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Perspectives — Ric Magillicuddy
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Ric Macgillicuddy
With the demonstrated success of the secondary city market on the trans-Tasman sector, led by Hamilton-based Kiwi Travel International Airlines, Danielle Doney speaks with Freedom Air International’s general manager, Ric Macgillicuddy, to discuss competition in the developing market.
Freedom Air’s charter operations have aided the revolution across the Tasman, linking the long-discussed market between so-called secondary cities in New Zealand and Australia.
Kiwi International’s inauguration of services in mid-1995 certainly gave Air New Zealand and Qantas concerns as market share stood to be eroded by the feisty initiatives of the newcomer. Consequently, Air New Zealand used its Mount Cook Airline subsidiary to delve into the fresh new market itself by the establishment of Freedom Air as a charter operator in December 1995. Its foundation based on the principles of the same routes, aircraft type and same low-fare cost structure as Kiwi International has caused widespread speculation in the industry as to whether Freedom’s motives are really that different to Kiwi. Ric Macgillicuddy emphasises that Freedom’s operations are distinctly different, its mission being to provide ad-hoc one-off charters for the Mount Cook Group. “The Mount Cook Group has been actively involved in the charter business for the last decade. Assessments by independent consultants have identified charter opportunities in the Pacific and the whole network that we operate in. We have tried to service that requirement,” Macgillicuddy says. “If one asks what’s the difference between us and Kiwi, we perhaps have a slightly privileged position in that we have this distribution system throughout the Mount Cook Group that feeds us, so there are opportunities that come to us. That helps us in the economies of scale, and enables us to respond to one-off situations.” One-off charters is an area which Freedom Air hopes to increasingly capitalise on, beyond its quasi-scheduled services between cities. “At Christmas an airline company chartered our aircraft to move a large body of people from Australia through to Tonga and back to New Zealand. It was profitable for us, and they could not have achieved it from any other source. That’s the sort of business we are trying hard to develop.” Freedom’s objectives of providing corporate clients with a total aircraft charter will provide immeasurable opportunities for it in this market. “So if we can get a 12 or 18 month vision, look at all the different aircraft types that are available, we can really get into the charter business.” With this, Macgillicuddy strongly points out that the airline does not intend to increase its fleet but rather increase its access opportunities. Aircraft on short-term lease arrangements with British charter companies have created some degree of angst for both Freedom and Kiwi. Freedom claims it is achieving maximum utilisation of its sole 757 on wet lease from Britannia, a fact which is limiting its ability to adapt to additional markets. Discussions with Britannia and other carriers are currently underway to secure a long-term future for Freedom Air. The company favours a damp lease, with tech crews provided by the lessor and Freedom training and employing its own flight attendants. Freedom Air International currently serves Sydney from Auckland, Christchurch, Hamilton, Wellington and Dunedin and Brisbane direct from Hamilton. Its need to spread the services over a wider network is borne out of the short-term nature of approvals for charter operations. Under the current agreement with the Australian Government, Freedom is limited to 25 services per city pairs over the duration of its operating lease with Britannia. Ric Macgillicuddy says, “When looking at the legislative requirements for operating charters you will note the restrictions on the number of flights from point to point, however, there is the opportunity for both the development of new traffic (through secondary ports) and new opportunities. We place an emphasis on the development of opportunities of a one-off nature that normal scheduled carriers would not undertake because of the rigidness of their schedules.” When addressing the issue of increasing destinations through targeting secondary ports such as Townsville and Coolangatta, the airline notes the requirements of instigating and establishing the essential facilities of an international airport at these previously domestic ports – border control, customs and immigration. “We have talked to airport management and other interested parties and I have to say that the co-operation they have offered is tremendous – if there is a way they can accommodate us they will.” With an increase in destinations, Freedom believes it can capture a larger number of first-time flyers. Passenger research has shown that on average, 40% of its flyers are doing so for the first time, having taken advantage of the comparatively low fares. On average, passengers are staying in either country for about one week. Increasingly however, traffic from Auckland is visiting Sydney for a long weekend. “The Auckland/Sydney/Auckland schedule is structured over three days, Friday to Sunday, to take advantage of theatre shows and other major events in Sydney.” The Freedom operation is also being used “to tease people to come to New Zealand. Australia was a little slow to start because we purposely did not wind the machinery up until after December. Our priority was to get our ground handling relationship right in Australia to make travel as seamless and simple as possible”. Freedom’s success in stimulating previously untouched markets is paying small dividends at present, but would appear that despite the short-term nature of charter operations, Freedom is finding a comfortable place in stealing away some of the lucrative market share from the majors and Kiwi International. Its next test will be a further revision of the trans-Tasman air pact in the coming year, should the one-off charter business still be viable at that time.
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