I linked earlier to One Mile at a Time‘s discussion of the problems faced by Air Tahiti Nui.

Basically, they’re a state-backed airline based on a remote island. There’s a limited number of hotels, mostly premium, and only so many people who are going to fly there. They need to support the tourism infrastructure, bringing visitors to the islands. But it’s been tough to make money.

They fly to Seattle twice-weekly, Tokyo once a week, Auckland twice-weekly, Los Angeles 11 times a week and Paris daily. Their entire fleet consists of 4 Boeing 787-9s. And in fact,

• Only Los Angeles – Papeete service is profitable ($11 million profit)
  
• Auckland and Paris – Los Angeles are basically break-even ($2.7 million and $2 million loss)
  
• Tokyo and Seattle flights are absolutely brutal money-losers ($8 million and $16 million loss

The Seattle flight margin was -8%, and load favtor on Tokyo service was under 50%.

The airline commissioned a consulting study on what they should do and suggested:

1. Replacing the Boeing 787-9s with four Airbus A330-900neos and two Airbus A321XLRs. The narrowbodies would fly to Honolulu and Auckland. As a small, money-losing airline I wouldn’t go to the capital expense.
   
2. Replacing Seattle and Tokyo flights with Sydney, Honololu, and San Francisco flying. These aren’t going to be great flights either.
   
3. Increased Auckland flying and eventually adding Hong Kong (but why?) and Latin America via the United States (huh?) They don’t say where, but let’s call it Peru. Obviously they’d need more planes for this, and need to stop the bleeding before launching new routes likely to lose money (and nearly guaranteed to do so initially).

San Francisco is a dumb idea, becoming the third carrier in the market (in addition to United and French Bee).

Sydney was a money-loser when they used to fly there. Their Qantas partnership can help with connecting feed, and they can pick up cheap Los Angeles – Sydney passengers willing to connect if the flights are well-timed. But this is low yield and doesn’t help the airline bring guests to the islands, really. Connecting traffic outside of Sydney is one-stop anyway and in the cases of most passengers can connect in Auckland.

Honolulu isn’t great, either. It’ll be a connecting point for passengers, flying Alaska and Hawaiian to Hawaii and connecting onward. But for most customers it’s not really better than connecting in Los Angeles (or San Francisco on United). And Hawaiian already flies to Papeete once-weekly on Saturdays. It’ll be relatively low yield traffic and just competing against other service.

The consultants see passengers from throughout Asia flying to Honolulu to pick up Air Tahiti Nui flights but the carrier needs better relationships for that. They’re getting killed out of Tokyo and aren’t going to win the Japanese market by forcing passengers to connect in the United States where they often need an expensive and time-consuming visa and must clear immigration and customs as well.

So what should Air Tahiti Nui do?

Ben Schlappig would like to see better integration between Air Tahiti Nui and domestic carrier Air Tahiti. They should sell through tickets and align flight times and interline bags. The process gets complicated because baggage handling on the islands for flights to Papeete on Tahiti isn’t going to meet international standards, but proper screening can still be done during connections (which limits how much they can reduce connecting times through better integration). Still, they should do this.

They need to decide if flying to Tokyo is actually worth it for the Asian tourist business. My guess is that it is not given the low load factors. They’d be better off deploying their aircraft to better markets and using the savings to subsidize another carrier to pick up service.

I’d make three suggestions:

1. Dallas. They already have an American Airlines partnership. DFW would bring them different and more convenient passenger connections, and even traffic that wouldn’t bother flying through Los Angeles. The connecting possibilities through Dallas – Fort Worth are incredible.

   And the flight is only a couple hundred miles longer than Seattle, so still doable roundtrip with a single aircraft (albeit with less margin for error, they could route an aircraft Los Angeles – Papeete – Dallas – Papeete – Los Angeles and v.v. if they really needed to).

   They should start with locking up a closer relationship with American, so that they don’t inaugurate the flight and have American slam the door on them.

   

2. Follow Fiji Airways and adopt AAdvantage as their currency. It’s Los Angeles that makes money, and their decent Paris flight is also to Los Angeles where there’s a decent concentration of American Airlines AAdvantage members. A frequent flyer program is an expense, and for a small airline it can be hard to justify a real investment, so it’s better to participate in a larger program. This would be a marketing engine for the airline, and for French Polynesia itself.

   

3. Open up more award space on money-losing routes. The goal is to bring people to the islands, why are you flying with empty seats? And introduce people to the destination. Plus, selling awards to partners is incremental revenue that they need!

   

I’d start with talking to American Airlines, get Dallas up and running 3 times a week to replace Seattle and Tokyo, and shore up finances. Once the 787-9s are operating profitably, consider whether narrowbodies make sense to free up widebody capacity for new routes – but recognize that the number of routes that will work are limited. So you’re going to need partnerships. Build more of those, although if you can copy the Fiji Airways playbook and pay American Airlines enough, those become easier.