Air Tahiti Nui is pushing ahead with an ambitious expansion scheme and has set its eyes firmly on the US market.
For the government of French Polynesia, a French overseas territory in the Pacific, it was an easy choice. Faced with disaster when the mainstay of the territory's economy - French military spending - was drastically cut, it focused attention and resources on its other area for potential economic livelihood: tourism.
So followed the establishment of Air Tahiti Nui, which began service late in 1998 and is 63%-owned by companies linked to the French Polynesian Government. Starting with just one leased Airbus A340-200, it now operates from its base at Papeete on the tropical Pacific island of Tahiti to Los Angeles, as well as to Osaka and Tokyo in Japan, and Auckland in New Zealand. Additionally, in early May, it began connecting Paris and Los Angeles.
Three-and-a-half-years on, the carrier has just completed a fleet revamp that has seen it add two A340-300s to eventually replace the smaller A340-200, one purchased from the manufacturer and the other leased for seven years from ILFC (International Lease Finance).
Air Tahiti Nui remains in the red, but the carrier and the government does not see that as a huge concern at this early stage. The contribution to picturesque French Polynesia's economy in terms of increased visitor arrivals and spending more than makes up for the airline's relatively small losses.
"Until 1995, Tahiti was dependent on military spending by France for its economy," says chairman and chief executive Nelson Levy. However, France decided to suspend its nuclear tests in the atoll of Moruroa in January 1996, having controversially resumed them after a three-year moratorium in September 1995. "The local government was faced with the problem of economic reconversion," says Levy. The decision to create Air Tahiti Nui was taken by French Polynesia's president Gaston Flosse himself. "We have been very successful in developing tourism," argues Levy. We haven't taken traffic away from established competitors, but rather have helped grow the market."
Although a tiny player on the world scene, the airline has been growing its business at a rapid rate. It expects to carry over 40% more passengers this year than last, as it continues to help drive a boom in tourism to French Polynesia, a French overseas territory since 1946 that is made up of more than 100 islands.
Commercial vice-president Nicholas Panza says Air Tahiti Nui - "nui" meaning "great" in Tahitian - expects to carry 175,000 passengers this year, up from 122,000 in 2001 and 100,000 in 2000. It also aims to boost its overall load factor this year to 67%, up from 65% last year and from 60% in 2000.
Safe destination
"For the first five months we have been on target," says Panza, who adds that the 11 September terrorist attacks had limited impact on the carrier's business last year, as French Polynesia was seen by many holidaymakers and honeymooners as a "safe" destination to visit. That said, the global drop in overall travel demand following the attacks did prevent the airline from meeting its 80% load factor target for its flagship Papeete-Los Angeles route, which ultimately came in at 74%. Japan services, however, were largely unaffected.
Profitability, however, is still several years away. For 2000, the carrier lost around $8 million, while for 2001 it recorded a loss of just under $500,000 on turnover of $64 million after the government provided financial aid.
"This year there will also be a loss," says Panza. "We have purchased a new aircraft and there is a high capital outlay. If we hadn't taken that aircraft we probably would have broken even. We are looking at a break-even around 2005-06." Panza says that while Air Tahiti Nui may be operating in the red, the airline has greatly benefited the archipelago's tourism industry. The carrier brought in 21% of all visitors to French Polynesia last year, translating into a $75 million contribution to the local economy.
Panza says the US market will remain the biggest for Air Tahiti Nui, despite the fact that Los Angeles-Papeete services are highly competitive. Air New Zealand and Air France are both established competitors on the route. He adds that the airline has seen growth in affluent US travellers to French Polynesia to 100,000 a year from 65,000 before the carrier was established, and it now claims a 35% share of the market for services from the USA. "For the US market, if you look at a three- to five-year period, that should grow to 150,000 visitors for us," he says.
The airline plans to expand its fleet with a third Airbus A340-300 next year as part of continuing growth that should include new and increased services, plus more partnerships with other airlines. The carrier hopes the third aircraft will join the fleet next April, when the A340-200 is due to return to lessor Airbus.
Panza says there are "incredible deals on new aircraft" to be had in the current depressed market - a key factor behind the recent fleet expansion.
Alongside its just-completed fleet overhaul, Air Tahiti Nui has increased services to main destination Los Angeles and to Tokyo, after the Japanese capital's busy Narita airport opened a long-awaited second runway in April. Although its market in Japan is much smaller than that from the USA, Air Tahiti Nui's de facto monopoly on routes to and from Japan helps it produce the highest yields in its network.
Codeshare plans
Panza says route planning could see Air Tahiti Nui operating its own aircraft to Sydney, to which it codeshares with Polynesian Airlines and Qantas Airways via Auckland, as well as to the US East Coast and possibly South America.
"We could do Sydney and a second city in North America, perhaps Chicago or New York," he says. "But that is over a three- to six-year timeframe. We could also possibly do South America - probably Santiago - but we will look for a partnership relationship on that route."
Panza says Air Tahiti Nui already has strong ties with Qantas and recently agreed a codeshare deal with Air France for Papeete-Los Angeles-Paris flights that are due to take effect in September. "They have an incredibly powerful distribution network and can feed traffic from Europe into us," Panza says of the Air France tie-up.
Three and a half years into its mission, the fledgling airline is content with its growth. "The importance of tourism to the economy of French Polynesia is growing exponentially each year, especially as there has been a winding down of direct government aid from France," says Panza. Simply put, he adds, "it has worked very well".
Source: Airline Business
