Regional Revival

Australia’s regional airline landscape is heading for its biggest shakeup since the
collapse of Ansett in 2001 with new players, aircraft and personnel shifts creating a fascinating, if potentially turbulent, landscape.

And the epicenter of that shake-up is Perth, Western Australia, which has become a hub for the country’s vast Fly-In Fly-Out (FIFO) operations to multiple natural resource centers and mine sites.

Murrin Murrin, West Angeles, Cloudbreak, Telfer, Granny Smith, Jundee, Plutonic, Sons of Gwalia, and Yandi are names you will not see on any other departure board in the world, but they are valuable to the increasing number of players competing for FIFO contracts.

Western Australia has 968 operating mine sites and 68 operating oil and gas fields that account for 42% of the country’s and 89% of the state’s exports, which are worth a total of $70.9 billion.

Underway are another $176 billion worth of projects that  will create another 43,000 jobs. Another $194 billion worth of projects are in the planning stage.

Transporting workers to the mine sites is creating a market that is breaking records, with Perth Airport seeing growth rates of 11% a year. In the morning peaks between 5:30 a.m. and 7:00 a.m. there are up to 80 aircraft movements—mostly departures—dominated by the 100-seat Fokker 100 that has become the aircraft of choice for Skywest Airlines, Alliance Airlines and Network Aviation, dominating the FIFO market.

There are more than 100 aircraft based in Perth—most of them supporting the resource industry.

Qantas Network 

After largely sitting on the sidelines for the past two decades, Qantas has moved into the FIFO contract market via the acquisition of the relatively small Perth-based Network Aviation. Qantas has been involved in some FIFO contracts, but these are focused on major centers such as Karratha—hours north of Perth—which is the hub to many off-shore oil and gas operations. Qantas has 10 Boeing 737-800 return flights a day to Karratha. Network is small, but Qantas has big plans for the operation.

Qantas acquired 10 ex-American Airlines Fokker 100s from Avianca and is having them refitted by Fokker Services to A-DSB standard. Next target was to lure local industry veteran Hugh Davin, one of Australia’s most experienced regional airline executives, from Skywest, to head up Qantas’s FIFO and charter operations.

Davin’s appointment brings the veteran executive back into the Qantas fold, but this time on the direct payroll. He left Skywest in 1993 and the following year set up National Jet Systems operations in Perth to launch its AirLink operation—later QantasLink. That operation grew from two BAe 146s to an operation that topped out at 18 jets, including nine 717s for QantasLink. The number also included BAe 146s, initially in NJS colors and later renamed Cobham to reflect its new UK-based owners. Davin left Cobham to re-join Skywest in 2007, and was a driving force in building its fleet from three Fokker 100s and five Fokker 50s to 11 Fokker 100s, one Airbus A320 and eight Fokker 50s by 2011.

For Network, Qantas executive general manager regional airlines Narendra Kumar said there are about 40 Fokker 100s in the marketplace that are suitable for further expansion.

And the Fokker 100s will arrive in Network colors. “There are no plans to bring them into the Qantas brand. Network is a standalone operation,” Kumar said.

Ahead of the arrival in December of the first Fokker 100s, Qantas is working with Network to ready the airline for the rapid ramp-up in operations. “We are making sure that Network is primed for the growth by establishing a project management framework,” Kumar said.

Recruitment Drive 

Many Skywest pilots and engineers are expected to join Network because of the strong following that Davin enjoys. Like the resource industry, there is a limited skills pool in the Australian aviation sector and the push by Network to grow quickly in the market will cause significant ripples—particularly around Perth.

Unlike other operations, Network is small but about to get significantly bigger, so there will be few seniority problems for aircrew joining the airline. Many aviation staff will also see the Network opportunity as a potential door into Qantas further down the road.

Kumar notes that the Fokker 100s will not be the only aircraft in the inventory as Qantas chases FIFO business.

“We can upscale or downscale to meet the client’s needs and have the ability to match any requirement,” he said.

Qantas has a number of 737-400s that are to be retired from the mainline fleet which could be dedicated for FIFO operations.

Meanwhile Cobham, which has just celebrated 20 years of supplying services to Qantas, has renewed its contract to operate 717s. In its own right Cobham has a fleet of 20 aircraft made up of one Avro RJ70, five Avro RJ100s and 14 BAe 146s of different models. Most are based in Perth. Supplementing those jets is one Dash 8-100 and a Dash 8-300.

Alliance Airlines 

Another major player in the FIFO market is Brisbane-based Alliance Airlines, which has in service or on order 18 Fokker 100s and two Fokker 70s.

According to Alliance managing director Scott McMillan, more growth will come. “Our national operations have increased substantially so that our core maintenance facility in Brisbane will soon be fully utilized, and we need to establish a second major base in Adelaide to support our growing fleet of jets, which recently increased from 16 to 20,” he said.

“Adelaide is the natural choice at this time in our development, having already grown into a significant technical support center for our turboprop aircraft.”

Alliance is expanding and has up to five Fokker 100s based in Western Australia to support FIFO work.

But it is the airline’s purchase of the Fokker 70LRs, which can fly nonstop from all major regional centers and capital cities on the eastern seaboard to Western Australian mine sites, that isintriguing.

Resource companies are finding sourcing labor in Western Australia more challenging. While Qantas and others offer flights from major capitals to cities such as Karratha and Port Hedland with 737s, this is the first significant use of a regional jet on a FIFO basis to mine sites from the cities on the eastern seaboard.

According to Alliance, it has already reached an agreement with one major customer to operate the Fokker 70LRs nonstop from the east coast into a mine site in Western Australia’s northwest, and is in discussions with others.

In all, there are 88 mine sites with airports that can take Fokker 100-sized aircraft.

“The decision to buy the Fokker F70LR aircraft was made after a review of the operating capabilities of a number of aircraft types,” McMillan said. “The capabilities of the F70LR and the ability to easily integrate the aircraft into our existing fleet made it a natural choice.”

To support the fleet, Alliance has awarded Fokker Services a three-year component management contract. Under the terms, Fokker Services will provide repair services on the basis of fixed price and turnaround time, ensuring predictability of cost and parts availability to Alliance.

Over the next 12 months, the speed and size of Network Aviation’s—Qantas funded—expansion plans will become clear.

ATWunderstands that Network will have all 10 Fokker 100s by the end of the first quarter 2012.

The growth is also putting enormous strain on Perth’s airport, with over $750 million in expansion of existing plus new terminals announced or under construction.

The entry of Qantas, with its deep pockets, into the FIFO market will increase the competitive heat on smaller players, which have until now had the market to themselves.

The next two years will be a watershed in Australian regional aviation.