations want maximum possible business for their national carriers and allow traffic rights to ensure tourists fly their way. 25. Fiji has a stronger clout to obtain the best deals - location, airport superstructure, and developed accommodation. TS107: WEEK 4: TS107: WEEK 4 26. Aviation relationship is governed by landing rights obtained under the “five freedoms of air.” THE FIVE FREEDOMS OF AIR 1. Freedom to overfly another country, 2. Freedom to land for refueling and to attend to other technical matters, TS107: WEEK 4: TS107: WEEK 4 3. Freedom to carry passengers and cargo to a country. 4. Freedom to pick passengers and cargo from another country. 5. Freedom to drop and pick passengers and cargo at in intermediate destination. TS107: WEEK 4: TS107: WEEK 4 HISTORY OF NAURU AIRLINES 1. In 1983, Air Nauru had - 6 Boeing jets - 40 experienced pilots - more than 60 other flight crew - covered 4 million statute miles TS107: WEEK 4: TS107: WEEK 4 2. Flew to Singapore, Hong Kong, Melbourne, Sydney, Honolulu, Manila, much of Micronesia, and other parts if the South Pacific. 3. 1982 - lost about $13million dollars. TS107: WEEK 4: TS107: WEEK 4 4. Revenues from phosphate deposit made the airline keep flying irrespective of losses. 5. Symbol of national pride - service to themselves and other isolated islands. 6. Without 5th freedom Air Nauru cannot make money. TS107: WEEK 4: TS107: WEEK 4 5. Currently, airline is left with two aircraft and operates to a few destinations. TS107: WEEK 4: TS107: WEEK 4 AVIATION CONSTRAINTS ON THE SOUTH PACIFIC COUNTRIES 1. Air transport produces many benefits - generator of incomes and employment - Other social and political benefits TS107: WEEK 4: TS107: WEEK 4 BENEFITS OF AIR TRANSPORTATION 1. Distinction between ‘economic impacts’ and ‘transportation impacts’ - ‘economic impacts’: contribution easily quantifiable . Contribution is direct and induced ‘transportation impacts’: difficult to quantify - assessed by qualitative means and historical data. TS107: WEEK 4: TS107: WEEK 4 2. In the South Pacific surface transport is inadequate or non-existent. - Benefits of mobility - Air transport is absolutely vital to the efficiency of government and social integration. TS107: WEEK 4: TS107: WEEK 4 - Air transport creates employment and builds local expertise in technology - Growth of tourism depends upon efficient air services. - Isolated, micro-states in the Pacific region have no alternative except to depend on air transport. TS107: WEEK 4: TS107: WEEK 4 - Two primary national objectives of air transport in the Pacific: - improve internal communications - provide external services for the purposes of earning and saving foreign exchange TS107: WEEK 4: TS107: WEEK 4 Key issue for all countries is to determine the extent to which these objectives can be achieved by laissez faire policies and allowing foreign airlines free entry into market. Many countries conclude control over air transport is essential to achieve national objectives TS107: WEEK 4: TS107: WEEK 4 Liberalisation of international regulation is seen as a threat to national airlines. Liberalisation leads to freer entry of new airlines and less controls on capacity, frequencies and tariffs. TS107: WEEK 4: TS107: WEEK 4 ROLE OF INTERNATIONAL AIRLINES IN PROMOTING TOURISM 1. Pacific island nations depend entirely on air transportation for tourism development. 2. International airlines -public awareness advertising and sales promotion. TS107: WEEK 4: TS107: WEEK 4 3. Recent developments have affected airline promotion of and pioneering of new destinations. 4. Technical developments of aircrafts - non stop flights. 5. Previously, airlines had to stop-over for refueling at one of two remote islands. TS107: WEEK 4: TS107: WEEK 4 6. Long haul aircraft - concessionary fares. 7. Charter airlines play a major role in European tourism. 8. In the South Pacific, tourism from charter airlines have failed - Canada 2000. TS107: WEEK 4: TS107: WEEK 4 9. Charter air services go with high load factors in both directions. 10. Charter companies are successful because of the vertical and horizontal integration of the services. 11. Not restricted by bilateral agreements. TS107: WEEK 4: TS107: WEEK 4 12. Airline from the tourist -receiving country can operate from the tourist-generating country to its home country - not to a third country. 13. Tourism affected by regulatory authorities. 14. Some countries highly protective . TS107: WEEK 4: TS107: WEEK 4 15. Move towards liberalisation. USA was the first country to liberalise its civil aviation sector. 16. 1976 - one-stop inclusive tour charter (OTC). Previously, charter tours involved three stops and a land package of 7 days. TS107: WEEK 4: TS107: WEEK 4 Problems with regional cooperation 1. Nonviability: A few cooperative ventures were financially or economically unsuccessful – e.g., a venture between the Cook Islands and the Ansett of Australia. Losses were inevitable in a business environment, and they do not necessarily mean that cooperative arrangements are undesirable per se. TS107: WEEK 4: TS107: WEEK 4 2. Moral hazard or principal agent problems. Ventures may break down because one party fails to perform according to the conditions stipulated in the cooperative agreement, particularly in complex arrangements. Such factors may be behind the failed agreement between Ansett, Polynesian Airlines, and the Western Samoan government. TS107: WEEK 4: TS107: WEEK 4 Changes to cost structures, fleets, and networks. Changing circumstances can precipitate the demise of cooperative arrangements. For instance, changes in an airline’s networks or aircraft fleets could lead to end its aircraft sharing arrangements with other carriers. TS107: WEEK 4: TS107: WEEK 4 4. Differences about the sharing of benefits. The agreement between Ansett and Air Vanuatu may have ended because of differences over the size and distribution of the gains. TS107: WEEK 4: TS107: WEEK 4 5. Cooperating with competitors. Cooperation between competing airlines is sometimes difficult to sustain; this is particularly the case when they cooperate in areas in which the prices of shared services are difficult to determine and risks are higher. Long-term cooperative relationships tend to be between airlines that are not close competitors. TS107: WEEK 4: TS107: WEEK 4 6. Costs of cooperation. Transactions costs in implementing cooperative arrangements may sometimes jeopardize these arrangements. However, transaction costs appear to be an insignificant factor in current regional cooperative arrangements. TS107: WEEK 4: TS107: WEEK 4 7. Cultural differences. Differences in corporate culture or languages spoken can make cooperation more difficult and costly. These problems do not appear to have constituted a major problem in the South Pacific. TS107: WEEK 4: TS107: WEEK 4 Reduced incentives for cooperation. In the 1990s some South Pacific airlines were kept on a loose financial leash, which reduced their incentives to reduce costs through cooperation. As a result, their participation in cooperative ventures declined. TS107: WEEK 4: TS107: WEEK 4 Reference Forsyth, P and King, J (1996). Cooperation, Competition, and Financial Performance ion South Pacific Aviation. IN Flying High (G. C. Hufbauer and C. Findlay eds.], Washington: Institute for Internatinal Economics, pp. 99-116.