Perth Airport

At the time Perth airport was recording profits for the Federal Airport’s Corporation (FAC) of just $23 million.

Perth airport was transferred to its new owners Westralia Airports Corporation (WAC) – the former Airstralia Development Group involving Airport Group Holdings International, Infratil Australia and Hastings Fund Management – on July 2, 1997, as part of the first tranche of government airport lease sales.

However the airport had layout problems with the then 10-year old badly designed international terminal on the eastern side of the airfield and the domestic terminals – Qantas and Ansett – on the original airport site on the western side.

For the first five years of its lease, WAC had to submit any investment plans in the first instance to the Australian Consumer and Competition Commission.

Very few were approved, limiting what could be done with the airport.

After the removal of the ACCC from the approval process, WAC was able to work directly with the airlines, but air travel was in a savage downturn after 9/11 and the collapse of Ansett.

However, by late 2002 investment in improvements started to flow and the initial focus was the badly designed international terminal that WAC had inherited.

But a major $30 million upgrade of the international terminal to address the departure and arrival levels nightmare was given the thumbs down by Qantas and other airlines.

Later, WAC resurfaced the runways and built taxiways to ease airport congestion.

Fast forward to 2007 and Perth airport had become the most dysfunctional airport in Australia with, for a variety of reasons, no major terminal improvements since the airport was privatised.

WAC and Qantas have been caught napping with the mineral boom and the fly-in / fly-out to resource sites causing passenger numbers to soar creating daily chaos at various terminals.

According to Airservices Australia, in December 2003 Perth Airport had on average 195 movements a day of aircraft sized at 30 seats and above but this had grown to 320 a day in 2007, with peaks at 450 daily movements.

In 2002/2003 year passenger numbers through the airport were 5.3 million but by the end of 2006/07 year the number had risen to 8 million.

Political heat

The then State Labor government was deeply concerned about the lack of terminal development and applied pressure on WAC to act.
According to several independent sources during the lead-up to the 2007 Federal election, the Labor State government and the Federal Opposition apparently reached a funding agreement, whereby a new Rudd government and, if elected would make a special, one-off grant of $80 million to the airport on condition that WAC committed to a time line for the terminal redevelopment.

That deal was apparently rejected because of the time line condition, although WAC rejects this claim.

However Perth airport CEO Brad Geatches told Australian Aviation that “while discussions canvassed on-airport infrastructure and arterial roads no specific or formal proposals were made to Perth Airport in relation to grants for on-airport infrastructure.”

The airport’s apparent reluctance to spend on terminals was brought to a head by former state premier Alan Carpenter in April 2008, when he blasted the airport in parliament calling it “embarrassing and inadequate” and demanding major upgrade works start immediately.

“Perth Airport needs to be upgraded and upgraded now … Perth Airport now is embarrassing, it is an embarrassment for a city which is a key city in the international economy,” Mr Carpenter told Parliament.

Carpenter said at the time that he had meetings with WAC the previous year and was given assurance changes were ahead, but was annoyed nothing had happened since then.

Three weeks later, the airport announced its “vision document”, which promised “one of the best airports in the Asia Pacific region in two phases for just “$1 billion”.

Phase 1 involved a 32 hard stand Terminal WA for low-cost airlines and regional airlines and Phase 2 an integrated international and domestic terminal with aerobridges for up to 45 aircraft.

That facility would be built around and incorporate the existing international terminal.

However, in August last year, Geatches conceded that Phase 2 would have only 25 aircraft gates and that the complex would only be C Grade as designated by IATA.

But Geactches points out that in its initial stages the airport would meet A and B grade ratings for space and services.

The problem is however the public in Western Australia has a very different vision to the airport on what “the best airport in the Asia Pacific region” means. Singapore, KL, Bangkok and Hong Kong spring to mind.

And a terminal to rival those does not come cheap.

In early 2007, Singapore Airport completed its 380,000sqm, 28 aerobridge Terminal Three at a cost of $S1.75 billion ($1.34 billion) with labour costs at least 30 percent less than Australia’s.

In August 2008 Qantas finally came to the party and agreed a $50 million upgrade of its existing domestic terminal which involved an additional aerobridge and importantly the relocation of the escalators to the departures and arrivals lounge.

That work is due for completion in September and will alleviate the nightmare of conflicting queues around the security area, near the terminal’s main entry doors.

The first phase of the Qantas project was rolled out late last year and included new baggage carousels, carpeting, upgrade of one aerobridge for 265-seat Boeing 767s and more self-service check-in kiosks.

WAC has also completed new car parking areas along with road works to alleviate congestion.

Catch 22

Complicating matters for WAC are timing issues as some airlines are balking at moving in isolation to the first stage of the airport’s redevelopment — regional Terminal WA — which is scheduled to open late next year.

Terminal WA is to be built just to the south-west of the international terminal and all the tarmac work is complete with light stands installed.

Perth Airport wants Virgin Blue, Skywest Airlines and Alliance to move from Terminal 3 — the old Ansett terminal — to Terminal WA, which would enable Qantas to expand its domestic operation by using the vacated Terminal 3, while it awaits the second stage of the redevelopment of the airport — a new integrated domestic and international terminal.

Key to this dilemma is Virgin Blue, as code share partner Skywest will not move to Terminal WA unless Virgin Blue joins them.
According to Virgin Blue chief operations officer Andrew David, the airport is “constrained.”

“I know it is difficult to balance all the differing needs of airlines while the market dynamics have changed dramatically in the past six months,” Mr David told Australian Aviation

David told Australian Aviation that it is yet to receive a proposal from WAC on the Terminal WA move.

Skywest’s Managing Director Hugh Davin has praise for the efforts of Mr Geatches to upgrade the existing facility. “They have done a great job expanding Terminal 3, we are delighted.”

Without access to Terminal 3 Qantas will be forced to spend more on its exiting domestic terminal which would mean that it would stay there till 2018 when its lease runs out scuttling the business case for the planned integrated international and domestic terminal till that date.

One of the upgrades completed recently was to link Terminal 3 and the Qantas domestic terminal using what was left of the original terminal built in 1961.

Qantas chief executive Alan Joyce who told Australian Aviation in May that the lack of an integrated terminal was slowing expansion of its low-cost subsidiary Jetstar in Perth.

“The delay in the integration of Perth’s international and domestic terminals is hampering our (Jetstar’s) growth potential,” he said.
Currently airlines are forced to tow aircraft across active runways between terminals when aircraft are swapping from domestic to international operations..

The airport’s layout problems are compounded by complex taxiway configurations and the location of the old Control Tower which prevents A330s taxing to the Qantas domestic terminal using taxiways on the western side of the airport, requiring the re-crossing of the main 03/21 runway.

Moody blues

In early May international ratings agency Moody’s cast doubt on the pace of the expansion of Perth Airport, revealing in two separate reports that WAC had apparently scaled back its capital expansion plans and that no major redevelopment of the international and domestic terminals would start before 2014.

In its Australian airports report, Moody’s senior analyst Paul Ovnerud-Potter warned “reduced access to capital markets will continue to affect the (airport) sector” and airports will “have to defer capital expenditure to maintain their credit ratings”.

In a separate credit report on WAC Ovnerud-Potter said Perth Airport’s credit rating could also be under pressure if it was unable to make progress on refinancing $431 million of debt due to mature in November.

But Geatches said the airport was “well advanced in discussions with lenders and shareholders to refinance existing loans and raise additional funds to support the first phase of the airport’s redevelopment.”

However Moody’s claimed that the time line on the integration of the domestic and international terminals “has been revised in light of the weakening operating environment, with the initial date for the new facility pushed back beyond 2013”.

Geatches conceded that the timing of the integration of the domestic and international terminals would be influenced by the “timing of the economic recovery.”

Moody’s also noted that under its revised capital expenditure program, WAC forecasts investments of about $625 million up to the end of 2013, with only 50 per cent of that amount for aeronautical investments, which is to provide for the first phase — Terminal WA.

Moody’s said that “major capital expansion — in the absence of an improvement in market conditions and agreement with airlines — is not expected to occur as it could pressure WAC’s (credit) rating”.

When the Moody’s credit report was made public by The West Australian both the State Liberal Government and opposition called for meetings with WAC for a please explain.

Road chaos

Complicating matters further, Perth Airport desperately needs the Federal Government and State Governments to commit $525 million to redesign the road system for greatly improved access to the international terminal — and the site of all the redevelopment, including Terminal WA.

Funding is now starting to trickle through and indications are that the ful amount will be forthcoming in a timely manner.

AirServices has been able to solve another headache for the airport by implementing the Western Australia Route Review Project (WARRP) which was launched in 2002

Air traffic control delays at Perth Airport have caused costly bottlenecks lasting up to 45 minutes in the early morning peak period with up to 70 movements – mainly departures.

WARRP examined all Western Australia’s air routes and procedures with the aim of bringing up to date a system that its origins in the 1940s.

The addition of global positioning satellite (GPS) capability on modern commercial aircraft has enabled much closer separation between aircraft.

Previously, the navigation tolerance between GPS approved aircraft was a 14 nautical mile buffer around each aircraft and thus two aircraft had to be 29nm apart – the extra 1nm allowance for error.

Controllers at Perth airport had to keep aircraft at least 3 minutes apart, which meant the maximum aircraft off one runway in an hour was 20 take-offs using one runway.

The new separation has been reduced to 15nautical miles – effectively doubling the number of take-offs the airport can handle and brings the airport into line with world standards.

At the same time WAC have completed a new taxiway to runway 06 – the shorter cross-runway – used in strong easterly winds which eliminates the need to taxi down the runway itself before turning for take-off. This taxiway saves at least 5 minutes per departure.

Patchwork

Anyway you look at Perth airport it is going to be a patchwork for many years to come.

WAC are planning some interim changes to the current international terminal so it can handle some domestic flights so satisfy airlines that need to quickly swap from domestic to international operations but this will inevitability lead to confusion with passengers.

The new Terminal WA will not have aerobridges, which probably doesn’t suit Virgin Blue’s push to be seen as the alternative business class airline.

It would appear, from the Moody’s reports that the travelling public in Western Australia – including millions of resource workers and executives – is hostage to the ability of WAC to raise the capital in tough economic times.

Problem is that aviation and its infrastructure are key economic drivers.

The Intergovernmental Panel on Climate Change said in its 2007 report: “Mobility is an essential human need and human survival and societal interaction depend on the ability to move people and goods. Efficient mobility systems are essential facilitators of economic development. Cities could not exist and global trade could not occur without systems to transport people and goods cheaply and efficiently.”

Adding weight to the significant economic argument, Australia’s Department of Foreign Affairs and Trade, in a submission to the Productivity Commission Inquiry into International Air Services in 1998, stated:

“Australia’s economic wellbeing has always been dependent upon international trade. As Australia becomes more integrated into the world economy, the infrastructure supporting our trade, including air transport which is becoming increasingly important must be competitive and efficient to maximize international trade’s growing benefits to the Australian economy.”

Ian A. Waitz, Professor of Aeronautics and Astronautics at MIT, and Head of the Department of Aeronautics and Astronautics summed up the importance of aviation and infrastructure to the US Congress thus; “Aviation enables economic growth. The Presidential Commission on the Future of Aerospace found that the superior mobility afforded the United States by air transportation is a major national asset and a competitive advantage.”

The challenge for WAC is to turn its promise of the world class airport into reality in tough economic times. Geatches is bullish that the airport can achieve that goal and prove Dixon wrong and all of Western Australia will be hoping he can deliver.