“Fiji Airways losing money on domestic route”.
Letter to Editor (The Fiji Times, Fiji Sun, Island Business) sent 30 June 2014s
I wish to congratulate Mr Pichler and Fiji Airways for listening to complaints by international flight customers (including this one) about the need for good hot simple meals and a low cost but informative old-style inflight magazine, rather than an expensive glossy and empty PR magazine.
But economics students (and the Commerce Commission) must seriously think about Mr Pichler’s recent claim (Fiji Sun, 28 June 2014 ) that his “domestic subsidiary is losing money”, that “their operating profit margin in the domestic network was negative two per cent” and that “ to some extent” this was because of the infrastructure restrictions like short runways at Savusavu.
Not too long ago, in contrast to the current monopoly, there were two competing airlines operating on the same routes, under the same runway infrastructure and presumably making some profits, despite the prices being much lower than the current ones, even allowing for inflation.
Today, especially on the major Nausori-Nadi-Labasa trunk routes, there are fewer flights, nearly all operating at maximum capacity, and presumably optimum profits. Of course, the consumers have no alternative but to suffer the inconvenience of long waits for connecting to or from international flights, with even that delayed after the scheduled time because of alleged “operational reasons” (i.e. airline gobbledegook for “waiting for more passengers from connecting flights to increase the load factor”).
The Chairman of the Commerce Commission (Dr Mahendra Reddy) has previously refused to reply to media questions on this particular monopoly issue, despite grand claims in the vision and mission statements of the Commerce Commission.
Given the now public explanation by Mr Pichler on the alleged unprofitability of the domestic routes of Fiji Link, can the Commerce Commission (and Dr Reddy) explain:
(a) whether the financial returns on the Nadi-Nausori-Labasa routes are indeed negative; or
(b) whether the high prices and high profits on the above routes are used to cross-subsidize other unprofitable sectors of Fiji Link;
(c) if subsidies have to be given on Fiji Link’s unprofitable but socially necessary routes elsewhere, why are they not given in a transparent fashion by tax-payers in general instead of being burdened on the consumers of the popular domestic routes; and
(d) why Fiji Airways cannot be ordered by Commerce Commission to reduce prices on the Suva-Nausori-Labasa routes.
If Dr Mahendra Reddy’s current activities also include trying to enhance “substantial competition” in the political arena, could he please ask the usually reticent CEO of the Commerce Commission to respond to this letter, although I point out that reducing domestic air fares might also win Dr Reddy some “kudos” useful in an election.
Or do consumers have to wait for a new Minister of Aviation or a new Executive Chairman of Commerce Commission, after the September elections?
Professor Wadan Narsey