Interview – Bill Astling

The culmination was that we were able to demonstrate to the Government that there was a brand new market which had not been tapped by the domestic airlines and would not be tapped by the domestic airlines unless they were going to give passengers away.

Naturally, a lot of our potential work is going to be involved with the development of Australia.

Therefore what we are doing today could not have been achieved 10 or 20 years ago.

We have gone to major companies who are opening up, developing, and getting involved in new areas in a number of instances in remote areas to demonstrate that we have this piece of equipment that can land alongside a site, unload, be gone in half an hour, and be back in another few hours with another load.

This enables companies to cut down lead times and ultimately our whole operation is centred on the economics-on lead times of the freight to be carried being of high value. It is fragile freight going into a specific area across some of the worst roads in the world.

We have firm letters of intent now from companies which will enable us to introduce two aircraft.

Having satisfied the department on all these issues, and they obviously have done their own homework and own checking, we got approval under the old legislation to import one aircraft.

Clearly, the department is astute enough to know that nobody can operate on a one-aircraft basis.

We would not dream of going into anything that was going to be a one aircraft situation.

Since then we have had this “deregulation” of air freight, which still has not been legislated, but ultimately I think will be.

That enables us to get involved in the domestic market. Maybe if I had been a Gordon Barton type I would have rushed into that and would have done lots of things.

However, we are operating a unique aeroplane. Its uniqueness really is in remote areas and carrying outsize, heavy loads, which we know are already there.

Therefore we were reticent, despite pressures being put on us, which could well be political, as well as from the marketplace, to become involved in the normal domestic freight situation at this stage.

TAA and Ansett know what we are doing.

A lot of people are sceptical and if they were not I would be surprised because I would then ask myself why the hell had not they got involved in the market before ourselves.

They are sceptical because they have not done the studies that we have done and have not gone to that untapped market.

At this stage, the market demands two – now.

I think it will grow to a four, possibly a six-octane exercise, possibly within the next two years.

But we do not intend to import aircraft unless we have work. We are really not in the market to speculate.

JS: Working in Australia, or regional work?

WA: Now we come to another question. Clearly, there is regional work for this aircraft. At this stage, the answer is that we have a lot of single-entity charters that we should be doing on a regional basis.

Some of them will be into unsealed strips in northern parts of Australia. I am talking to Qantas and Qantas are taking the view that perhaps this aeroplane could be a good unit for them to promote as well.

However, I have had a major corporation in Australia come and say: “We want you to take from A to B (and B is outside Australia but in a fairly remote area) X hundred thousand gallons of diesel fuel.”

From that point of view, I do not expect any trouble from Qantas or the destination country’s air carrier.

However, I do not think that we are going to be able to fly willy-nilly across the Tasman.

If we play the game properly and straight down the line, in a lot of areas the existing carriers will find we are supplementing and complementing their existing services.

That all sounds like bullshit and euphoria, but in fact that is what will happen.

JS: Is Qantas looking at it on the basis that they could market it themselves?

WA: That is in the early stages. We have one company for instance that wants us to go to New Zealand every day, taking a product into New Zealand. It will save them about $2.8 million a year so from an economic point of view, it has to happen.

In fact that product is into Wellington and the Qantas SP has just started going into Wellington. I personally think it should be flying from Sydney to LA in competition with Pan Am.

Pan Am load factors on that SP out of here to LA are magnificent. I do not think Qantas can carry what has to be carried.

What we are saying is that there is a possibility of another five to seven tonnes a day that will flow on, which we will not be able to carry, which will automatically go on to Qantas.

JS: This is goods currently going by sea?

WA: Yes. In terms of taking it off the sea into the air it is point 01 per cent difference in freight rate. But in terms of value, it is about 18 per cent, so it is very significant.

It is units that are high cost components. This company is putting everything into the air in the US – about 80 per cent of their movements.

This sort of philosophy is being pushed and followed throughout the world -that air should be the one that ultimately performs the duty cargo shippers want it to perform.

JS: The first Hercules was supposed to be in service by September last year?

WA: Yes, although we did not have permission by then.

Originally we were going to wet lease an aircraft and while that aircraft was here in operation, proceed to certification. That was a hopeful dream which did not come to fruition.

JS: Why?

WA: Because the Transport Australia airworthiness branch want to control the maintenance of aircraft which operate in this region. Therefore, they want that aircraft on the Australian register, which made the wet lease a problem.

We have now accepted that we cannot go that way and are in the process of having the Hercules certified. Lockheed, in conjunction with Transport Australia airworthiness, are now working flat to the boards to have that completed by July-August.

It is a bad time, since airworthiness are busy with Airbuses, 737s and 767s and all the other aircraft that are coming in like CASAs and other weird and wonderful ones.

They are not a department flush with great numbers of people.

JS: The certification is the only delay at the moment?

WA: Yes.

JS: When it comes out here, will it still be a wet or dry-leased aircraft?

WA: The aircraft when it arrives in Australia will be on the Australian register, at that stage, probably still operated by US crews and personnel. We will have selected crews who will then be in training and I would imagine that within two months it will turn into a totally Australian operation.

JS: Does not Air Alaska have some sort of equity in this?

WA: There is another company which has come between this holding company of ours which will have 60 per cent in the operating company, and the other 40 per cent goes to Alaska International Air.

Obviously we have had to put up some very strong reasons as to why we want the involvement in terms of physical and emotional bonds, with a US carrier.

AIA are one of the most experienced Herc operators in the world. They made a lot of money out of the aeroplane. Alaska 10 years ago was starting the development that Australia is entering now.

It seemed very much to all concerned that there was a great compatibility there and why go through having to suffer the learning curve twice.

We are a small private enterprise company that does not have the resources of either Government or large shareholders.

We would have loved to have kept the company Australian but there were just not the people within Australia with the resources or the experience and knowledge to provide the input that we wanted.

It is not without great pain that we say that equity has gone to a US operator. We would have loved to have done it by our- selves. But we will do a ten times better job having them in there with us.

Effectively we still have control. There are more Australian directors than AIA directors in a three-to-two situation. We need no convincing that we have a significant market there.

I am continually told by people that once the aircraft are here and operating, the amount of business that will come out of the woodwork will be enormous.

So everywhere I go I am looking at woodwork just hoping that somewhere behind there is somebody moving.

JS: It is not a terribly economical aircraft to operate compared to a jet on a tonne/ kilometre basis.

WA: I would like to take you to task on that. In a circumference to Singapore from Sydney or Melbourne as a base, it will kill a DC8. After that, it may be a different matter.

JS: DCBs are not really the best example of economical freight aircraft, even though there are still a lot around.

WA: All right. Let us say a 727 or a DC9. We are really not going to be running cargo between Melbourne, Sydney and Brisbane.

JS: You are talking about from one major airport to another. Not into a remote strip?

WA: We are going to operate between major airports because we know there is a requirement to do so. But we are not going to put an advertisement in the newspapers offering to take freight from Melbourne to Sydney for a few cents less per kilo than Ansett or TAA.

If we had twenty tonnes of cargo that goes into the belly lockers of the 727s and DC9s, we would make $74,000 an hour.

JS: Charging the rates they charge?

WA: Yes. That is even taking into account discounts that are given for bulk loadings. We have worked on this. In many instances, our aircraft will probably be chartered out at $3500 an hour.

It is difficult to give a general description of the economics of the operation, but if you were Fred Smith, with a requirement to move parts from Melbourne to Bris- bane, every day, or Harry the fisherman, who wants to export special abalone out of Tasmania into Sydney for the US or Japanese market, then I would be able to demonstrate the viability of our service.

We do not just go to anybody with a rate. We go to try to understand how we can assist their business.

I had a guy the other day who operates three fishing vessels in Australia. He says he can never put bulk fish with the domestic airlines.

We are talking premium prices in using our service. He is overseas doing deals that are going to increase his fleet to 30 – he tells me because we are going to be able to take it out of a specific area into Sydney and put it straight on to DC-10s and 747s or whatever.

JS: Are you planning to use containers?

WA: We are for products such as that. I suppose I have talked to 50 people involved in the development of the northwest shelf and it is interesting to hear what each one says.

I know we are going to have a big involvement there.

Woodside has not given me a written contract yet. Nor have any of the others who will be involved in the construction and what is going up there.

We are really looking at overall freight.

The inefficiencies in freight today are starting to be looked at by management because of the high costs involved. It does not matter whether it is road, rail, sea or air.

What we are leading to in a good degree of our marketing is a premium service – but to specific areas where people are going to rely on the service and where ultimately the economics will win through because their cash flow is going to start in June 1982, for example, instead of March 1983, to quote one company.

March 83 would be the time certain goods were delivered to the site by road and sea. We are able to do the movement a whole nine months quicker.

JS: That must be one hell of a trip by sea and road.

WA: We would employ two aeroplanes on that one virtually full-time around the clock.

JS: When do you expect the second aircraft?

WA: Subject to Government approval, within a month of the first. But as I say, we are not going to speculate and have a piece of equipment worth $13 million sitting on the tarmac, unless we know we have work for it.

JS: You can do that sort of thing with a DC-4, but not a C-130?

WA: The L100 Herc in June 1980 was selling for $9 million. This year it is $13 million.

JS: What is the reason for that?

WA: US interest rates are running at 20 per cent. Inflation has been very high there.

JS: You will be buying this on a leveraged lease?

WA: Yes.

JS: I gather you have had a large number of applications from aircrew. It sounded as if the entire RAAF Hercules flight crew must have applied.

WA: I know. It is worrying. We have had some very good commercials and some very good RAAF people with a tremendous amount of experience who want to work commercially now. The combination of the two will stand us in very good stead.

JS: Any civil people with Herc experience?

WA: No. But people with a good time on other equipment, including large turbines which have been floating around the place.

JS: Four engine turbines?

WA: I do not know what is going to happen about spec. It would not surprise me if Lpec Air was sold.

In 1974 I looked at trying to operate the Argosy and I cannot see how it can pay.

JS: What is the problem? High operating costs?

WA: Yes. It is unable to carry a full payload of more than about 400NM, so it is ideally suited for Tasmania, but try to get any versatility out of the aircraft and you are shot.

There was a company in the US lost $45 million out of operating Argosies. British Airways lost 800,000 pounds in a year about 15 years ago operating Argosies and called in Mike Keegan, of British Air Ferries, who is a pretty astute operator.

JS: BAF operated Argosies didn’t they?

WA: No. They took two or three from British Airways under sub-charter to see if they could get them to pay – and they could not.

I think where some of the changes are going to come, is in aircraft utilisation by the big airlines. There is unquestionably going to be pressure from Qantas to operate domestically. There must ultimately be a quid pro quo that you cannot have several Airbuses sitting on the ground from 10 pm until 7 am· not earning any revenue.

It will be a fact of life. You cannot have $30 million aeroplanes sitting on the ground not working for almost half the day.

Equipment and assets are going to have to be utilised a lot more. Whatever happens in this life, economics is the ultimate destiny of everybody’s decisions. It might take a long time for those economics to get through but there is no question in my mind that Ansett and TAA will go to Singapore.

JS: What is the noise situation like on the Herc for night curfew operations?

WA: It is well within the parameters set down. We have already been told we will operate from Tullamarine, not Essendon.

JS: What sort of utilisation are you looking at?

WA: In the first full year, 5250 hours about eight-nine hours a day.

JS: Will utilisation increase?

WA: The aeroplane makes money if utilisation is over 2000 hours per year. When I say makes money – if you have 1000 hours a year, you do not charge $3000 an hour, you charge $6000.

People come to me at the moment and say they are thinking of a once-a-week trip Sydney-Melbourne-Adelaide-Perth-north West Shelf-Darwin running a milk run on four commodities that are sitting on people’s shelves at the moment.

They are flown in from the US and they sit in Sydney. When somebody in Perth wants something, they ring up. It might have been sitting in Sydney for three months. They are re-organising their business so that they can plan the flow of these commodities into a milk run we will probably do around Australia.

The items are not only fragile but worth enormous amounts of money.

In this day and age, people cannot afford to have large inventories.

JS: How did you get yourself in to this line of business?

WA: I suppose my basis is accountancy and marketing. I got involved in aviation about 15 years ago when somebody came to me and said they were running a flying business and not making any money. He was a flier and all he worried about was getting the aircraft off the ground and carrying a few passengers from A to B.

He got paid his cash which went into his pocket and at the end of 12 months he was wondering how the hell he would pay tax. He did not know about payroll tax or a lot of these other things. His business was running on a day-to-day situation. I set him up with a set of books and did all the normal things one would do. And things went on and on.

In 1971 or 1972 I tried to take over Air Express.

JS: Which particular part of the Air Express saga was that?

WA: That was when they were owned by Westco who bought it from Cambridge Credits for $150,000 about three weeks before Cambridge collapsed.

Westco thought they were buying a hangar in Brisbane for Mr Bjelke Petersen’s new Navajo, but found they also owned several Bristol Freighters based in Essendon. They had no idea. And they wanted out.

I missed out on that takeover bid and another in 1974 but in 1977 we won. I was involved in a few other things in the industry. I got called into BBA who was operating the old Argosy and losing vast amounts of money.

Prior to me acquiring both BBA and Air Express I worked there as a salaried person going through all the figures on how to set the Argosy going, which was hopeless. It just was not going to work. The Argosy was grounded because BAA lost the spec contract and was put against the fence.

I knew there was no hope of continuing to operate piston-engine aircraft and it was really at that stage I started trying to find out what aeroplane would be suitable for Australia as a freighter.

It was a question of thoroughly assessing the market and ultimately coming to the decision that the Hercules was the right aircraft.

I put in an application for Hercules and got Carvairs – the DC-4s with the big bubble on top and nose-loading, which ultimately gave Boeing the idea for the 747. The Department of Transport said I could not run before I could walk.

I bought three from British Air Ferries, after the Government gave its approval to bring the aircraft into the country. Then Ansett took out its injunction.

At that stage I was bloody determined that we would fight this thing through and I am convinced that our quite unenviable position brought about the review of the domestic airline policy, which subsequently said air freight should be deregulated.

JS: I think you had an awful lot of moral support on that?

WA: I got enormous help from the Tasmanian Government but I believe if Tasmania had not have helped, it would have had a considerable effect on their economy.

We were taking 60 per cent of all air freight into Tasmania using Bristol Freighters and DC-3s.

Of course we could not get the Carvairs so three months later the Government turned round and said we could buy the DC-4s from Qantas.

As far as I am concerned the line has been drawn now with Air Express and the thing is finished. It suffered and died because of the two airline policy. Air Express is not the first company to have suffered that and will not be the last.

JS: How do you keep body and soul together in the meantime?

WA: I get a small salary. I am just about keeping body and soul together.

JS: What would be smallest consignment you could go into a place for?

WA: The Hercules takes 22 tonnes. If last week we had had the Herc we would have gone into Darwin with a piece of equipment weighing two tonnes. The company concerned very nearly chartered an aeroplane from Alaska and ferried it out to Melbourne, and return it to Alaska. That is how strong the market is.