Airline Profile — Southern Australia Airlines

In July 1985 MVA was purchased by private concerns, though after only 16 months under new ownership the airline was once more in the hands of receivers until Queensland businessman Bevan Whitaker and local Mildura business people purchased the remnants of Murray Valley Airlines. The airline was renamed Sunstate, reflecting the same name as the regional carrier owned by Whitaker in Queensland, and in an attempt to remove the connection with an airline that had had a clouded financial history. From 1986 to 1990, Sunstate operated one Shorts 360 and one Cessna Titan on RPT routes. In March 1989 the company was successful in bidding for the Victorian Air Ambulance contract, thereby adding a further six Titans to the fleet.

Expanding its regional operations, Australian Airlines purchased Sunstate from Bevan Whitaker in July 1990, and while continuing to operate under the name Sunstate, the passenger fleet was repainted in the blue, gold and green livery of the new owners. With the experience gained in his Queensland operations, the purchase of the ‘Southern’ Sunstate by Whitaker in November 1986 established the carrier on a firmer financial basis, and the subsequent takeover by Australian put to rest any further question of the airline’s long term viability and ability to serve the local region on a continual basis.

1992 brought about an expansion of Sunstate’s services, with routes to northern Tasmania opened up as Australian rationalised its own operations to key regional centres. The move brought about Sunstate’s first association with de Havilland equipment, with one Dash 8-100, VH-WZI Spirit of Sunraysia, introduced to the fleet specifically for services from Melbourne to Devonport in March 1992. The carrier’s single Shorts 360 was sent to Sunstate in Queensland as part of a fleet rationalisation at the time of the first Dash 8’s delivery. A second Dash 8 was delivered as VH-WZJ City of Devonport one month later, and was operated on the Mildura to Melbourne service, which continues today as the busiest route on the network.

The fleet operates today in the ubiquitous livery of Qantas (which, following its takeover of Australian, now owns the airline) as Southern Australia Airlines. Two Dash 8s are deployed on services from Mildura to Melbourne and onward to Launceston, and from Melbourne to Devonport. Two nine seat Cessna 404 Titans are used from Mildura to Adelaide and to Broken Hill. A third Dash 8 has been acquired by Southern to meet capacity demands and strong competition from Kendell on routes to northern Tasmania from Melbourne. This aircraft, identical to the existing two Dash 8s, was added to the fleet in January this year as VH-WZS after significant refurbishment to Qantas standards and the installation of an APU.

Six Titans remain in the Air Ambulance fleet based at Essendon, dedicated to providing medical services throughout Victoria, northern Tasmania and south eastern South Australia. The contract was recently renewed for a further five years, allowing Southern to provide its 24 hour on call Air Ambulance service. Southern Australia’s current RPT network comprises Adelaide, Broken Hill, Canberra, Devonport, Launceston, Melbourne Tullamarine and Renmark, over which it operates 128 flights per week. The entire network has experienced the steady growth that the majority of regional carriers have enjoyed over the past eighteen months. The Mildura to Melbourne route is providing the most rapid growth since train services ceased between the two cities in 1993. A service from Melbourne to Burnie was commenced in March 1995, adding another port in Tasmania to be serviced by the additional Dash 8 aircraft.

The airline’s fleet is based at Mildura, where a 1300m² hangar was constructed in early 1993 to handle the Dash 8s including all maintenance and overhaul work. Spare engines for the Dash 8s and Titans are kept at Mildura, while Titan engine overhaul is carried out by Eastern Australia at its Tamworth facility. The airline has tried hard to focus itself as an important part of the Mildura economy rather like how Kendell has in Wagga and Hazelton at Cudal. Two Titans are overnighted in Mildura for morning services to South Australia, one Dash 8 in Mildura and one in Launceston. Current Dash 8 utilisation is around 2800 hours per annum.

Making Changes

“Essentially we have run a profitable organisation. Some of the previous problems were associated with undercapitalisation”, says Tony Mathews. He also suggested that under previous ownerships, Murray Valley Airlines had used up to eight aircraft to service a network that could support only two aircraft. The current fleet arrangements, with only two aircraft types, provide Southern with significant cost benefits in maintenance and other operating expenses, but also provide the exact amount of capacity required to meet the demand of its eight port network. Similar cost savings have arisen out of the combined purchasing power of the Qantas regional group, with Eastern Australia, Sunstate and Southern operating common equipment and sharing spares and supporting needs. “This has certainly helped our bottom line,” says Mathews.

There has been no profound change to Southern’s operations since Qantas’ takeover of Australian, however, the marketing advantages brought with the addition of QF flight designators have considerably improved Southern’s marketability overseas. Tony Mathews says that oncarriage from the larger domestic network and international network of Qantas has not dramatically improved given that there was always a strong flow of traffic to and from Australian Airlines. The QF designator, however, stands to provide long term growth as tourism traffic increases to supplement a strong business market in the region. These immediate advantages aside, Tony Mathews does not see that many more influences will be cast on Southern from the Qantas headquarters.

“James Strong set up some of the regional operations when he was with Australian. He was very heavily involved with Eastern, and has had a fair bit of involvement with Sunstate in Queensland. Consequently, his philosophy initially set up the principle of the regional airlines that Qantas now owns, and I think he is comfortable as it still runs under his previous premise.” All Qantas regional carriers report directly to Norm Fricker, Group Executive Qantas Associated Businesses, as separate business units of the group. Southern, like all the regionals, must justify its major operational decisions to Norm Fricker, while maintaining complete autonomy in day to day operations. Issues such as route changes are at the discretion of the airline, though plant and equipment purchases or base relocation would be the subject of discussion between Qantas head office and the regional airline.

Southern Australia has no desire to move from its current base at Mildura. As part of the local economy and the community there, it has been able to carve a niche network under the careful guidance of Tony Mathews. Of the airline’s 79 staff, 40 live in Mildura, with the remainder at the Melbourne sub base involved in RPT crewing and flight planning in addition to Essendon where 10 pilots and one administrative officer are employed to support the Air Ambulance operation. Thirty seven pilots, 15 engineering staff and 13 flight attendants make up the total staff, with the remaining 14 personnel involved with the various essential administrative duties of financial control, reservations and check in.

Southern Australia And The Economy

“Quite definitely the economy is improving,” says Mathews when discussing Southern Australia’s position after the lifting of the recent recession. “Things weren’t quite as bad in Mildura because it has a mixed economy. There are five or six facets to the local economy, including a citrus industry, a very large dried fruit industry, wine growing, wheat and barley and then tourism.” These diverse enterprises provide a reasonable balance to the local economy, which keeps the volume of traffic between principal destinations buoyant without the peaks and troughs often associated with largely tourism-dependent networks. “The wine and dried fruit industries have had their best years ever in dollar terms,” he explains.

Southern has matched this economy with high frequency services to its key port of Melbourne, offering schedules designed to provide a full day for business people visiting Mildura, and similarly those visiting Melbourne. The one hour flights to Melbourne from Mildura depart at 0645, 1015 and 1655, and return flights to Mildura depart Melbourne at 0830, 1500 and 1845. The market has grown considerably since the Shorts 360 has been replaced with the much faster, pressurised Dash 8. Given Mildura’s distance from Melbourne, the sector is an ideal business commuter service for the whole region and load factors are consistently high. Around 50,000 passengers each year are carried on the route, of a total network annual uplift of around 120,000.

The Tasmanian market, though, is quite the reverse in its consistency, experiencing the typical highs and lows of routes that contain a 70% tourism factor. “We have only been operating to Tasmania for three years, so it is still difficult to make any definitive statement on the character of that market.” In that three years, however, Southern has been able to successfully stimulate the market to warrant increasing capacity with its third Dash 8 against Ansett aligned Kendell Airlines. The two airlines come head to head on a number of sectors, including Mildura to Melbourne, Melbourne to Devonport and Melbourne to Burnie.

“We do compete with each other fairly fiercely,” Tony Mathews admits, explaining that the two carriers actively use fare discounts and special offers to lure passengers. Mathews says there is little loyalty amongst passengers, particularly on the Melbourne/Mildura route on which each airline offers three return flights a day, where people prefer to take whichever carrier offers the most convenient service to suit their business needs. “We fight for every passenger.”

So, too, is Southern fighting the continuing battle for justice in charges applied to it from Federal and local governments. As the former Chairman of the Regional Airlines Association of Australia (RAAA), Tony Mathews has a clear and unbiased view of the influences adversely affecting all regional carriers in Australia, as well as in his own region. Many of the constraints he faces for his own Southern Australia Airlines are those same ones faced by any operator to rural areas. Council and shire charges for operating into and from rural airports are prohibitive, suggests Mathews, who has waged a battle against the often ruthless treatment of air operators by local governments.

“Broken Hill Airport,” says Mathews with an honest air of disappointment, “is nearly the most expensive airport in country Australia.” Even the most senior members of the council believe there is little or no need for RPT operations to The Hill, and its belligerent attitude to operators leaves distaste in the mouths of the likes of Tony Mathews. Consequently, none of the airlines operating to Broken Hill, including Southern Australia, Hazelton and Kendell are represented at council meetings. Not for the want of trying to be heard, however, simply that they are not listened to. The local council there administers a landing fee and weight charge, which is calculated at around $8 per head and $5.50 per tonne respectively. “It is expensive,” Tony Mathews laments.

He is only a little less concerned about charges imposed by Mildura’s local council, though at least there is a direct benefit from landing fee proceeds for travellers using the facility, with the construction of a newly completed terminal building. Southern pays to Mildura Council in the vicinity of $350,000 in head taxes and landing fees per annum. “The airport doesn’t warrant the half million dollars the council receives from Kendell and ourselves each year in charges.” Many councils, it would seem, have little appreciation of the operating costs of airlines, and rather see it still as a large money industry. Tony Mathews does reserve some very favourable comment, however, for the Federal Government authorities who have reviewed pricing structures, in particular the Civil Aviation Authority.

“The CAA charges are lower now than they were two or three years ago, due to them constantly revamping their organisation and getting their charges down.” “They have improved their operation so dramatically that the costs have been brought down to realistic levels, and they have done very well by the industry, by and large. I am not saying that we should sit on our laurels and that these can’t be improved upon further, but I don’t think we’ll see them get back to the levels of three or four years ago for some time: they were very expensive.” As an indicator, Southern Australia paid around $200,000 less in CAA airways charges during the last financial year. In discussing the other Federal authority often called into question by regional operators, Tony Mathews comments on the Federal Airports Corporation, “I don’t think the FAC charges are over the top, but obviously we (Southern) don’t get hit with the peak period charge in Sydney, which to me doesn’t seem to have done anything for anybody. I personally think it is an unfair and unsound premise to have that operating as it stands.”

Southern itself has enjoyed particularly good service from the FAC at Essendon during their various dealings concerning buildings and infrastructure for the Air Ambulance facilities. Southern Australia has been a member of the RAAA since 1985, and its membership together with the other major carriers in Australia helps to make the Association an effective tool to fight issues such as local government fees, albeit with concerted and protracted effort.

Into The Future

Under Tony Mathews, Southern Australia will consolidate its position and remain Qantas’ regional stronghold in the face of competitive marketing from Kendell. Unlike nine previous commuter and charter operators, Southern has no aspirations to schedule a Mildura to Sydney direct service. With schedules to Melbourne allowing easy connections to Sydney via Melbourne allowing a full day in Sydney for business people and the volume of business traffic being comparatively low, a direct service simply cannot be justified. One goal that will be achieved in the current financial year is an increase in passenger uplift over the network from 130,000 to 150,000, which may well be exceeded if current trends continue.