Fiji Airways has said that competition with 46% shareholder Qantas is to blame for a poor 2019 financial year. While still an excellent year for the airline, they have claimed the Australian airline dramatically changed the landscape of the tourist market and put them on the back foot, resulting in a negative impact of FJ$65 million ($30.48 million US).
How has Fiji Airways done this financial year?
Fiji Airways recently posted its financial results from the last fiscal year (2019/2020). The group, which includes the international Fiji Airways and domestic Fiji Link, did rather well-considering market conditions.
The total group revenue increased by 9% to over FJ$1.12 billion ($525.1 million US) compared to FJ$1.02 billion ($478.2 million) for the previous financial year. This is notable as its the second time in a row that the airline has crossed that magic Fijian billion-dollar mark (around $500 million US).
The total operating profit before tax increased up to FJ$58.9 million ($27.62 million) from last year’s FJ$50 million ($23.44 million US).
“The operating environment pre-COVID was already very challenging, with lots of factors adversely affecting profitability,” said Mr. Andre Viljoen, Fiji Airways Managing Director, and CEO.
“Despite these challenges, the Fiji Airways Group grew profits by 10.7% year on year, while also outperforming the previous year in terms of revenue and passenger numbers.”
Other achievements in the year of 2019 include:
- Integration of two brand new Airbus A350-900 aircraft into the fleet.
- Creation of the Fiji Airways Aviation Academy to train new pilots.
- Joining the oneworld air alliance as an oneworld connect partner airline 2
- The airline also won the Skytrax 4-Star rating.
What about Qantas?
Qantas began flights from Sydney to Nadi in March 2019, which lead to a massive impact on the lucrative Australian tourist trade to the island.
“Qantas commenced direct Sydney-Nadi services on 31 March 2019 in direct competition with Fiji Airways. Qantas entered the market at the start of an already sluggish off-season period, and the resultant excess capacity negatively impacted yields. Loss of market share to Qantas, together with the drop in yields, dramatically reduced the profitability of our Australian operations, resulting in a negative impact upon profitability of around FJ$65 million. ($30.48 million US)”
The number expressed above, if accurate, means that Fiji Airways would have had close to double the profit if Qantas had stayed away. Fiji Airways passengers rose by 2% over the period.
While competition between airlines is nothing new (and Qantas has proven to be a competitive master when it comes to Australian air traffic), it is a bit of a red flag considering that Qantas owns 46% of Fiji Airways.
Why they would make moves to financially rock the flag carrier of the island paradise doesn’t make much sense, especially when they may have made more profit deploying their aircraft on other routes (and taking a dividend of its investment).
Perhaps Qantas is making overtures towards a pacific acquisition (much like Jetstar does in Asia) and is sizing up the local competition. Again, Qantas’s plans at this time are unknown.
What about the future of the airline?
The airline is confident that they have survived the worse of the current crisis and will push forward into a brighter future.
“In mid-2019, we faced the very real prospect of a FJ$100 million loss due to the impact of competition and fuel price increases. However, the Fiji Airways and Fiji Link teams once again demonstrated grit and resilience to deliver these results. Despite their small size, our airlines continued to punch way above their weight.
With a settlement made for the two Boeing 737 MAX aircraft that are currently grounded (currently stored in Australia), and the airline ready for the creation of a pacific bubble with New Zealand, the future looks positive.
“We are certainly not sitting back and waiting for border restrictions to ease. I can assure all of our valued customers, stakeholders, and partners, that all of us at Fiji Airways and Fiji Link are working tirelessly to put measures in place which will ensure your health and safety, and to create incredibly enticing holiday packages so that as soon as border restrictions ease, we can welcome you back to our beautiful shores with peace of mind.”
What do you think? Let us know in the comments.