ABTN speaks to Oman Air’s CEO Peter Hill about future plans for the airline...
Your route network is growing quickly. Is there a strategy for future routes in Europe?
It’s all about identifying markets where we believe there is a long term future in terms of inbound and outbound leisure traffic as well as business traffic. The UK has always been a strong candidate and we have been there several years now. France and Germany were the next biggest markets. Italy is the one we have just chosen. We have also worked with the Oman tourist board to find out where they believe the future areas for development will be. We will be announcing another couple of destinations in a couple of months. Europe is certainly, probably from our experience, the best inbound market for Oman in the next five to ten years. We would like Oman to be put on the map quicker than it is. Currently it is a great destination but not enough people know about it.
Is that a challenge for you or Oman itself? Is it an infrastructure issue?
It’s a challenge for everybody. We are just part of Oman. The Government is investing heavily in infrastructure. They build roads and then they identify sites they want to develop for tourist purposes and then they put the rest of the services in and open up plots for development: Hotels, golf courses, marinas. All of that is very well planned, but it takes time here because they do everything correctly. It bodes well for the future but it takes time.
Things like Oman Sail have done a lot to raise the profile, but only have a handful of boats.
There is a lot you don’t see with Oman Sail. They have a lot of dinghies and are working with the school kids but the public side is the events they have been involved with and there are only 3 or 4 catarmarans.
Is there a lack of capacity in marina, berths?
I think it will come. Oman just moves a bit slower than the Dubais, Abu Dhabis and Qatars. When development happens it is done in a way that fits the country rather than tearing down everything and then thinking we had better build a cultural village to remind everybody what it used to be like. One of our challenges is that as we have been growing the airline very quickly but we don’t have enough passengers who want to go point to point with us and that’s where we see the future of the airline. So we are like most of the other Gulf Carriers having to fill up the aircraft with 5th and 6th freedom traffic which is not really our ultimate aim.
What is the percentage split?
It depends on the route. For the emerging routes like Munich and Milan many of those customers will be going beyond 60-75% depending on the time of year. We have to raise awareness in those markets that Oman is a destination in itself. We are currently working on getting those people to stop over for a couple of days, perhaps on the way to the Maldives or Srilanka, Thailand , Malaysia but that is not the easiest way to do it and what we need is strong campaign going pan Europe really with the same sort of spend as Incredible India, Malaysia Thailand have with big budget promotions.
Do you not need transit traffic to be successful and support the network?
We do but I would like to see more point to point rather than transit traffic. I don’t want to be another Gulf carrier that provides cheap transportation to third country nationals who simply use Oman Air to go from the UK to the Far East. The benefit of that is it’s great if you have huge networks like Emirates but we are never going to have that size of operation here. We have to ask ourselves can we develop this into a non-stop daily product that is going to fill up an aircraft in the next 5-10 years with the largest percentage getting on and off in Muscat. If we can do that then our yields will improve. As I said we are not going to be for everybody. We are really not looking for the bucket and spade brigade and really looking for the medium to upper level of spenders who have probably been to quite a lot of destinations around the world and would see Oman as a niche for many of the things they find attractive for going on holiday. Not just lying on the beach or going on shopping expeditions.
Bearing in mind that at the moment you have a high percentage of transit traffic the current airport is not really geared for that is it?
The new airport will be a very large improvement over what we have today. The capability when it opens in 2014 or possibly 2015 will be twelve million passengers. That’s doubling the size of the current terminal. The current terminal capacity is about five million but the throughput is about six million, so at peak times its jammed which is far from ideal. It was never built as a transfer style of operation and so it gets very congested very quickly. The new airport will be a bit of both. Twelve million capable in the first phase, 25 million in the second phase and 35 million in the third phase. A second runway is going in, mainly air bridge connected stands and a large number of extra remote stands. So many airports today are geared towards what people think the traffic will be in five years time but they then have to last 20-30 years so they outgrow capacity – it’s crazy.
One of the criticisms levied at certain gulf carriers was that the speed of growth meant considerable inconsistency in product and service. How will you address that as a potential issue?
When I came here we already had 7 A330s on order the first four to be delivered in four months. From nowhere to four wide-bodied aircraft. Two more came the year after and the last one will come this year. This was quite a tall order, a huge challenge. I have to admit that whilst the training teams did a great job getting us up and running we did in the first six months see a lot of variable service levels. Now we worked hard on trying to bring consistency to the wide bodied fleet and have made good progress but consistency of deliverables on the ground and in the air is the key thing for us over the next year.
What about the future long haul fleet?
At the moment we have four A330-200 fitted with Business and Economy and three A330-300 fitted with First, Business and Economy. They will have all come in the last two years by the time we get our last aircraft. They are all in our own specification such as being wifi equipped and all with the same product onboard.
We also have on order six B787. They are due for delivery now delivery in 2014, two in 2016 two in 2018 and we have to wait and see how that’s pans out. They are still on schedule at the moment.
Does this mean you might have to look elsewhere?
Who knows? I don’t want to stick a knife into Boeing at the moment but who knows what we might have to do in the course of the next 12 months. We also need to see how that all fits because the A330’s will still be relatively young in 2014 and bringing in another wide bodied unit into a small fleet has its own share of operational challenges.
Are there any obvious destinations where transit times work well?
What we have done in Europe is to realign our arrival and departure times in mainland Europe to make sure that they connect better with the onward flights such as our flights to SE Asia the sub continent So destinations such as Bangkok, Kuala Lumpur, Colombo, Male the Indian sub-continent.If you take the overnight flights from Europe you will arrive in Muscat at about 8-9am in the morning and then we have another bank of flights leaving between 10-12 am going eastbound which will fit fairly well. So you look at 1.5 -2 hrs in Muscat.
It’s not our target market but it works. We only have one slot form each destination and the timings work very well for point to point traffic and in Europe the mix of overnight and daylight flights to Europe connects well with destinations to the East.
Looking at Asia, are there more destinations on the way or is Europe the future?
Yes there are but not quite yet. We need more connectivity as well. If you are looking at the Far East Oman is even less known, if I am looking at leisure travellers in places like Japan, Korea, Hong Kong, Malaysia. Our presence is improving in Malaysia and a lot of Omani’s have second home’s there so that one is a good fit. But talking about inbound traffic coming this way we really have to educate and tell people what’s here and why we are different. They have all heard of Dubai but not Oman. They will probably think Oman is another little version of Dubai so that’s the challenge we have got.
So yes we are looking at more destinations in the Far East but we must recognise that a lot of Far East traffic goes into Africa and so we have to start developing some feeder services into those destinations before we go into places like China because otherwise we will be operating pretty empty flight for quite a while. So if we had three or four destinations in East Africa. We have Dar a salam and Khartoum , Addis, Nairobi could all easily be served from here in 3-4 hours. Then suddenly we can mix our traffic. Some will stop here but others will go into these destinations. In North Africa Libya is a key labour market so for sixth freedom traffic you need to be into some of these markets.
If you look at my colleagues up the road they mainly carry traffic from China to places like North Africa. Libya being a big place at the moment. So for Oman to start going to some of those markets it going to take some time before we can really show a business case or at least get the route to a sort of break even situation. There is no point in flying to places where there is really not much hope yet . I am sure that in 10-15 years time Oman will be pretty well known and we will be flying to Japan, China, the Phillipines, Korea but at the moment it’s too early.
You are on the record of saying how the UK economy was underperforming compared to other mainland Europe markets. Has that changed?
We have seen an improvement but maybe we have got better at sourcing the British public that want to travel with us from different sources. We were finding that the backend of the bus was filling up relatively OK from Europe if we were stimulating the market with price but in First and Business we were not seeing so much as coming out of France and Germany. Now that has changed quite a bit recently. Two reasons for that I think. Firstly because the local market here has taken us. Omanis never used to travel Oman Air four or five years ago, partly because the standard of service was at a different level and also because the foreign carriers were offering better products and connectivity. Secondly outside of Oman we were represented by Gulf Air as the national carrier, (25 Owner of them). When that changed and we started bringing the new product in, it took a little while, but now most Omanis are proud of Oman Air and will not travel with anyone else. Also expats who were always going on their national carrier or other gulf carriers with a stop somewhere else in the Gulf now prefer our non-stop services arriving at the right time in the home market in preference to a late night flight that stops 1.5 hrs into it.
There was some talk of increasing frequency to some markets?
We will be increasing frequency in some markets. Paris and Frankfurt will increase to six flights a week this year. Munich will stay at 4 times a week. Load factors have improved and these added frequencies will help connectivity as well as getting people to see Oman Air and a little of Oman. We also have two new destinations to announce soon for the later part of the year.
I recently read that Oman Air had five divisions. People know Oman Air but what are the other divisions?
The strategic business divisions are the airline, the engineering team which does third party work, the Hotels and Catering division and the Airport Services Division. There is also a training unit where we will be doing third party training.
The newest of the lot is Hotels and Catering now we have been asked to take over the hotel property up the road, the Golden Tulip just over a year because it was previously under the control of the Ministry of Tourism. As they are not really engaged in running businesses it was not as successful as it could be and we both agreed it was a better fit with us and as a result we became the custodian’s of it on behalf of the Government. Rick Hodges is now onboard to rejuvenate the property
In the recent past Emirates established its own hotel brand but I believe they only have one property left. Are you trying to emulate that?
We will see. What we are trying to do first of all is to see how, when we develop the hotel we are not going to brand it under our own name. We are going to decide whose franchise it will be under and the current franchisee will be able to bid for that under a different style. A number of others will be offered the opportunity. We will see how that goes. We believe with the proximity close to the airport, the expansion at the airport and being able to use it as part of our holiday and stopover programs that there are a number of ways we can improve the utililisation of that property. If we are successful then we have an idea where we could take over the management of a number of properties in Oman itself. This is a large country. The major hotel properties of international quality are found here in Musact and down in Salalah. But Oman is more than these destinations. There are properties around that could benefit from strong management expertise like us where we could use them and leverage them as part of other programmes the group might be involved in.
As well as the potential of taking over some franchised food outlets and maybe acting as the master franchisee for certain chains that are not in Oman at the moment and the expansion of our opportunity for industrial catering. We have a large unit providing airline food for ourselves and other visiting airlines. We are moving from there into a new purpose built unit which will triple capacity as part of the new airport project which is only four years away. We will then have an industrial kitchen as a second unit ideal for other work – another opportunity. Maybe work for other restaurants , hotels, outside catering, schools, hospitals and so on.
There is no lack of opportunity. Just waiting for people to grab it. When I worked up the road that’s what we did big time. There is a large part of the Emirates/DNATA set up not in the travel industry. That all ads to the group profit. As you know airlines are a bit like a roller coaster so you need some of these other businesses to actually smooth things out and help in the tough times and add benefits in the good times.
When people talk about Dubai they talk about Emirate inc. Does Oman work in the same way? Are you part of Oman Inc?
Well I see ourselves diversifying in a number of ways. We are the handling agent at the airport and that is a profitable business and one where we are good and successful. Today due to space constraints you don’t see many executive jets at the airport. They are all up the road in Dubai or Abu Dhabi but they could be here because we have Omani owners parking them outside of the country. That’s crazy so we could develop that part of the business. We are about to embark on a range of sightseeing flights very similar to what happens in Dubai where they have scenic flights over the Palm. The scenery here is even more interesting so we are just about to start a joint venture with Seawings from Dubai to do scenic flights here with a float plane. That will also add a different dimension to the business here.
There are half a dozen domestic airports coming in the next few years. All of those are situated at business centres or potential tourist destination so in the next 5-10 years we may be able to do aerial safaris from one to another and then visitors can spend a day or two in a destination before moving onto a different site. This is not for everybody but could be a lucrative business and where our hotels could come in.