Francesco Contini is a cruise industry veteran, with extensive experience in expedition cruising. After starting out in the mid-90s, he held senior positions at Quark Expeditions between 2004 and 2012. Since then, he is the Executive Vice President, Sales and Marketing for Antarctica21. We catch up with him to understand how the company is navigating through the pandemic, the operations of its unique vessel Magellan Explorer and the developments in Antarctica’s expedition cruise market.
Last time we talked, it was late 2019, when the Magellan Explorer had just been launched and about to begin operations. Could you talk about the timeline from there until today, how was the season of 2019-2020, and the impacts of the pandemic?
It was in November of 2019 that we launched Magellan Explorer. We did three shakedown cruises with just friends and family. We did an overnight cruise for board members and their families and then we did two cruises from Punta Arenas to Ushuaia, then Ushuaia to Punta Arenas with some of our travel partners, staff and various friends, suppliers, and it was a way of getting the systems going and testing the ship and the kitchen, making sure that everything was working well.
“We ran the entire [2019-2020] season, and thankfully, it was a very good season, and at the very beginning of the pandemic, we were sitting with a lot of reserves. That has been quite important for us, because, [for 2020-2021], we canceled everything”
After that, the ship embarked its first group of paying customers and went to Antarctica. And we did the entire season without any difficulties or complications until the very end. And then at the very end, the last two trips, we had some groups that were coming from Asia that couldn’t participate. It was the beginning of the restrictions, but otherwise it was a very successful season. Commercially, it was super successful and operationally as well.
We ran the entire season, and thankfully, it was a very good season, and at the very beginning of the pandemic, we were sitting with a lot of reserves, because the season was very successful. Not just for Magellan Explorer, but for the other two ships. And that has been quite important for us, because, obviously, what happened after that, the ship came back and during the 2020 year we started preparing for 2021 but then at some point around August, we canceled everything. We didn’t really have any operation. So, the vessel was parked and then we did a drydock. There were some processes that were included as part of the purchase of the ship after the first season of operation and that was taken care of during the drydock.
Was it back at Asenav, the original shipbuilder?
No, the drydock was in Chile, but farther north in Talcahuano. The ship now has gone back south where we park it, and we are waiting hopefully to operate the 2021-2022 season.
“We had very extensive screening in Punta Arenas for arriving guests and we did deny boarding to some people. If they had symptoms, even mild symptoms, we would refund them and basically tell them, ‘sorry, but it’s too risky right now’”
What are the plans for the 2021-2022 season?
We have already made a number of important operational decisions regarding this season. For example, we have reduced the number of sellable cabins on the ship and that’s because we have dedicated some passenger cabins to additional resources that are necessary to manage the Covid protocols, so we are going to have a registered nurse, for example.
Normally, we only have a doctor, and then there is somebody within the officers that has training, that can provide assistance. And then other things like, certain rotations of work groups on board, so that they never meet each other. If the chef gets sick, we can continue to cook. The other chef doesn’t work at the same time. Things of that sort.
I think it’s maybe likely that we will require vaccinations from everybody, but that decision has not been formalized as of yet.
Did you have any Covid cases in your operations, crew or passengers, last year?
We finished the season without having any cases onboard the ships or among our people. We did manage it very carefully. We had very extensive screening in Punta Arenas for arriving guests and we did deny boarding to some people. If they had symptoms, even mild symptoms, we would refund them and basically tell them, “sorry, but it’s too risky right now”.
We had one case where a guest developed a fever onboard the ship and we isolated the guest and then we flew the guest and the person that was sharing that cabin, they were two friends. One had the fever, the other didn’t, but we flew both of them to Punta Arenas. Then they did the PCR test and in the end they didn’t have Covid.
Did you have any other relevant impacts, maybe even positive ones, from the pandemic?
Certain things and mostly when it comes to the commercial department, it has to do with the team in Santiago. We have this office in downtown Santiago where the majority of the commercial team is based. And obviously, for most of the pandemic, they didn’t go to the office. Everybody has been working from home or some people who are lucky have some alternatives also available. But because of that, the way we relate to each other had to change a little bit. And interestingly, some things have suffered, because South America is a very social kind of environment.
At lunchtime, we have a kitchen in the office with a big table and most people get together and have lunch together. You know, it’s all work, but it adds an element of pleasure and social life to your day that right now is gone. And that impacts in many ways the wellbeing of people, their satisfaction and all of that. So that’s the part that wasn’t so positive.
“I have been in board meetings where one board member is in Tierra del Fuego, on top of a hill, connected with his cell phone in his car. And another one is in his house in Punta Arenas and another one is in Santiago, and it’s crazy, right?”
On the other hand, before the opportunities to meet socially sort of were limited to the Santiago office and the people physically in that office. Now, we have instituted other things that even the people outside get to socialize. On Fridays, at the end of the week, if you want, you join, and we have a virtual drink and we talk about how the week went, we talk about what’s happening in Chile and the world, but we also talk about our personal lives and we strengthen the relationship between colleagues. So, that has been positive, because before those moments were limited to our visits to Santiago, to the office. And now I think in some ways, even though we are more distant, we are almost closer.
Interesting side effect.
Exactly, and there are other things that are more on the practical level, for example, there are some technology improvements that we have made, that make it easier to work and meet remotely.
I have been in board meetings where one board member is in Tierra del Fuego, on top of a hill, connected with his cell phone in his car. And another one is in his house in Punta Arenas and another one is in Santiago, and it’s crazy, right? The board meetings have never been like that, they have been in a room, together. So, this kind of has opened up new opportunities for people to be in different places, do different things and still carry their responsibility. So, there are some positive sides, you know, in all of that.
Just following up on this next season of 2021-2022, so you will be back flying to Antarctica and to the Malvinas / Falkland Islands?
Antarctica21 really has two separate product offers. Our central product offer and 85% of our revenue is Antarctic air cruises. These are combined flights into Antarctica and the exploration in Antarctica by ship. But then we have a small component of our offer, what we call sea voyages, and those sea voyages take place before the air cruise season and after the air cruise season.
So, we essentially extend a little bit the season in Antarctica with those sea voyages, and it’s because the reliability of flying decreases during that time, and so we don’t schedule flights and we simply sail on longer trips and we take advantage of the time to go the Falkland Islands and to South Georgia. And South Georgia cannot be visited in any other way. The only way to go is by ship.
What we do is some departures that go from the Falkland Islands to South Georgia, back to the Falkland Islands, 14-day programs, and some departures that go Ushuaia-Falkland Islands-South Georgia, the (Antarctic) Peninsula, back to Ushuaia. But then, in the beginning of December, we start our air cruise season and we do December, January, February and a portion of March with air cruises.
At the end of March, again, we do three trips that are simply going to Antarctica by ship. There’s one that goes to the Falklands, South Georgia, Antarctica, and two that go just to Antarctica and back. That’s sailing across the Drake passage.
“Our business is the (Antarctic) peninsula with a lot of wildlife and beautiful scenery. That’s the experience we offer”
So, you are still flying to King George Island and to the Falkland Islands. Those are the two airports that you operate in. Are you also considering other possible airfields or somewhere you could also land an airplane and operate from?
No. There are some runways in the interior of the continent, that are called blue runways, so basically the plane lands on ice. They are prepared, but the plane lands on ice. But they are in the interior of the continent and it’s not our business. Our business is the peninsula with a lot of wildlife and beautiful scenery. That’s the experience we offer. And there the opportunity exists in King George Island. The only other real, functioning runway is at a British Base called Rothera, but is quite a bit further south.
They have good infrastructure in Rothera, don’t they?
The thing is, it’s very short. It’s beautifully maintained, they do a great job there, but I don’t think that has ever been used for any other purposes. I don’t know 100%, but I don’t think that it has been in use for any other purposes other than British Antarctic Survey flights.
King George Island is used quite a bit by various programs and many of the national science programs that operate out of King George Island, rely on the commercial operator of flights, Aerovias DAP, that are our partners and our supplier as well.
Inner Antarctica camps: “highly technical, specialized operations, very, very small volume, very, very expensive”
You mentioned the interior of the continent, and you already said that’s not your focus. But do you see any development of parts of the interior of Antarctica, not just the peninsula, as attractive expedition cruising destinations?
I think for expedition cruising it’s difficult, but who knows? Because, for example, there could be opportunities in the Ross Sea, coming down from New Zealand or Australia. There could be opportunities there. It’s not our area of focus and we’ve never studied it, but conceptually, I don’t know what would be required, but I think it’s a very exciting and interesting place to go and visit. There are many attractions.
Most of the stuff that is currently being done in Antarctica’s interior is based on temporary camps. There is a relatively new South African operator, it has been going for a few years now, but compared to the one at Union Glacier it’s relatively new. But those are camps, those are temporary camps that are built for the season and then are removed after the season. And highly technical, specialized operations, very, very small volume, very, very expensive.
Obviously, the infrastructure is very complex, but those opportunities exist and they are quite established, and they do flights to the South Pole from there, they do climbing expeditions, they do visits to emperor penguin colonies, those are a big attraction. So, they are very, very good experiences, but the market is small because the price is so, so high, you know? We’re talking about 35, 40, 50 thousand dollars a person or something like that, you know, even more.
What about the Patagonian Straits or even warmer places like Galápagos? Of course, “Antarctica” is in the name of the company, so the concept is already quite focused. But my question is connected to the uptime of vessels, to the vessel utilization, because many expedition operators, they switch the seasons, right? When it’s winter in the southern hemisphere, they will move operations to the north, and vice versa. So, do you consider also moving to warmer places in South America or even to the Arctic during the winter season in the south?
Yes, this would be very specifically for Magellan Explorer, because the other two ships that we operate, Ocean Nova and Hebridean Sky, those vessels we charter only for the Antarctic period. They then go back to the shipowners and are used by other companies to do other things. So, we don’t have the responsibility of developing alternative programs. But the question has to do with Magellan Explorer, which is our own ship that we have 365 days a year.
As of right now, we start at the end of September the programming with the trip that goes from Ushuaia to Cape Horn and then it goes to the Falkland Islands. That’s early spring, so it’s mostly a trip that is interesting to people who are birdwatchers. That’s really the main attraction. Or people who want to visit the Falkland Islands in an efficient way, because the Falklands only gets one flight per week, so tourists need to go and stay 7 days normally. With us, you can go and spend three days, very efficiently moving by sea, you see the highlights of the Falkland Islands in an efficient way.
“We looked at the possibility of an Arctic program. What we have found is that the economics are very challenging”
And then we go up to the beginning of April with the last trip that goes to Antarctica. So, from the end of September to the beginning of April, the vessel is currently employed.
What’s really not happening is from, say, you reposition the ship and then the vessel is, at the end of April, back to South America. And at the beginning of September you need to get ready to the Antarctic season again. So those are the months where currently the vessel is underutilized. We park it, reduce everything to the lowest possible operating cost and we wait for the new season. That’s our model, and it works. When we built the ship and we built the economic model, that was our plan. We did not take into consideration anything else, we set our prices and everything accordingly, so that works well.
However, there is obviously an opportunity, because the vessel could be used to generate revenue during those months of June, July, August, say, and we looked at the possibility of an Arctic program. We didn’t want to operate the Arctic program ourselves, but we could give the ship to an operator of Arctic programs for them to create trips and operate it, and simply, maybe in conjunction, provide some services or what have you. And what we have found is that the economics are very challenging.
“And then, in the Arctic, there is constant pressure on prices. Retail prices are much, much lower than in Antarctica. Fundamentally, the demand for Arctic experiences is lower than the demand for Antarctic experiences. So, there is an oversupply of capacity, and lower prices as a result”
It would not be worth it?
When you reposition the ship, the cost of positioning north, positioning south, is pure cost. It’s very difficult to create a revenue-generating program because the consumers who may be interested in doing a trip along the coast of South America don’t want to pay a lot of money. The moment you stop, and you develop programming in ports, what they pay you doesn’t really cover the cost of doing it.
And then, in the Arctic, there is constant pressure on prices. Retail prices are much, much lower than in Antarctica. Fundamentally, the demand for Arctic experiences is lower than the demand for Antarctic experiences. So, there is an oversupply of capacity, and lower prices as a result.
Arctic expeditions: “The only way that it could be worth it is if we operated it ourselves. Because the operator’s margin gets added to the very, very small margin of the shipowner”
So, when we did the analysis, what happens is you do all this effort, you take on all this risk, and commercially and from an economic analysis point of view, it’s not worth it.
The only way that it could be worth it is if we operated it ourselves. If we operated and retailed it ourselves, then it could be worth it. Because the operator’s margin gets added to the very, very small margin of the shipowner and as of right now, there has not been appetite for complicating the brand, as you say, we are called Antartica21. Doing Arctic trips, there is an issue there with perception by consumers, and fundamentally it’s a very competitive place where we don’t have the same differentiator that we have in Antarctica.
In Antarctica, we are the pioneering company that invented air cruises, we are the biggest, we offer the most departures, we are very established in the market with this unique way of doing it, where the great majority of the capacity is the sailing model. In the Arctic, we would be there as one of the other companies. There is no opportunity to create that differentiator that we have. And so, as of right now, we have not decided to enter that Arctic business.
On the other hand, we do think that there are opportunities in South America to do creative things. The vessel is built for a polar region, so we wouldn’t be using some of the features that the vessel has, but creatively, there could be some interesting things that can be done in very small niches of our industry, of adventure tourism. And those we are exploring. It’s not a huge priority, but we’ve had some interesting conversations about what could be done.
“In Antarctica, we are the pioneering company that invented air cruises, we are the biggest, we offer the most departures, we are very established in the market with this unique way of doing it”
Interesting. But many relevant expedition destinations are rather closed. The hard thing about Galápagos, for example, is that it’s very hard to get the operating slots (“cupos”), right?
No, Galápagos won’t work. Galápagos is not a possibility. But there are other places and there are very interesting niches in our industry. It wouldn’t be an Antarctica21 branded trip, it may be an operator that has a particular audience, and we develop a program for that particular audience. I’ll just give an example, there is a company in Germany – and this is not what we are considering – but for the readers to understand, there is a company in Germany that caters to vegan travelers.
So, even though I am sure that there are conventional cruise lines that will serve you vegan meals, they have an audience of vegan travelers where they are assured that their diet will be catered to throughout the trip. So, they have created this niche where they do very specific programs for vegan travelers. Imagine something like that if we found a way to cater to that particular audience and, instead of just one company in Germany, it’s a style where there are 15 companies around the world in every major economy.
And as you mentioned, there are also other niches, like climbers, or birdwatchers, you can always find a niche.
Exactly.
China, Hong Kong and Taiwan: “2021-2022, we are expecting maybe 3% or 4% from those markets. The drop has been tremendous”
So, since you are talking about the clients. What is the overview of the clients of Antarctica21? Of course, you need to have a considerable income to be able to afford it, but where do your customers come from?
It changes every year, slightly. And also, I don’t know what it will be going forward, because there are some very significant changes underway as a result of the pandemic. But during pre-pandemic times, our biggest source market for clients was the US, about 35%. The second one is China, Hong Kong, Taiwan. It depends on the year, but it’s somewhere around 30% of our clients. It’s quite big. And that’s where we have seen the biggest change. In other words, for 2021-2022, we are expecting maybe 3% or 4% from those markets. The drop has been tremendous. Simply, they are not traveling internationally right now.
Then there is about 10% from the UK, and then from there the other bigger markets providing a certain number of clients are the other European economies, Germany, the Netherlands, Spain, Switzerland, France, and you take all of those together, it’s somewhere around the size of the UK, roughly. So, our European business is 50% the UK, and all the other countries together the other 50%. And then, from all over the world. Like, on a normal year, we would take maybe 40 to 45 different nationalities onboard. And there’s always maybe two people from Lebanon, one person from the UAE, one person from Finland, 8 people from Russia, you know, things like that. But that’s roughly the distribution. Where we don’t take a lot of clients is Australia and New Zealand. We do have a presence there, but it’s fairly small, the number of passengers.
So very few locals, you would say, Chileans, or Argentines or South Americans in general?
Every year we take some, but it’s not many. Although we have very big partnerships in Argentina and Chile, because there are local operators that package what we offer with land programs and they sell them worldwide.
How would you see the risk of restrictions for your operations in this next season regarding the pandemic?
The thing is, there is enormous uncertainty, right? Because the authorities right now simply don’t have the information, the ability to do projections as to what is likely to happen. I mean, it’s super frustrating but it’s no ones’ fault. It’s just the reality of managing this pandemic where the conditions are changing constantly and evolving.
“The authorities are super supportive, everybody understands the importance of tourism to local employment and the local economy, but you can only work with the reality of the pandemic”
So, I think that Chile is doing the very best they can do with the vaccination program and they have been quite successful in vaccinating a large portion of the population. But how long will that take? Nobody knows. And you don’t have a manual you can go to and use it to do projections. Everybody is trying their very best.
What we are doing is that we are maintaining constant communication through a number of organizations that work with the tourism industry. One is Fedetur, which is the Federation of Tourism Organizations in Chile, and through them there are dialogs with authorities and government representatives and so information comes and exchanges through that channel.
The other one is local in Punta Arenas, there is a similar organization called Austrochile and with them we interface with the local authorities and from the very beginning, already last year, the authorities are super supportive, everybody understands the importance of tourism to local employment and the local economy, but you can only work with the reality of the pandemic.
The hope is that, with the goodwill that exists in Chile, and the understanding of how important tourism is to the economy in one side, and on the other side, obviously, responsibility towards the population and making sure that what is done is safe, find the balance. And restart when things can be restarted safely.
The short answer is, nobody knows. It’s too early.
We have cancelled everything until the end of November. So, this year, those early season trips, we have not scheduled them. We are not doing them. We have a little bit more time than we would normally have, but at the end of November, we would need to start operating. So, we will see.
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