Interview with

Ceo Of Air Pacific

Mr. Campbell, you became CEO of Air Pacific on July 2001, only 2 months before September 11th, a date that will be remembered in this industry. What were you doing, how did you find out about the September 11th attacks?

I was in hotel bed in Auckland. I received a phone call at three o'clock in the morning as we had a 747 on route to Los Angeles. The question was if we should turn the aircraft back or not and we decided to bring it back. Thank goodness we did, otherwise we would have had one of our airplanes caught in Los Angeles for the next five days. I remember the day very well and always will.

Concerning the background of Air Pacific. It has been operating for more than five decades now. It is a Fiji company that has been profitable since 1985. If you had to point out two or three reasons for that success, what would they be?

Air Pacific has been profitable for 18 years. It was unprofitable only two years, 1987 and 2001. Success comes from the same critical elements as in any other business: Keeping a close control on costs and managing the rate of production so that production parallels demand. It becomes necessary to stimulate demand from time to time and an airline company will always do that by promotion and marketing activities. Another factor for success has been our ability, even though we are relatively a small company, to have excellent management data. We have worked very hard on technology to ensure that we have the information to be able to manage properly at all times. Quality decision making is very important and must be supported. The management team is highly qualified and have very wide experience. This is a small company, people accept broad responsibilities and this supports decisions. The other key element for success has been that we focus on Fiji. We do not pretend to be a global company, an intercontinental airline, we serve a specific tourist demand and focus on key source markets into Fiji. This way, we can quite accurately forecast the level of demand under normal economic circumstances.

In 1985, Qantas and Air pacific became strategic partners and formalized a management support agreement, one-year later Air Pacific started being profitable. How do you measure the importance of good partnerships for the future growth of Air Pacific?

Early in the 1980's, Air Pacific became a little ambitious and decided to enter into some lease arrangements for a DC10 aircraft to service the USA through Honolulu with connections onwards to Los Angeles. For a small company like Air Pacific it probably was brave to do that but it did not bring a profitable conclusion. We accumulated losses up to $36 million FJD and the company was technically in bankruptcy. It had to be supported by the Government of Fiji otherwise it would have failed. Then, the Government of Fiji invited a number of overseas airlines to submit management proposals to solve the situation. They looked at international airlines for operational management support and systems development in order to allow the business to recover. The tender was a vigorous campaign in which a number of airlines participated and Qantas won. Qantas, in turn, brought a management team to the airline and made a first critical decision of leasing to Air Pacific, on a very inexpensive basis, a 747 to operate the Australia-Fiji route which became a profitable route for the company. Backed by loans, this gave a stable source of income that enabled the business to be rebuilt. There was a significant process involving personnel training, technical investments and various other developments over a period of four years. After those four years, the Qantas team withdrew and left management to the developed and trained Air Pacific team. It was a commercial opportunity for both parties and in the end, the agreement between the Government of Fiji and Qantas evolved, the loan was converted into equity and today we can talk about a long term stable relationship. The Government of Fiji is the principle shareholder with 51% of the company and Qantas owns 46.3%. The rest of the shareholding is divided among various Governments of neighbouring countries.

How does the merger agreement between Qantas and Air New Zealand affect Air Pacific and what is your opinion about this issue?

Because of Qantas' shareholding in Air Pacific, we are captured in this process. We have to be part of the arrangement and therefore we hope to have the future opportunity to co-ordinate marketing efforts with Air New Zealand as we have already done with Qantas. We already have an excellent technical support arrangement with Air New Zealand. When it comes to major maintenance we must rely on Qantas and Air New Zealand as our partners, we cannot afford to be without one aircraft as our fleet is only five at the moment. Our agreements allow us the quick replacement of an aircraft, access to spare parts, to training, to simulators and to technical expertise. We are a small company and we cannot generate all these things ourselves. This potential commercial partnership is really going to increase our ability to function and to be profitable. Most of the airline business in the South Pacific is based on tourism, there is not much business traffic in the area so must of the major intercontinental airlines do not operate here as they would find it hard to make a profit. We offer partner airlines the possibility of spreading their network, to link their major networks through the hub of the Pacific, Fiji, into nearly all countries in the South Pacific.

Besides the airline industry, what other partnerships is Air Pacific involved in?

We have a number of stakeholders we work with and also, because we are a tourism based company, we work in partnership and harmony with the industry. We have to understand the problems and the needs that the industry is facing so we work very closely with the Fiji Hotel Association and with the Society of Fiji Travel Agents but also with Aviation partners like Airports Fiji Limited. One of the most important partnerships we have is with the Fiji Visitors Bureau because they are in charge of marketing Fiji abroad to bring tourists into Fiji.
You mentioned before that Air Pacific only had two unprofitable years in the last 18 years, the most recent being 2001. Is Air Pacific financially recovered? What are your expectations for 2003 and your commitments with the Tourism industry in Fiji?

We achieved turn around from an operating loss of 39.5 million FJD in 2001 to a profit of 9.65 million FJD in 2002. The current financial year ends on 31st March 2003 and we will show a further improvement on the results of last year. We have always been very keen about matching our fleet to demand and that is what we are going to do. We are commencing the first part of this expansion with two 747-400 aircraft leased from Singapore Airlines for a period of five years with options to extend, the first delivery in April this year and the second in June. They will operate daily between Nadi and Sydney and four weekly flights between Nadi and Los Angeles. They will provide the backbone to allow us to increase our route to Los Angeles to daily. They will also allow substitution for our B767 flights to Japan during the peak periods of the summer. These two aircraft will also send airfreight to Los Angeles, Japan and Sydney and occasionally operate to Auckland during peak periods. The second part of this development plan will be to acquire four A330-300 aircraft with delivery every two years starting June 2005. So we will have larger aircraft by 2005, then an additional one in 2007, 2009 and the last in 2011. These 4 A330-300's will improve our services to the markets we operate on the Pacific Rim as we need wide body aircraft. With this development we can see steady growth plus possible new markets that represent future opportunities. It is quite an ambitious project. To give you an idea of its scale, this investment is equivalent to 65% of the GDP of Fiji for this year. It is about 1.3 billion FJD whilst Fiji's GDP is around 2 billion FJD. The whole project will be funded by our own reserves and operating cash flow. We are very confident in developing this plan but for us to be capable of sustaining such an investment we need to make sure that there will be sufficient hotel beds in Fiji to handle the increasing number of visitors to the country. This is one of the reasons we are contributing to the development of a hotel ourselves on Denarau Island in partnership with ACCOR and other investors. It will be a 300 room hotel in its first stage and later on there will be further development to increase rooms to about 500. It is not our desire to be a hotel operator but we want to see more rooms in Fiji. We will exit that hotel, probably three to five years after it is successfully opened. We are aware of a number of other projects that are proposed and planned in Fiji. Tourist numbers in and out of Fiji today are about 400,000 per year. If we consider the planned 8% annual growth, the number of tourists coming in 2005/06 will be around 550,000 to 600,000.

What will be your initiatives and strategy in terms of marketing Fiji abroad for the next few years?

Fiji Visitors bureau spends 13 million FJD each year on marketing. We spend around 30 million FJD per annum and it is not marketing focusing on the airline but focused on the destination to increase visitor arrivals. We will continue this strategy, with key partners in source markets, for the foreseeable future.

After the coup of May 2000 there was a dramatic decline in tourism arrivals. Australia and New Zealand arrivals dropped significantly. After that the Fiji tourism industry has tried to diversify target markets. Do you agree with this strategy?

Yes, we must spread the tourists origin markets. It is vital to do so and there are many reasons for that. One is obviously to reduce exposure from only one or two countries so that the industry is not so vulnerable. Neighboring countries such as Australia and New Zealand will probably always be our largest markets because it is an easy journey and not expensive. We are seeking growth on Tokyo right now. The extension of the second runway in Narita International airport in 2004 should open more landing and take off slots. We hope to increase our flights from three to five to Japan at that time if we are able to negotiate more traffic rights between Fiji and Japan. At the moment we operate three services to Los Angeles and that will increase from June 2003, subject always to the market. For New Zealand and Australia we already have multiple daily flights in both markets and throughout the South Pacific we have many flights weekly, two or three per week to most destinations. We do support the idea of diversification. Europeans are finding the South Pacific increasingly attractive and we have good growth in the UK. We have an office in London already and will soon open another one in Germany or the Nordic area. The challenge is to be able to offer the tourism experience visitors wish to have. For instance, tourists from South East Asia, professionals with business background, look for high quality hotels, good shopping, excellent restaurants, multiple activities, sight-seeing and cultural experiences but also gambling and night life. Before investing in such a market we need to be able to offer what they want. The majority of travellers from South East Asia are not typically sun and sand tourists. We may be investing in the wrong place if we spend large marketing and operational funds in Asia.

Our readers always like to know about the person behind the company. You were in Indonesia and then came back to the Pacific. What brought you back to the Pacific?

I had a phone call inviting me. Qantas recruited me from Air Pacific in 1987. I was part of the Air Pacific team that helped turn the company around from 1984 to 1987. After joining Qantas I was involved in planning and marketing, pricing and had a variety of different responsibilities. Over the last six or seven years, Qantas has tended to send me to places where there was a problem so, somehow, I became a "Mr Fix It". I like working where there is a challenge. I like Fiji and considered this job an opportunity, a business opportunity for me. I wanted to help recover the airline from 2001 and this is already on its way but I also wanted to take it beyond recovery. It represented a very interesting challenge for me so it did not take long to say yes.
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