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No Sight of Pie in Long Haul Skies

Category: , Posted:11 Sep 2010 | 15:43 pm

The Phuket Gazette.
Recent media accounts over Virgin Blue's decision to stop their V Australia flights between Phuket, Melbourne and Brisbane have provided many a good headline. But one can't help but wonder if there is more to it.
While none of us want to live perpetually "underneath the rainbow", perhaps, for a moment, we should take our pet dog Toto out for a walk into the real world of tin-man aviation economics to see sense or cents as it were.
While Americans and Europeans drive to their mini-break destinations, Asians fly to theirs. Over the past few years the underlying storyline for the island's success has been a continued increase in airline seats. Keeping planes in the air, and connecting the dots to fill empty seats remains the industry's continual challenge given the volatility and risk associated. With challenging margins, fuel prices, labor issues, terrorism and erupting, volcanoes it all adds up a business model that could best be termed as "oingo boingo".
Increasing competition from low-cost and no-cost airlines only fuel the fire of uncertainty.
Analyzing Virgin Blue's rationale, one has to look at comments made by CEO John Borghetti who was quoted in the press as saying “The Phuket service is also sub-optimal for our Boeing 777-300 ER given our configuration".
This move coincides with the airlines link-up to Middle East carrier Etihad and news that the Boeing aircraft will be deployed on long haul flights from Australia to Abu Dhabi. It's important to note Virgin Blue's subsidiary carrier Pacific Blue will continue to fly between Phuket and Perth but with a smaller Boeing 737.
Compare V Australia's Boeing 777-300 ER which seats 363 passengers and Pacific Blue's 737-800 with a capacity of 192. That is a very big difference in seats for sale.
The once friendly skies are no longer so welcoming, as political obstacles, such as landing rights, often border on sovereign issues but in the end come to back pocket economics. Hence, over the years airline alliances, joint ventures and code sharing have all been compelling issues to connect networks and tap into the larger catchments to fill seats. At the end of the day the Virgin Blue service is more about man and machine. A mismatch between size and the trend in Asia which focuses on smaller Airbus crafts, use of multiple hubs, spokes and a customer driven need for frequency or times.
Getting, aboard the magic bus today means seeing loss-cost and regional carriers use Airbus A320's which in many cases use one class of service with 180 seats. What is becoming apparent though, is that tourism will be both a driver and a passenger on short-haul destinations served by smaller aircraft.
Unfortunately this is not entirely a good thing, as anyone who operates a business knows about the need for healthy market segmentation, which in many cases are slices of pie cut up between a large hungry family. If suddenly, part of the family opts for a low-carb diet out goes their appetite for pie and you end up with leftovers.
Part and parcel of the global financial crisis was an incredible decline of long-haul seats. Even today the numbers remain stinted. By now, the pie has turned chunky and one has to worry if the remaining pie-eaters of the family will become ill. The entire lifespan of a pie presents some or other danger.
So yes, Phuket's tourism future remains firmly entrenched – with flight times of eight hours or less – in the shadow of giants such as India and China who are looming in every hotel's marketing plan.
Even the recent announcement of a new budget carrier launched by Thai Airways and another loss-cost carrier – Tiger – boasts three hours or under as their Never-Never Land.
But the question that remains is if smaller and closer is better than bigger and far away? For those wanting answers, perhaps a glance up to the skies is the best indication of things to come.

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