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FIJI’S AIR PACIFIC CAUGHT IN WAR OF TITANS Big international competitors vie for Fiji market share

SUVA, Fiji (Fiji Times, Nov. 5, 2009) - SYDNEY - A bruising battle for airline market shares in the South Pacific is clouding the outlook for one of Asia’s most successful carriers -- the small but popular national airline of Fiji -- as Australian discount carriers move in on its turf.

Air Pacific Group, part-owned by Australia’s Qantas Airways Ltd., has long dominated the lucrative traffic into Fiji, a country that is one of the world’s most famous tourist destinations. The nation accounts for as much as 40 percent of the total air traffic in the South Pacific islands, which tallies more than five million seats a year, according to the Association of South Pacific Airlines in Fiji, and around 40 percent of the visitors to Fiji travel from Australia.

Fiji’s Air Pacific vies for travelers amid a downturn and political unrest.

To capture that market, Qantas’ discount carrier, Jetstar, and its main Australian rival, Virgin Blue Holdings Ltd., which are battling for market share at home, are ramping up flights there.

Although tourist arrivals have fallen significantly in Fiji this year as the country grapples with domestic political unrest and the overall downturn in travel, it remains one of the few major markets in Asia that hasn’t yet been carved up by budget carriers, making it a particularly attractive prize for big airlines at a time when other routes have become more competitive.

Air Pacific, which is 51 percent owned by the Fiji government, said last month it recorded a loss of $F12.4million (US$6.6m) for the year ended March 31, compared with a profit of $38.15m the previous year. It forecast a much larger loss for the year ending March 31, 2010 as competition intensifies further.

"There is a saying that when two elephants fight, the grass is crushed," the airline’s chief executive, John Campbell, said, referring to Jetstar and Virgin Blue. "We’re the grass."

Many tour operators in Fiji welcome the competition, saying more flights into the country -- and potentially lower fares -- will help restore Fiji’s tourism sector, which accounts for roughly one-quarter of the local economy.

But lower fares are problematic for Air Pacific, which enjoyed two decades of profitability starting in the mid-1980s as Fiji’s tourism industry grew.

Patrick Wong, Chairman of Tourism Fiji, the local tourism promotion authority, said in an email that "we welcome an ‘open sky’ policy" that adds more seats so Fiji can attract more tourists.

"There’s no magic pixie dust" to solve the airline’s issues, said Mr Campbell, who said he won’t seek an extension of his contract when it runs out next June. For now, he said, "the only way you can get the business to turn around is to manage costs very tightly."

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