Pero’s Pasifika just might fly
COMMENT: Planned airline faces challenges, but low costs mean this could be the right time to launch
Inmany ways, Mike Pero has got his timing just right. The owner of the “emerging” Pasifika Air has broken cover and givensome details of his operation. The airline will use leased Virgin Australia aircraft at a time whenmarket lease rates have crumbled. Around the middle of the year they weredownby 38 per cent on January.
Pero can also tap into ahighly skilled and motivated workforce for his airline, which will initially point its planes at the Cook Islands, which could be part of a quarantine-free travel arrangement from late March.
The majority of staff will be from Virgin Australia, which laid off between 550 and600cabin crew and pilots in April, withmanyof them based in Christchurch, from where Pero will launch operations.
Hecan avoid “legacy costs”— the longstanding employment arrangements faced by established airlines, with pay and conditions negotiated over years.
Although fuel prices are forecast to increase slightly next year, they comeoff a lowbase. The price of jet fuel isdownbymorethan 30 per cent on a year ago, at US$55 ($77) a barrel.
Andwith the prospect of a transtasman bubble starting at the sametime, the big competitors— Virgin Australia, Jetstar and Airnew Zealand— maybe focused on that denser route with itsmorereliable revenue, rather than aholiday destination in the Pacific.
Pero is the main backer of Pasifika, although he says there is the potential for other investors. If banks want to lend, moneyhas never been cheaper.
Flights will be three times aweek from Christchurch and Wellington. Starved of international traffic, from which theymaketheir highest yields, the airports would be keen to accommodate anewcomer. Most importantly, Pero avoids going headto-head with Airnewzealand, which flies out of Auckland to the Cooks.
He’s hoping to get airborne by the middle of the year, in time for the peak winter travel season and, Covid willing, a fewmonths after a quarantine-free travel bubble has been established.
Pero is one of the most recognisable faces innewzealand business and got his timing right in launching the idea of the airlinewhen he did, well before it has approval to fly. Hecan portray Pasifika Air as a challenger brand, the little scrapper taking on the big airlines.
He’s certainly got tailwinds on the cost side, neatly summarising it like this: “We’ve got aircraft parked up, desperate lease companies and banks trying to get theirmoneyback, fuel is good, crew is good and Kiwis are ready to goawayfor their winter holidays.” With dual residency innew Zealand and the Cook Islands, Pero knowsthe market well— he’s travelled there frequently during the past 40years.
Theheadwinds
Pero has been a commercial pilot and knowshowtough the airline business is. His first job as a commercial pilot waswith Pacifica Air, flying between Christchurch and Wanaka.
That airline suspended services in 1989, hit by competition from a bigger rival and high charges.
Pero also flew formtcook Airline, andwas onthe list for an interview at Airnewzealand, but reportedly missed outwhenthecompanyhit turbulence and laid off staff.
Hewasalso involved in Origin Pacific Airways, which ceased flying in 2006, and lost a “significant amountof money”.
With understatement, he says: “It’s not easy starting an international airline.” He’s also upagainst Airnew Zealand, which has ahistory of not surrendering routes without a fight. Whyshould it?
With plenty of aircraft, the airline could swing adreamliner onto the Rarotonga route. Nomatter what Pero does to the interior of the narrow-body Virgin planes (some of which are 17 years old), the bigger twin-aisle 787 is usually going to be moreattractive.
Airnewzealand has flown from Christchurch to Rarotonga before and could do so again. Likewise, the airline could fly out of Wellington.
It also has morethan three million Airpointsmembersand it is pulling out the stops to keep them moreloyal than ever. While the airline suffered a reputational blow this year over refunds and credits, for most customers loyalty is all about the loyalty scheme.
But the thing that makes Airnew Zealand most formidable is hundreds of millions of dollars in travel credits. Peoplewhoareowedflights must takethem with the airline.
Those with big credit balances maybe willing to burnthemup quickly just in case borders close again, and could be happy to fly to Auckland if necessary to catch a flight to Rarotonga without too muchconcern about the cost. They’ve spent themoney already.
Pasifika also faces significant regulatory hurdles.
The Civil Aviation Authority says it has met Pero and his team and talked through theaoc(air Operators Certificate) certification process in general terms.
“Whenthey are ready tomakean application for anaocitwill be assessed in accordance withcaa policy and procedures and, upon successful completion of that process, anaoccan be issued,” said a spokesman.
Aviation commentator Ireneking says the concept of Pasifika Air sounds great but startingup an airline inthese most uncertain times is not for the fainthearted.
Newzealand doesn’t have a great track record in being able to sustain airlines— even AIRNZ has had, and is having, its troubles, she says.
“I’d say the odds are not great but Mike’s a serial entrepreneur and maybethenewworld order favours serial entrepreneurs as opposed to themore traditional airlinemodel.”
Pero has to hope that awave of public support, a bit of luck and big competitors beingdistracted by flying to Australia willmeanhis Pacific Bubble airline really will fly.