Will Qatar Airways’ pullout from Seychelles mark a turning point for Gulf aviation?

COMPETITION AMONG GULF AIRLINES PRODUCES FIRST FAULT LINES

The announcement by Qatar Airways to withdraw from the Seychelles route, a destination they have served uninterrupted since 2004, has sent out signals to aviation observers, that this may constitute a turning point in the hitherto relentless march of the three Gulf giants towards expansion, adding new destinations on an almost monthly basis.

Erstwhile Pan Arabian carrier Gulf Air were the first to pull the plug on destinations which their accountants said did not produce enough revenue to sustain the routes, subsequently leaving from Entebbe within months of a re-launch and later last year also from Nairobi.

Also today did news emerge that Etihad was reducing their flights to Sao Paulo from daily to three times a week, at least until end October this year, during which time a thorough evaluation of loads and revenues will undoubtedly be carried out to establish if more flights should be added again.

After publishing the news of Qatar pulling out of the Seychelles in September, Capt. David Savy, current chairman of the Seychelles CAA and former long serving CEO of Air Seychelles, came back with some important observations, he permitted to share here: ‘(I) would just like to enlighten you on a few issues and arm you with the facts and truth. Qatar operates an A319 seating 110 seats daily since December 2004. In fact they rushed to start a month ahead of EK who had announced commencement of services in Jan 2005. Qatar commenced with four weekly services using a narrow body A319 whilst EK commenced with 5 weekly wide-body A330’s. Let us remember that at the time Air Seychelles was still operating its B767’s on Europe. As I stated then and it is still true today we have far too much capacity for the number of visitors we pull in and the current hotel room occupancy. Clearly Qatar has been bleeding since commencement of operations and has decided that after 8.5 years of systematic loses it had to make a decision’.

There is subsequently speculation now if Qatar Airways might drop other destinations with similar patterns too, and perhaps strengthen their presence on routes where high loads do produce acceptable financial returns.

Capt. Savy then went on to say, with clear reference to Emirates’ recent statement that they would wish to move from 12 flights a week to a full double daily service: ‘It is true to say that EK’s announcement that it is moving to double daily with a three class service dwarfs QR’s offer. EK will offer 3626 weekly seats on a wide body compared to QR offering 770 seats on a narrow body. This is a staggering 4.7 times.

Another poignant reality is that whilst we have just over 400’000 one way seats on offer into the Seychelles per annum (all airlines) only about 250’000 are being occupied. This is a dismal overall load factor of 63% and you and I know that this is way below breakeven point.

What is really happening today is that the market is stabilizing and reality is sinking in, simple as that.

Likewise the room occupancy of all hotels combined is in the mid 60’s. Therefore the reality is staring us in the face. We need to create even greater demand for the destination although one must appreciate the work STB/Tourism is doing currently as well as Govt having significantly increased STB’s marketing budget.

Seychelles has to become even ‘sexier’ with a steady stream of new properties, upgrading of existing ones and overall better service delivery. It is ironic that certain persons or sector of the trade is conveniently deflecting the blame or pointing fingers whereas the real solution lies on the ground and primarily hospitality sector.

The airline community has done their fair share and [reality is] that when Seychelles can generate more demand to fill [the] planes and [there are] more new hotels even Qatar Airways will come back. There you are Wolfgang, this is the reality. As a country we may be shining compared to other Indian Ocean islands but not bright enough to retain all existing airlines and attract others. The day we accept this as a fact and stop the blame game we can make real progress. After all the market does exist. Mauritius and Maldives receive close to a million visitors a year and Seychelles a quarter of that number! We certainly do not need that many but a bit more than currently would certainly retain airlines.

David, correctly, also pointed out that handling charges only formed a relatively smaller portion of an airline’s cost when deciding for or against a destination, though Blue Panorama had cited this as one of their reasons last year when they pulled from the route after only a few months.

Another regular reader of my blog posted this comment, again worth repeating here, as after all it is now in the public domain: ‘Don’t think it’s because of the high cost, Qatar they got money and good load factor into sez. With etihad in full control of air seychelles QR know it will be difficult for them to defend themselves in the future, better leave now then leave later with some insult. And now big rumors circulating that ek is going to go double daily to SEZ, with air austral, blue panorama and now Qatar maybe Ethiopian is in the queue next it will be UAE domination in the aviation sector in Seychelles’.

There certainly now are growing indications that the main Gulf carriers are taking a fresh look at load factors and frequencies to certain destinations, and rather – like in the old days when money seemingly did not matter as growth at almost any cost was deemed an acceptable strategy – cut their losses now than bleed fund urgently needed elsewhere, in places where the returns are assured.

The clock is now ticking down on Qatar Airways’ flights to Mahe, and should Emirates’ make good of their intention to go double daily, it remains to be seen how Air Seychelles and partner Etihad will be responding, perhaps with added flights between Abu Dhabi and Mahe in what will no doubt be a tooth and nail fight over passenger numbers and load factors, now that QR has dropped the proverbial towel into the skies.

Emirates meanwhile, in a move to further boost arrivals to the archipelago, held a joint workshop with the Seychelles Tourism Board on 28th May at the Constance Ephelia Resort, Seychelles. The workshop saw the participation of leading tour operators from UK, France, Germany, Russia, and Denmark.

‘The Seychelles destination is an important one for Emirates and this explains why we regularly engage in activities to promote the archipelago across our strong network. The Seychelles is popular with Emirates clients’ but we need to sustain its visibility in key markets’ stated Oomar Ramtoola, Emirates’ Manager for the Indian Ocean islands before adding: ‘With 12 weekly flights to the Seychelles, Emirates is the only airline offering three classes of travel; First Class, Business Class and Economy Class to the archipelago. We consider ourselves as a long-term partner of the tourism industry of the Seychelles. Our partnership with the Ministry of Tourism and the Seychelles Tourism Board is a very fruitful one’.

In response did Mrs. Elsia Grandcourt, CEO of the Seychelles Tourism Board reply: ‘Air accessibility is key to the development of any tourism destination and the Seychelles Tourism Board seizes every opportunity to work with partner airlines such as Emirates to continue to develop the market. The Emirates / Seychelles Tourism Board summit is happening at an opportune time. It will allow the local partners such as destination management companies and large hotels to discuss market opportunities, exchange market intelligence and consumer needs and explore special deals and business ventures/opportunities with Emirates sales and pricing managers with tour operators based in Europe. A second summit will take place in June with tour operators based in Asia and other markets. It is important for us to include the core European markets, which we want to further consolidate, and the new emerging markets, which the destination is developing, in this summit to exchange ideas and continue to work together in planning the way forward’.

In February did Emirates and the Seychelles Tourism Board renew their Memorandum of Understanding which aims at jointly promoting the destination throughout the airline’s network.

Watch this space for regular and breaking news from the Indian Ocean islands’ aviation industry.