Airlines Interview with Air Seychelles CEO Remco Althuis

Mr. Althuis, you joined Air Seychelles as interim CEO in January 2018. Looking back at the year now, what were the biggest challenges in this time?

The biggest challenge was clearly the redundancy we had to go to as we forced to say goodbye to our long-haul flights. We gave back our two A330 and with that we had a lot of pilots and cabin crew that we had to make redundant. The cabin crew mostly found other jobs on our islands. A lot of the pilots were over-sea pilots from Alitalia and AirBerlin and a lot of them found jobs at other airlines. The former leased A330 are now operating for FijiAirways.

In January 2018, your airline reported a major restructuring plan. What were the first steps of this restructuring and where do you stand now?

We have three major pillars of our business: regional flying with the regional network, domestic operations between the different islands and our ground handling business, which is responsible for around 15 % of our total revenue. We have consolidated the network that means that we gave up long-haul flying but we still have flights to Johannesburg and Mauritius, Abu Dhabi and Mumbai left. We are probably going back to Antananarivo, the capital of Madagascar, in next summer. We are studying that seriously. Most of the time of the year was spent on getting leases for A320Neo aircraft.

As part of the restructuring the company stopped operating the Airbus A330 on your remaining long-haul flight to Paris. What were the reasons for this decision?

It was not economically viable. We lost money – that is the reason! You have to understand that for a small operator this is a very sizable chunk of your revenue if you make losses with your long-haul operations. If your long-haul operations are not profitable it impacts your company tremendously. If you are a larger carrier, you can afford routes that are not performing well but as a small airline as we are this is not possible.

Do you think that long-haul operations might be possible again with more efficient aircraft in the future?

It could be more attractive. It depends very much on the overall growth of the demand, which is for a tourist destination like the Seychelles linked to the number of hotel beds. If the number of hotel beds grows, the overall demand will grow. If you have a very strong source market, this will be possible. A company of our size will have distribution challenges because if you have a long-haul operation, then you have to ensure that the demand in that source market is more than enough to operate flight on an annual basis. What the airlines of the European network are doing - generating more demand through their European feeder network - is very difficult for us. For us it is far from easy.

Your fleet currently consists of two Airbus A320 and several DHC-6-400 Twin Otter aircraft. What are your fleet plans for the future?

We are getting two A320 Neo’s in the next year and we have five Twin Otters.

Is the A321 LR interesting for Air Seychelles?

It depends. Clearly it offers more market possibilities. You could fly non-stop to Cape Town, Delhi or maybe even Singapore. But Western Europe is too far away. For us it would depend on the performance and the costs per seat. One particular issue that we have on the Seychelles is that we are so isolated that we need to take extra fuel for our flights. We would never have the amount of seats in an A321LR compared to airlines who operate in a market with a lot of alternative airports. The Airbus A321LR can take 240 seats but we would have to see on what routes we would be able to carry that many seats on the return-lag to the Seychelles to see if it is economically viable. The aircraft is able to fly up to eight hours but if you have a payload restriction it might not be viable. The landing weight is relevant for us. The A321LR and Air Seychelles is not an automatic match for us.

Your two Airbus A320 are configured with two classes: 16 seats in business class and 120 in economy class. Why have you decided for this cabin configuration and what will be the cabin layout of your Airbus A320Neo?

The layout that we have is very much linked to Etihad. One of the aircraft we have was coming from Etihad and we never changed the configuration. We received the aircraft five years ago and there was no demand to increase the seating capacity. This is once again linked to the isolated location of Seychelles International Airport.  From Johannesburg we have to take a payload restriction on our 136 seats due to the altitude of Johannesburg and the operational restrictions we have on several routes. The next alternate for Seychelles International Airport is in the North of Madagascar. When it is very hot or windy in Johannesburg and bad weather is forecasted for the Seychelles we have to take extra fuel which takes payload.  That's why we can't occupy all 136 seats on these flights.

Since 2012, Gulf carrier Etihad owns a 40% share in Air Seychelles. How do your airlines cooperate? Where do you see challenges in this cooperation?

We cooperate quite closely. We use Etihad for our crew training. We use their simulators and our cabin crew has been trained in Abu Dhabi. We will bring this training back to the Seychelles now. But Etihad helps us out in several fields. A company of our size cannot have expertise in all fields. Etihad helps us with leasing arrangements, advice on various aspects and Etihad has board members in our board. We have historically been cooperating closely but we will become more independent and stand on our own feet. We have gained a lot of knowledge from our colleagues from Etihad for example in project management and maintenance. Of course we have a commercial cooperation for our flights between Abu Dhabi and the Seychelles. Our cooperation allows Etihad to have a short turn-around on the Seychelles and we have a short turn-around at Abu Dhabi. Other operators have a lot of ground time on the Seychelles or they need to stay overnight. We don’t have to do this.

How were you affected by the insolvency of the former Etihad partner airline AirBerlin?

We operated flights to Dusseldorf last year but that was not viable. As AirBerlin went bankrupt there were no feeder connections for us anymore. After AirBerlins insolvency, there is no connection between Berlin and Abu Dhabi. Some of the customers that may have come from Berlin to the Seychelles are not coming due to the missing connection.

In the last months, low cost long-haul carriers like Air France’s Joon and Lufthansa’s Eurowings launched flights from Europe to the Seychelles. How do these new competitors affect the aviation market?

Eurowings is very much coming here to provide customers for AIDA cruises which start and end on the Seychelles. Eurowings flies to the Seychelles ten times this winter season. That is good because more people spend time in our country but it is new business that does not affect our operations. If we still had operated flights to Europe, we might have been affected.

Joon has taken over the flights to Paris two times per week, which we operated before. The total number of passengers has not increased so much. The international arrivals of passengers are going just up a small percentage year per year. Once again this is linked to the number of hotel beds. If the number of hotel beds doesn’t grow substantially, the overall demand is not growing. In the peaks all hotels are full so we can’t fly more.

Etihad and Lufthansa are getting closer in some areas. Might there be a possibility for a codesharing agreement or a cooperation between Air Seychelles and Eurowings?

Yes, sure. Right now their operations are almost like a charter for AIDA. But in the future if they want to come here structurally by codesharing with us – why not?

What we understand that Lufthansa’s subsidiary Austrian Airlines is not coming back in next year.

At the end of this interview we are interested in your view of the future: Where do you see Air Seychelles in 5 years?

2023 we will still be operating domestic flights. We will still be operating our very important ground handling business. We will operate a regional network to cities where we see good demand and we have taken a decision on whether we feel going back long haul flying is worth it. As we are an Island nation so communication and connectivity is important for us. This means we have the mandate to fly and a responsibility to do this sustainable.  We have to optimize our aircraft resources and the number of our employees. Depending on how the technologies evoke there may be better aircraft available but everything we do have to be in close consultation with our shareholders and the local government and airport. Geographically we are in a good spot between the two emerging markets Africa and India but we also have to look at the resources that we have. Our airport is small and currently has no infrastructure for in a European or Middle Eastern style hub system. If the demand grows, we would require an overall aviation plan for the Seychelles.

Thank you very much for this interview Mr Althuis.