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:
- 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.
- Replacing Seattle and Tokyo flights with Sydney, Honololu, and San Francisco flying. These aren’t going to be great flights either.
- 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) and without United’s domestic feed.
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:
- 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.
- 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.
- 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.
Well, if we only did what was ‘profitable’ in the moment, ignoring stakeholders and necessities, I’m sure that’s a great way to run a business and a society…
Or, just copy what Fiji did, (bottle your water… charge a fortune…) sorry, I meant, their airline, and provide an alternative for US-AU/NZ travelers. Many seek out SYD/AKL-NAN-SFO/LAX, so why not swap NAN for PPT? Oh wait, it’s technically ‘France’ so probably some rule against this.
I mean, in their shoes I’d look at modernizing J (IIRC they didn’t have lie-flats pre-pandemic) and then leaning on partner redemptions – but I’d insist on allowing stopovers (for policy reasons/to fill some hotel space). I’d make award space close-to-last-seat and try to facilitate through space in J.
The inter-island connector biz is a huge moneymaker. I suppose they are somehow prohibited from flying onward to Bora Bora etc., but offering those connections either directly on NUI or demanding a cut from the local carrier is an obvious solution…. They’d also do well with SFO-PPT I think; this is ALSO a candidate for a fifth freedom continuation, like Paris or London or Frankfurt, since One World has abandoned these as nonstops from CA. Maybe just ORD, for grins, since AA is constantly full in their tiny 737s, and it opens a world of connections…
I redeemed a LAX-CDG leaving soon so there must be seats.
If I were the consultant, I would look to see if there are opportunities at CDG. Reunion? Mauritius? Bangkok? Maybe there is traffic for LAX-CDG-BKK?
Drop Seattle ASAP.
Look to see if NRT could be replaced. TPE? Tag on ICN-NRT-PPT?
Look to see if (likely high risk) NRT could be replaced with AKL-PPT-SCL-CDG or just AKL-PPT-SCL. Decades ago, I was once on a flight SCL-IPC Easter Island-PPT that had connecting service on UTA to somewhere. A passenger was going to New Caledonia.
Call in a genius advisor who once owned and ran the Trump Shuttle
Maybe he can get ElonTusk back on board with his chainsaw to cut costs
Possibilities are endless and they can call it Air Tahiti Muski/Trumpi
Excellent proposal Gary.
I like it very much.
It is very genuine and could work.
Really enjoyed flying them in J on the CDG route – such thoughtful service and great wines. Hope they keep that soft element going.
You are right moving to AAdvantage could work out well. And capitalize on the inter-Pacific island connections.
You mentioned the potential upside of being less parsimonious in opening up award space in Business Class. I flew RT SEA-PPT in July. No reasonably-priced business class seats ever opened, although I booked many months in advance and monitored the flight regularly.The outbound flight was delayed by a full 24 hours due to an ill pilot. (I flew in Premium Economy.) On the return flight, I was able to upgrade to Business Class for a co-pay of about $600. It took over an hour for our luggage to show up in Seattle. So all in all, not a great experience. And I’m not sure the extra distance and extra expense of going to Tahiti (versus Hawaii) is worth it, but that’s another story.
Air France, which has partner airlines, flies the CDG-LAX-PPT route with A350s which probably cuts into Air Tahiti Nui’s profit. Even though other airlines fly from San Francisco, flights to there could be more profitable than Seattle. Flights to Texas may work. There are certainly enough people with money there. The question that is unanswered is if there are enough people there and in the South who want to fly to Tahiti. Of course, if such flying is profitable, another airline will likely try flying the same route.
Gary could have saved these clowns a few million. You didn’t need to pay millions to a consulting firm to know they need to cut the extremely unprofitable routes with 50% load factors, or at least downgauge. But switching out all 787 for all Airbus isn’t a serious proposal, makes me think there’s a little bias with that firm. If anything pick up a few used 737s.
The purpose of government owned entities is to lose money, so I expect that to continue.
@Gray is spot on. The more bang for your buck stopover is a win win.
Who wouldn’t want a couple days in Tahiti on the way to OZ or NZ
SEA needs to be axed yesterday. I’m doubtful it has ever made money. DL is loosing millions flying long haul there. AA stopped the bleeding and pulled the LHR flight. I’m cautiously optimistic that AS will make long haul work due to the massive feed opportunity at SEA.
I’d look at getting into HND. And a connection or stopover to Lima makes sense for the Japanese market.
@Mantis — You were so close… the purpose of government entities… is to serve the public, not make a profit. See the postal service (which you probably loathe), roads, fire departments, the military, etc. They. Serve. The. People.
Maybe the government could entice a major hotel operator to add some more rooms (at various price levels) to the overall inventory?
Gotta say the amount of open business seats available LAX-CDG in July was a huge plus for me, and redeeming 57.5k AA miles plus $5.60 for one of them was a big draw. Yeah, their lie-flat seat is outdated and having six across in a 787 is incredibly tight … but the service was fantastic, the choice of spirits and wine decent, the dishware and glasses quite nice … would probably do it again if I needed a last-minute business seat traveling that distance. For those unaware, you definitely want to sit in Row 1 for the extra footwell legroom.
It’s not just about hotel rooms, which are definitely limited. There are two 300-pax cruise ships operating year round out of PPT, plus more beds at sea from about a dozen cruise lines that operate out of Tahiti more intermittently.
The DFW idea is a good one, as is tightening the hookup with AA.