Air Nauru is a small fish in a very big pond

    Nauru Airlines, the tiny South Pacific flag carrier, has had to adopt a flexible and innovative strategy to survive, establishing its own maintenance company and travel agency. The airline, which relies heavily on the Australian market, is now starting to look at renewing its ageing fleet of 737-300 Classics. It has had a varied history, but is now reverting to a model where it offers a service for some of the smaller islands, as well as offering a mim-hub operation for central Pacific tourism.

    The airline currently operates a fleet of five 737-300s, including four passenger aircraft and one freighter, that are 20 to 25 years old. Nauru Airlines CFO Wendy Bowden told the CAPA Fleet and Finance Summit on 3-Mar-2017 the airline is now considering the acquisition of second hand 737NGs.

    Acquiring new aircraft are still not a viable option given the airline’s small size and business model. “We have to be realistic in what we can do,” Ms Bowden said.

    It is hard for Nauru Airlines to justify new aircraft as does not heavily utilise its fleet given its limited schedule. Most of its network is served with outbound flights leaving Nauru on Friday and returning on Sunday with multiple island stops on each route. Its sectors are generally long and thin, connecting tiny isolated islands.

    Older model 737-700s/800s are starting to become more affordable and will be much less costly to maintain. Operating 737-300s has become challenging due to a shrinking pool of engineers and pilots. Ms Bowden also cited an increasing number of airworthiness directives and availability of parts as challenges confronting the 737-300 fleet.

    Air Nauru recently invested in its own Brisbane-based aircraft maintenance facility after deciding it was too difficult to continue relying on outside providers. “We feel we are very much a small fish in a big pond,” she said.

    And moves along the supply chain

    The airline also has its own travel agency subsidiary, Our Travel Pty Ltd. Ms Bowden said Nauru Airlines was not getting high enough priority from agents such as Flight Centre, leading it to set up an in-house agency. Having its own travel agency also has been financially successful as it has enabled the airline to stop handing over a share of its revenues to outside agents.

    Nauru Airlines aims to begin renewing its fleet in 2019 by replacing one 737-300 with one 737NG. In the meantime, it is looking at converting in 2017 one of its 737-300 passenger aircraft to a freighter, which result in a fleet of three passenger aircraft and two freighters. Nauru Airlines has no intentions to grow its fleet beyond a modest five aircraft.

    Nauru Airlines currently operates scheduled services to eight destinations in the South Pacific and Australia. Brisbane is its largest destination outside Nauru with three weekly scheduled flights. Nauru Airlines also offers provides charter and wet lease services – often in the Australian market as well as throughout the Pacific. “We are a can do airline,” Ms Bowden said, adding it always responds fast to charter requests.

    Potential new tourism routes

    The airline plans to launch a new scheduled service to Guam in late Mar-2017. Guam will initially be served with once weekly frequency from Nauru with stops in Tarawa, Majuro and Pohnpei – all existing destinations. Mr Bowen said the new Guam service will provide an important new currently un-served link to Micronesia, facilitating trade. Tourism is also a potential; Pohnpei for example is home to the remarkable world heritage listed architectural remains dating from the 13th century and Nauru Airlines is one of the few that offer ready access for Australians.

    Nauru Airlines also expects to attract Guam residents, including US military personnel, by offering alternative holiday destinations in the Pacific and Australia.  

    Guam is a much larger local market than tiny Nauru and the other Pacific islands Nauru Airlines now serves as part of its extended home market.

    With the population of Nauru consisting of only 10,000 people, Nauru Airlines has had to be creative with its business model and work closely with other small Pacific islands, some of which do not have their own flag carrier. Acquiring 737NGs will be a major investment and require more close cooperation from a variety of stakeholders – and potentially an innovative financing scheme. However, renewing the fleet is crucial as the nimble airline charts out a sustainable business for the next two decades.

    Air Nauru’s markets by population

    Source: Air Nauru