Testing Times for Fiji Airways

  • 7th August 2020
  • 2020
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Fiji Airways must come up with a viable rescue plan amidst concerns that borders with our major source markets, Australia and New Zealand are not likely to open anytime soon.

“The national airline is unlikely to survive without a comprehensive review and restructuring of its operations – finances, workforce, fleet size, flight schedules and destinations,” says Labour Leader Mahendra Chaudhry.

The people are entitled to know how Fiji Airways  proposes to restructure itself to meet the demands of a changed market without becoming an enormous liability on the taxpayer.

Yet such a plan was a notable omission from Economy Minister Aiyaz Sayed-Khaiyum’s  20/21 Budget address.

Parliament at its sitting last June approved government guarantee of a massive post Covid-19 bail out loan of $450 million to the airline. It is now certain this will not be adequate to keep Fiji Airways afloat as borders with our major tourism markets are likely to remain closed for sometime.

The airline carries a huge debt burden associated with its hasty fleet and route expansion programme. But the true extent of its debts is not known because audited accounts are not published and tabled in Parliament.

It will be a different market once international borders begin to open. It will be a painfully slow process which could take up to three years , even longer, before  returning  to the 2019 operational levels.

The restructuring will require cutting costs across-the-board to match the demands of a changed market. Can Fiji Airways survive on its own during this transition or will it need to be supported by Qantas, its much bigger and experienced partner airline?

“After all, the Fijian government has huge problems of its own and is hardly in a position to go beyond the assistance it has so far provided. But it must ensure that concrete steps are taken to avoid Fiji Airways becoming a millstone around the neck of the taxpayer,” said Mr Chaudhry.

Going forward, will the airline take a critical look at its fleet size and retire aircraft that are uneconomical to run or in excess of requirement? It will be a much smaller market for quite some time when the borders re-open requiring a much reduced fleet size.

Likewise, routes that are not profitable are best axed. Staff costs need to be rationalized by right sizing the workforce and employing expatriates only where locals with requisite qualifications are unavailable.

It will be advisable to reach an acceptable settlement of the dispute with its 750 terminated  workers.

The airline was engaging far too many expatriate pilots – they have been terminated for the time being but their re-entry must be strictly controlled.

A hard look is absolutely necessary at the Board membership and staffing at senior management level – the cronyism and nepotism of the past must be avoided. This is imperative given the sharp dive in the airline’s announced profits over the last two years.

Going forward, its financials should be confined entirely to its own operations and not lumped with those of its associated companies, which distorts its actual trading results.

As normality returns, Fiji Airways must be encouraged to recapitalise through equity raise – and not expect to survive through borrowing endlessly on  government guarantees.