in Air Transport / Features

Seychelles takes one step back to move forward

Posted 3 September 2018 · Add Comment

Air Seychelles is undergoing a major restructuring as it feels the effects of a surge in long-haul competition. Alan Dron found out more from interim CEO, Remco Althuis.

The Seychelles is a popular holiday destination in the Indian Ocean. In some ways, it has become too popular, with several major international carriers introducing services to the archipelago in recent months.
The intense competition for traffic has led Air Seychelles to begin a significant retrenchment, terminating its long-haul routes and aircraft, cutting personnel and focusing on domestic and regional services.
“The islands have been very heavily reliant on tourism and the country had a very liberal aviation policy – not ‘open skies’ but there’s been a very active engagement with countries for bilaterals,” explained interim CEO Remco Althuis. “What you’ve seen happening is the Middle East carriers have stepped in with these bilateral opportunities all over the Indian Ocean.
“During the financial crisis, the legacy carriers didn’t quite have the fleet types to operate these routes. Now they’ve come out of the crisis and at the same time they have been getting these Boeing 787s, for instance, and now the Airbus A350-900 is coming on line, so they have a much better opportunity to operate these routes more economically.”
This means that most of the major European airline groups – IAG, Air France-KLM and Lufthansa Group – are making their presence increasingly felt in places such as Sri Lanka, Mauritius, the Maldives, and now, the Seychelles. This is on top of the presence of the major Middle East carriers – Emirates, Etihad, Qatar Airways and Turkish – which have been expanding rapidly in recent years.
That means there are a lot of empty seats on flights to and from the islands and small players like Air Seychelles have felt the brunt of this over-capacity.
A particular problem was the beginning of Air France flights from Paris in May. Paris was Air Seychelles’ sole remaining European destination, after its decision to drop Dusseldorf in 2017 due to disappointing traffic loads.
“The announcement that they wanted to get back on to the Seychelles pushed us over the edge,” said Althuis. “It’s not a direct cause and effect but it clearly didn’t help.”
The Air Seychelles management quickly realised that the number of competing air services from Europe to the Seychelles would have a significant impact on both passenger numbers and fare levels on the airline’s three weekly flights to and from Paris. This accounted for 30% of the carrier’s total passenger revenue, making the route unsustainable.
As the airline depended heavily on the Paris feed to fill seats on its connecting service to Antananarivo, it also decided to suspend services to Madagascar’s capital.
As a result, Air Seychelles decided to get out of the long-haul side of its business. Its two Airbus A330-200s are being sub-leased to Fiji Airways.
Its two Airbus A320s, meanwhile, are being replaced by two A320neos, with the first scheduled to arrive in mid 2019, and the second due to follow some six to 12 months later. Both the new aircraft are being leased.
For domestic services, the airline will continue to depend on its fleet of six Twin Otter turboprops.
Air Seychelles’ A320s can theoretically carry 180 passengers, but the distance of any diversionary airports from Victoria, the Seychelles’ capital, means that the carrier has a payload of just 136 passengers, due to the requirement to have sufficient fuel on board to reach an alternate airport.
For the same reason, the new A320neos will be outfitted with 12 business-class and either 150 or 156 economy-class seats. “It depends what Airbus can give us, because they are working on extra take-off weight for the neo,” said Althuis. “If they can give us an extra tonne, which is in their brochure but not certified yet, we could potentially put in a few more seats.
Air Seychelles is looking at installing an ‘economy-plus’ section on its A320neos, which is likely to be given a new name to distinguish it from the rest of the cabin. “Up to the overwing exits we will have at least a 33-inch pitch and, depending on how many seats we put in eventually – 150 or 156 – it will be 29 inches or 30 inches for the rest. It will either be all 30-inch, or a few rows at 29-inch.”
Althuis intends to keep Air Seychelles’ full-service model, “although we are, like everyone, looking at what elements of the low-cost model we can apply. Like many other carriers we will try to get more ancillary revenue.”
This will likely take the form of allowing passengers to manage their bookings, for example, giving them the opportunity to purchase certain favoured seat rows, either at the front of the cabin or at emergency exit rows.
“On the cost side, we have to become a more efficient airline. We will do the same, or more, with fewer people.” This will involve reductions in cabin crew and pilots, as well as in supporting flight and commercial roles.
“We fully understand how challenging these changes will be and we are establishing the optimum way of dealing with the transition,” said Althuis when the news was announced in January. “During the coming months, the airline team will be working closely with the supervisory board, Etihad and the Government of Seychelles to preserve as many jobs as possible and provide assistance to staff. Resizing the workforce to our changing business requirements is a necessary step to create a lean and efficient company.”
With the new aircraft due to arrive, Althuis and his team are looking at the future shape of the airline’s route map. Increasing flights to Mumbai from five-weekly to daily is a possibility, although slots at the Indian hub are difficult to find. More regional destinations are being studied: “We’re looking at the region more closely – Mauritius, Madagascar, Reunion etc – going forward.”
Last year, several charter flights were organised from China using the Airbus A330s; repeating those will not be possible with the reduced fleet, “but never say never” for returning to China in the future, said Althuis.
The immediate aim is to consolidate, get costs in order, then look at the future, he added.
“Clearly, there are new, smaller aircraft with longer range coming to market. They are not completely ready yet. With a 300-seater [the approximate capacity of the A330s], it has proven to be difficult, but with a 180-200-seater, who knows?” However, looking at this possibility will not happen over the next three years, he admitted.
Air Seychelles’ regional and domestic services are profitable, with the services operated by the A320s and Twin Otters vital for the islands’ economy. The company’s business is seasonal, with late spring traditionally being a quiet period; with Ramadan falling at the same period this year, that has intensified the lull.
“The big paradox is that, given the seasonality of our business, we can’t operate long-haul profitably. But, clearly, with more competition coming into the island, it’s a larger market to feed our domestic flights.”
The airline will concentrate on developing its inter-island services, including scenic flights and island charters, which are set to play an increasingly important role as more international travellers visit the archipelago.
Abu Dhabi-based Etihad Airways holds a 40% shareholding in Air Seychelles and has a management contract with the Indian Ocean carrier until 2022.
“They look to support us where they can,” said Althuis, who was previously the Arab airline’s regional general manager, Europe. Support for Air Seychelles includes assistance in maintaining its aircraft and in providing training for both pilots and cabin crew.
It all points to a challenging period for Althuis; will the retrenchment period make his job harder than he had originally been expecting when he was appointed to the role in December 2017? “I was well-briefed,” he said. “I knew exactly what I was getting into.”
 

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