Tokelau Air Services Study – Stage 1 7 January 2010 Final Report
Prepared by: Eagle-i Airline Planning PO Box 90162 Victoria Street West Auckland 1142 Phone +64 9 3663375 Fax +64 9 366 3371 Email [email protected] Web http://eaglei.aero
January 7, 2010 TOKELAU STAGE 1 - FINAL
1.0 Contents
1.0 Contents ...... 2 2.0 Executive summary ...... 7 2.1 Risk assessment ...... 9 3.0 Commercial ...... 10 3.1 Demand Analysis ...... 10 3.1.1 A Single Point of Entry Airstrip ...... 10 3.1.2 Existing Passenger Demand ...... 11 3.1.3 Passenger Demand Projections to 2012 ...... 11 3.1.4 Air Fare Modelling ...... 13 3.1.5 Excess Baggage & Perishable Airfreight Demand ...... 19 3.2 Revenue Estimates ...... 20 3.2.1 The Aircraft Type Options ...... 20 3.2.2 Frequency Estimates by Aircraft Type ...... 20 3.2.3 Airfreight Payload Estimates ...... 21 3.2.4 Passenger & Airfreight Revenue Estimates ...... 22 3.2.5 Passenger & Airfreight Revenue Sensitivity ...... 24 3.3 Aircraft Operational Trip Cost Performance ...... 26 3.3.1 Aircraft Type Operating Cost Analysis ...... 26 3.4 Operational Profitability ...... 28 3.4.1 Aircraft Type EBITDAR Margin ...... 28 3.4.1 Net Present Value of EBITDAR Results – The Most Likely Growth Scenario ...... 28 3.4.2 Net Present Value of EBITDAR Results Sensitivity ...... 29 3.5 Summary of Aircraft Suitability ...... 31 3.6 Potential Operating Models ...... 32 3.6.1 The Charter Model ...... 32 3.6.2 A Joint Venture Model ...... 33 4.0 Partner Evaluation ...... 34 4.01 Aircraft Operator...... 35 4.02 Sales and Marketing ...... 35 4.03 Distribution ...... 35 4.04 Airport Operations ...... 35 4.05 Partner Management ...... 35 4.1 Aircraft Operating Partner ...... 36 4.1.1 Selection Criteria and Summary of Results ...... 36
2 1.0 Contents | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.1.2 Aircraft Partner Technical Evaluation ...... 37 4.1.3 Aircraft Partner Propensity to Engage ...... 39 4.1.4. Detailed Aircraft Operating Partner Analysis ...... 41 4.1.4.1 Inter Island Airways ...... 41 4.1.4.2 Pacific Sun ...... 42 4.1.4.3 Polynesian Airlines ...... 43 4.1.4.4 Chathams Pacific/Air Chathams ...... 45 4.1.4.5 Air Tahiti ...... 46 4.1.4.6 Air Nelson (Air New Zealand) ...... 47 4.1.4.7 Air Rarotonga ...... 48 4.1.4.8 Air Niugini ...... 49 4.1.4.9 Air Calédonie ...... 50 4.2 Sales and Marketing Partner ...... 52 4.3 Distribution Partner ...... 52 4.4 Airport Operations ...... 52 4.5 Partner Management ...... 53 4.6 Partner Discussions ...... 54 5.0 Airstrip & Infrastructure ...... 55 5.1 Background ...... 55 5.2 Airstrip Specifications ...... 55 5.3 Site Selection Criteria ...... 57 5.3.1 Site Selection Overview ...... 57 5.3.2 Specific Site Selection Criteria ...... 57 5.3.3 Selected Sites ...... 58 5.4 Airstrip surfacing specifications and cost estimates ...... 60 5.4.1 Overview of airstrip cost assumptions ...... 60 5.4.2 Unsealed Coral Surface ...... 60 5.4.3 Chip Seal Surface ...... 61 5.4.4 Asphalt Surfacing ...... 61 5.5 Airport infrastructure specifications and cost estimates ...... 63 5.5.1 Overview of airport designation ...... 63 5.5.2 Airport infrastructure capital costs ...... 63 5.6 Construction timeline and overall cost summary ...... 65 5.6.1 Construction timeline ...... 65 5.6.2 Cost Summary and surface recommendation ...... 66 5.7 Regulatory assumptions ...... 67 Eagle-i | 1.0 Contents 3
January 7, 2010 TOKELAU STAGE 1 - FINAL
6.0 Recommendations for Stage 2 ...... 68 7.0 A Wider Pacific Solution ...... 70 7.1 Overview ...... 70 7.2 Cross-Pacific Air Service ...... 71 7.3 Aircraft cost efficiency ...... 71 7.3.1 Historic air service inefficiency in the South Pacific ...... 71 7.4 Efficient aircraft utilisation ...... 72 8.0 Appendices ...... 73 8.1 Financial Statements ...... 73 8.2 General Assumptions ...... 76 8.2.1 The Operating Model ...... 76 8.2.2 Positioning Costs ...... 76 8.2.2 Performance Scenarios ...... 76 8.2.3 Notes to Financial Statements...... 77 8.3 Airstrip Construction & Infrastructure detailed cost estimates ...... 78 8.4 Airport Technical Requirements ...... 79 8.4.1 Regulatory facility standards – Domestic NZ only – non security designated aerodromes ...... 79 8.4.2 Regulatory facility standards – International NZ – security designated aerodromes ...... 80 8.4.3 Regulatory facility standards – Fagali'i Airport model ...... 82 8.4.4 Regulatory facility standards – Full international model – ICAO ...... 83 8.4.5 Service facility requirements ...... 84 8.5 Airstrip Infrastructure Specification Recommendation ...... 85 8.6 Timeline ...... 86 8.7 PIASA ...... 88 8.8 Acronyms ...... 89
List of Tables: Table 1. Risk Assessment Table ...... 9 Table 2. Fare benchmarking Asia-Pacific routes by distance (Sep-Nov 2009)...... 13 Table 3. Air fare distribution scenario ...... 16 Table 4. Annual & Year Three Weekly Frequencies by Aircraft Type and Growth Scenario ...... 21 Table 5. Revenue Estimates by Aircraft Type 25% Growth $250 Average One-Way fare...... 23 Table 6. Growth Scenarios ...... 24 Table 7. Three Year Average Revenue Estimates ...... 25 Table 8. Growth Scenarios ...... 29 Table 9. EBITDAR Return Table – Charter Operating Model ...... 30 Table 11. Operating model option matrix...... 32 Table 12. EBITDAR Return Table – Joint Venture Operating Model ...... 33 4 1.0 Contents | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Table 13. Aircraft partner high level technical ability evaluation table ...... 37 Table 14. Aircraft partner propensity to engage...... 39 Table 15. Inter Island Airways Profile ...... 41 Table 16. Pacific Sun Profile ...... 42 Table 17. Polynesian Profile ...... 44 Table 18. Chathams Pacific/ Air Chathams Profile ...... 45 Table 19. Air Tahiti Profile ...... 46 Table 20. Air Nelson Profile...... 47 Table 21. Air Rarotonga Profile ...... 48 Table 22. Air Niugini Profile ...... 49 Table 23. Air Calédonie Profile ...... 51 Table 24. Airport ground operations costs ...... 53 Table 25. Airfield site location options ...... 58 Table 26 Airstrip timeline as advised by Beca ...... 65 Table 27. Airstrip and infrastructure cost estimates ...... 66 Table 28. Tokelau Air Services Study Stages 1 & 2 ...... 69
List of Figures:
Figure 1. Proposed Aircraft Routing ...... 10 Figure 2. Passenger volumes by sea for 12 months to May 2009 ...... 11 Figure 3. Tokelau demand estimates ...... 12 Figure 4. South pacific air fare comparison ...... 14 Figure 5. Asia/Pacific air fare comparison ...... 14 Figure 6. Average Fare scenarios and total flight revenue impact ...... 16 Figure 7. Air fare distribution chart ...... 17 Figure 8. Aircraft seat configurations ...... 20 Figure 9. Estimated Average Payload by Aircraft Type ...... 22 Figure 10. RASK by Aircraft Type ...... 24 Figure 11. CASK Analysis by Aircraft Type ...... 26 Figure 12. Actual Seat Cost by Aircraft Type ...... 27 Figure 13. EBITDAR Margin by Aircraft Type ...... 28 Figure 14. Net Present Value of EBITDAR Margin by Aircraft Type – Most Likely Scenario ...... 29 Figure 15. EBITDAR Returns by Growth Scenario ...... 30 Figure 16. Net Present Value of EBITDAR Margin for Preferred Aircraft – Most Likely Scenario ... 31 Figure 17. Core Partner Activities...... 34 Figure 18. Inter Island Airways operation map ...... 42 Figure 19. Pacific Sun operation map ...... 43 Figure 20. Polynesian Airlines operation map ...... 44 Figure 21. Chathams Pacific/Air Chathams Route map ...... 45 Figure 22. Air Tahiti operation map ...... 47 Figure 23. Air Nelson operation map ...... 48 Figure 24. Air Rarotonga operation map ...... 49 Figure 25. Air Niugini operation map ...... 50 Figure 26. Air Calédonie operation map ...... 51 Figure 27. Airfield design specifications ...... 56 Figure 28. Nukunonu airfield options map ...... 58
Eagle-i | 1.0 Contents 5
January 7, 2010 TOKELAU STAGE 1 - FINAL
Figure 29. Atafu airfield options map ...... 58 Figure 31. Nukunonu airfield options map ...... 59 Figure 30. Fakaofo airfield options map ...... 59 Figure 32. Present value of airstrip investment and maintenance costs ...... 62 Figure 33. Airport infrastructure investment domestic versus international ...... 64 Figure 34. South Pacific zone map ...... 70 Figure 35. Air service benefits ...... 72
6 2.0 Executive summary | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
2.0 Executive summary
It is the conclusion of this desk study that, subject to confirmation of suitable airfield sites a commercially viable air service could be established to Tokelau using a range of short listed turbo- prop aircraft in association with a number of shorted listed potential aircraft operating partners. We have assumed that air services would be supported by a sunk costed single airstrip and an inter and intra-atoll shipping service.
The provision of a reliable, frequent “lifeline” air service first and foremost, would meet the transportation requirements of the present inhabitants of the three main atolls of Tokelau. Additional demand reflects the return trips that are periodically taken by sections of the approximately 8,000 extended Tokelauan community in New Zealand and possibly 20,000 in total worldwide. While potential total demand is expected to increase with an air service, the “lifeline” measure is presently based on the annual passenger shipping traffic of 1,750 round trips per year from Apia.
With regards to the air service operations eight aircraft types were evaluated at a high level. The four short listed aircraft have been selected on the basis of superior economic performance with services expected to be self sustaining and requiring no additional investment. They have also been selected on the basis of availability within the South Pacific region. They include in order of preference: ATR42-500, Dash8-Q200, Dash8-Q300 and Dornier 328.
Furthermore nine aircraft operators were identified as potential operators of a Tokelau air service. Selection criteria included current regional operations, aircraft type and performance capability, proximity to Apia, and safety accreditation. Although no operator should be ruled out at this stage of the process, three have been identified as offering higher potential. These aircraft operators include Inter Island Airways, Air Tahiti and Polynesian Airlines.
The Dornier 328 has been assumed to be the aircraft most likely to be readily accessible given its use by Inter Island Airways, and due to the perceived appetite of Inter Island Airways to cooperate in this venture. Assuming a charter relationship with Inter Island Airways the Dornier 328 operations are projected to deliver a positive net present value EBITDAR performance of NZD2.811m.
A crucial assumption in terms of the revenue estimates relates to the assumed fare levels. Fare benchmarking reveals that an average fare of NZD250 one-way is realistic for the sector distance involved, with actual fares ranging from NZD129 upwards.
The best business model is a joint venture arrangement to achieve commercial and operational scale advantages, whilst sharing risk between partners. However the more conservative charter- based operating model, with higher associated financial costs, has been assumed for the purposes of modelling financial returns for the air services.
In order to successfully deliver an air service to Tokelau four core functions must be performed. These include the physical operation of air services, sales and marketing, distribution and airport operations. These activities may be provided by one single partner or contracted to individual service providers.
Eagle-i | 2.0 Executive summary 7
January 7, 2010 TOKELAU STAGE 1 - FINAL
Irrespective of the functional composition of the air service it is recommended that a separate air services management entity be established with accountability to NZAID and the Tokelau Administration. This entity will be held responsible for the ongoing management of the individual service provider partners through service level agreements, ensuring the ongoing integrity of the air services and the achievement of commercial objectives established by NZAID and the Tokelau Administration.
Airstrip location and cost estimates have been provided by Beca based solely on a desk study. At least one site has been selected on each Atoll. Selection criteria included the requirement to minimise environmental damage and reclamation works. The actual selection of a suitable site can only be determined by field geotechnical investigations and stakeholder dialogue.
Airstrip construction costs in present value terms including ongoing maintenance requirements, but before infrastructure costs, is estimated to be NZD15.53m for a chip seal surface, NZD17.99m for coral and NZD18.37m for asphalt.
Based on present information and subject to confirmation, it is proposed that asphalt is the preferred surface. Despite the highest overall capital cost asphalt delivers a number of advantages in terms of lowest ongoing maintenance costs, an operationally safe repair process, withstanding heavier wheel loads, and is likely to offer higher protection from flooding/wave incursion.
In addition infrastructure conforming to NZ CAA “International” specifications and a jetty are estimated to cost a further NZD2.35m under each surfacing scenario. In comparison infrastructure conforming to CAA “Domestic” specifications is estimated to cost NZD1.63m.
The total sunk cost investment in the recommended asphalt airstrip and “International” airport infrastructure is therefore estimated at NZD20.73m, compared with NZD20.34m for coral and NZD17.88m for a chip seal surface.
Given that costs have been based upon a desk study and without a physical site visit to validate assumptions these cost estimates include contingencies within the airstrip construction costs of NZD4.93m for coral through to NZD6.3m for asphalt.
With regards to construction times Beca estimate that approximately 90 to 100 weeks will be required before construction of the airstrip and associated infrastructure will have been completed. In addition security and safety audits will also be required before the airport is certified. A total elapsed time of almost two years is therefore anticipated.
Refinement of costs and anticipated timelines is recommended in the proposed Stage 2 process which includes a physical site audit, and consequently the refinement of actual airstrip and infrastructure costings. In addition Stage 2 will be used to provide greater certainty around the regulatory regime which will apply to air services, and additional clarity on the estimated timeline, and preliminary partner discussions and due diligence.
8 2.0 Executive summary | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
2.12.12.1 Risk assessment
As with the October 2009 Astral Aviation report, this work has been undertaken as a desk study, and endeavours to provide further feasibility and analysis for potential Tokelau Air Services.
All assumptions and data for market sizing, regulatory compliance and framework, air strip construction feasibility and challenges, and most importantly the political decisions and discussions with the Tokelauans, must be acknowledged as “best estimate” for a desktop study.
Further feasibility/design work will be required in a subsequent phase (Stage 2) and an actual site visit undertaken for geotechnical feasibility and construction material/method estimation.
The following items are recognised as risks associated for the provision of air service to Tokelau, and during a subsequent phase (Stage 2), further risks may be identified with necessary mitigations. Current risks identified include:
Table 1. Risk Assessment Table
Risk Magnitude /likelihood Mitigation Land acquisition at Tokelau for High Political discussion and early air strip clarification of land issues in terms of purchase, and current use Gr owth for air service demand Low Lifeline service needs met, and does not eventuate additional frequencies not required Air service provider is not High Work with candidate air service identified or available providers and develop business proposition to attract suitable provider Air strip construction cost Medium-High Stage 2 of feasibility to define increases and/or build time construction challenges and lengthens validate timeframe
Sea service becomes High Fast-track air service solution unsustainable or inoperable Environmental/ecological Low-medium Minimal or nil reclamation of reef damage or damage to atoll edges, with strip sides being 50m from lagoon or reef edges. Minimise tree clearance Post Stage 2 design & tender Medium- high Fast-track tender process and process duration shorten design phase, with a fixed cost/fixed time construction agreement Air service provider Low-medium Ongoing professional relationship becomes management of relationship with unworkable, or air service potential JV partner through defaults during pre-launch carefully negotiation of agreement phase for service. Undertake due diligence on potential air service. partner Manage pre-start-up phase to ensure provider has operational/technical capability to perform services in a sustainable and safe manner.
Eagle-i | 2.0 Executive summary 9
January 7, 2010 TOKELAU STAGE 1 - FINAL
333.03.0 Commercial
333.13.1 Demand Analysis For inter-atoll traffic volumes or purpose-of-travel data, there is presently no reliable data available. All analysis has been based on passenger ship loads to/from Apia, and minimal traffic volumes have been estimated in this study for inter-atoll.
This study has not assessed the inter-atoll mode of transport or traffic volumes, in order to assess the feasibility of air service to/from Tokelau.
333.1.13.1.1 A Single Point of Entry AirstriAirstripppp A single point of entry airstrip has been assumed in this stage 1 evaluation of aircraft operating costs and demand modelling. A hypothetical site on the South East Coast of Nukunonu 1 (NUK) has been identified as a potential location for a suitable airstrip, an approximate distance of 519 Kilometres from Apia, at a flying time of approximately 90-100 minutes.
Figure 1. Proposed Aircraft Routing
It is assumed services would operate from Apia (APW) with a turnaround time of 30 minutes on Nukunonu, during which refuelling would take place (if required), and the aircraft loaded with returning passengers and their baggage/ airfreight. The service will then return to Apia. It is anticipated that an entire return trip will require an average of 4 hours of aircraft time (180 minutes of block time plus 60 minutes of ground time).
In estimating air service demand it has been assumed that a sea service would be available to transport air passengers to and from the Islands of Atafu and Fakaofo.
1 The actual Island and site is subject to further validation. 10 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
333.1.23.1.2 Existing Passenger Demand As stated i n the October 2009 Tokelau Air Services Study international visitor arrivals to Tokelau are approximately 1,750 per annum , or an average of 34 per week.2 Today all visitors travel via a shipping service departing Apia.
Data was not available on the mix o f Tokelau residents, off-shore Tokelau affiliates, or other visitors using the current sea ferry service, with an average fortnightly sailing.
An estimate of 70% was derived for the percentage of Tokelau residents using the subsidised service, on the basis that it is a lifeline to Tokelau for essential supplies from Apia, and also for visiting friends & relatives (VFR) at other locations.
Peak months for travel to Tokelau include December (approximately 500 arrivals ), followed by August -October (500 arriva ls ), and January / February (230 arrivals).
Departures from Tokelau peak in December (250 departures), followed by August – October (400 departures, and January / February (320 departures).
Figure 2. Passenger volumes by sea for 12 months to May 2009
333.1.3 Passenger Demand Projections to 2012 Given the sho rtage of tourist related infrastructure, the demand analysis has concentrated on latent demand for resident departures to Apia, and points beyond, together with off -shore Tokelau affiliates, who are constrained by sea transport.
In the October 2009 Tokelau Air Services desktop study report (based on earlier studies and discussions with the Tokelau administration), the level of latent demand for travel to/ from Tokelau is expected to be moderately high. Today the difficulties associated with travelling to To kelau are considered as likely to have constrained demand for travel by Tokelauan residents and non- residents alike.
The potential convenience of an air service operating at least once weekly , versus a shipping service operating fortnightly, plus the sign ificant reduction in elapsed travel time ( approximately 2 hours versus 24-36 hours) are considered as factors that may result in increased in demand for international travel to /from Tokelau.
2 Passenger demand estimates. Tokelau Air Service Report, Octobe r 2009. Astral Aviation Consultants: Eagle -i Airline Planning.
Eagle-i | 3.0 Commercial 11
January 7, 2010 TOKELAU STAGE 1 - FINAL
Sea ferry bookings are reportedly full up to two months prior to sailing, which indicates latent un- fulfilled demand for “walk up” travel where an urgent need to travel is constrained by full loads. Equally, heavily booked sea ferry demand is likely to displace other passengers who may want to travel at this time, but are forced to book later and are displaced.
Air fares are expected to be set at levels higher than those currently charged for travel via ship, although a series of fare breakpoints would be achievable and necessary to manage air service demand. The continuation of a freight-oriented shipping service, albeit at reduced frequency, would provide an alternative mode of travel for travellers choosing an air alternative.
On the basis of the above factors and given the relatively low base of visitor arrivals today a 25% annual growth in arrival numbers to year 3 before plateauing is considered the likely scenario once air services are introduced. This scenario recognises the expected latent demand for travel whilst also considering the likely impact of infrastructure constraints such as pressure on accommodation stocks, water supplies, and sanitation etc. These constraints are expected to constrain travel demand by non-residents, particularly during seasonal peaks.
A 25% growth rate equates to an average increase of 8 passengers per week in year one (42 passengers per week). Visitor arrivals could double in approximately three years to circa 3,418, or approximately 65 passengers per week.
On the basis of approximately 70% of travellers being Tokelau residents, current annual demand equates to one Tokelau resident (equivalent) making a trip to Apia every 14-15 months (1,750 passengers x 70% = approximately 1,200 residents, out of a population of 1,500 residents).
Weekly Arrival Numbers Demand for Tokelau Air Travel 5%, 10% and assumed 25% growth scenarios - Annual Growth Projections 2009 to 2012 70 3,750 65 3,500 3,418 60 3,250 55 5% 3,000 5% 50 10% 2,750 10% 25% 2,500 45 2,329 2,250 25% 40
Weekly Arrival Numbers 35 2,000 2,026 1,750 30 1,750
Projected Annual ProjectedAnnual International Arrivals 2009 2010 2011 2012 2009 2010 2011 2012
Figure 3. Tokelau demand estimates
A 5% and 10% growth scenario have also been modelled in order to consider market risk.
A 10% annual growth rate equates to an average increase of 3 passengers per week in year one (37 passengers per week). Visitor arrivals will grow to 2,329 by 2012, or approximately 45 passengers per week.
A worst case scenario given the preceding discussion around the anticipated levels of latent demand for travel to/ from Tokelau is expected to be the 5% growth scenario. An average increase of 1 passenger per week is anticipated in year one (35 passengers per week). Visitor numbers will increase to 2,026 by 2012 or 39 passengers per week. By 2012 passenger volumes are assumed to plateau and then remain constant under each growth scenario.
12 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
333.1.43.1.4 Air Fare ModModellingelling
3.1.4.1 Fare benchmarking Fares were benchmarked across Asia- Pacific as well as South Pacific routes to provide a comparison for potential Tokelau fare levels.
Sampling of fares across various South-Pacific countries and routes – Fiji, Samoa, Tahiti, Tuvalu, Wallis – was also compared with routes around Asia-Pacific on sectors operated by turboprop aircraft – Australia, Philippines, New Zealand, and Fiji – with data sourced from airline websites.
For most routes, the lowest fares were used on each route and converted to NZ dollars for comparison purposes.
Analysis demonstrates that the market fares for sector distances of 500-900km (distance from Apia to Tokelau is approximately 500km) ranges between NZD190-468 for a one-way fare. Similar analysis of selected Asia-Pacific routes for shows a range of NZD189-683 one-way 3.
Table 2. Fare benchmarking Asia-Pacific routes by distance (Sep-Nov 2009)
South Pacific fares - Fiji, Samoa, Cooks, Asia -Pacific fares - NZ, Australia, Fiji, Tahiti, Tuvalu Philippines Sector Distance Fare NZ$ Sector Distance Fare NZ$ KmKmKm KmKmKm Papeete-Moorea 25 $ 84 Nadi-Savusavu 230 $ 151 Pago-Tau 137 $ 115 Nadi-Labasa 253 $ 202 Pago-Apia 153 $ 151 Wellington-Westport 271 $ 122 Papeete-Huahine 180 $ 228 Nadi-Taveuni 285 $ 197 Raro-Mangaia 208 $ 178 Wellington-Taupo 304 $ 184 Papeete-Raiatea 217 $ 259 Kalibo-Manila 327 $ 118 Raro-Aitutaki 260 $ 187 Manila-Kalibo 327 $ 49 Papeete-Bora Bora 260 $ 343 Zamboanga-Davao 400 $ 41 Raro-Mitiaro 265 $ 149 Wellington-Gisborne 404 $ 132 Raro-Mauke 282 $ 239 Wellington-Timaru 447 $ 144 Papeete-Rangiroa 353 $ 345 Manila-Iloilo 455 $ 35 Papeete-Tubuai 648 $ 468 Sydney-Albury 460 $ 287 Suva-Tonga 735 $ 269 Melbourne-Mildura 467 $ 328 Nadi-Wallis 840 $ 190 Manila-Bacolod 484 $ 41 Papeete-Hao 932 $ 555 Adelaide-Ceduna 546 $ 342 Suva-Funafuti 1,071 $ 292 Manila-Cebu 573 $ 46 Raro-Papeete 1,140 $ 429 Napier-Christchurch 576 $ 189 Nadi-Apia 1,209 $ 321 Manila-Palawan 586 $ 46 Papeete-NukuHiva 1,411 $ 615 Sydney-Ballina 607 $ 340 Papeete-UaHuka 1,444 $ 688 Whangarei-Wellington 615 $ 366 Papeete- Gambier 1,662 $ 688 Dubbo-Broken hill 660 $ 683 Noumea-Wallis 2,073 $ 567 Adelaide-Coober Pedy 746 $ 434 Nadi-Tarawa 2,167 $ 411 Wellington-Invercargill 767 $ 204 Source: Airline websites September- November 2009
3 Fares in the Philippines are very low due to intense competition and average $30-$50 for turboprop sectors.
Eagle-i | 3.0 Commercial 13
January 7, 2010 TOKELAU STAGE 1 - FINAL
The following chart shows the relationship between distance and lowest fare for the South Pacific using the data above, and the expected range for Tokelau airfares within a South Pacific context of between NZD110-390 for a 500km one-way journey.
South Pacific air fare comparison $800
Papeete- Gambier $700 Papeete-UaHuka Papeete-NukuHiva Noumea-Wallis $600 Papeete-Hao
Papeete-Tubuai $500 Raro-Papeete Nadi-Tarawa $400 Papeete-Bora Bora Papeete-Rangiroa Nadi-Apia Papeete-Raiatea Suva-Tonga $300 Raro-Mauke Papeete-Huahine Suva-Funafuti Raro-Mangaia Nadi-Wallis $200 Pago-Apia Raro-Aitutaki
Lowestfare - NZD$ equivalent Pago-Tau Papeete-Moorea Raro-Mitiaro Possible Fare range $100 for Tokelau
$- - 500 1,000 1,500 2,000 2,500
Distance Km Source: airline websites September -November 2009
Figure 4. South pacific air fare comparison
Comparing the benchmarking data from the table above, for Asia-Pacific selected routes, the expected Tokelau fare ranges are consistent with the South Pacific selected route fares.
Asia Pacific air fare comparison - Fiji, NZ, Australia, Philippines Average fare NZD$ - ATR/Saab/1900D aircraft on route 800 Dubbo-Broken hill 700
600
500 Adelaide-Coober Pedy Adelaide-Ceduna Whangarei-Wellington 400 Melbourne-Mildura Sydney-Ballina Sydney-Albury 300 Nadi-Labasa Nadi-Taveuni Napier-Christchurch Wellington-Invercargill Wellington-Taupo Wellington-Timaru 200 Nadi-Savusavu Possible Fare range Wellington-Westport Wellington-Gisborne
Lowestfare - NZD$equivalent Kalibo-Manila for Tokelau 100 Manila-Kalibo Manila-Iloilo Manila-Cebu Zamboanga-Davao Manila-Bacolod Manila-Palawan - 0 100 200 300 400 500 600 700 800 900
Distance Km Source: airline websites September 2009
Figure 5. Asia/Pacific air fare comparison
14 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
3.1.4.2 Fare elasticity
To test acceptable levels of air fare for the proposed Tokelau air route, fare modelling has been performed for three average fare scenarios:
• NZD190 average one-way air fare for Apia-Tokelau, and similar fare Tokelau-Apia • NZD250 average fare • NZD290 average fare
From experience in the airline industry, Eagle-i have analysed the fare elasticity, or expected fare range for each of the scenarios above. Fare elasticity compares the ratio between high and low fare offering and the elasticity factor or pricing differential. This technique is critically important to ensure demand is captured at early booking low fare levels and to stimulate travel, while managing higher yielding “last minute” travel demand for which a higher fare will be paid. It allows an air service to be managed through peaks and troughs in demand during a single month, as well as seasonality throughout the year, by smoothing customer demand through pricing – i.e. non-time critical travel demand is shifted through attractive pricing levels to non-peak times, while preserving higher load factors and ensuring high yield fare demand is not spilled or displaced.
Tokelau air services, in spite of the likelihood of only a single service per week in the initial start-up years, will experience normal customer demand patterns as outlined above. Therefore, each flight needs to be carefully revenue-managed to maintain total revenue per flight at the best quality, whilst allowing the maximum number of customers to travel. This activity could be performed manually for start-up with one flight per week, and then move to a more sophisticated system over time.
Pacific route fare levels, from the analysis undertaken in this desktop study, suffer from un- sophisticated revenue management (RM) and pricing techniques, lack of an RM system (manual or automated) to manage demand, and to optimise fare levels. Many routes offer a single fare level at all times, which constrains and limits latent demand for air travel, resulting in less travel than potentially available, and constrains load factor potential.
For the Tokelau scenarios, the fare offering ranges from NZD129 to NZD379 with varying average fares at NZD190, NZD250, and NZD290.
For each of the three average fares analysed, the aircraft seat numbers at an overall average of 80% load factor has been applied. Across a grouping of low, medium, and high fare breakpoint categories, the distribution of an average fare has been allocated at differing percentages totalling up to 100%.
For example, at NZD190 average fare for a flight, a low fare bucket has 60% of the passenger demand, at a fare of NZD129 one-way, 30% are at NZD249, with the higher fare bucket at NZD379. The table below identifies the breakpoints and buckets that have been analysed, and the overall revenue per flight.
Eagle-i | 3.0 Commercial 15
January 7, 2010 TOKELAU STAGE 1 - FINAL
Table 3. Air fare distribution scenario
Air fare distribution Scenario Mix of fares sold Allocation Air fare price point Scenario 1 Scenario 2 Scenario 3 Low % $129 60% 34% 9% Medium % $249 30% 34% 51% High % $379 10% 32% 40% Average fare $190 $249 $290 Total flight revenue 4 $6,690 $8,790 $10,215
This data is illustrated in the chart below, and shows the relationship between high/low fare levels available, the impact of distribution at various fare bucket points, for each average overall fare scenario - $190, $250, & $290 - for a potential Apia-Tokelau one-way fare and return.
Air Fare availability and allocation (high, medium, low fare) per flight , and total revenue per flight at 3 average fare levels - $190, $250, & $290 NZD (modelled on a 44-seater aircraft at 80% load factor) Fare $ $10,215 100% of $3,525 or 52% available gain on $190 $400 seats $10,000 100% of available seats $8,790 $2,100 or 32% Gain on $190 40%
$300 100% of $7,500 available 32% seats $6,690 10% $379 $379 $379 $200 $5,000 30% Sea revenue $249 est. $3,360 100% $249 34% $249 15% 51% $100 $264 $2,500 60% 15% $143 70% $129 $50 34% $129 9% $129 Total Flight 0 Revenue $96 2 $190 $250 $290 Average Fare
1 Based on ½ round trip fare Return fares for an adult Tokelauan resident range from NZD100 for deck access only through to NZD220 for a Cabin. Return fares for an adult non-resident range from NZD286 for deck access only through to NZD528 for a Cabin. Fares for Children between ages 1-12 are typically 50% of the adult fare, with infants under 1 year of age travelling free. Source: Boat Fares to Tokelau. Tokelau Transport. Government of Tokelau. May 22 2009. 2 Ferry sailing every 2 weeks average 35 passenger p.w. or 1,750 p.a with estimated deck load of 70% and rest split over cabins, at ½ round trip rates above = $3,360 revenue for weekly trip equivalent (load of 70 per fortnight or 35 passengers per week)
Figure 6. Average Fare scenarios and total flight revenue impact
4 Based on a 44 seat aircraft at 80% seat factor
16 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Sea revenue
Sea revenue, on a weekly equivalent basis, has been estimated as $3,360 per week. With an average of 25-26 sailings per annum carrying 70 passengers, the weekly estimate is as follows:
• 70% of passengers (24.5 pax) at $50 ½ round trip fare, or $1,225 revenue on a weekly equivalent • 15% of passengers (5.6 pax) at $143 ½ round trip fare, or $750 revenue on a weekly equivalent • 15% of passengers (5.6 pax) at $264 ½ round trip fare, or $1,386 revenue on a weekly equivalent
Air fare breakpoints
For comparison purposes, three fare break-points – low, medium, and high – have been used across each of the three average fare levels. These are:
• $129 – low fare grouping • $249 – medium fare grouping • $379 – high fare grouping
Low fare points can be offered at 60% of load for the $190 average , whilst at an average of $290, the low fare percentage of total passenger load reduces to 9% of fares available at this level.
Air fare distribution by low/medium/high price points 100% 10% 90% 32% 80% 40% 30% 70% 60% 50% 34% High 40% Medium 51% 30% 60% Low 20% 34% 10% 9% 0% 80% load factor, +/- 80% load factor, +/- 80% load factor, +/- $190 average fare $250 average fare $290 average fare
Figure 7. Air fare distribution chart
A critical requirement to enable viable air service for Tokelau is an expectation of balancing the current resident reduced/subsidised fare levels (contingent on further policy review by NZAID/MFAT), with the off-shore demand believed to be severely constrained by the current ferry journey duration of 24-36 hours and fortnightly return trip.
It is expected that a weekly 90-100 minute air service from Apia-Tokelau will release the latent demand for travel, and if fares are offered at various breakpoints, further stimulate VFR (visiting
Eagle-i | 3.0 Commercial 17
January 7, 2010 TOKELAU STAGE 1 - FINAL friends & relatives) travel demand from off-shore Tokelau peoples in New Zealand, Australia and Hawaii/USA, let alone other demand for customers without an national affinity for Tokelau.
In this context, the low, medium, high fare groupings become important to manage demand by residents, whilst satisfying market level fare demand from off-shore Tokelau visitors and other travellers, who are accustomed to paying higher fares within the Pacific.
Revenue maximisation
A key feature of the range of fares offered, and the average fare achieved per flight, is the total revenue per flight (for passenger revenue). Our modelling shows the expected average fare that could realistically facilitate air service for both residents of Tokelau plus off-shore visitors (Tokelau and non-Tokelau origin) centres around an average of $250 one-way.
Medivacs and convenient official trips
The presence of an air service will help resolve medical evacuation service needs, as well as boost demand for by Tokelau government officials. The latter may need to be managed through strict approval and pricing policy agreements with Tokelau. Subsidies and equitability of service demand will need careful management through pricing and other policy controls.
3.1.4.3 Conclusions on likely fare level
Using an average fare of NZD250 one-way, as the expected sustainable fare level from the air fare analysis in the October 2009 study, total flight revenue of NZD8,790 could be achieved at an average of 80% load factor on a 44 –seat aircraft scenario. This number reduces or increases based on aircraft type, but represents weekly demand of 35 passengers, or 1,750 per annum, which is in line with current ferry service volumes.
If the average fare was at a level of NZD190, with an offering a range of NZD129 - 379, the total flight revenue reduces to NZD6,690 revenue per flight from passenger fares. This is a drop of NZD2,100 on the NZD250 level and cost modelling in the following cost section will demonstrate the minimum trip cost by aircraft type, and therefore the breakeven flight revenue required to sustain air services.
In conclusion, an average fare of NZD250 per one-way journey is the minimum level to sustain a Tokelau air service, and provides a fare range of NZD129 - 379. Revenue modelling on the basis of an 80% load factor (35 passengers per week on average, or 1,750 p.a.) produces weekly air fare revenue of NZD8,790.
Higher load factors – e.g. 90% - allow greater flexibility of fare offering, and produce a higher revenue total per flight. At various times through the year, and depending on administrative, cultural, or sporting events related to Tokelau, the demand is expected to exceed 100% load factor, and revenue management then become seven more critical to ensure a quality revenue load. The overall revenue per flight at these times is high, and this assists with managing periods of lower demand during the year through seasonality or directionality (outbound or inbound travel with a delay in the return journey due to work, extended vacation, or other commitments).
18 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
The revenue per available seat kilometre (RASK 5) is then derived from the overall flight revenue generated at the modelled passenger load factor of 80%. The cost section will compare RASK with CASK 6 (cost per available seat kilometre)
333.1.3.1..1..1.5555 Excess Baggage & Perishable Airfreight Demand
As discussed in the October 2009 Tokelau Air Services Study the demand for airfreight capacity is anticipated to be high. Based on an understanding of existing demand for excess baggage uplift between New Zealand and Samoa it is anticipated that a similar demand will exist between Samoa and Tokelau. Excess baggage will most likely include typical domestic household items such as food, clothing, cleaning products, and smaller electronic equipment which may not be readily available in Tokelau.
In addition it is anticipated that limited demand for perishable airfreight will also develop, again based on an understanding of the New Zealand – Samoa market. For example perishable airfreight may include limited volumes of fresh or chilled food product shipped on a commercial basis, urgent medical supplies, and may also include human remains being returned for burial.
In volume terms the expected latent demand for excess baggage and perishable airfreight has been estimated at 5% of current sea freight volume. With sea freight volumes advised as 2,700 tonnes per annum, a 5% shift equates to 135 tonnes per annum or approximately 2.5 tonnes on average per week.
Demand for airfreight capacity from Tokelau is expected to be more modest. Demand will exist for excess baggage, and other products such as the urgent shipment of small machinery to be repaired in Samoa, it is also anticipated that a very limited volume of fresh fish exports could develop.
Outbound demand for airfreight capacity has been estimated at one-third of the level of inbound demand, or approximately 800kgs per week.
Demand for airfreight capacity is anticipated to grow at 5% per annum, or approximately 9 tonne per annum, or approximately 80kgs per flight each week.
It has been assumed that freight rates between Samoa and Tokelau will average NZD2.50 per kilogram. On this basis the value of the annual airfreight market is estimated at NZD450,000 assuming that total demand for airfreight capacity could be met by air services.
5 RASK – revenue per available seat kilometre, is an airline economic metric to measures ticket price and passenger load movements (quality of the revenue load) and is divided by the total seats times distance for the sector.
6 CASK – cost per available seat kilometre, takes total cost divided by total seat times distance for the sector, to calculate sector economic performance compared with RASK.
Eagle-i | 3.0 Commercial 19
January 7, 2010 TOKELAU STAGE 1 - FINAL
333.3...2222 Revenue Estimates
333.2.13.2.1 The AAircraftircraft Type Options
Four aircraft were identified in the October 2009 Tokelau Air Services Report as offering superior commercial performance 7, these included:
1. ATR42-500 2. Fairchild Dornier 328 / Dash8-Q200 3. Fairchild Dornier 228.
In addition the following four aircraft have been included in this latest study given the requirement to specifically evaluate aircraft opportunities provided by potential operating partners;
1. Dash8-Q300 – Air New Zealand 2. Saab 340A - Air Rarotonga 3. Embraer Bandeirante - Air Rarotonga 4. Convair 580 - Chathams Pacific
333.2.23.2.2 Frequency Estimates by Aircraft Type
The following table indicates the number of annual trips required to satisfy existing and forecast passenger demand utilising each aircraft type on the APW-NUK-APW and return aircraft routing.
The larger the aircraft’s seating capacity the lower the frequency required to satisfy the demand for air services. The Dash8-Q300 and Convair 580 are the largest aircraft with a seating capacity of 49-50 passengers. By Year Three between 55 (5% growth) and 88 (25% growth) annual return services will be required to satisfy the anticipated demand. This equates to approximately 1-1.7 services per week depending upon the growth scenario.
Aircraft Type Seat Configurations 55 50 45 40 35 30 25 20 Seat Number Seat 15 10 5 0 500 - Q200 Q300 - - Saab 340 Saab ATR42 Emb Bandit Emb Dornier228 Dornier328 Convair580 Dash8 Dash8 Figure 8. Aircraft seat configurations
The ATR42-500 has an assumed seating capacity for 44 passengers. By Year Three between 61 (5% growth) and 99 (25% growth) annual return services will be required to satisfy the anticipated
7 Tokelau Air Service Report, October 2009. Astral Aviation Consultants: Eagle-i Airline Planning.
20 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010 demand. This equates to approximately 1.2-2 services per week depending upon the growth scenario.
The Saab340A, Dornier 328 and Dash8-Q200 offer a similar seating capacity of between 27 and 29 seats. By Year Three between 87 (5% growth) and 153 (25% growth) annual return services will be required to satisfy the anticipated demand. This equates to approximately 1.7-3 services per week depending upon the growth scenario.
Table 4. Annual & Year Three Weekly Frequencies by Aircraft Type and Growth Scenario
Aircraft Type Aircraft Seats Growth % 2009 Base Year 1 Year 2 Year 3 Year 3 Wkly Dornier 228 5% 141 149 155 163 3.1 10% 141 155 169 185 3.6 15 25% 141 175 216 270 5.2 Emb Bandit 5% 141 149 155 163 3.1 10% 141 155 169 185 3.6 15 25% 141 175 216 270 5.2 Saab 340 5% 80 86 88 92 1.8 10% 80 88 96 105 2.0 27 25% 80 101 124 153 2.9 Dash8-Q200 5% 75 79 85 87 1.7 10% 75 81 90 100 1.9 29 25% 75 92 116 141 2.7 Dornier 328 5% 80 86 88 92 1.8 10% 80 88 96 105 2.0 27 25% 80 101 124 153 2.9 Dash8-Q300 5% 50 51 53 55 1.1 10% 50 53 58 63 1.2 49 25% 50 60 72 88 1.7 ATR42-500 5% 53 55 58 61 1.2 10% 53 58 63 68 1.3 44 25% 53 65 79 99 1.9 Convair 580 5% 50 51 53 55 1.1 10% 50 53 58 63 1.2 49 25% 50 60 72 88 1.7
The Dornier 228 and Embraer Bandeirante are the smallest aircraft with seating capacity for 15 passengers. By Year Three between 163 (5% growth) and 270 (25% growth) annual return services will be required to satisfy the anticipated demand. This equates to approximately 3-5 services per week depending upon the growth scenario.
3.2.3 Airfreight Payload Estimates The carriage of airfreight is dependent upon the type of aircraft operating given the variation in payloads available on the APW-NUK sector.
Eagle-i | 3.0 Commercial 21
January 7, 2010 TOKELAU STAGE 1 - FINAL
Estimated Average Payload per One-Way APW-NUK Service 1200 1000 800 600 400 200 Payload PotentialPayload KGs 0 500 - Q200 - Saab 340 Saab ATR42 Emb Bandit Emb Convair 580 Convair Dornier228 Dornier328 Dash8- Q300 Dash8
Figure 9. Estimated Average Payload by Aircraft Type
The Convair 580 provides the greatest airfreight uplift potential with a payload estimated at an average of 1,000 kg per service, the ATR42 offers a payload which averages approximately 700kg per service, the Dash8-Q200 560kg, Dash8-Q300 350kg, Dornier 328 250kg. All other aircraft do not offer airfreight uplift potential.
3.2.4 Passenger & Airfreight Revenue Estimates
On the basis of the abovementioned frequencies all aircraft type options generate a similar net passenger revenue result. At the assumed average gross fare of NZD250 one-way, total annual net passenger revenue is estimated at NZD1.012m in Year 1 increasing to NZD1.582m by Year 3.
When payload is combined with frequency of operation discussed above, airfreight revenue ranges from zero for those aircraft types with no payload capability to NZD296,901 by Year Three. The best performing aircraft, the Convair 580 has been assumed to have a maximum capacity of 1,000kg, a payload capability superior to all other aircraft evaluated.
Over the Three Year evaluation period the Convair 580 is projected to generate the highest average revenue result of NZD1.567m pa, followed by the Dash8 – Q200 NZD1.498m pa, and ATR42-500 NZD1.492m. The worst performing aircraft are the Embraer Bandeirante, Saab340A and the Dornier 228, all offering no payload capability. Total revenue averages NZD1.287m pa over the three year period.
22 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Table 5. Revenue Estimates by Aircraft Type 25% Growth $250 Average One-Way fare.
Aircraft Type Revenue Source Year 1 Year 2 Year 3 3 Year Average Dornier 228 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo - - - - TOTAL 1,012,982 1,266,228 1,582,785 1,287,332
Emb Bandit Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo - - - - TOTAL 1,012,982 1,266,228 1,582,785 1,287,332
Saab 340 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo - - - - TOTAL 1,012,982 1,266,228 1,582,785 1,287,332
Dash8-Q200 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo 203,297 216,414 214,901 211,537 TOTAL 1,216,279 1,482,642 1,797,686 1,498,869
Dornier 328 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo 119,163 134,785 145,512 133,153 TOTAL 1,132,146 1,401,013 1,728,297 1,420,485
Dash8-Q300 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo 104,004 122,937 145,309 124,083 TOTAL 1,116,986 1,389,165 1,728,094 1,411,415
ATR42-500 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo 190,862 205,681 218,143 204,896 TOTAL 1,203,844 1,471,909 1,800,928 1,492,227
Convair 580 Passenger 1,012,982 1,266,228 1,582,785 1,287,332 Cargo 263,785 281,050 296,901 280,579 TOTAL 1,276,767 1,547,278 1,879,686 1,567,911 .
Revenue per available Seat Kilometre (RASK), a measure of revenue generation efficiency indicates that the Dash8-Q200 is the most effective aircraft, generating a RASK of NZD42.81 cents. 8 This is due to the Q200’s ability to maximise both passenger and airfreight revenue opportunities.
The Convair 580 is the next best aircraft with a RASK of NZD42.04 cents.
The ATR42-500 and Dornier 328 achieve a similar RASK of NZD40.34 and 40.23 cents. The poorest performing aircraft in terms of RASK are the, Saab340A, Dornier 228, and Embraer Bandeirante and Dash8-Q300 all with a RASK below NZD38 cents.
These aircraft are penalised due to their general lack of payload performance, while the Q300 has a modest airfreight payload capability the lower relative frequency of operations means it is unable to generate sufficient airfreight revenue relative to the other aircraft of a similar gauge.
8 Based on the average of per trip revenue estimates for both passenger and airfreight over years 1-3.
Eagle-i | 3.0 Commercial 23
January 7, 2010 TOKELAU STAGE 1 - FINAL
Revenue per Available Seat Kilometer (RASK) by Aircraft Type 44.00 42.00 40.00 38.00 36.00 34.00 RASK NZD RASK Cents 32.00 30.00 500 - Q300 Q200 - - Saab 340 Saab ATR42 Emb Bandit Emb Dornier228 Dornier328 Convair580 Dash8 Dash8 Figure 10. RASK by Aircraft Type
3.2.5 Passenger & Airfreight Revenue SensSensitivityitivity The above analysis is based upon what is considered the most likely growth scenario, expected passenger and airfreight growth projections and average air fare estimates resulting from the anticipated levels of latent demand which are believed to exist today.
To manage risk around revenue expectations two further scenarios are now briefly evaluated; a best case and worst case scenario. The best case scenario assumes an average one-way fare of NZD290, airfreight growth of 10% pa and passenger growth of 25% to 2012 and 5% pa from 2013.
The worst case scenario assumes that an average fare of NZD190 is achieved, no airfreight growth, while passenger volumes growth at 5% pa from 2009, with volumes remaining flat from 2012 onwards.
Under both worst case and best case scenarios the Dash8-Q200 generates the highest revenue contribution followed by the Convair 580 and ATR42-500.
Table 6. Growth Scenarios
Scenario Passenger Growth Average One -Way Fare Airfreight Growth Worst Case 5% pa $190:00 0%pa Most Likely 25% pa $250:00 5%pa Best Case 25% pa, 5% pa post 2013. $290:00 10%pa
Three year average revenue estimates under the worst case scenario range from NZD$679,561 for the Dornier 228, Embraer Bandeirante, and Saab340A to NZD$924,097m for the Convair 580. The Dash8-Q200 and ATR42-500 generate average annual revenue of NZD$874,935 and NZD$857,198 respectively.
Under the best case scenario three year average revenue ranges are essentially double the worst case scenario. Revenue falls within a range from NZD1.493m for the Dornier 228, Embraer Bandeirante, and Saab340A to NZD1.785m for the Convair 580. The Dash8-Q200 and ATR42-500 generate average annual revenue of NZD1.716m and NZD1.706m respectively.
24 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Table 7. Three Year Average Revenue Estimates
Aircraft Type Revenue Source Worst Case Most Likely Best Case Dornier 228 Passenger 679,561 1,287,332 1,493,305 Cargo - - - TOTAL 679,561 1,287,332 1,493,305 Emb Bandit Passenger 679,561 1,287,332 1,493,305 Cargo - - - TOTAL 679,561 1,287,332 1,493,305 - - - Saab 340 Passenger 679,561 1,287,332 1,493,305 Cargo - - - TOTAL 679,561 1,287,332 1,493,305 - - - Dash8-Q200 Passenger 679,561 1,287,332 1,493,305 Cargo 195,374 211,537 222,805 TOTAL 874,935 1,498,869 1,716,110 - - - Dornier 328 Passenger 679,561 1,287,332 1,493,305 Cargo 106,815 133,153 137,389 TOTAL 786,376 1,420,485 1,630,694 - - - Dash8-Q300 Passenger 679,561 1,287,332 1,493,305 Cargo 91,870 124,083 125,228 TOTAL 771,432 1,411,415 1,618,533 - - - ATR42-500 Passenger 679,561 1,287,332 1,493,305 Cargo 177,636 204,896 213,068 TOTAL 857,198 1,492,227 1,706,373 - - - Convair 580 Passenger 679,561 1,287,332 1,493,305 Cargo 244,536 280,579 291,690 TOTAL 924,097 1,567,911 1,784,995
Eagle-i | 3.0 Commercial 25
January 7, 2010 TOKELAU STAGE 1 - FINAL
333.3...3333 Aircraft Operational Trip Cost Performance
3.3.1 Aircraft Type Operating Cost Analysis
The eight aircraft have been evaluated on the basis of operating an APW-NUK-APW routing, under the most likely scenario of a 25% passenger growth and NZD250 one-way average fare, and a 5% growth in airfreight.
Under the assumption that aircraft are operated from Apia without a requirement to position aircraft to Apia, the following evaluation of direct operating, management overhead and ownership costs including estimated charter costs indicates that the ATR42-500, Dash8-Q300 and Dornier 328 are the most economical in terms of Cost per Available Seat Kilometre, a measure of the relative cost efficiency of each aircraft type. These aircraft generate a Cost per Available Seat Kilometre (CASK) of NZD 32.48 cents to NZD37.18 cents 9.
The Embraer Bandeirante, Dornier 228 and Convair 580 are the most expensive aircraft to operate with CASK’s ranging from NZD 39.59 cents to NZD47.91 cents. Seat costs of the two smaller aircraft are higher given the lower number of seats across which costs can be allocated. The high fuel burn of the Convair 580 penalises its performance relative to the ATR42-500 and Dash8- Q300.
Cost per Available Seat Kilometer (CASK) by Aircraft Type 60.00 50.00 40.00 30.00 20.00 CASK NZD Cents 10.00 0.00 500 - Q200 Q300 - - Saab 340 Saab ATR42 Emb Bandit Emb Dornier228 Convair580 Dornier328 Dash8 Dash8 Fuel Other
Figure 11. CASK Analysis by Aircraft Type
The seat cost measures the hypothetical cost allocated to each seat on the aircraft in order to cover all relevant costs. It provides a rough estimate on the net fare required to cover costs, although other considerations including any offset associated with airfreight revenue and the achieved seat factor will also have an impact on the actual cost allocated to each seat.
9 Based on the average of per trip operating costs over years 1-3.
26 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
The Embraer Bandeirante has the highest seat cost of NZD248.63 per seat, the lowest seat cost is NZD168.59 associated with the ATR42-500. The Dash8-Q300, Dornier 328, Saab 340A and Dash8-Q200 all produce a sub NZD200.00 seat cost.
Actual Seat Cost by Aircraft Type 300.00
250.00
200.00
150.00
100.00 Seat CostNZD Seat
50.00
0.00 500 - Q200 Q300 - - Saab 340 Saab ATR42 Emb Bandit Emb Convair 580 Convair Dornier228 Dornier328 Dash8 Dash8
Figure 12. Actual Seat Cost by Aircraft Type
Eagle-i | 3.0 Commercial 27
January 7, 2010 TOKELAU STAGE 1 - FINAL
333.3...4444 Operational Profitability
3.4.1 Aircraft Type EBITDAR Margin When respective aircraft revenue (RASK) and cost per seat (CASK) metrics are combined a view on operating profitability is provided, again based on the most likely scenario of a 25% passenger growth and NZD250 one-way average fare, and a 5% growth in airfreight.
The analysis indicates that the ATR42-500 and Dash8-Q200 deliver the best trade-off between cost and revenue efficiencies with an EBITDAR margin of 24% and 12% respectively. The ATR42- 500 has the lowest CASK and a relatively high RASK, while the Dash8-Q200 has the highest RASK and an average CASK.
The next best performing aircraft is the Dornier 328 which generates an EBITDAR margin of 8%, the result of a relatively high RASK. The Convair 580 and Dash8-Q300 generate an EBITDAR margin of 6% and 6% respectively.
The Embraer Bandeirante, Dornier 228 and Saab 340A generate the poorest EBITDAR margins of -22% and -11% and -4% respectively, the result of both a relatively low RASK and high CASK.
Profit Margin by Aircraft Type: RASK vs CASK 60.00 30%
50.00 20%
40.00 10%
30.00 0%
20.00 -10% Margin%
10.00 -20% RASK/ CASK RASK/ CASK Cents NZD 0.00 -30% 500 - Q300 Q200 - - Saab 340 Saab ATR42 Emb Bandit Emb Dornier228 Convair580 Dornier328 Dash8 Dash8 RASK CASK RASK/CASK
Figure 13. EBITDAR Margin by Aircraft Type
3.4.1 Net Present Value of EBITDAR Results ––– The Most Likely Growth Scenario The above analysis has been based on the average of nominal three year revenue and cost estimates and was used to demonstrate their relative impact on EBITDAR margins. The following analysis relies on a discounted cashflow approach to derive the expected EBITDAR result in real dollars. This analysis takes into account the expected timing of cashflows and therefore may result in a different ranking of aircraft types than in the above analysis which relies on averages of nominal cashflow streams 10 .
Based upon the most likely growth scenario the discounted cashflow analysis indicates a similar result to the nominal EBITDAR margin analysis above. The ATR42-500 and Dash8-Q200 generate the highest EBITDAR returns of NZD5.187m and NZD3.924m respectively.
10 A cost of capital of 8.0% has been applied to the discounted cashflow analysis based upon requirements of NZAID.
28 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
The Dash8-Q300, Dornier 328, Convair 580 and are the next best performers generating NZD3.026m, NZD2.812m and NZD2.372m respectively. The Saab340A generates an EBITDAR return of NZD1.216m, while the Embraer Bandeirante and Dornier 228 are unprofitable generating negative EBITDAR returns of –NZD3.756m and –NZD0.810m respectively.
Figure 14. Net Present Value of EBITDAR Margin by Aircraft Type – Most Likely Scenario
3.4.2 Net Present Value of EBITDAR Results Sensitivity As discussed above three growth scenarios have been considered. The best case scenario assumes an average one-way fare of NZD290, airfreight growth of 10% pa and passenger growth of 25% to 2012 and 5% pa from 2013. The worst case scenario assumes that an average fare of NZD190 is achieved, no airfreight growth, while passenger volumes growth at 5% pa from 2009, with volumes remaining flat from 2012 onwards. All modelling assumes a charter solution with a 40% fee applied to direct operating and fixed operating costs.
Table 8. Growth Scenarios
Scenario Passenger Growth Average One -Way Fare Airfreight Growth Worst Case 5% pa $190:00 0%pa Most Likely 25% pa $250:00 5%pa Best Case 25% pa, 5% pa post 2013. $290:00 10%pa
When these scenarios are applied the following range of EBITDAR performance is generated. Under the best case scenario all aircraft with the exception of the Embraer Bandeirante generate a positive EBITDAR result, ranging from NZD2.042m for the Dornier 228 to NZD8.179m for the ATR42-500.
Eagle-i | 3.0 Commercial 29
January 7, 2010 TOKELAU STAGE 1 - FINAL
Figure 15. EBITDAR Returns by Growth Scenario
Under the worst case scenario all aircraft generate a negative EBITDAR return. The ATR42-500 performs the best with a negative EBITDAR of NZD1.636m followed by the Dash8-Q200 at NZD3.223m, the Embraer Bandeirante is the worst performer with a negative EBITDAR performance of NZD7.178m.
Table 9. EBITDAR Return Table – Charter Operating Model
30 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
3.5 Summary of Aircraft Suitability
The above analysis indicates that the ATR42-500 is the preferred aircraft from a financial perspective under the most likely operating scenario, delivering a net present value EBITDAR result of NZD5.187m versus the next best aircraft the Dash8-Q200 with an EBITDAR result of NZD3.924m.
Furthermore under the worst case scenario the ATR42-500 minimises net present value EBITDAR losses, at –NZD1.636m.
However for practical purposes the Dash8-Q200, Dash8-Q300 and Dornier 328 must also be considered as realistic options as aircraft suitability is also reliant upon the careful identification of a suitable partner, who operates the aircraft of choice or a preferred aircraft type. Positioning of suitable aircraft to Apia to operate the Tokelau service must also be considered in the partner selection process. Discussion on the estimated positioning costs is included under Section 4.0.
Figure 16 . Net Present Value of EBITDAR Margin for Preferred Aircraft – Most Likely Scenario
Eagle-i | 3.0 Commercial 31
January 7, 2010 TOKELAU STAGE 1 - FINAL
3.3.3.63. 6 Potential OOperatingperating Models
As discussed in the October 2009 Tokelau Air Services Report two primary operating models exist; a charter based model, and secondly a joint venture public-private-partnership (PPP) model.
Table 10. Operating model option matrix
Self-operated Commercial option
Aircraft Dornier 228 ATR42-500 Charter Joint Venture PPP Open market
Technical Standalone n.a In fleet n.a. Maintenance issues n.a. n.a. n.a. Benefits/Strengths Guaranteed delivery of service Quick start Lower risk Hands off - market decides Know price/cost of operating Incentivise partner to perform Certainty of supply
Risks/Weaknesses Low utilisation High cost Partner doesn't materialise No incentive for regular service High cost Long contract period Rate can not be agreed Unable to influence fare Standalone operation Risk - all with NZAID Opportunities Link to other NZAID locations in n.a. Link to other NZAID locations Status quo - market will Pacific? in Pacific? decide Growth? No Yes Uncertain - but at cost Yes - with support Market decides Capability? No No Yes - some Yes - High Yes- but uncertain Sustainability? No Yes - with Yes - with financial Yes -with support or Market decision growth support breakeven point Subsidy reduction No no No Yes - with appropriate n.a. over time? structure & mechanism
Both operating models – charter and joint venture PPP - are achievable for providing air services, while as discussed below the joint venture is considered more attractive from the perspective of risk sharing and in terms of lower overall costs.
3.3.3.6.13. 6.16.16.1 The Charter Model
The above financial analysis has been based on an assumed charter-based operating model. Specifically an aircraft would be provided on a wetlease basis whereby the aircraft operator provides the aircraft, tech crew, cabin crew, maintenance and insurance. Typically a wetlease arrangement relates to a fixed period from one month in duration to around 2 years.
Furthermore it has been assumed that sales, marketing, distribution and commercial management have been outsourced. Thus providing a virtual airline solution for Tokelau Air Services however with the necessary checks and balances and accountabilities in place.
A charter operator levy of 40% has been applied to direct and fixed operating costs as an estimate of an expected charter cost.
32 3.0 Commercial | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
3.6.2 A Joint Venture Model A joint venture (JV) may be defined as a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. 11 Furthermore parties share in risks associated with the JV. It will involve a closer working relationship between parties than a charter as defined above given the requirement to share in risks and profits.
Due to the profit and risk sharing nature of a JV it has been assumed that it would have a lower financial cost than the charter model suggested above. In relation to the provision of Tokelau Air Services a JV may take a number of forms and involve a number of different parties. To simulate the likely costs of a JV a 20% margin has been placed on direct and fixed operating costs.
As a trade-off for a lower financial cost other risks are likely to increase under a v model, for example these could include the requirement to underwrite any losses. These risks have not been modelled due to their uncertain nature.
The following analysis illustrates the potential financial returns assuming a JV solution in terms of the relative EBITDAR performances of each aircraft type. For example assuming the most likely scenario the ATR42-500 is estimated to generate a positive EBITDAR result of NZD7.2m versus NZD5.186m under a charter model.
When compared with the more expensive charter model the upside benefit of a JV averages NZD2.3m in NPV terms under the most likely scenario and NZD1.7m under the worst case scenario. These benefits could be considered as potential upside on the financial evaluation discussed above, but would be subject to negotiation.
Table 11. EBITDAR Return Table – Joint Venture Operating Model
11 Australian Accounting Standards Board, AASB131 Interests in Joint Ventures.
Eagle-i | 3.0 Commercial 33
January 7, 2010 TOKELAU STAGE 1 - FINAL
4.0 Partner EEvaluationvaluation
In order to successfully deliver an air service to Tokelau four core activities, with a coordinating management function (commercial/operational capability) must be performed. These activities may be provided by one single partner or by separate partners.
The four core activities – Aircraft Operator, Sales & Marketing, Distribution, Airport Management - and the over-arching function of Partner Management, are summarised below:
Tokelau NZAID Administration
Figure 17. Core Partner Activities
34 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.01 Aircraft OOperatorperator
A selected partner to operate the aircraft of choice. An aircraft operator would ideally be based in Apia to limit aircraft positioning costs. The next best solution would be for an airline operator who already operates to Apia with the aircraft of choice, with Tokelau services becoming an extension to avoid positioning costs.
4.02 Sales and Marketing
The sales and marketing activities include the management of the sales process including sales transaction processing, the collection of fares and issuance of tickets. This activity should be supported in key expatriate markets including Samoa, New Zealand, Australia and Hawaii, as well as Tokelau.
4.03 Distribution
Distribution activities involves the revenue management of flight inventory to ensure revenue maximisation, and the management of passenger bookings.
4.04 Airport Operations
Airport operations and management including ground handling, safety and security , to deliver safe and reliable ground function provided by external partner, ideally with local staffing subject to training.
4.05 Partner Management
An independent entity providing an oversight and advisory role in relation to the management of air services and partner relationships discussed above, ensuring operational integrity and commercial performance targets are achieved, and with accountability to NZAID and the Tokelau Administration.
Eagle-i | 4.0 Partner Evaluation 35
January 7, 2010 TOKELAU STAGE 1 - FINAL
4.4.4.14. 111 Aircraft Operating Partner
A number of small airlines characterise the Pacific aviation sector, with small, often older inefficient aircraft types with limited service and relatively expensive fares. This analysis considers aircraft operators within the Pacific region that either operate the aircraft of choice the ATR42-500, or the next best aircraft types, or have existing services to Apia, or are at least in a close proximity to Apia.
The selection process needs to be robust and advantageous commercially, with a partner who is operationally strong and able to provide efficient air service. The ability to ensure consistent supply of air capacity to Tokelau is paramount.
With the Pacific Islands Air Services Agreement (PIASA) aiming to open up the Pacific air services market, the landscape of operators is expected to change through consolidation and competitive pressure, and a shake-up of operators could be an outcome of this process, with mergers, acquisitions, and airline failures likely.
4.1.1 Selection Criteria and Summary of Results The criteria for partner selection would include a review of respective technical abilities and secondly, the operator’s propensity for provision of cost-effective air service on behalf of the Tokelau Administration.
Based upon this desktop review, the following three aircraft operators have been identified as potential shortlist candidates. However other aircraft operators cannot be ruled out at this early stage:
1. Inter Island Airways (American Samoa) 2. Air Tahiti (Tahiti) 3. Polynesian Airlines (Samoa)
Although not operating the number one preferred aircraft type, Inter Island Airways of American Samoa, scored highest on the basis of a potentially high propensity to cooperate for provision of air service given their expansion plans and likely desire to secure additional aircraft utilisation. Inter Island Airways were ranked second on technical capability, with existing services to Apia and operations of a preferred aircraft. Furthermore positioning costs from American Samoa are relatively low.
Air Tahiti were ranked second overall. They scored highest in terms of technical capability with operations of the aircraft of choice the ATR42-500, a relatively large fleet size and safety accreditation key criteria. Their propensity to cooperate for provision of air service is, however, anticipated to be moderate, based on distance from Apia as the primary reason for a possible low level of interest. This needs to be tested in Stage 2, as well as true positioning costs for a suitable aircraft, which from Tahiti are expected to be relatively high.
Polynesian Airlines were ranked third, and their propensity to cooperate for provision of air service is considered to be high on the basis of having previously flown the second best aircraft type the Dash8-Q200, and the possibility that Polynesian Airlines maintain aspirations to become a larger regional player. From a technical perspective Polynesian Airlines scored moderately, lacking the preferred aircraft at present although this was offset by their obvious location in Apia and network strength. 36 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.1.2 Aircraft Partner Technical Evaluation The following table applies a quantitative scoring system to evaluate at a high level technical ability of potential airline partners. Airline ability assessment measures include identified best fit aircraft from the financial analysis, location of the airline in terms of proximity to Apia, overall fleet size, IATA IOSA certification for safety standards and whether the airline currently operates the identified aircraft type to Apia.
The actual selection of a preferred partner will require further evaluation in stage 2 where it is recommended that preliminary discussions will be held with each potential partner to further gauge their propensity for involvement in the provision of Tokelau air services.
Table 12. Aircraft partner high level technical ability evaluation table
Air Tahiti score highest, with operations of the aircraft of choice the ATR42-500, a relatively large fleet size and safety accreditation key criteria.
Inter Island Airways were ranked second, primarily on the basis of location, an existing presence in Apia and operations of the fourth best aircraft type the Dornier 328.
Air Niugini were ranked third, being operators of the Dash8-Q200, the second best aircraft type and safety accreditation.
Eagle-i | 4.0 Partner Evaluation 37
January 7, 2010 TOKELAU STAGE 1 - FINAL
Polynesian Airlines were ranked fourth with location and Apia services in their favour.
Pacific Sun were ranked fifth equal with operations of the aircraft of choice, and a relatively good proximity to Apia.
Air Caledonie were ranked fifth equal with operations of an earlier model ATR42, a relatively good proximity to Apia, and relatively good fleet size.
Air Nelson (a subsidiary of Air New Zealand) were also ranked fifth equal with operations of the third best aircraft the Dash8-Q300.
Chathams Pacific were ranked 8 th , operating the fifth best aircraft type the Convair 580 and a relatively good proximity to Apia.
Next were Air Rarotonga, operating the least preferred aircraft types, a small fleet and the lack of services to Apia.
38 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.1.4.1.3333 AAAircraftAircraft Partner Propensity to Engage Table 13. Aircraft partner propensity to engage
Aircraft Operator Appetite 1 Notes Inter Island Airways 5 > Expanding to International destinations: Fiji, Tonga, Wallis And Futuna and Niue. > Schedules operate as “on-demand” > Currently don’t fly the 328 to Apia, but a commercial operation may be possible to avoid positioning costs > Based in Pago Pago and comes under Federal Aviation Authority (FAA) and is not part of PIASA. Polynesian Airlines 4 > Have previously operated Q200 aircraft, which performed well but had insufficient markets to retain it. > Is the most likely GSA (General Sales Agent) that would be used in Samoa; Pacific/Polynesian Blue is represented by Polynesian Airlines > Is the sole ground handling provider at Apia Air Rarotonga 3 > Signatory to PIASA > Currently only service domestic Cook Island destinations > Current fleet mix not suitable for Tokelau Chathams Pacific/ Air 3 > May consider an arrangement Chathams > Airline based in Chatham Island > Expanded to domestic Tonga services 2008 Pacific Sun 3 2 > Fleet size of two aircraft may limit their ability in the short term > Positioning costs could be eliminated if Pacific Sun are prepared to operate an commercial service using ATR42 service from Fiji to Apia. Air Tahiti 2 > Air Tahiti may consider some form of partnership > Currently have limited international service; closest operated point currently is Rarotonga > Not a PIASA signatory > May seek positioning cost recovery to Apia Air Calédonie 2 > CurrentlyIOSA certified operate for safety older ATR42-320 series > Future uncertain due financial issues Air Nelson 2,3 1 > Not likely interested unless price is high or they have plans for a wider Pacific strategy using turboprops under the new PIASA agreement > Operate third best Q300 from operating cost perspective > Apia/Tokelau too disconnected from rest of Q300 operation and would be considered too high risk > No turboprop capability outside domestic New Zealand operations > Cost recovery sought by Air New Zealand over and above direct operating costs may be prohibitive Air Niugini 1 > Too far removed from Apia > Operate both the Q200 and Q300 aircraft > IOSA Certified for safety 1. 5 = Likely, 1 = Not likely
Eagle-i | 4.0 Partner Evaluation 39
January 7, 2010 TOKELAU STAGE 1 - FINAL
Inter Island Airways scored highest in terms of likely interest to work with the Tokelau Administration. Inter Island Airways plan to operate two Dornier 328’s and are expanding their network accordingly. It is probable that Inter Island Airways would view the opportunity to provide air service as beneficial to their own aircraft utilisation, and improve cashflow through a contract to supply service with the Tokelau Administration.
Polynesian Airlines is ranked in second place, they have previously flown the second best aircraft type the Dash8-Q200 and it is believed still hold aspirations to become a larger regional player. An opportunity to cooperate with the Tokelau Administration could be sufficient to justify route expansion plans.
Air Rarotonga and Chathams Pacific were ranked third on expected level of interest. Furthermore, it is expected that Air Rarotonga may hold regional aspirations given the opportunities provided by PIASA. Chathams Pacific may view the Tonga-Apia route as a natural extension of Tonga services from which a Tokelau extension could also be considered.
Pacific Sun, Air Caledonie and Air Tahiti are ranked fourth on likely interest. International politics, financial difficulties, and extended positioning distance from Apia, could be viewed as potential challenges to possible lack of interest or ability to mount a remote operation away from the air providers home base.
Air Nelson (a Bombardier Dash8-Q300 operator 100% subsidiary of Air New Zealand), and Air Niugini scored lower on perceived level of interest, due to remoteness of Apia-Tokelau services relative to their existing networks, and high cost of positioning aircraft and flight crews.
40 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.4.4.1.44. 1.41.41.4.. Detailed Aircraft Operating Partner Analysis
The following partner analysis provides further detail on their backgrounds and operating environment. Furthermore estimates are made on the cost of positioning aircraft to Apia to operate Tokelau services. In many instances these costs are prohibitive, with costs escalating as the distance from Apia increases.
4.4.4.1.4.14. 1.4.1 Inter Island Airways
i. About
Inter Island Airways represents the best overall position to establish a JV partnership or charter agreement with given current limitations. The airline is based in Pago Pago, American Samoa and comes under the jurisdiction of the United States of America and the FAA (Federal Aviation Administration). While not based in Apia the airline operates regular “on demand” services from Pago Pago to Apia with Dornier 228 aircraft. Although this aircraft is not optimal in terms of its economics, positioning charges into Apia would be avoided. Inter Island Airways have also taken delivery of one Dornier 328 which is capable of operating to Tokelau with a 1000m airstrip, it will be used to operate to destinations including Apia, Samoa, Tonga, Niue and Fiji. A second Dornier 328 has been ordered.
Inter Island Airways have been in operation for 16 years and are still a very small operator by commercial airline standards. A fleet size of four aircraft and three different types may make this airline an expensive option from a direct operating cost, but could be offset with their proximity to Apia.
ii. Profile
Table 14. Inter Island Airways Profile
Year Founded 1993 Fleet (4) Dornier 228 2 Dornier 328 1 (and 1 on order) Britten Norman Islander 1 Cities Served Pago Pago, American Samoa (home base) Ofu and Tau Islands, American Samoa Apia, Samoa Nuku ʻalofa and Vava'u, Tonga and Alofi, Niue 12 Suva, Fiji 13 , plus plans for Wallis and Futuna Islands Aircraft Positioning Assumes that aircraft positions to APW on day of operation. Total block time of 1.5 hours. Estimated annual cost Dornier 328: NZD124,000 (NZD700 per round trip to Tokelau). Dornier 228: NZD107,500 (NZD345 per round trip to Tokelau). Aircraft Utilisation Unknown 14 Business Model Mixed Scheduled / Charter operator
12 Due to start Nov/Dec 2009 13 Due to start Feb/Mar 2010 14 Schedule operates as “on-demand charter” Eagle-i | 4.0 Partner Evaluation 41
January 7, 2010 TOKELAU STAGE 1 - FINAL
iii. Service Scope
Inter Island Airways
Nauru Kiribati Papua Indonesia Solomon Is 228 Range New Guinea Tuvalu . Tokelau 1100Km
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue
Tonga 328 Range Australia 1800Km
New Zealand
Aircraft Range
Existing Operations
Figure 18. Inter Island Airways operation map
4.4.4.1.4.24. 1.4.2 Pacific Sun
i. About
Pacific Sun, formally Sunflower Airlines was acquired by Air Pacific in 2007 and forms a regional link subsidiary for the Air Pacific parent. Pacific Sun is the closest operator of the ATR42-500 to Apia currently. The longest flight operated by Pacific Sun is a 1,078Km flight from Suva Fiji to Fongafale Tuvalu, almost twice the distance between Apia and Tokelau.
Parent company Air Pacific has IOSA operational safety certification, while the Pacific Sun has not specifically been audited for safety compliance and processes.
ii. Profile
Table 15. Pacific Sun Profile
Year Founded 1980 (as Sunflower Airlines), 2007 became Air Pacific subsidiary Fleet (8) ATR42-500 2 DHC-6 Twin Otter 3 Britten Norman Islander 3 Cities Served Domestic Fiji Tuvalu Ownership Air Pacific - Fiji Government 51%, Qantas 46% Aircraft Positioning Assumes that aircraft positions to APW on day of operation. Total block time of 4.7 hours. Estimated annual cost NZD331,000 (NZD2,850 per round trip to Tokelau). Aircraft Utilisation Business Model Full Service
42 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
iii. Service Scope
Pacific Sun (Air Pacific) ATR42-500 Operations
Nauru Kiribati Papua Indonesia Solomon Is ATR42 Range New Guinea Tuvalu . Tokelau 1600Km
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia Pacific Sun (Air Pacific) Fiji New Zealand
Aircraft Range
Existing Operations
Figure 19. Pacific Sun operation map
4.4.4.1.4.4. 1.4.1.4.33 Polynesian Airlines
i. About
Former flag carrier of Samoa which previously operated a fleet of aircraft up to 737 and 767 size. Polynesian was scaled back to a small turboprop airline in 2005 with the joint venture between Virgin Blue and the Samoan government to form Polynesian Blue. Polynesian do not currently operate any of the preferred aircraft, however the airline has previously operated the Q200 which would have been suitable for Tokelau operation. The reason for the Q200’s return was cited as insufficient network options required the airline to return the aircraft to Papua New Guinea, and some capability to operate may still exist, although this requires verification.
As the only turboprop operator based in Apia, this airline could present a viable option depending on its ability to acquire a different fleet type. The airline is limited by its small fleet size.
Polynesian Airlines is the General Sales Agent (GSA) in Samoa for Polynesian Blue/Pacific Blue and Air Pacific. Polynesian also represents Polynesian Blue/Pacific Blue in Tonga.
Polynesian Airlines is also the sole ground handling agent at Apia.
ii. Profile
Eagle-i | 4.0 Partner Evaluation 43
January 7, 2010 TOKELAU STAGE 1 - FINAL
Table 16. Polynesian Profile
Year Founded 1959 Fleet (4) DHC-6 Twin Otter 2 Britten Norman Islander 1 Cities Served Apia (home base) Pago Pago, American Samoa, plus other domestic points within Samoa Ownership Samoan Government Aircraft Positioning Not required Aircr aft Utilisation Unknown Business Model
iii. Service Scope
Polynesian Airlines
Polynesian Samoa Twin Otter Nauru Kiribati Papua Indonesia Solomon Is New Guinea Tuvalu . Tokelau
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia
New Zealand
Aircraft Range
Existing Operations
Figure 20. Polynesian Airlines operation map
44 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
4.4.4.1.4.4. 1.4.1.4.4444 Chathams Pacific/Air Chathams
i. About
Based in Chatham Islands New Zealand and operates to various points in the North and South Islands on a scheduled basis. Domestic Tonga services were established in 2008. The airline does not operate international services however Tonga to Apia could be a possibility in the future, which may facilitate the addition of a Tokelau service.
ii. Profile
Table 17. Chathams Pacific/ Air Chathams Profile
Year Founded 1986 Fleet (19) Convair 580 4 Fairchild Metro III 1 Cities Served New Zealand to Chatham Islands Domestic Tonga Ownership Private Aircra ft positioning Assumes that aircraft positions to APW on day of operation. Total block time of 4.5 hours. Estimated annual cost NZD416,000 (NZD3,900 per round trip to Tokelau). Aircraft Utilisation Business Model
iii. Service Profile Chathams Pacific/Air Chathams
Nauru Kiribati Papua Indonesia Solomon Is New Guinea Tuvalu . Tokelau
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga Australia
Air Chathams/ Chathams New Zealand Pacific Convair
Aircraft Range
Existing Operations
Figure 21. Chathams Pacific/Air Chathams Route map
Eagle-i | 4.0 Partner Evaluation 45
January 7, 2010 TOKELAU STAGE 1 - FINAL
4.4.4.1.4.4. 1.4.1.4.55 Air Tahiti
i. About
Air Tahiti is the largest ATR operator in the Pacific Islands. Current operations are mainly domestic French Polynesia, and an ATR72 is operated to Rarotonga, as a code-share operation with Air Rarotonga.. Air Tahiti is the only turboprop airline identified in the Pacific Islands with IATA IOSA certification, and the fleet includes both ATR42 and -72 series aircraft.
In 2011, Air Tahiti will upgrade their fleet from the -500 series model of ATR42 and ATR72 aircraft to the newer, more fuel efficient and technologically advanced -600 series.
ii. Profile
Table 18. Air Tahiti Profile
Year Founded 1953 Fleet (4) ATR42-500 3 ATR72-500 7 + 1 on order Cities Served Papeete, French Polynesia (home base) Domestic French Polynesia points Rarotonga Ownership French Polynesian Government (13.7%), Socredo Bank (13.4%), employees (8.4%), private shareholders (33.5), Air France (7.48%) and the rest by other institutional investors Aircraft positioning Assumes that aircraft positions to APW on day prior to operation. Tech crew stationed in Apia. Total block time of 12.20 hours. Estimated annual cost NZD810,000 (NZD6,990 per round trip to Tokelau). Air craft Utilisation Unknown Business Model
46 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
iii. Service Profile
Air Tahiti
Nauru Kiribati Papua Indonesia Solomon Is ATR42 Range New Guinea Tuvalu . Tokelau 1600Km
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia Air Tahiti Tahiti
New Zealand
Aircraft Range
Existing Operations
Figure 22. Air Tahiti operation map
4.4.4.1.4.4. 1.4.1.4.6666 Air Nelson (Air New Zealand)
i. About
Air Nelson is the airline subsidiary operating under the Air New Zealand Link brand. The airline is 100% owned by Air New Zealand but is managed as a separate operating entity. All airline commercial aspects are managed at a group level. Air Nelson exclusively operates the Bombardier Q300 aircraft type. Air New Zealand and subsidiary ZEAL 320 (formerly Freedom Air) are the only operating units within the Air New Zealand group that have IATA IOSA certification.
The distance of the current operation for the Q300 from Apia and the cost and time involved to position aircraft empty to Apia could detract from Air New Zealand being a potential air service operating partner at this stage, however this needs to be verified. Air New Zealand could be the General Sales Agent (GSA) and Distribution partner for the Tokelau service.
ii. Profile
Table 19. Air Nelson Profile
Year Founded 1979 Fleet (23) Q300 23 Cities Served Nelson, New Zealand (home base) Domestic New Zealand points Ownership Air New Zealand 100%
Eagle-i | 4.0 Partner Evaluation 47
January 7, 2010 TOKELAU STAGE 1 - FINAL
Aircraft positioning Assumes that aircraft positions to APW on day prior to operation. Tech crew stationed in Apia. Total block time of 22 hours. Estimated annual cost NZD1.5m (NZD9,090 per round trip to Tokelau). Aircraft Utilisation Business Model
iii. Service Profile
Air Nelson (Air New Zealand subsidiary)
Nauru Kiribati Papua Indonesia Solomon Is Q300 Range New Guinea Tuvalu . Tokelau 1500Km
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia
New Zealand Air New Zealand New Zealand Aircraft Range
Existing Operations
Figure 23. Air Nelson operation map
4.4.4.1.4.74. 1.4.7 Air Rarotonga
i. About
Air Rarotonga may have an interest in forming a JV relationship. However they do not currently have aircraft considered suitable for the Tokelau operation. Existing aircraft including the Saab 340 (34 seater) is understood to require a 1400m runway, while the Embraer Bandeirante (19 seater) has the least favourable operating economics of the identified aircraft in the region.
ii. Profile
Table 20. Air Rarotonga Profile
Year Founded 1978 Flee t (3) Saab 340A 1 Embraer Bandeirante 2 Cities Served Rarotonga (home base) Domestic Cook Island points
48 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Ownership Private Aircraft positioning Assumes that aircraft positions to APW on day prior to operation. Tech crew stationed in Apia. Total block time of 7.50 hours. Estimated annual cost Saab340A:NZD483,000 (NZD2,700 per round trip to Tokelau). Embraer Bandeirante: NZD501,000 (NZD1,600 per round trip to Tokelau). Aircraft Utilisation Business Model
iii. Service Profile
Air Rarotonga
Nauru Kiribati Air Rarotonga Papua Indonesia Solomon Is Cook Islands New Guinea Tuvalu . Tokelau Saab 340A Bandeirante Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia
New Zealand
Aircraft Range
Existing Operations
Figure 24. Air Rarotonga operation map
4.4.4.1.4.4. 1.4.1.4.8888 Air Niugini
i. About
Based in Papua New Guinea and operating Q200 and Q300 aircraft. The airline operates jet services down to Fiji, however the identified turboprop aircraft are remote to Apia and would require significant positioning of aircraft for the Tokelau service. Air Niugini also operates Fokker 100, a Boeing 757-200 and 767-300.
ii. Profile
Table 21. Air Niugini Profile
Year Founded 1973 Fleet (19) Bombardier Q200 3
Eagle-i | 4.0 Partner Evaluation 49
January 7, 2010 TOKELAU STAGE 1 - FINAL
Bombardier Q200 3 Cities Served Papua New Guinea domestic Ownership Private Aircraft positioning Assumes that aircraft positions to APW on day prior to operation. Tech crew stationed in Apia. Total block time of 21 hours. Estimated annual cost NZD1.3m (NZD7,800 per round trip to Tokelau). Aircraft Utilisation Business Model
iii. Service Profile
Air Niugini Air Niugini PNG
Nauru Kiribati Papua Indonesia Solomon Is Q200 Range New Guinea Tuvalu . Tokelau 1700Km
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga Q300 Range Australia 1500Km
New Zealand
Aircraft Range
Existing Operations
Figure 25. Air Niugini operation map
4.1.4.9 Air CalCaléééédoniedonie
i. About
Based in New Caledonia and operating the ATR42/72-500 and the Dornier 228. The airline operates domestic services within New Caledonia. Currently the airline doesn’t serve any international destinations. The main airport of Noumea is outside the range the ATR42-500 and with a small fleet would find the logistics of getting an aircraft to Apia each week difficult.
50 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
ii. Profile
Table 22. Air Calédonie Profile
Year Founded 1954 Fleet (4 ) ATR42-500 1 ATR72-500 2 Dornier 228 1 Cities Served New Caledonia domestic Ownership Majority government owned Aircraft pos itioning Assumes that aircraft positions to APW on day prior to operation. Tech crew stationed in Apia. Total block time of 12.20 hours. Estimated annual cost NZD810,000 (NZD6,990 per round trip to Tokelau). Aircraft Utilisation Business Model
iii. Service Profile
Air Calédonie
Nauru Kiribati Papua Indonesia Solomon Is New Guinea Tuvalu . Tokelau
Vanuatu Samoa Am.Samoa French Fiji Polynesia New Caledonia Cook Is. Niue Tonga
Australia
New Zealand
Aircraft Range Air Calédonie New Caledonia Existing Operations
Figure 26. Air Calédonie operation map
Eagle-i | 4.0 Partner Evaluation 51
January 7, 2010 TOKELAU STAGE 1 - FINAL
4.4.4.24. 222 Sales and Marketing Partner
Selection of a General Sales Agent (GSA) in key markets is important, but not a significant barrier to entry. Different GSA providers can be contracted in different markets. For example the Virgin Blue Group airlines Polynesian Blue/Pacific Blue use Polynesian Airlines in Samoa and Tonga. A GSA represents the airline at a local level and arranges ticketing and payment collection services on behalf of client airlines.
4.4.4.34. 333 Distribution Partner
A distribution partner could be provided either separately or in combination with the operating airline partner. The distribution system manages bookings, inventory, revenue management and departure control functions.
Distribution is critical to ensure there is availability of seat visibility in regions of sale, particularly with internet sales.
4.4.4.44. 444 Airport Operations
To provide international standard airport operations, an external provider will be required for Tokelau, as there is no capability on Tokelau. This may be an air operator function or specialist ground handling provider from within the region. Further study and evaluation is required.
In order to comply with full “International” regulations a complement of nine employees will be required at Tokelau airport. Given the low expected frequency of operations the actual number of full time equivalents is estimated at 3.3 FTEs.
Functions to be covered by staff will include the following: Airport Manager, check in staff, general security, ramp, passenger screening and refuelling. Ideally, many of these positions could be recruited locally and provided with appropriate training for the airport roles.
Total annualised costs of NZD171,000 have been assumed to cover the required 3.3 FTEs. These costs have been categorised as station operation costs within the aircraft operating financials.
A further provision of NZD169,000 has made for other operational costs including infrastructure maintenance and utilities. These costs have also been included within the station operating costs within the aircraft operating financials.
52 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Table 23. Airport ground operations costs
4.4.4.54. 555 Partner ManageManagementment
Appointment of an airline/air service management advisor could assist NZAID and the Tokelau administration to establish required partnerships with commercially viable conditions and ensure ongoing operational integrity and accountability.
As the provision of air service is a complex proposition, both commercially and operationally, an appropriate and commensurate level of industry support is critical to ensure:
• Delivery of outcomes to meet the aims of a Tokelau air service • Operational compliance meets all NZ and International standards for safety & security • Commercial outcomes are in line with targeted expectations for a minimum breakeven service, and are progressing each year toward self-sustaining revenue/cost deliverables by Year 3 • Joint venture conditions are monitored and met by the air service provider • Air strip operations are managed in accordance with international standards and meet/exceed the operating requirements of an air service provider, or providers.
Eagle-i | 4.0 Partner Evaluation 53
January 7, 2010 TOKELAU STAGE 1 - FINAL
444.4...6666 Partner Discussions
The study has evaluated potential partners from an external perspective to gauge their suitability and appetite to engage with NZAID and the Tokelau Administration. The first engagement with any potential partner should be at a commercial/strategic level. The negotiations may take some months to conclude, however intentions and willingness to work with Tokelau could be gauged relatively quickly.
The initial engagement with potential partners, as required, should cover the following aspects to ensure the right mix, and compatibility of partners for delivery of a sustainable and viable outcome:
1. Identify and appoint a Partner Management entity to coordinate and manage the venture on behalf of Tokelau and NZAID to ensure a robust and sustainable outcome. 2. Brief potential providers/operator on the Tokelau requirement and level of demand expected 3. Provide information of the type of airfield/operation that may be constructed (subject to further engineering site evaluation) 4. Outline the options for a joint venture and the expected frequencies required from the operator as well as seasonal demand 5. Seek views on the proposal and feedback on current capability, possible level of interest, and growth aspirations in the Samoa/Tokelau region 6. Confirmation of the partners current status, growth and ability to deliver on criteria. 7. Identify options for partners to offer services in terms of distribution, sales, and airport management. 8. Confirm the air service providers technical ability to undertake the service to Tokelau on a consistent and reliable basis, and any ETOPS (extended over water twin engine operations) constraints or certification requirements for long over-water sectors such as Tokelau. 9. Discuss a negotiation framework, timeframe to conclude arrangements, pricing methodology, and availability for first service – subject to interest and completion of possible airfield.
As a result from a first round of meetings with the identified preferred partners, a short list could form more detailed discussions and terms of reference for provision of air service.
54 4.0 Partner Evaluation | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
5.0 AirstAirstripripriprip & Infrastructure
5.1 Background The October 2009 desktop study focused on three coral surface airstrips suitable for light-medium turboprop aircraft capable of landing and taking off on a 700m-1000m air strip under daylight conditions. The air strip construction review and cost analysis was updated from the 1985 MOW study and, without reference to current construction costs on the region for air fields, and a factor applied for inflation to approximate 2009 costs.
As part of this review, the engineering aspects of air strip construction have been allocated to Beca consulting engineers for an up-to-date cost estimation (as a desktop review), however, are based on their recent experience of known costs at similar South Pacific air strip construction or upgrade sites. 5.2 Airstrip Specifications The following diagram outlines the specifications required for a Tokelau Airstrip. The overall dimensions are 1300m by 90m. The airstrip may best be defined as a short Code 3C strip. With a sealed runway length of 1000m the airstrip is less than the 1200m requirement for a 3C airstrip, however it is capable of accommodating the ATR42-500 (Code 3C aircraft) at maximum landing weight. Furthermore airstrip width, runway safety ends and slope clearance conform to Code 3C requirements.
The airstrip is comprised of a paved runway length of 1120m and width of 30m. For costing purposes it is assumed that a 15m wide taxiway and 40m x 30m apron will also be provided which would facilitate an aircraft landing with another aircraft already on the ground and clear of the runway.
In addition to the paved runway, a cleared and graded runway strip will be required providing the airspace and aircraft runoff safety areas in compliance with civil aviation regulations. This area will be 110m wide and 1300m long on dry land and its formation will involve earthworks to form free drainage slopes and ICAO/NZCAA complying longitudinal and transverse gradients.
A 50m wide margin of vegetation and trees would ideally remain on each side of the cleared strip area to reduce the risk of excessive storm erosion.
A typical cross section sketch is attached, showing the conceptual earthworks profile required. Clearance of trees will also be required for some 1000m beyond each end of the runway strip to allow the obstacle-free flight path to be formed (unless over water, depending on the runway location).
The runway construction estimate has been based on the assumption that reclamation into the sea and lagoon will not be required. Beca recommend this limitation is placed on the site at this stage as reclamation and seawalls would add significantly to the costs.
Eagle-i | 5.0 Airstrip & Infrastructure 55
January 7, 2010 TOKELAU STAGE 1 - FINAL
Figure 27 . Airfield design specifications
56 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
5.3 Site Selection Criteria
5.3.1 Site Selection Overview Tokelau is a group of three coral atolls in the Pacific Ocean, around 100km apart, and around 500km north of Apia, Samoa.
The proposed airfield site has not been identified yet, but could be on anyone of the three atolls. Several possible sites have been identified in previous studies, however, many of these appear not to be suitable for the runway length now being proposed (1,000m plus 300m for runway end safety areas (RESA) and sealed starter extensions).
Therefore this Stage 1 estimate is based on a “generic” airfield layout which assumes possible construction at any of the three atolls.
It is noted that areas of sufficient dimensions have been identified as possible air strips (about 120m wide x 1300m long) plus a location for an apron on the three atolls, however, these are yet to be considered by the representatives and residents of Tokelau, nor investigated to confirm suitability.
It is envisaged that “Stage 2” of the study would include a visit to potential sites at all three atolls with a view to identifying a preferred site. Once a site has been identified and approved by the Tokelauan Government and residents, geotechnical investigations and topographical survey could proceed, followed by conceptual or preliminary design work, which would then allow refinement of the cost estimate.
5.3.2 Specific Site Selection Criteria The primary criteria used in the selection of sites in this desktop study are as follows. The information available for site selection is limited to the review of previous reports and new briefing information. No site visit has been undertaken.
The minimisation of reclamation works.
Costs associated with reclaiming into the lagoon or open ocean will be significant, hence the desire to identify sites which could accommodate the required area of120,000m2 (1300m x 90m).
The minimisation of tree clearance requirements
Beyond the runway ends a requirement will exist to clear any trees or other obstacles on a ratio of 1m height clearance for each 40m increment from the runway end. Site selection criteria therefore include a requirement to minimise tree clearance. Given that the atoll is relatively narrow (estimated at around 225m in identified areas) tree clearance could be minimised by setting the airstrip on an angle across any land area thus maximising the natural clearance provided by the ocean and lagoon areas.
5.3.2.1 Airstrip apron alignment On the basis that an apron is to be provided to facilitate aircraft turns, safety requirements dictate that the apron must be established to the side of the runway area clear of the 90m prepared area. Given the lack of atoll width discussed above site criteria also includes a requirement for the airstrip to be located as close as possible to any natural arc in the atolls land area, providing the ability for an aircraft to veer away from the direct line of the airstrip.
Eagle-i | 5.0 Airstrip & Infrastructure 57
January 7, 2010 TOKELAU STAGE 1 - FINAL
5.3.2.2 Weather impact To withstand the effects of weather at the air strip, the recommendation is that the runway must be able to survive a wave over the top of the strip or extended storm surge, and with minimal debris clearance and removal after an event, be available for continued air operations. This requires a edge to be created and the surface construction to be of sufficient compaction or strength, so as to withstand erosion from both wind and wave action.
5.3.2.3 Future proofing A further criteria is the selection of a site which could ideally facilitate future airstrip lengthening. This is likely to prove problematic given the above requirement to minimise clearance for the initial strip.
On the basis of these criteria sites have been identified on each atoll.
5.3.3 Selected Sites
Table 24. Airfield site location options
Option 15 Atoll Airfield Category Airfield Length 16 A Atafu 3C 1000m B Atafu 3C 1000m C Nukunonu 3C 1000m D Fakaofo 3C 1000m
Figure 28. Nukunonu airfield options map
Figure 29. Atafu airfield options map
15 All airfield blocks indicated on the maps are approximately 1300m x 120m
16 Runway length excluding RESA and 30m sealed starter extensions at each end.
58 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Figure 31 . Fakaofo airfield options map
Figure 30 . Nukunonu airfield options map
Eagle-i | 5.0 Airstrip & Infrastructure 59
January 7, 2010 TOKELAU STAGE 1 - FINAL
5.4 Airstrip surfacing specifications and cost estimates
5.4.1 Overview ooff airstrip cost assumptions Three options for runway pavement surfacing are presented below and cost estimates are provided for each on the basis of providing a 1,000m runway with 300m RESA extensions capable of sustaining operations by an aircraft up to 19 tonnes maximum takeoff weight such as the ATR42-500, and to fully comply with New Zealand CAA regulations and air operator expectations.
The cost estimates are based upon the following assumptions;
• Costs based upon the cost to construct a similar airstrip in New Zealand plus an additional factor to cover the logistics of constructing an airstrip in a remote location with no existing construction infrastructure, mobilisation of personnel, materials and equipment and a construction market factor to allow for remoteness. • Site establishment – from equipment/machinery and some base material delivered by ship/barge • Development of site with elevated runway to avoid ponding, stabilisation of sides/edges, and ditches for water run-off • Any required fill is able to be excavated from the lagoon • Local disposal of cleared vegetation, and possible planting of low vegetation and grassing of edges/RESA area • Pavement of works, and cement treatment of existing sand base
The following costs are excluded from the airstrip cost estimates and a separate allowance may need to be made in overall budgeting:
• Airstrip infrastructure, utilities and servicing – see later section • Pavement strengthening to support heavier aircraft such as the C-130 Hercules. • Land purchase costs • Legal and finance costs • Insurance costs • Local authority consents, permits, contributions etc • Escalation and exchange rate fluctuations (present day values used) • GST, import duties, value added taxes if applicable
Furthermore as a site has not yet been identified through a physical site inspection, geotechnical and access conditions have not yet been determined, the accuracy of the following estimates are therefore likely to be in the range of 0% - +50%.
5.4.5.4.2222 Unsealed Coral Surface For this surface, it is recommended that a layer of local coral aggregate is placed onto the compacted formation made of local coraline soil and cement stabilised to provide adequate strength for the ATR 42 aircraft, which has a maximum takeoff weight of around 19 tonnes. This would require the cement to be imported. Establishment, earthworks and pavement, design and project management are estimated to cost NZD8.3m before a cost contingency of NZD4.94m.
60 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Pavement life is expected to be in the range of 5-10+ years with regular maintenance, e.g. monthly sweeping, 6 monthly repair of potholes (approximately NZD20,000 per year), plus every 3-5 years regrade, at approximately NZD200,000. Likely to require upgrade with a seal in the medium term.
The cemented surface will be susceptible to erosion and stone loss, resulting in risk of foreign object damage to aircraft, and will require regular maintenance to keep in operational condition. This type of surface may be unacceptable to aircraft operators due to the risk of damage to aircraft.
Total initial capital investment incl contingency: NZD13.23m
Present value of 30 year maintenance: NZD 4.76m
Total investment: NZD17.99m
5.4.5.4.3333 Chip Seal SSurfaceurface The pavement construction in this case would include the cement stabilised coral layer as above, and a two-coat bitumen spray and chip seal surfacing would be applied in addition, using imported bitumen and stone chips. Establishment, earthworks and pavement, design and project management are estimated to cost NZD8.69m before a cost contingency of NZD5.10m.
Pavement life can be expected to be 20+ years before significant maintenance is required. Maintenance costs should allow for 3 monthly sweep for the first year, approximately NZD5,000 per year. Pothole repairs will likely be required after 5-1 0 years, at approximately NZD10,000 per year. Resealing may be required after 15 years, at approximately NZD1-2m.
This surface would be typical of many airfields where ATR 42-type aircraft operate, however, chip seal would still not be ideal for this size of aircraft due to risk of foreign object damage to aircraft from loose stones (albeit less risk than for an unsealed surface) and susceptibility of the surfacing to damage. Regular maintenance sweeping would be required.
Total initial capital investment incl contingency: NZD13.79m
Present value of 30 year maintenance: NZD 1.74m
Total investment: NZD15.53m
5.4.5.4.4444 Asphalt SSurfacingurfacing For this surface, a 50mm thick asphaltic concrete surface is required, which would need to be manufactured on site using imported bitumen and imported crushed rock aggregates, requiring mobilisation of an asphalt plant and specialist paving machines. Establishment, earthworks and pavement, design and project management are estimated to cost NZD11.49m before a cost contingency of NZD6.27m.
Pavement life can be expected to be in the range of 30+ years. Nominal maintenance allowance of approximately NZD5,000 per year plus NZD20,000 every 5 years.
Eagle-i | 5.0 Airstrip & Infrastructure 61
January 7, 2010 TOKELAU STAGE 1 - FINAL
This is the technically preferred surfacing, as a reasonably durable surface is achieved with low foreign object damage risk to aircraft. Maintenance requirements are minimal for around 10-15 years.
Total initial capital investment incl contingency: NZD17.76m
Present value of 30 year maintenance: NZD 0.62m
Total investment: NZD18.38m
Figure 32. Present value of airstrip investment and maintenance costs
62 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
5.5 Airport infrastructure specifications and cost estimates
5.5.1 Overview of airport designation Astral Aviation has advised that the standard designation for the airport would be “International” due to the operation of services from/ to Samoa.
The Stage 1 desktop evaluation could not establish whether the airport could be designated as a New Zealand "Domestic” airport under some form of dispensation. In costing the airport infrastructure requirements it has therefore been assumed that "International” specifications as outlined by New Zealand Civil Aviation regulations would apply. However for comparative purposes “Domestic” airport infrastructure costs are also provided.
5.5.5.5.2222 Airport infrastructure capital costs The main additional features associated with an International airport include:
• Larger and higher standard of terminal building assumed at 400m2 - required to include separation of arriving and departing passengers from the public, security screening etc.
Total initial capital investment: NZD 0.43m
• 2.4m high hurricane mesh security fence around whole airfield, approx 3km in total length
Total initial capital investment: NZD 0.37m
• Provision of fire fighting equipment
Total initial capital investment: NZD 0.15m
• Services, Utilities and Security. Includes security requirements, firewater storage and piping storm water, sewerage, navigational aids, power supply, fuel storage, generators etc.
Total initial capital investment: NZD1.12m
The sub total cost associated with “International” infrastructure is therefore estimated at NZD2.07m before inclusion of a jetty (discussed below). In comparison “Domestic” airport infrastructure is estimated to cost NZD1.35m, with savings associated with a lower fence, reduced security requirements, a smaller building (300m2), and no fire equipment.
The construction of a 48m2 jetty to service the airport from villages located away from the airport has been considered at a total cost of NZD0.28m. A similar cost is anticipated for a “Domestic” airport.
Total infrastructure related costs for an “International” airport is NZD2.35m, and NZD1.63m for a “Domestic” airport.
Eagle-i | 5.0 Airstrip & Infrastructure 63
January 7, 2010 TOKELAU STAGE 1 - FINAL
Figure 33. Airport infrastructure investment domestic versus international
64 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
5.6 Construction timeline and overall cost summary
5.6.1 Construction timeline Beca estimate that approximately 90 to 100 weeks will be required before construction of the airstrip and associated infrastructure will have been completed. In addition security and safety audits will also be required before the airport is certified. A total elapsed time of two years is therefore anticipated; however this timeline is subject to validation during the recommended Stage 2 of the Tokelau air services study.
The phases to be defined during a Stage 2 site inspection and report are part of an estimated 8 week process, at commencement of the next stage.
Further activities are as follows:
Geotechnical Investigation and topographic survey (site work, lab testing and report) - 10 weeks
Engineering Design
• Prelim Design - 8 weeks • Detailed Design and Tender Document - 10 weeks
Tender Stage
• Confirmation of funding, tender period, tender evaluation, approval for award - 12 weeks
Construction
• Mobilisation - 12 weeks • Site preparation - 10 weeks • Earthworks - 12 weeks • Paving - 8 weeks • Building and jetty - 16 weeks, overlapping with paving
Table 25 Airstrip timeline as advised by Beca
Tokelau Airstrip timeline (source: Beca) Weeks 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 8488 92 96 100
Stage 2 site inspection & report 8 1 1 1 1 Geotech investigation & topo survey 10 1 1 1 1 1 Engineering Design Preliminary design 8 1 1 1 1 Detailed Design & Tender document 10 1 1 1 1 1 Tender stage - funding, tender evaluation 12 1 1 1 1 1 1 Construction Mobilisation 12 1 1 1 1 1 1 Site preparation 10 1 1 1 1 1 Earthworks 12 1 1 1 1 1 1 Paving 8 1 1 1 1 Building & jetty 16 1 1 1 1 1 1 1 1
Eagle-i | 5.0 Airstrip & Infrastructure 65
January 7, 2010 TOKELAU STAGE 1 - FINAL
5.6.2 Cost Summary and surface recommendation The airport construction will likely cost in the range of NZD15.53m for a chip seal surface to NZD18.375m for asphalt. In addition infrastructure conforming to NZ CAA “International” specifications and a jetty are estimated to cost a further NZD2.35m. The total investment in airstrip and airport infrastructure is therefore estimated at NZD17.88m for a chip seal surface to NZD20.73m for asphalt. In addition Beca’s have advised that cost estimates are likely to be accurate to about -0%/+50% due to the early stage of project definition.
Table 26. Airstrip and infrastructure cost estimates
Based on present information and subject to confirmation from Stage 2, it is proposed that the asphalt option is the preferred surface. Asphalt despite the highest overall capital cost has a number of advantages in terms of lower maintenance cost, an operationally safe repair process, withstanding heavier wheel loads, and is likely to offer higher protection from flooding/wave incursion.
66 5.0 Airstrip & Infrastructure | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
5.5.5.75. 777 Regulatory assumptions
During Stage 1, it has been assumed that Tokelau is within the air services jurisdiction of New Zealand, and therefore covered by both the Warsaw Convention (conditions of carriage) and the Montreal convention (update and amendment to Warsaw on compensation, and conditions of carriage). The Warsaw convention is understood to automatically include a territory of New Zealand, and the Montreal Convention through the instrument of accession specifically including Tokelau.
It is further assumed that the international Air Services licensing Act 1947 (IASL) applies to Tokelau, however clarification is required prior to Stage 2 of Tokelau Air Services study to confirm that:
• The IASL which originally extended to Tokelau has subsequently been repealed, and therefore an Act which has been repealed in New Zealand cannot be in force in Tokelau • The Civil Aviation Act 1990 (but not including Part 8A of the Act) is in force in Tokelau, but does not expressly state that it applies to Tokelau. However, if the Civil Aviation Act 1990 was “passed in substitution” for the 1947 Act (or if it was “passed in substitution” for another relevant Act which expressly extended to Tokelau – e.g. the Carriage by air Act 1967 – then the 1990 Act may be applicable and in force in Tokelau by virtue of s 7 of the Tokelau Act 1948.
Additionally, it has been assumed that the following treaties are applicable:
• The Convention on International Civil Aviation 1944 (Chicago convention) • The Convention on Offenses and Certain Other Acts committed on Board Aircraft, at Tokyo on September 14, 1963 • The convention for the suppression of Unlawful seizure of Aircraft, at the Hague on 16 December, 1970 • The Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, at Montreal on September 23, 1971 • The Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving Civil Aviation, at Montreal on February 24, 1988
It is understood that the Conventions and Protocol apply to Tokelau, however this needs to be confirmed.
Therefore, this analysis and report has assumed that Tokelau is covered by New Zealand, and consequently air service from Tokelau to another country would be deemed as international air service, in the case of Tokelau to/from Apia, Samoa.
With the status of Tokelau as an international airport, then full international security obligations and regulations would apply.
For Stage 2 evaluation, the level of security and customs processing at Fagali’i airport, Apia, which has flights operating to/from American Samoa, may provide a model on how the requirements are enacted in the Pacific at lower aircraft frequency/aircraft size airports, however this is unknown for the current Stage 1 analysis.
Eagle-i | 5.0 Airstrip & Infrastructure 67
January 7, 2010 TOKELAU STAGE 1 - FINAL
6.0 Recommendations for Stage 2
The following table identifies the tasks required for a Stage 2 evaluation. The main purpose of this Stage 2 is to further define:
• Identify Partner Management candidate, and select • Shortlist JV partners, and commence engagement process • Select Air Strip location, design finalisation & geotechnical requirements (including site visits) • Refinement of airstrip and infrastructure costs based on the site visit. • Confirm operational & regulatory requirements • Confirm legislative criteria, security requirements, and air services jurisdiction • Undertake risk analysis
As Stage 1 work is a desk study, there is a critical requirement during Stage 2 for political discussions and decisions, discussions with Tokelau, and it is expected that this activity will occur concurrently with the feasibility/design work required.
68 6.0 Recommendations for Stage 2 | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Table 27. Tokelau Air Services Study Stages 1 & 2 on n vels 1 12 Report 26 Mar ‘10 Mar 26 Final Stage Stage Final2 DRAFT Stage2 Stage 2 Inputs for runway, taxiway, apron, building building runway, cost apron, taxiway,for Inputs Refinement of potential JV structuring of potential Refinement potential air servicepartners Shortlist &mitigation analysis Risk economics Aircraft relationship on commercial partners with Engage le incl. sustainability airfarecommercial Validate costs operating & preferred partner with MOU Draft coordination pricing Inter-atoll Initial site visit by by visitgeotech/surveyor site Initial &compliance operational environment Regulatory per (3) singlesiteatoll to Short-list - investigation field Second geotech/topography erosion, local aspects incl. and Environmental preferences Tokelau single site for Recommend site/s documentati selected for designand Finalise Airfield/approach Navigation/comms/security/rescue Services/PIASA implications Air resourcing, operating &jurisdictio entity, Airport • • • • • • • • • 2) Engineering • • • • • • • Regulatory/Operational • • Commercial • • 4 18 Dec 18 Report Final Stage Stage 1 Final Stage 1 1 completion Stage Stage 1b Stage Final Final report Stage 1 Civil works –works nextCivil outline steps cost detailed Further estimates cost infrastructure Airport detail regulatory Explore assumptions 1a) from outcomesAddress presentation presentation Eagle-I NZAID, Dec 21 WLG 1b) • • • • • • • 2 Report & feedback & Stage 1a Stage Workshop Decisionpoint Reportpresentation & Legend Stage 1 Interim Report infrastructure airfieldscenario renewalplans partners 27 Nov 27 •satelliteimagery Procure •diagram Airfield& sketch •validationairfield Furtheron •C130pavement to Variationsup •onefor Validate operating costs •demand Review volumes • Demandsensitivity • Airfares/pricing • Airfieldoperationalcosts running •schedules/capacity Review •fleetairline Identify& partners •questions Preparepotentialfor 1a) • costs capital airfield Generic • Security/rescuevalidation • review Commercial •partner network/airline Route •assessment Risk •Eagle-i NZAID, presentation WLG Initial Workshop feedback Workshop 0 Project brief Project TOR on Discussion feasibility Technical dates Milestone Coordination betweenparties airstrip Generic agreement Broad TOR overall on 1a into 1 Stage Split & report (Interim and presentation) report One stage 1b NZAID, Beca, Astral, Astral, Beca, NZAID, 11 Nov 11 Workshop 0) • • • • • Nov 27 • • • • Eagle-I Tokelau Air Services Study Tokelau – Stage & 2 1 17 December2009 17 Preliminaryconfidential & Date Weeks Milestones Deliverable participants Deliverable/
Eagle-i | 6.0 Recommendations for Stage 2 69
January 7, 2010 TOKELAU STAGE 1 - FINAL
7.7.7.07. 000 A Wider Pacific Solution
7.1 Overview New Zealand currently performs a key role in the central South Pacific, through historic, social, and political linkages.
Territories and protectorates, along with former territories, occupy a central position between French interests and territories in New Caledonia, Wallis & Futuna, and French Polynesia. The island states of Fiji, Tonga, Samoa, and American Samoa, with Tuvalu and Kiribati to the north complete the scenario.
This central position affords an opportunity, through the 2004 Pacific Island air services agreement of which New Zealand is a signatory with entry in April 2010, to explore a greater role for aid maximisation and economic development, especially for the organisation of efficient air services.
Nauru Kiribati Papua Indonesia New Guinea Solomon Is Tuvalu
. Tokelau Vanuatu Samoa French (US).Samoa Polynesia Fiji New Caledonia Cook Is. Niue French Influence Tonga New Zealand’s
Australia Pacific influence
New Zealand
Figure 34. South Pacific zone map
Given the significant over-water distances in the South Pacific, a fragmented and historically ill- equipped history of air service, the commencement of air service to Tokelau may provide an initial building block and impetus to service New Zealand’s interests in the region while also “joining dots” on sectors without air service,
The nature of the operations proposed for Tokelau – a round-trip air service requiring 4-8 hours of aircraft time (1-2 frequencies per week) offers a modest and cost-effective air service supported by New Zealand. Air service patterns for the central South Pacific are predominantly “North-South” with air routes in southern origin in New Zealand or Australia through to the USA/Hawaii in the north. 70 7.0 A Wider Pacific Solution | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
In the south central Pacific, Air Tahiti has created an extensive cross-Pacific network with six ATR- type aircraft to service French Polynesia. In the south-west Pacific – Fiji, New Caledonia, Vanuatu, and Papua New Guinea – have intra-island air service from a central point generally using turboprop aircraft for short sectors of 30-90 minutes, complemented by north-south jet services. 777.7...2222 CrossCross----PacificPacific Air Service In the central Pacific, there is little or no cross-Pacific air service and this is particularly relevant for New Zealand’s central Pacific areas of interest. Historic jet services provided by Air New Zealand or the former Polynesian airlines included sectors such as:
• Apia- Rarotonga • Apia – Tonga (once a week 767-300 service by air New Zealand, subsidised by New Zealand and local governments) • Nadi – Rarotonga • Rarotonga – Papeete (now serviced by Air Tahiti ATR in conjunction with Air Rarotonga)
A commencement of air service to Tokelau may offer some attraction to current operators within the region, as an additional route to their present network. This could present potential efficiencies in aircraft utilisation time, and leverage existing management and technical capability if a Tokelau link were to be added. 777.7...3333 Aircraft cost efficiency The concept of is the wider Pacific is specifically raised in conjunction with this study on Tokelau for the main reason of efficient utilisation of an aircraft asset. Typically, 30% of the operational cost of an air service is attributable to aircraft lease or ownership costs. Additional flying time for an aircraft asset (whether charter or joint-venture arrangement) offers further potential to reduce sector trip cost as the aircraft is more efficiently and productively utilised, and fixed aircraft costs are spread over a greater utilisation period.
Historically, the provision of air service in the South Pacific has followed a territorial behaviour model where each small state mounts air service to a neighbouring state, and competes with its neighbours airline. The cost of replicating airline infrastructure in each state, leasing or purchase of expensive aircraft assets which are under-utilised has been adequately demonstrated as a failed model in the Pacific over the past 30-40 years.
7.3.1 Historic air service inefficiency in the SouthSouth PaciPacificfic The current high levels of air fares on many routes demonstrate the infrequency and costliness of air service, lack of competition, age of mixed and inefficient aircraft fleets, non-sustainability of either pricing offering or provision of air service. These are outcomes of the type of practices described above, and offer an explanation as to why South Pacific air service has been characterised as an “airline graveyard”, not dissimilar to other regions of the world where this activity exists.
The PIASA agreement was formulated to minimise inefficiency while offering commercially contestable and competitive air services that offered affordable travel within the region to nationals and tourists. It offers New Zealand, as of 2010, with a potential Tokelau starting point to explore wider opportunities to efficiently utilise aircraft time, while meeting the needs of local populations in a commercially viable manner.
Eagle-i | 7.0 A Wider Pacific Solution 71
January 7, 2010 TOKELAU STAGE 1 - FINAL
777.7...4444 Efficient aircraft utilisation With further analysis, options may include supporting existing air service providers under a joint- venture type arrangement similar to that being explored for Tokelau, or attracting a larger air service provider – such as Air New Zealand – to consider wider turboprop aircraft operations from a central point in the Pacific.
Modern turboprop aircraft are between 15-25% more cost effective than jet aircraft, in particular the older generation jets that have been used in the Pacific (737-200,-300, -500 series or similar).
With between 40-70 seats and expected fare yield levels, modern turboprops could operate at a sustainable load factor of 70-90%, and therefore are more likely to succeed from both an operating cost and economic load factor perspective than larger 130-180 seat narrow body jets which service the main centres.
Air service introduction offers wider criteria than a lifeline for Tokelau
Air service Economic development Aid dependency reduction Tourism growth Micro-industry (export) Medivac Airfrieght Maritime surveillance Visit Friends Relatives (VFR) Lifeline Sea Ferry Seafreight
Figure 35. Air service benefits
The provision of air service generates employment, export potential, and offers tourism potential.
Therefore, a modern efficient turboprop route network which requires 6-9 hours flying per day of aircraft time, throughout New Zealand’s territories in the Pacific in an “East-West” network configuration, could present a viable commercial opportunity as well as ameliorating the dependency on aid from New Zealand.
72 7.0 A Wider Pacific Solution | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
888.08.0 Appendices
888.18.1 Financial Statements Aircraft Operating Performance - Most Likely Scenario Embraer YEAR 1 Notes Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,012,982 1,012,982 1,012,982 1,012,982 1,012,982 1,012,982 1,012,982 1,012,982 Cargo Revenue 2 - - 119,163 - 203,297 190,862 104,004 263,785 TOTAL REVENUE 1,012,982 1,012,982 1,132,146 1,012,982 1,216,279 1,203,844 1,116,986 1,276,767 Less: Variable Flight Costs 3 290,031 290,300 306,122 263,862 276,810 253,627 229,332 428,794 OPERATING CONTRIBUTION 722,951 722,682 826,024 749,120 939,469 950,217 887,654 847,973 Less: Fixed and Overhead Costs 4 963,623 1,096,867 843,765 864,537 928,050 808,651 989,237 865,228 EBITDAR (240,672) (374,185) (17,741) (115,417) 11,419 141,566 (101,583) (17,255) Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 3.4 3.4 1.9 1.9 1.8 1.3 1.2 1.2 Annual roundtrip services 8 175 175 101 101 92 65 60 60 Passenger Load Factor 9 83% 83% 80% 80% 82% 76% 74% 74% Air Freight Load Factor 10 0% 0% 85% 0% 70% 78% 90% 79% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 599 619 289 291 243 186 158 232 Aircraft Utilisation (Hrs/Day) 13 1.85 2.76 1.01 1.87 3.66 1.17 3.57 1.28 Revenue Passenger Kilometres (RPK) 14 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 Available Seat Kilometres (ASK) 15 2,724,435 2,724,435 2,830,299 2,830,299 2,769,064 2,968,337 3,051,367 3,051,367 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 22,376,834 - 37,526,288 36,151,452 19,643,955 49,150,874 Available Tonne Kilometres (ATK) 18 - - 26,206,470 - 53,376,093 46,076,683 21,826,616 62,272,800 Revenue per ASK (RASK) 19 37.18 37.18 40.00 35.79 43.92 40.56 36.61 41.84 Cost per ASK (CASK) 20 46.02 50.92 40.63 39.87 43.51 35.79 39.94 42.41 Embraer YEAR 2 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,266,228 1,266,228 1,266,228 1,266,228 1,266,228 1,266,228 1,266,228 1,266,228 Cargo Revenue 2 - - 134,785 - 216,414 205,681 122,937 281,050 TOTAL REVENUE 1,266,228 1,266,228 1,401,013 1,266,228 1,482,642 1,471,909 1,389,165 1,547,278 Less: Variable Flight Costs 3 359,906 360,239 378,561 326,678 347,690 312,494 281,323 520,677 OPERATING CONTRIBUTION 906,322 905,990 1,022,452 939,550 1,134,952 1,159,415 1,107,842 1,026,600 Less: Fixed and Overhead Costs 4 1,056,741 1,245,097 906,326 942,168 958,552 858,515 1,026,189 926,571 EBITDAR (150,419) (339,107) 116,126 (2,619) 176,400 300,900 81,653 100,030 Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 4.2 4.2 2.4 2.4 2.2 1.5 1.4 1.4 Annual roundtrip services 8 216 216 124 124 116 79 72 72 Passenger Load Factor 9 84% 84% 82% 82% 81% 79% 77% 77% Air Freight Load Factor 10 0% 0% 78% 0% 59% 69% 89% 69% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 739 764 355 357 306 226 190 278 Aircraft Utilisation (Hrs/Day) 13 2.24 3.16 1.19 2.05 3.83 1.28 3.65 1.40 Revenue Passenger Kilometres (RPK) 14 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 Available Seat Kilometres (ASK) 15 3,362,731 3,362,731 3,474,822 3,474,822 3,491,428 3,607,671 3,661,641 3,661,641 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 25,082,505 - 39,410,014 38,480,928 23,184,998 51,787,709 Available Tonne Kilometres (ATK) 18 - - 32,174,280 - 67,300,291 56,000,891 26,191,940 74,727,360 Revenue per ASK (RASK) 19 37.65 37.65 40.32 36.44 42.47 40.80 37.94 42.26 Cost per ASK (CASK) 20 42.13 47.74 36.98 36.52 37.41 32.46 35.71 39.52 Embraer YEAR 3 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,582,785 1,582,785 1,582,785 1,582,785 1,582,785 1,582,785 1,582,785 1,582,785 Cargo Revenue 2 - - 145,512 - 214,901 218,143 145,309 296,901 TOTAL REVENUE 1,582,785 1,582,785 1,728,297 1,582,785 1,797,686 1,800,928 1,728,094 1,879,686 Less: Variable Flight Costs 3 449,883 450,298 469,565 405,549 427,902 391,122 348,092 640,637 OPERATING CONTRIBUTION 1,132,902 1,132,487 1,258,732 1,177,237 1,369,784 1,409,806 1,380,002 1,239,050 Less: Fixed and Overhead Costs 4 1,178,764 1,444,919 985,380 1,044,468 992,878 929,161 1,074,438 1,008,456 EBITDAR (45,862) (312,432) 273,352 132,768 376,906 480,645 305,564 230,594 Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 5.2 5.2 2.9 2.9 2.7 1.9 1.7 1.7 Annual roundtrip services 8 270 270 153 153 141 99 88 88 Passenger Load Factor 9 84% 84% 83% 83% 84% 78% 79% 79% Air Freight Load Factor 10 0% 0% 67% 0% 48% 57% 85% 59% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 924 955 438 440 372 284 232 340 Aircraft Utilisation (Hrs/Day) 13 2.74 3.68 1.41 2.28 4.01 1.44 3.77 1.57 Revenue Passenger Kilometres (RPK) 14 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 Available Seat Kilometres (ASK) 15 4,203,414 4,203,414 4,287,482 4,287,482 4,243,891 4,521,005 4,475,339 4,475,339 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 26,745,037 - 38,889,691 40,171,146 27,310,368 54,096,799 Available Tonne Kilometres (ATK) 18 - - 39,698,910 - 81,804,664 70,178,332 32,012,371 91,333,440 Revenue per ASK (RASK) 19 37.65 37.65 40.31 36.92 42.36 39.83 38.61 42.00 Cost per ASK (CASK) 20 38.75 45.09 33.93 33.82 33.48 29.20 31.79 36.85
Eagle-i | 8.0 Appendices 73
January 7, 2010 TOKELAU STAGE 1 - FINAL
Aircraft Operating Performance - Worst Case Scenario
Embraer YEAR 1 Notes Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 646,688 646,688 646,688 646,688 646,688 646,688 646,688 646,688 Cargo Revenue 2 - - 104,265 - 192,172 172,150 88,403 237,291 TOTAL REVENUE 646,688 646,688 750,953 646,688 838,860 818,838 735,091 883,979 Less: Variable Flight Costs 3 245,541 245,770 259,251 223,268 235,405 213,854 193,707 363,250 OPERATING CONTRIBUTION 401,147 400,918 491,701 423,420 603,455 604,985 541,384 520,729 Less: Fixed and Overhead Costs 4 904,618 1,005,492 803,298 816,298 910,323 774,685 962,870 821,194 EBITDAR (503,471) (604,574) (311,597) (392,878) (306,868) (169,701) (421,486) (300,465) Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 2.9 2.9 1.7 1.7 1.5 1.1 1.0 1.0 Annual roundtrip services 8 149 149 86 86 79 55 51 51 Passenger Load Factor 9 82% 82% 79% 79% 80% 76% 74% 74% Air Freight Load Factor 10 0% 0% 88% 0% 78% 84% 90% 84% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 510 527 246 248 208 158 135 197 Aircraft Utilisation (Hrs/Day) 13 1.61 2.51 0.89 1.75 3.56 1.10 3.50 1.18 Revenue Passenger Kilometres (RPK) 14 1,906,910 1,906,910 1,906,910 1,906,910 1,906,910 1,906,910 1,906,910 1,906,910 Available Seat Kilometres (ASK) 15 2,319,662 2,319,662 2,409,957 2,409,957 2,377,783 2,511,670 2,593,662 2,593,662 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 19,634,540 - 35,780,037 32,800,736 16,697,362 44,492,125 Available Tonne Kilometres (ATK) 18 - - 22,314,420 - 45,833,819 38,987,962 18,552,624 52,931,880 Revenue per ASK (RASK) 19 27.88 27.88 31.16 26.83 35.28 32.60 28.34 34.08 Cost per ASK (CASK) 20 49.58 53.94 44.09 43.14 48.18 39.36 44.59 45.67 Embraer YEAR 2 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 679,022 679,022 679,022 679,022 679,022 679,022 679,022 679,022 Cargo Revenue 2 - - 106,610 - 196,260 177,730 91,870 246,391 TOTAL REVENUE 679,022 679,022 785,633 679,022 875,282 856,752 770,893 925,413 Less: Variable Flight Costs 3 256,430 256,668 268,032 231,212 250,614 225,051 202,413 378,605 OPERATING CONTRIBUTION 422,592 422,354 517,601 447,810 624,668 631,701 568,479 546,808 Less: Fixed and Overhead Costs 4 918,472 1,026,599 809,696 823,624 916,944 784,507 969,045 831,241 EBITDAR (495,880) (604,245) (292,095) (375,813) (292,277) (152,805) (400,566) (284,433) Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 3.0 3.0 1.7 1.7 1.6 1.1 1.0 1.0 Annual roundtrip services 8 155 155 88 88 85 58 53 53 Passenger Load Factor 9 83% 83% 81% 81% 78% 76% 74% 74% Air Freight Load Factor 10 0% 0% 88% 0% 74% 82% 90% 84% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 530 548 252 253 224 166 140 205 Aircraft Utilisation (Hrs/Day) 13 1.67 2.57 0.90 1.76 3.61 1.12 3.52 1.20 Revenue Passenger Kilometres (RPK) 14 2,002,255 2,002,255 2,002,255 2,002,255 2,002,255 2,002,255 2,002,255 2,002,255 Available Seat Kilometres (ASK) 15 2,413,071 2,413,071 2,466,003 2,466,003 2,558,374 2,648,670 2,695,374 2,695,374 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 20,074,723 - 36,360,242 33,798,868 17,352,160 46,194,080 Available Tonne Kilometres (ATK) 18 - - 22,833,360 - 49,314,868 41,114,578 19,280,178 55,007,640 Revenue per ASK (RASK) 19 28.14 28.14 31.86 27.54 34.21 32.35 28.60 34.33 Cost per ASK (CASK) 20 48.69 53.18 43.70 42.78 45.64 38.12 43.46 44.89 Embraer YEAR 3 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 712,974 712,974 712,974 712,974 712,974 712,974 712,974 712,974 Cargo Revenue 2 - - 109,569 - 197,689 183,029 95,337 249,925 TOTAL REVENUE 712,974 712,974 822,543 712,974 910,662 896,002 808,311 962,899 Less: Variable Flight Costs 3 269,491 269,741 280,706 242,213 259,371 236,505 211,377 394,217 OPERATING CONTRIBUTION 443,483 443,232 541,836 470,761 651,292 659,497 596,934 568,682 Less: Fixed and Overhead Costs 4 936,373 1,054,381 820,546 836,434 920,626 794,496 975,323 841,423 EBITDAR (492,890) (611,149) (278,710) (365,674) (269,335) (134,999) (378,389) (272,741) Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 3.1 3.1 1.8 1.8 1.7 1.2 1.1 1.1 Annual roundtrip services 8 163 163 92 92 87 61 55 55 Passenger Load Factor 9 83% 83% 82% 82% 80% 75% 75% 75% Air Freight Load Factor 10 0% 0% 86% 0% 72% 80% 90% 82% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 558 576 263 265 230 175 145 212 Aircraft Utilisation (Hrs/Day) 13 1.74 2.65 0.94 1.79 3.62 1.14 3.53 1.22 Revenue Passenger Kilometres (RPK) 14 2,102,368 2,102,368 2,102,368 2,102,368 2,102,368 2,102,368 2,102,368 2,102,368 Available Seat Kilometres (ASK) 15 2,537,617 2,537,617 2,578,094 2,578,094 2,618,571 2,785,670 2,797,087 2,797,087 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 20,595,528 - 36,561,240 34,738,860 18,006,959 46,740,945 Available Tonne Kilometres (ATK) 18 - - 23,871,240 - 50,475,218 43,241,194 20,007,732 57,083,400 Revenue per ASK (RASK) 19 28.10 28.10 31.91 27.66 34.78 32.16 28.90 34.43 Cost per ASK (CASK) 20 47.52 52.18 42.72 41.84 45.06 37.01 42.43 44.18
74 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Aircraft Operating Performance - Best Case Scenario
Embraer YEAR 1 Notes Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,175,060 1,175,060 1,175,060 1,175,060 1,175,060 1,175,060 1,175,060 1,175,060 Cargo Revenue 2 - - 120,024 - 207,019 194,156 104,004 266,217 TOTAL REVENUE 1,175,060 1,175,060 1,295,084 1,175,060 1,382,079 1,369,216 1,279,064 1,441,277 Less: Variable Flight Costs 3 290,031 290,300 306,122 263,862 276,810 253,627 229,332 428,794 OPERATING CONTRIBUTION 885,028 884,759 988,962 911,197 1,105,269 1,115,589 1,049,732 1,012,482 Less: Fixed and Overhead Costs 4 963,623 1,096,867 843,765 864,537 928,050 808,651 989,237 865,228 EBITDAR (78,594) (212,108) 145,197 46,660 177,219 306,938 60,495 147,255 Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 3.4 3.4 1.9 1.9 1.8 1.3 1.2 1.2 Annual roundtrip services 8 175 175 101 101 92 65 60 60 Passenger Load Factor 9 83% 83% 80% 80% 82% 76% 74% 74% Air Freight Load Factor 10 0% 0% 86% 0% 72% 80% 90% 80% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 599 619 289 291 243 186 158 232 Aircraft Utilisation (Hrs/Day) 13 1.85 2.76 1.01 1.87 3.66 1.17 3.57 1.28 Revenue Passenger Kilometres (RPK) 14 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 2,270,131 Available Seat Kilometres (ASK) 15 2,724,435 2,724,435 2,830,299 2,830,299 2,769,064 2,968,337 3,051,367 3,051,367 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 22,555,584 - 38,272,231 36,835,329 19,643,955 49,655,715 Available Tonne Kilometres (ATK) 18 - - 26,206,470 - 53,376,093 46,076,683 21,826,616 62,272,800 Revenue per ASK (RASK) 19 43.13 43.13 45.76 41.52 49.91 46.13 41.92 47.23 Cost per ASK (CASK) 20 46.02 50.92 40.63 39.87 43.51 35.79 39.94 42.41 Embraer YEAR 2 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,468,825 1,468,825 1,468,825 1,468,825 1,468,825 1,468,825 1,468,825 1,468,825 Cargo Revenue 2 - - 138,351 - 226,340 213,861 123,531 291,254 TOTAL REVENUE 1,468,825 1,468,825 1,607,175 1,468,825 1,695,165 1,682,685 1,592,356 1,760,078 Less: Variable Flight Costs 3 359,906 360,239 378,561 326,678 347,690 312,494 281,323 520,677 OPERATING CONTRIBUTION 1,108,918 1,108,586 1,228,614 1,142,146 1,347,475 1,370,191 1,311,033 1,239,401 Less: Fixed and Overhead Costs 4 1,056,741 1,245,097 906,326 942,168 958,552 858,515 1,026,189 926,571 EBITDAR 52,178 (136,511) 322,288 199,978 388,923 511,676 284,844 312,830 Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 4.2 4.2 2.4 2.4 2.2 1.5 1.4 1.4 Annual roundtrip services 8 216 216 124 124 116 79 72 72 Passenger Load Factor 9 84% 84% 82% 82% 81% 79% 77% 77% Air Freight Load Factor 10 0% 0% 80% 0% 61% 72% 89% 72% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 739 764 355 357 306 226 190 278 Aircraft Utilisation (Hrs/Day) 13 2.24 3.16 1.19 2.05 3.83 1.28 3.65 1.40 Revenue Passenger Kilometres (RPK) 14 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 2,837,663 Available Seat Kilometres (ASK) 15 3,362,731 3,362,731 3,474,822 3,474,822 3,491,428 3,607,671 3,661,641 3,661,641 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 25,822,643 - 41,319,609 40,178,789 23,308,401 53,831,688 Available Tonne Kilometres (ATK) 18 - - 32,174,280 - 67,300,291 56,000,891 26,191,940 74,727,360 Revenue per ASK (RASK) 19 43.68 43.68 46.25 42.27 48.55 46.64 43.49 48.07 Cost per ASK (CASK) 20 42.13 47.74 36.98 36.52 37.41 32.46 35.71 39.52 Embraer YEAR 3 Dornier 228 Dornier 328 Saab 340 Dash 8 Q200 ATR42-500 Dash 8 Q300 Convair 580 Bandeirante Passenger Revenue 1 1,836,031 1,836,031 1,836,031 1,836,031 1,836,031 1,836,031 1,836,031 1,836,031 Cargo Revenue 2 - - 153,791 - 235,056 231,188 148,150 317,598 TOTAL REVENUE 1,836,031 1,836,031 1,989,822 1,836,031 2,071,087 2,067,219 1,984,181 2,153,629 Less: Variable Flight Costs 3 449,883 450,298 469,565 405,549 427,902 391,122 348,092 640,637 OPERATING CONTRIBUTION 1,386,148 1,385,733 1,520,257 1,430,482 1,643,184 1,676,097 1,636,088 1,512,992 Less: Fixed and Overhead Costs 4 1,178,764 1,444,919 985,380 1,044,468 992,878 929,161 1,074,438 1,008,456 EBITDAR 207,384 (59,187) 534,877 386,014 650,307 746,935 561,650 504,536 Aircraft Fleet Size 5 1 1 1 1 1 1 1 1 Seating Capacity 6 15 15 27 28 29 44 49 49 Weekly average roundtrip services 7 5.2 5.2 2.9 2.9 2.7 1.9 1.7 1.7 Annual roundtrip services 8 270 270 153 153 141 99 88 88 Passenger Load Factor 9 84% 84% 83% 83% 84% 78% 79% 79% Air Freight Load Factor 10 0% 0% 72% 0% 52% 61% 87% 64% Average Trip Block Time (hrs) 11 3.42 3.54 2.86 2.88 2.64 2.86 2.64 3.86 Block Hours 12 924 955 438 440 372 284 232 340 Aircraft Utilisation (Hrs/Day) 13 2.74 3.68 1.41 2.28 4.01 1.44 3.77 1.57 Revenue Passenger Kilometres (RPK) 14 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 3,547,079 Available Seat Kilometres (ASK) 15 4,203,414 4,203,414 4,287,482 4,287,482 4,243,891 4,521,005 4,475,339 4,475,339 Aircraft Cargo Payload 16 - - 250 - 557 571 347 1,000 Revenue Tonne Kilometres (RTK) 17 - - 28,407,132 - 42,633,095 42,792,542 27,900,016 58,087,097 Available Tonne Kilometres (ATK) 18 - - 39,698,910 - 81,804,664 70,178,332 32,012,371 91,333,440 Revenue per ASK (RASK) 19 43.68 43.68 46.41 42.82 48.80 45.72 44.34 48.12 Cost per ASK (CASK) 38.75 45.09 33.93 33.82 33.48 29.20 31.79 36.85
Eagle-i | 8.0 Appendices 75
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...2222 General Assumptions
888.8...2222.1.1 The Operating Model • Tokelau services are operated by an existing airline operator, taking advantage of perceived low utilisation. • Aircraft are chartered on a 1-2 year basis enabling Tokelau Administration to negotiate the best possible terms. Charter fees based on a 40% margin on direct and fixed operating costs, but excluding any required positioning costs to Apia. • Sales and marketing activities are undertaken by a third party contracted to Tokelau Administration, this could be a general sales agent, or an existing airline. A fee of 5% of gross passenger sales has been assumed for this function. • Distribution may also be contracted to a third party. Fee assumed to be included in the 5% fee discussed under sales and marketing. • Management of the overall commercial relationships is outsourced by the Tokelau Administration to an organisation with the necessary capability to ensure all parties meet expectations. Commercial team would be accountable to Tokelau Administration.
888.2.28.2.2 Positioning Costs Estimated on the basis that aircraft will be required to position to Apia to operate Apia-Tokelau services.
• Aircraft operator is assumed to cost positioning flights on DOCs (fuel, landing charges, air navigation charges, and maintenance) plus share of ownership. • Tech crew and cabin crew costs based on accommodating crew in Apia if positioning time from base is greater than 10 hours. Positioning crew lay-over of 1night in APW either side of Tokelau services where aircraft positions into APW one day prior to operation.
888.8...2222.2.2 Performance Scenarios Three financial performance scenarios modelled to provide range of potential results.
Most Likely Scenario : • Passenger numbers based on the existing annual 1,750 return passengers. • Passenger numbers on Apia-Tokelau air services to grow at 25% per annum from the first year of air services to Year 3 before plateauing at year 3 levels. • An average gross one-way fare of NZD250.00 is achieved, based on the sale of a range of fares from NZD129 to NZD379. • Unconstrained demand for air freight capacity on Apia-Tokelau sector assumed to be 5% of the current shipping volumes, or 135 tonnes per annum. • Unconstrained demand for air freight capacity on Tokelau- Apia sector assumed to be one-third of the inbound demand or 45 tonnes per annum. • Air freight charged at NZD2.50/kg on Apia-Tokelau and Tokelau-Apia sectors. • Airfreight demand to grow at 5% pa.
Worst Case Scenario : • Passenger numbers based on the existing annual 1,750 return passengers. • Passenger numbers on Apia-Tokelau air services to grow at 5% per annum from the first year of air services to Year 3 before plateauing at year 3 levels. • An average gross one-way fare of NZD190.00 is achieved, based on the sale of a range of fares from NZD129 to NZD379. • Unconstrained demand for air freight capacity on Apia-Tokelau sector assumed to be 5% of the current shipping volumes, or 135 tonnes per annum. • Unconstrained demand for air freight capacity on Tokelau- Apia sector assumed to be one-third of the inbound demand or 45 tonnes per annum. • Air freight charged at NZD2.50/kg on Apia-Tokelau and Tokelau-Apia sectors. • Airfreight demand to remain flat.
76 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
Best Case Scenario : • Passenger numbers based on the existing annual 1,750 return passengers. • Passenger numbers on Apia-Tokelau air services to grow at 25% per annum from the first year of air services to Year 3. Growth to continue at 5% pa from year 4. • An average gross one-way fare of NZD290.00 is achieved, based on the sale of a range of fares from NZD129 to NZD379. • Unconstrained demand for air freight capacity on Apia-Tokelau sector assumed to be 5% of the current shipping volumes, or 135 tonnes per annum. • Unconstrained demand for air freight capacity on Tokelau- Apia sector assumed to be one-third of the inbound demand or 45 tonnes per annum. • Air freight charged at NZD2.50/kg on Apia-Tokelau and Tokelau-Apia sectors. • Airfreight demand to grow at 10% pa.
888.8...2222.3.3 Notes to Financial Statements 1. Passenger Revenue. Gross passenger revenue generated on the Apia-Tokelau and Tokelau-Apia sectors, less cost of sale (2.5%) and a GSA commission (5%). 2. Cargo Revenue. All revenue associated with the carriage of Air freight on Apia-Tokelau and Tokelau-Apia sectors. 3. Variable Flight Costs. Direct operating costs associated with operations to Tokelau. Includes aircraft fuel, maintenance, airport terminal fees, landing fees and navigation fees. 4. Fixed & Overhead Costs. Includes fixed operating costs consisting of flight operations costs, cabin crew (where relevant), station operations, and crew and accommodation allowances. 5. Aircraft Fleet Size. The minimum number of aircraft required to operate. 6. Seating Capacity. The number of seats available for sale on each aircraft type. This may vary from the total seats on each aircraft due to payload constraints on the former. 7. Weekly average round trip services. The number of services operated Apia-Tokelau-Apia in an average week. 8. Annual round trip services. The number of services operated Apia-Tokelau-Apia in a full year. 9. Passenger load factor. The measure of seat utilisation whereby revenue passenger kilometres divided by available seat kilometres. 10. Air freight load factor. The measure of air freight capacity utilisation, revenue tonne kilometres divided by available tonne kilometres. 11. Average Trip Block Time (hrs). The time from when an aircraft departs from the gate to the time it arrives at the next gate. 12. Block Hours. The total number of block hours flown in a full year. 13. Aircraft utilisation (Hrs/Day). Total block hours in a full year divided by 365 days. 14. Revenue Passenger kilometres (RPK). A measure of the number of passengers who have paid an airfare multiplied by the distance they were flown. 15. Available Seat kilometres (ASK). A measure of the total number of seats available for sale multiplied by the distance they were flown. 16. Aircraft Cargo Payload. The gross payload available for the carriage of air freight on a single sector. Where variations exist in payload into and ex Tokelau the lowest payload has been displayed. 17. Revenue Tonne kilometres (RTK). A measure of the airfreight carried multiplied by the distance flown. 18. Available Tonne kilometres (ATK). A measure of the total capacity available for the carriage of air freight, based on the payload multiplied by the distance flown. 19. Revenue per ASK (RASK). A measure of revenue generation efficiency. Total revenue (passenger and air freight) divided by the available seat kilometres. 20. Cost per ASK (CASK). A measure of seat costs, total costs divided by available seat kilometres.
Eagle-i | 8.0 Appendices 77
January 7, 2010 TOKELAU STAGE 1 - FINAL
8.3 Airstrip Construction & Infrastructure detailed cost estimates
See separate attachment - Beca analysis
78 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
888.8...4444 Airport Technical Requirements
888.8...4444.1.1 Regulatory facility standards ––– Domestic NZ only ––– non security designated aerodromes
Facility Source / Requirement Standard Aerodrome Security Part 139.69 Public protection - Safeguards to prevent inadvertent entry of animals to the movement area, and to deter the entry of unauthorised persons or vehicles to the aerodrome operational area; and (2) reasonable protection of persons and property from aircraft blast. (1) in areas adjacent to the aerodrome operational area to which the public has direct vehicle or pedestrian access— (i) be continuous barriers that may include existing structures, gates and doors with secured or controlled access; and (ii) be at least 1200 millimetres in height; and (2) in other areas, be of a construction and height appropriate to prevent incursion by animals likely to endanger aircraft Passenger screening Part 139.205 Not required for aircraft with less than 90 passengers
Hold baggage Part 139.205 Not required - (5) appropriate security controls are applied to screening Part 108.53 baggage, cargo, courier, and mail, aircraft supplies, stores, and air operator’s supplies intended for carriage on the air operator’s aircraft Freight screening Part 108.53 Not required as above
Rescue and Part 139.61 Not Required – if <700 movements in busiest consecutive 3 Firefighting mths = Domestic- Non turbo jet > 30 passengers >700 movements consecutive 3 mths shall be cat 3 ATR42- RFF 4 < 3 – Water 1,800L Foam 1,300L / Q300 - RFF 5 < 4 – Water 3,600L Foam 2,600L Ditched aircraft Not required rescue Police
Terminal space Est 200m2 requirements
Eagle-i | 8.0 Appendices 79
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...4444.2.2 Regulatory facility standards ––– International NZ ––– security designated aerodromes
Facility Source / Requirement Standard Aerodrome Security Part 139.69 Public protection - Safeguards to prevent inadvertent entry of animals to the movement area, and to deter the entry of unauthorised persons or vehicles to the aerodrome operational area; and (2) reasonable protection of persons and property from aircraft blast. (1) in areas adjacent to the aerodrome operational area to which the public has direct vehicle or pedestrian access— (i) be continuous barriers that may include existing structures, gates and doors with secured or controlled access; and (ii) be Part 139.203 at least 1200 millimetres in height; and (2) in other areas, be of a construction and height appropriate to prevent incursion by animals likely to endanger aircraft
In addition to 139.69 (Public Protection), provide safeguards to prevent inadvertent unauthorised access and to deter intentional unauthorised access, to any security area or security enhanced area within their aerodrome. (1) consist of fences, gates, doors and other barriers between public and security areas or security enhanced areas with adequate locking or control systems; and (2) ensure control of any duct, drain or tunnel giving access to any security area or security enhanced area. (c) The construction and height of each barrier required by paragraph (b)(1) shall, considering the surrounding topography, provide an effective measure against penetration of any security area or security enhanced area and shall in no case be less than 2440 millimetres in height (8ft) Passenger screening Part 139.203 (4) provide the following areas at their aerodrome for the screening of passengers, crew and baggage: (i) areas for the screening of international passengers, crew, and baggage, prior to aircraft boarding: (ii) sterile areas where international passengers and crew subject to screening are prevented from having access to unauthorised articles or contact with unscreened persons: (iii) areas for the separation of arriving passengers and crew from departing passengers and crew during international deplaning to prevent arriving, transit, and transfer passengers and crew having contact with any person who has been subject to screening; and (4A) when considered necessary by the Minister or the Director, provide areas at their aerodrome for the screening and searching of persons, items, substances, and vehicles entering and within security enhanced areas
Hold baggage Part 108.55 Required - as above – plus (16) before being loaded onto an screening air operator’s aircraft, every item of baggage that is not carry on baggage is screened in accordance with rule 108.63 in order to prevent a weapon, explosive, or other dangerous article or substance that may be used to commit an act of unlawful interference being loaded onto the air operator’s aircraft Freight screening Part 108.55 An air operator must not allow cargo or mail to be loaded onto an aircraft carrying passengers unless— (1) the cargo or mail is received from a regulated air cargo agent and the consignment of cargo or mail is— 80 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
(i) accompanied by a declaration of security issued by the regulated air cargo agent; and (ii) checked by the air operator to ensure that the consignment has not been tampered with; or (2) if the air operator accepts the cargo or mail from a person who is not a regulated air cargo agent, the cargo or mail is subjected to appropriate security controls, in accordance with paragraph (d); or (d) If the air operator is to accept cargo or mail from a person Part 109.55 who is not a regulated air cargo agent, the air operator must establish appropriate facilities and procedures that are equivalent to those required under the following rules to ensure that the security controls required in paragraph (c)(2) meet the requirements of Part 109:
((1) every consignment of cargo or mail that is accepted by the regulated air cargo agent for carriage by air from a person who is not a known customer has security controls applied to it in order to prevent any weapon, explosive, or other dangerous device, article or substance that may be used to commit an act of unlawful interference being carried in the consignment; and (2) every consignment of cargo or mail that is accepted by the regulated air cargo agent for carriage by air from a known customer is— (i) accompanied by a statement of content; and (ii) checked to ensure that the consignment has not been tampered with; Rescue and Part 139.61 Cat 3 - ATR / Cat 4 – Q300 - Cat 3 & 4 - 1 x rescue and Firefighting firefighting vehicle ATR42- RFF 4 < 3 – Water 1,800L Foam 1,300L / Q300 - RFF 5 < 4 – Water 3,600L Foam 2,600L International <700 movements in busiest consecutive 3 mths, cat reduced to one less Ditched aircraft Plan and deploy the necessary life-saving flotation equipment rescue as expeditiously as possible Police Aviation Security Service
Terminal space Est 300m2 requirements
Eagle-i | 8.0 Appendices 81
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...4444.3.3.3.3 RegulatoRegulatoryry facility standards ––– Fagali'i Airport model
Facility Source / Requirement Standard Aerodrome Security Full 8ft high security fence surrounds the perimeter
Passenger screening Security screening of hand luggage is carried out by the Samoa Airport Authority security staff Hold baggage / freight Security screening of hand luggage is carried out by the screening Samoa Airport Authority security staff and there are sterile areas at airside Rescue and Not on site, provided by Apia fire brigade 8-10 mins away Firefighting Ditched aircraft rescue Police Samoa Airport Authority security staff
Terminal space requirements Notes: 1. The airport is owned and operated by Polynesian Airlines, who are the only airline currently operating into Fagali’i Airport. 2. Average return flights per day to American .Samoa is 4 3. Runway is tar sealed - length approx 670 metres 4. Customs, quarantine & immigration facilities and services are provided at the terminal building. 5. Aircraft refuelling services on site are provided by PPS. 6. The airport has no navaids aircraft are controlled from the Control Tower at Faleolo Airport.
82 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
888.8...4444.4.4.4.4 Regulatory facility standards ––– Full international model ––– ICAO
Facility Source / Requirement Standard Aerodrome Security ICAO Annex 14 A fence or other suitable barrier should be provided to 9.10 prevent the entrance to the movement area of animals large enough to be a hazard to aircraft. A fence or other suitable barrier should be provided to deter the inadvertent or premeditated access of an unauthorised person onto a non-public area of the aerodrome Passenger screening ICAO Annex 17 Establish measures to ensure originating passengers and 4.3 their cabin baggage are screened Transfer and transit passengers and their cabin baggage subjected to adequate security controls No possibility of mixing or contact between passengers subjected to and other persons not subjected to such control Hold baggage ICAO Annex 17 Establish measures to ensure hold baggage is subjected to 4.4 appropriate security controls, and from Jan 2006 is screened, prior to being loaded into an aircraft. Establish measures to ensure hold baggage intended for carriage on passenger flights is protected from unauthorised interference from the point it is checked in until it is placed on board an aircraft Establish secure storage area where mishandled baggage may be held Freight screening ICAO Annex 17 Establish measures at airports to protect cargo, baggage, 4.5 mail, stores and operators supplies being moved within an airport to safeguard aircraft against an act of unlawful interference. Establish measures to ensure cargo, courier and express parcels and mail are subjected to appropriate security controls Establish measures to ensure catering supplies and operators stores and supplies are subjected to appropriate security controls Rescue and ICAO Annex 14– ATR42- RFF 4 < 3 – Water 1,800L Foam 1,300L / Q300 - Firefighting 9.2.3 RFF 5 < 4 – Water 3,600L Foam 2,600L If movements for highest category aeroplanes for busiest consecutive 3 months is less than 700 then protection shall be one category below. Ditched aircraft ICAO Annex 14 – 9.2.2 “Specialist rescue services and fire fighting equipment rescue 9.2 appropriate to the risk shall be available.” Note1 “Special fire fighting equipment need not be provided for water areas …” Note 2 “The objective is to plan and deploy the necessary life- saving flotation equipment as expeditiously as possible”… Aviation security / ICAO Annex 17 Ensure the appropriate authority arranges for supporting Police 3.1 resources and facilities required by the aviation security services to be available at each airport Arrange for an authority at each airport to be responsible for coordinating the implementation of security controls Terminal space requirements
Eagle-i | 8.0 Appendices 83
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...4444.5.5.5.5 Service facility requirements
Facility Source / Standard Requirement
Automatic Weather Part 174.3, 174.6 Basic aerodrome reports required during the hours of Stations operation "Basic weather report " means a verbal comment, in support of aviation, describing any of the following current weather conditions observed at a particular place or airspace: (1) wind direction and strength: (2) mean sea level air pressure: (3) air temperature: (4) weather conditions and cloud cover:
This can be provided either manually, automatically or by a combination of both. Every person who provides a basic weather report shall— (1) utilise equipment that is suitable for the observations being made; and (2) employ a system for checking that equipment; and (3) be trained to provide accurate basic weather reports.
There is an mSTAR automatic weather station on Fakaofo, this provides Wind direction and speed, Air temperature, Dew point, Relative humidity, Pressure, Rainfall and is solar powered, this does not perform automatic reporting and is unlikely to be moved.
An iStar automatic weather station provides weather conditions and cloud cover in addition to the mStar putput, but requires mains power. The required sensors are quite ‘power-hungry’, consuming approx mean 450W (peak 700W) from 230 VAC – cost approx $180K
Best solution is an iStar automatic weather station without the additional sensors with the weather conditions and cloud cover provided by a trained Met Observer in Tokelau, cost approx $90K Fuel Storage
Electrical Power Water / Sanitation Equipment Storage Domestic Storage shed for apron equipment, ground power unit, aircraft steps, firefighting equipment, baggage handling carts, aerodrome maintenance equipment - L 8.0m x D 6.0m x H International 2.4m
Storage shed, additional allowance for fire truck - L 12m x D 6.0m x H 4.0 Terminal space Assessment of Domestic – est 300m2 / required terminals serving International – est 400m2 similar aircraft and local requirements
84 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
8.5 Airstrip Infrastructure Specification Recommendation
Facility NZ Intl Fagali'i NZ Dom Tokelau Airport Airport Airport Model Aerodrome Security Fencing - in areas adjacent to the aerodrome operational area to be 1.2m high mesh fencing, in other areas, five wire fence appropriate to prevent incursion by animals likely to endanger aircraft Fencing - full perimeter fence no less than 2440 millimetres in height (8ft)
Hand held scanners for passengers and cabin bags Full s creening of passengers, crew and hand baggage On arrival Apia Hold baggage screening On arrival Apia Freight screening On arrival Apia Additional Passenger Departure area - separation required from arrival passengers
Rescue and firefighting vehicle Apia fire brigade 8-10 mins Ditched aircraft rescue - Plan and deploy necessary life-saving flotation equipment ? Police / Aviation Security Terminal space requirements 400m2 560 m2 300m2 300m2
Eagle-i | 8.0 Appendices 85
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...6666 Timeline
Elapsed Elapsed Weeks 100 & Jetty/ & Building Navaids (16 weeks) (16 Paving (8 weeks) (8 Airport Airport Management Earth Works (12 weeks) (12 80 90-100 weeks 90-100 Designation/commissioning Site Prep (10 weeks) (10 Mobilise (12 weeks) (12 60 Construction Marketing, Sales, Distribution Sales, Marketing, Tender (12 weeks) (12 Partner set-up/alignment Partner JV process JV ICAO weeks) 40 40 10 Detailed Design/ &Tender ( CAA Go/ Design/Tender/Construction/Commissioning/Completion– No go No Prelim Due diligence Due 8 weeks) 8 Design – Design ( Engineering Tokelau Tender /Topo Bilateral Geotech 20 (10 weeks) (10 Stage 2 Stage 2 Site inspection weeks) (8 Tokelau Air service - streams work service andAir Timeline Tokelau Preliminary Pre-start – Pre-start 18 weeks NZAID/MFAT Stage 1 Stage Final Report Stage 1 Stage 1b 1a& Aeronautical/Legislative Airstrip Political Commercial Operational
Strategy, Analysis &Scoping Analysis Strategy,
CONSTRUCTION Workshop point Decision presentation & Report FEASIBILITY FRAMEWORK Legend
86 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
The timeline diagram above shows the potential phases for feasibility, design, and construction of an airstrip at Tokelau, based on best estimates from a desktop perspective.
The first eighteen weeks include the current Stage 1 evaluation which concludes 18 December 2009, and proposed Stage 2 detailed evaluation including site visit and geotechnical analysis, with a completion prior to end of March 2010.
Subject to further approvals to proceed, and the outcomes of political discussions and decision- making in both New Zealand and Tokelau, the engineering design advice obtained from Beca indicates a design/build phase of 96 weeks elapsed time from site inspection through to buildings and jetty construction.
This timeframe may be conservative, and requires independent testing and validation during a detailed Stage 2 evaluation. Each process is currently sequential for design/construction, and it is suggested that this could be reviewed, with the possibility for time contraction. Feedback from Beca has suggested that the time period could be reduced if additional labour was applied, or costs increased to shorten this phase.
Eagle-i | 8.0 Appendices 87
January 7, 2010 TOKELAU STAGE 1 - FINAL
888.8...7777 PIPIPIASAPI ASA The Pacific Island air Service Agreement (PIASA) mechanism offers New Zealand an opportunity to take a leadership role for air service to/from New Zealand territories and protectorates in the South Pacific. This agreement applies to New Zealand from early 2010, and while Tokelau is not specifically a signatory to the document, it’s status as a territory of New Zealand may provide inclusion for air service commencement to/from Samoa, and possibly other Pacific states or territories.
ANNEX 1: Phased movement to a Single Aviation Market pursuant to Article 5 (1) (c) 8.8.8.78. 777.1.1 Stage 1 --- Initial phase Commences six months after the Agreement comes into force
1. The designated airlines of one Party may operate scheduled services to and from the territory of another Party (3rd and 4th freedom), and between the territories of Parties via the territory of their own Party (6th freedom).
2. Where a Party already has the rights for its designated airline(s) to operate scheduled services to and from the territory of another Party (1) via the territory of a third Party and/or (2) beyond the territory of the other Party to the territory of a third Party or of another State, with the right to pick up and put down local traffic travelling between the territory of the other Party and that of the third Party or other State, the designated airlines of the first Party may continue to exercise those rights (5th freedom).
3. 5th freedom rights may also be exercised for scheduled services between the territory of Parties to this Agreement (1) by the designated airline of a Party that does not have an airline operating on international routes at the time that this Agreement comes into force; and (2) for scheduled dedicated cargo services operated by the designated airlines of any Party to this Agreement.
4. The designated airlines of any Party may exercise such 5th freedom rights, where they do not already exist, for the carriage of passengers whose journey originates in the territory of a State that is not a Party to this Agreement.
5. Designated airlines operating to the territory of more than one other Party on the same scheduled service are entitled to pick up and put down their own passengers travelling between the territories of the other Parties (own stopover traffic).
8.8.8.78. 777.2.2 Stage 2 --- Internal Single Aviation Market Commences 12 months after this Agreement comes into force
1. The designated airlines of any Party to this Agreement are entitled to operate scheduled 3rd, 4th, 5th and 6th freedom services between the territories of all Parties to this Agreement.
2. Where a Party already has rights for its designated airlines to operate scheduled 5th freedom services between the territory of another Party to this Agreement and the territory of a State that is not a Party to this Agreement, those rights may continue to be exercised.
3. The designated airlines of all Parties to this Agreement may operate scheduled 5th freedom services between the territory of another Party to this Agreement and, to the extent that bilateral arrangements allow, the territory of a State that is not a Party to this Agreement for the carriage of passengers whose journey originates in any State that is not a Party to this Agreement.
8.8.8.78. 777.3.3 Stage 3 --- Full Single Aviation Market Commences 30 months after this Agreement comes into force
The designated airlines of all Parties to this Agreement may operate:
(a) scheduled 3rd, 4th, 5th and 6th freedom services between all Parties to this Agreement; and
(b) to the extent that bilateral arrangements with States that are not a Party to this Agreement allow, scheduled beyond (5th freedom) services to and from those States.
88 8.0 Appendices | Eagle-i
TOKELAU STAGE 1 - FINAL January 7, 2010
888.8...8888 Acronyms
AOC Air Operator Certificate ARC Aerodrome Reference Code ASK Available Seat Kilometre ATK Available Tonne Kilometer AWS Aviation Weather Station CAANZ Civil Aviation Authority of New Zealand CASK Cost per Available Seat Kilometer CAR Civil Aviation Rule DOC Direct Operating Cost EBITDAR Earnings Before Interest, Tax Depreciation, Amortisation & Rentals FOC Fixed Operating Costs FOD Foreign Object Damage (to aircraft) GSA General Sales Agency HF High Frequency (radio) IASA International Air Services Agreement IASL International Air Services Legislation ICAO International Civil Aviation Organisation JV Joint venture LAME Licensed Aircraft Maintenance Engineer MCTOW Maximum Certificated Take ‐Off Weight MEL Minimum Equipment List MFA Ministry of Foreign Affairs MFAT Ministry of Foreign Affairs And Trade MWD Ministry of Works and Development NDB Non ‐Directional (radio navigation) Beacon NOTAM Notice To Airmen NPV Net Present Value PIASA Pacific Islands Air Services Agreement POE Point Of Entry PPP Public Private Partnership QA Quality Assurance QC Quick Change RASK Revenue per Available Seat Kilometer RESA Runway End Safety Areas RPK Revenue Passenger Kilometer RTK Revenue Tonne Kilometer SARPS Standards And Recommended Practices SATCOM Satellite Communications VFR Visiting Friends and Relatives
Eagle-i | 8.0 Appendices 89