Solomon Airlines Chairman hosts second Solomon Islands media update for 2021

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Full Transcript

Frank Wickham, Chairman, Solomon Airlines

First of all, on behalf of the board and the management and staff of Solomon Airlines, we’d like to welcome and thank the media for being with us here again.

It was in April when we first met and we thought it would be timely for us to update you on the progress since we last met. And again, I also want to highlight that the media is an important partner, hence our recognition of the opportunities we should make use of to brief the media and work together with the media, in promoting and furthering the objectives of our national airline.

I’d like to start firstly, to acknowledge a number of entities. First of all, as you can see through this difficult time Solomon Airlines is still flying as there’s been a lot of hard work right from the cleaner to the CEO and the Board, a lot of people are working to keep the business going, keep the planes in the air, and we acknowledge the CEO, the pilots, engineers, the Executive team, and all in the airlines, for all their hard work.

And also, particularly our shareholder, the Government of Solomon Islands, through the various ministries, the Ministry of Finance, the Ministry of Communication and Aviation, the Ministry of Tourism and Culture, Tourism Solomons, for the strong support in various ways they have come forward to assist and partner with the airlines, to see the progress we’ve achieved thus far.

I need to also make special mention to our development partners, particularly Australia and New Zealand Governments, they have provided very strong support through their embassies here in Honiara, and we acknowledge them and thank them.

And the general public, thank you everyone, thank you so much for flying on Solomon Airlines, for the trust and the confidence you have to fly with us, on domestic routes and also on international. A few weeks ago, I saw all our Solomon Islanders boarding the A320 to go to work overseas, seasonal workers, and it was a special sight to see, Solomon Islanders from all walks of life, different provinces, queuing up to seek a future through employment overseas, and there’s Solomon Airlines helping to make this dream come true for many Solomon Islanders and it was quite a special time for me as Chair to see this, so we thank the public for your support and all our business partners, creditors, other state-owned enterprises. It is really partnership in very very difficult times.

Joining me in this session is my Management team, we have Mr Brett Gebers online from overseas in Brisbane, our CEO, welcome Brett and thank you for joining us.

Brett Gebers, CEO, Solomon Airlines

Thank you Chairman.

Frank Wickham, Chairman, Solomon Airlines

We have Peter Soqoilo our Finance Manager, and Mr Colin Sigimanu Commercial Manager. And they will also share with you various aspects of our progress thus far.

We are working on a new strategy for long term business, and we are talking with the Government and we are seeking opportunities with World Bank-funded programs in the Solomons to look at how we can strengthen and build a more coherent and practical strategy going forward.

And a lot of the success of any strategy moving forward basically hinges on the opening of our borders, and so when you come to think of it, Solomon Airlines is the link with the rest of the world, cargo and passengers, and so the timing for the opening of borders again is one we are really looking forward to, so we look to the Government for guidance and we look to the public for supporting the Government, so that we can all continue to have a safe and secure interaction with the rest of the world because Solomon Airlines is the link to the rest of the world for passenger movements.

I will take this time now, to allow the CEO to share on the progress thus far with various operations, particularly in the charter environment, the leasing and some of the new developments and we will move on to the other updates from the two managers. Over to you Brett

Brett Gebers, CEO, Solomon Airlines

Well in terms of charter, charter is not a consistent way of earning money but at the same time, it is the only option available to us at the moment since we are not allowed to fly general scheduled services to the Solomons or anywhere else for that matter.

So, we have a Friday flight that flies from Brisbane to Honiara and back to Brisbane with a limited number of passengers allowed. For the whole of July and most of August we weren’t allowed to carry any passengers as a result of the new Delta variant of the COVID virus, however, the Government has recently allowed a limited number of people to start flying again. And the rest of the Friday flight is filled up with cargo and that cargo is obviously important stuff for the country and in some instances even the airline, spare parts for our domestic operations etc.

As far as charters go, we’ve done a number of charters to China picking up vaccines which we’ve delivered to both Honiara and to Tarawa, we’ve done flights picking up construction workers and brought them to Honiara from China as well as taking some home as well. We’ve done a significant amount of flying for Nauru Airlines, and we’ve taken seasonal workers from a number of different countries in the South Pacific to Australia, mainly Brisbane and Sydney, sometimes Hobart. The charters all take a huge amount of planning, time and effort, and many of them get cancelled at the last minute for a number of reasons, some of which is COVID related, some of which is capacity for quarantine in the host countries. There is a limitation to the number of people that can be taken into any country and that’s driven largely around the country’s ability to provide quarantine facilities, just like the Solomons in fact. And sometimes of course it’s the price as well, somebody pops up with a better price and the charter flight is cancelled. Nonetheless, we work extremely hard at generating charters, the Brisbane based crew are really working exceptionally hard to make the A320 a success, and within Solomon Airlines and within the Solomon Islands itself we obviously have a domestic operation which is a Dash-8 and 2 Twin Otters, we had a 3rd Twin Otter which we leased to Air Kiribati because they needed another Twin Otter very badly. And for the whole of last year, and in fact up to June this year, we only used 2 of the 3 Twin Otters that we actually had in Honiara, so we elected to lease the aircraft because it generates much-needed income for the company, and that obviously comes with a number of compromises that we have to make in terms of having a spare aeroplane available just sitting around in case one breaks, we don’t have that anymore, so we are fairly reliant on having to recover some of those cancelled flights over weekends due to weather or sometimes mechanical breakdowns etc. So anyway, that’s where we are with that. The domestic service is operating at about 60% of what it used to and obviously the international service I can’t even relate passenger numbers to what we used to fly because we fly so few passengers.

Other problems we have are because of the decline in worldwide flying it has become incredibly difficult to get parts shipped from anywhere in the world to Brisbane in order to meet our weekly flight to Honiara. For example, the number of flights between Australia and the USA is about 10% of what it used to be, and we just have to work exceptionally hard to get parts onto a flight that flies to Sydney or Brisbane, and then get the parts to Brisbane and bring them up to Honiara. That is a constraint for us and it's one that we have to manage. It’s also made getting parts to the Solomon Islands very expensive as well.

The other problem that we have is that the crew for the Dash-8 and the A320 all have to go to simulator training in Melbourne, and with health restrictions in Melbourne and in Brisbane, Australia and Solomon Islands, makes the round trip for the Dash-8 crew very very long. It used to take a week, we could send people from Honiara to Melbourne and get them back to Honiara within a week having done their training, it used to cost us the equivalent of about $12,000 for a crew. Now we have to send the same crew to Brisbane, 2 weeks in quarantine, then they go to Melbourne, do their simulator training, come back to Brisbane, wait for another flight to Honiara, and then spend 3 weeks in quarantine. So, the cost of training a crew has gone from $12000 per crew to about $51000 per crew. So that’s the sort of thing that we’ve had to deal with, the cost of compliance has risen hugely. We also have great difficulty in having to find workarounds to get people trained, which includes the use of Zoom or Microsoft Teams etc and we are fully compliant and we still have an IOSA certificate which is the highest qualification that we can get from an international body, and we did the IOSA audit in February, it was a remote audit, and we have another one coming up shortly.

So, we are in good shape from a regulatory perspective, we’re in good shape from a compliance perspective, we’re just waiting for the borders to open so that we can restart flying.

Frank Wickham, Chairman, Solomon Airlines

Thank you Brett. There are some good developments you would have seen recently also on the domestic front, and the promotion and marketing to get more business for our planes. I’ll let Colin share on this front.

Colin Sigimanu, Commercial Manager, Solomon Airlines

Thank you Chairman, as the CEO has already touched on, our domestic flying has been reduced a lot, and it’s a part of our cost-saving exercise, so basically we are still flying a scheduled domestic service from Mondays to Fridays only and the weekends are reserved for aircraft maintenance for Engineers to work on the aeroplanes and for any recoveries from disruptions that we may incur during the week. We have been experiencing so many disruptions, and basically, recently we have been flying 7 days a week now because the recoveries are all operating over Saturday and Sunday which is increasing our cost as well, but our passengers are important. So that’s on the domestic service.

In terms of initiatives, earlier this year, we launched the Iumi Tugeda Holidays, as part of the Iumi Tugeda campaign that was launched by the Prime Minister last year. The holidays package is really taking off, it’s becoming very popular, the private sector initially made use of it buying packages to visit our domestic destinations, but with the public service now coming on board we have now seen a marked increase in travel under the Iumi Tugeda Holidays. In fact, my team, the Marketing team has just reported to me late yesterday afternoon, that the months of December and January for a particular resort in Marau, Milk Fish, has been totally booked out. And that’s basically coming from the public servants who are taking more and more interest in utilising the Iumi Tugeda Holidays, and I think our forward booking profile, the graph is actually going north. So those sorts of incentives are really helping us with our revenue and our cash flow, but they’re also a very positive sign for our struggling operators in the provinces for whom the packages are also aimed at assisting them in the absence of international tourists coming in, so the aim of the package as we initially wanted it to do is actually being realised, and we are hoping more and more of our unknown operators who are participants in Iumi Tugeda Holidays, will also start to receive clients.

Our operators out in the provinces are struggling to survive, and the Iumi Tugeda Holidays package is assisting in generating the much-needed revenue that they will need to sustain and maintain the facilities on the ground, so that’s worked out very well for us.

Frank Wickham, Chairman, Solomon Airlines

Thank you Colin. We continue to face additional challenges, and the rising fuel price has really crept up and increased our operating costs, I’ll get our Head of Finance, Mr Peter Soqoilo to share some highlights on the Finance side.

Peter Soqoilo, Finance Manager, Solomon Airlines

Thank you Chairman. As the Chairman and my CEO has highlighted, we are operating under a very challenging environment. Despite this challenging environment, we’ve just had our August financial report extracted. Overall, in terms of our performance from our projected numbers, in terms of our profit and loss, we are better off by SBD$11m. We have projected around SBD$23m loss, our current loss is SBD$12m, so that is where the SBD$11m is. So things are hard, but there are some positive signs, and this is driven by as Brett says, additional charters, we have generated about SBD$20m over and above what we have projected, and the weekly cargo flight, has still been generating good revenue, and from June, as my colleague Colin has highlighted, with these Iumi Tugeda packages it’s showing some increase in our domestic revenue, so those are some of the positive drivers driving these numbers. In terms of our projections, cost wise as we speak the A320 is in Singapore to undergo its normal C-check. We have projected it will cost us around SBD$4m, that is our projection, last week we have paid about half of that to the service providers there in Singapore.

The other thing that we have done is as my CEO has highlighted to ease our cash flow, we have leased 2 of our Twin Otters to Air Kiribati, that’s generating around, in fixed cost, because it costs about US$25k, so that’s US$50k per month for the two, plus we charge them flying hours of about $220 per hour for using those aircraft. So that’s some of the ways we are trying to do to ease up our cash flow variance. That’s what I can update us.

Frank Wickham, Chairman, Solomon Airlines

Thank you Peter. As I alluded to the cost of fuel, you would have seen just recently we increased our airfares slightly, and that’s by 7%, the fuel price has gone up by 56% recently and so we were forced to raise our airfares slightly to recoup some of that. As you have heard from the CEO, we are looking at more means to increase our revenue, maximise our revenue, from these various charters and leases and keep our costs low. There are some areas that we are really struggling with, and it’s the state of our runways and airports in the country, it is still rough and causing downtime, when it rains we can’t get to our provincial airstrips, a number of them, and we lose revenue because of that, and also our repair and maintenance cost is very high because of the rough landings that we experience out in the provinces, so it would be a great boost for the airline if the Government continue to improve our airstrips in the country and increase flying times for our aircraft.

I’d just like to touch on, the international flying and border re-opening again, as you know tourism recovery will be fully based on the re-opening, we are seeing the countries in our region working to try and reopen their borders, with Fiji announcing that they will reopen soon and each country approaching it differently, and we’ve also heard from the Government, the target to have a good high percentage of our population vaccinated. Solomon Airlines is closely involved with the Solomon Islands Government in these evolving COVID-19 protocols and as we continue to refine our procedures and response plans, we hope that we will reach a stage soon where we have more people travelling in and out of Honiara on our international flights.

In our previous meeting in April, I shared my strong confidence in the future of the airlines, I maintain this outlook and I can speak on behalf of the Board and Management and all of us in the airline, that with the ongoing support from the Government, the support from our partners and with the special attention given to the airlines, we can see through this difficult time, and be sustainable in the medium to long term future. The projections going forward is still looking good if the borders are open, and we know the Government still plans to host the Games in 2023 and we look forward to that exciting time when we can see more people travelling in and out of the country, but it will require all of us in the country to work with our government, to implement whatever plans there is to prevent community transmission and protect our country. Many times, I’ve observed our people board and disembark our domestic planes with confidence and trust in the airline. These experiences remind us of the significance of Solomon Airlines as a national carrier, the significant essential role that Solomon Airlines plays in our economy, in health services, supporting the private sector to grow, particularly in tourism and business. And I want to reiterate again the importance of Solomon Airlines being our national carrier and we look to the Government to support us continuing with this position, continuing with this strategy, and so on behalf of all of us, I wish to acknowledge and thank everyone in the airline again, from the most junior to the most senior and the board for the continued dedication and hard work, and I thank you all for your support of Solomon Airlines.