InselAir President and CEO Albert Kluyver talks to Perry Flint about the speed of innovation in the industry and the need to break free of the commodity shackles
You were an investment banker, so how did you get involved in running an airline?
In 2004, the Curaçao government was pushing for the private sector to take over the airline and the staff were asking for the same thing. I was doing a lot of merger and acquisition work at the time so the government advised the people working for the airline to see if they could get my company to put a deal together.
We were not the only group trying to set up private airline at that time but we were the only one that succeeded. A few years later, Aruba was in the same situation and we were able to start there too.
There are two different operating licenses for Curaçao and Aruba, but we are branded as one airline. We market our services in multiple markets in the Pan-American region, so operating as one brand makes sense. And it also saves on the marketing costs too.
Can you tell us about your fleet plans and interline strategy?
InselAir has expanded and established a relevant foothold in the region. Together with our current strategy, this attracted the interest of key stakeholders to join us in the planned expansion.
Right now, we are open and engaged in negotiations for a strategic partner to help us to renew and upgrade our fleet. The main aim is to increase the airline’s reach in South America and North America. We fly Fokker 50s, Fokker 70s and MD 80s, but we need to serve longer destinations in South America and improve connectivity. At the moment, our longest flights are about three hours, to places like Quito, Manaus, and Miami.
In terms of interlines, we have agreements with almost all airlines that fly into Curaçao and we are certainly open to more partnerships. There is a growing demand from our network of 25 destinations for long-haul connections. So it works for both partners as well as for our passengers. Amsterdam is the biggest part of this aspect of our business.
Is InselAir a leisure or business carrier?
Despite the impression many people have, InselAir isn’t just about tourism. In fact, most of our routes have business travelers. There are consultants, lawyers, IT personnel and so forth that are working for companies with a regional reach and use us to connect with the islands and with South America.
In addition to business travel, in Curaçao there are lots of people from South America and from the other Caribbean islands, so there are a lot of people visiting families and friends going back and forth.
Are there unique challenges for airlines in the Caribbean?
The unique challenge has to be the extremely high cost in taxes and distribution relative to the price of the ticket. The region is not big, but there are a lot of islands. What that means is that even a 10-minute trip can be an international service and so the taxes are the same as if we were doing a 10-hour flight.
Up to 60% of a ticket price can be taken up by taxes and distribution costs. It is too much. We need to find a solution. Intra-Caribbean traffic is the only major market where air traffic has declined in the last 10 years. The only reason for the decline is the high price of a ticket.
You connect to South America where you must compete with larger airlines. How difficult is that?
We fly a lot to South America, so our business model is a little different than other Caribbean airlines. In fact, our focus is on South America and connecting that with North America as much as it is on connecting the Caribbean islands.
Historically, a lot of South America traffic connects through our islands because, geographically, we are on their doorstep. That gives us a good platform and a unique competitive advantage. In any case, we are happy to compete. We have added Antigua and Barbados to our expansion plans and we are always improving our connectivity. It makes sense for many South American travelers to fly with us and connect to other places in the region and to North America too.
You even connect Cuba and the United States?
Yes, that was something we felt we had to do. It wasn’t easy to get but eventually we managed to get some 7th freedom rights. We freed up some capacity and we used that for a charter program connecting Cuba with the United States. Even though the United States is now starting scheduled services, there is still business there for InselAir and we will look at scheduled services. But we will also look at using some of the capacity elsewhere too.
What does New Distribution Capability (NDC) mean for InselAir?
NDC means we will get information about our customers that we simply didn’t have before. As mentioned, InselAir isn’t just about the leisure traveler, but we are a carrier that flies into a lot of tourist destinations. A lot of those tourists want to book their full trip and not just an air fare. The ticket price is only part of a complete package. People want to know what they are going to spend and what they are going to experience. NDC enables us to fulfil these requirements through all channels. Before, this was a manual process. Now, we can sell the complete package electronically and have it settled electronically. It saves people paying for a rental car separately, for example.
I actually wanted to do this 10 years ago and so we took the opportunity to participate in NDC immediately. I asked IATA to join the pilot program and fortunately that request was granted even though we are a small airline. But because we are a small airline the changes are easier to implement and as of October we will have a direct channel available that we can use commercially.
Do governments understand the value of aviation?
There are some taxes being cut. But the basic premise is that what tourists spend in a country is far more than a government gets in aviation taxes. Caribbean governments have to see the economic value of getting people into their country. If that happens, it would demonstrate understanding. We have developed a lot of new connections and our experience shows that traffic grows quickly. Because when people have the opportunity they choose mobility and that boosts the economy, locally and regionally.
Does the industry need to help itself by innovating faster?
Absolutely. When I started the airline, I was astonished that we could not get the history of the passenger or make connections to other products. That is something the banking industry had been doing for a long time. Airlines need that insight and it was not there. Some loyalty programs give airlines part of that information, but it is not enough.
That lack of knowledge about our customers pushed airlines in a corner and made us a commodity. And that is why the industry had low returns for so long.
I’m happy that initiatives like NDC that are being pushed by IATA are changing that, but it cannot happen fast enough. EDIFACT had been going for how many decades? And to be honest, XML, which the NDC standard is based on, has been around since the 1990s. There is a big role for IATA to play to ensure the industry acts quickly.
Finally, what is the single biggest challenge for InselAir right now?
It has to be strategizing for the future. The region that we operate in has proven to have a lot of potential and demand is growing in many of our markets. At the moment, we are at a crossroads and starting a new phase in terms of the equipment and the routes we fly while being open for discussions with potential strategic partners.
Of course, governments, and the host of taxes, are a challenge. But there is nowhere in the world that couldn’t benefit from better government policy so that is not a challenge unique to InselAir.