Cobham Australia

Its major new contract, in the final stages of negotiation, involves fixed-wing air support services for the $43 billion Gorgon oil and gas development by Chevron and partners off the WA north-west coast.

The full value of the contract has not been disclosed but, provided negotiations are successfully concluded, is understood to be worth as much as $250 million to the end of 2016. Cobham will lease two BAe Avro RJ100s and also use a BAe 146-300 – already on the route – to provide services between Perth and Barrow Island for the massive project.

It’s also likely to subcontract shuttle services to move workers between Barrow Island and accommodation on the mainland.

Meanwhile, the aviation company has just gained a five year extension of its longrunning overnight air freight operations for Australian air Express, which was due to expire at the end of next year. The new deal secures work for three 146s until the end of 2015, and generates further revenue of $120-$150 million.

“That’s a nice chunk of business,” said Peter Nottage, managing director of Cobham Aviation Services Australia, and follows new and extended contracts worth about $140 million since late last year.

The strong growth of its civil aviation task is being matched by additional work in its contract with the Australian Customs Service for its Coastwatch maritime surveillance role (operated by Subsidiary Surveillance Australia), brought about by an upsurge in the arrival of boatloads of asylum seekers in northern waters.

And, as it cranks up its various operations and seeks to recruit more pilots and engineers to its workforce of 1100 and fleet of about 45 jet and turboprop aircraft, Cobham is moving to use its demanding Coastwatch contract for border protection as a springboard to overseas deals.

Nottage said the group is in a “very strong” position, despite the testing economic climate.

“We have not changed our business plan through the downturn,” he said.

Despite a squeeze on margins, which has proved fatal for some rivals, Nottage said Cobham has stuck to its strategy and remained profitable on an annual turnover of more than $300 million – a figure that will increase significantly next year.

The aviation industry veteran, who started out as an apprentice with Lloyd Helicopters in Adelaide in 1982, credits a disciplined approach during the recent boom times for Cobham’s present strength in a depressed industry.

“I’ve been in the aviation industry for 27 years and seen a lot of ups and downs, booms and busts,” Nottage said. In such a cyclical, capital intensive and low margin industry, he said, “there’s a need to be very disciplined. ” While some rivals aggressively chased market share with “amazing” price offers to customers, and acquired expensive new aircraft, Cobham adopted a more conservative approach, employing its fleet of about a dozen ageing but reliable and low cost British Aerospace 146 jets, originally acquired by National Jet, and ensuring new contracts were financially viable.

“Some other aviation groups have been caught short,” he said, as they battled to meet rising costs – such as financing or leasing costs for new aircraft – in a market characterised by shrinking returns.

Not that everything has gone Cobham’s way this year. It lost one major mining services contract when BHP Billiton closed its Ravensthorpe mine in Western Australia following a collapse in nickel prices, andalso lost an AaE tender to Qantas to provide west coast-east coast overnight freight services, with the joint venture specifying Boeing 737s to replace the old Boeing 727- 200 fleet National Jet operated.

Nevertheless, through the year – apart from its new AaE deal – Cobham gained two important extensions of resources work, and its Surveillance Australia unit brought two of its radar equipped Reims F406s back into service in July with minor equipment upgrades to cope with the additional workload for its maritime fleet, after the recent appearance of more boat people on the northern horizon led to additional funds in this year’s federal budget.

It was the original Coastwatch contract, won by National Jet Systems in 1993 and operated from 1994, using 15 aircraft of four different types, which brought the British aerospace group into Australia.

As a losing bidder, Cobham Plc later approached National Jet – founded by the late Guy Lloyd – with a takeover offer and took control of the company in 2000, using the experience to tender for the much-upgraded Customs service requirement.

It claimed a big coup in winning the new turnkey Coastwatch contract, Project Sentinel, in 2006 against tough international competition, in a deal worth about $1 billion over 12 years, taking it out to 2020 with options for a further two years.

It required the company to upgrade its five Bombardier Dash 8s and acquire another five, all to be fitted with the latest surveillance sensors, communications and data technology for satellite based, all-electronic surveillance.

The task to detect illegal immigrants and fishing boats, drug smugglers, environmental hazards and missing ships around the clock, in all weathers, in Australia’s maritime exclusive economic zone keeps seven aircraft in the air. They fly 40 to 50 mission hours each day, with each Bombardier Dash 8 capable of covering 1100 square kilometres per flight from four bases extending around the northern coast from Broome to Cairns.

The two Reims F406s, based in Cairns, are now helping Cobham to provide an additional 2000 flying hours annually to the original 15,000 hours, which consists of about 2500 missions.

At the time of the Cobham takeover, National Jet also had contracts to fly regional services for Qantas subsidiary QantasLink, operate overnight freight services for the Qantas-Australia Post joint venture, Australian air Express, and provide passenger services to remote sites for resources companies.

The QantasLink work, first obtained in 1990, now involves fully crewing and maintaining a fleet of 11 Boeing 717s, carrying more than one million passengers annually. Cobham’s British executives tout this contract as making the company “the virtual custodians of the Qantas product’’ in regional Australia.

Nottage said the current contract had “several years” to run, extending well into the next decade.

The AaE contract – which dates back to 1991 – covers weeknight flights linking Adelaide, Melbourne, Sydney and Brisbane, using a fleet of three BAe 146QT freighters which are cleared to use Sydney and Adelaide during curfew hours.

The service, for which Cobham has operational management, carries more than 22,000 tonnes of air freight each year.

In the economic downturn, Nottage said, “the air freight industry has been hit quite hard”, while the venture grounded its Boeing 727 freighters last December as Qantas phased in the 737 replacements. Three of the four old Boeing trijets have been sold overseas, including one to Malaysia, and the fourth broken up.

In the resources sector, Cobham has become the largest contractor, overshadowing the likes of busy rivals such as Alliance and Skywest. The British parent says its Australian arm, with a mix of 146s and Dash 8s, operates more than 7500 flights annually for the resources sector in Australia and Papua New Guinea, transporting about 130,000 passengers.

Its clients include Rio Tinto, Leighton Holdings, US oil giant Chevron and Santos – the listed Australian petroleum group an original National Jet client.

In the past 12 months it has secured a $50 million contract extension for the Ok Tedi copper-gold mine in Papua New Guinea, another $50 million extension to link Leighton subsidiary HWE Mining’s Yandi iron ore operation for BHP Billiton in the Pilbara with Perth, and a $40 million deal to serve the Minara Resources nickel and cobalt mine at Murrin Murrin in WA. It has also started charter services from Perth to Kambalda for five gold mining companies, using a 36-seat Dash 8-100.

That is being upgraded to a leased 50- seat Dash 8-300, with some seats being released to the local community under an RPT arrangement.

Before the huge Gorgon deal, the resources sector accounted for about 30 per cent of the company’s turnover, but its importance is increasing substantially now.

At the other end of the scale, Cobham is taking over the operation of the RAN’s Dash 8 for its LADS coastal mapping and survey work. The company will provide flightcrews and maintenance for the aircraft, which was previously employed by Tenix on ad hoc work around the world but is now taking over the role of the RAN Fokker F27. That aircraft will move to ad hoc contracts under Dutch company Fugro which is acquiring the Tenix LADS business.

Meanwhile, as it expands its civil passenger and freight and maritime border protection tasks, Cobham continues to look for new work, as the local and some overseas economies show signs of revival.

“I have some reservations about the talk of a rebound from the economic downturn just yet,” Nottage said. “But I still think there are some good business prospects out there. ” These could include new services to the Cocos Islands and Christmas Island. After providing the air links to the Australian territories, Cobham decided not to tender for the previous contract, which was won by SkyAirWorld.

When that operator failed before it started the service, Cobham agreed to continue flights until the middle of next year with its RJ100, and is expected to tender for the new contract which was due to close in mid-October.

Jeff McCulloch, Cobham Australia’s general manager for business development and strategy, said there were signs the resources sector was starting to stir from its two year hiatus as commodity prices edged up again.

“It’s a pretty moveable feast, but we see ongoing opportunities for fly-in/fly-out work in mining. The key will be commodity prices. ” From the strong base of its Coastwatch program, Cobham broadly targets the special missions field, ranging over surveillance, search and rescue, aerial ambulance, aircrew training and aircraft modification.

The impending Defence requirement for target towing at eight different ranges, and steps towards a public/private partnership in crew training for military fixed wing aircraft and helicopters were creating considerable interest in the aviation industry.

In the surveillance field, the Coastwatch operation – the largest of its type in the world – could be leveraged to potentialoverseas contracts, although possible opportunities in Asia and the Middle East had long gestation times, McCulloch said.

The Philippines, Indonesia and Brunei had been on the radar for several years, but budgetary and bureaucratic problems had restrained progress on establishing any maritime surveillance operations.

“There is nothing imminent – it’s a matter of keeping in touch – but these things can happen pretty quickly,” Mc- Culloch said.

Cobham had identified maritime surveillance requirements in the South Pacific region as well, but the small island nations lacked the resources to act individually and it was likely any operation would have to be operated jointly through the South Pacific Forum or an overseas aid project.

Rather than a turnkey operation like Project Sentinel, he believed the likeliest way forward in overseas contracts was the provision of service components, such as aircraft leasing and modification, equipment installation, data processing and transmission, and crew training.

Cobham Australia is working in collaboration with its $5 billion British parent, which in its latest annual report recognises aerial surveillance has become “one of the most critical areas of security” for nations around the world.

Cobham Plc’s Bournemouth based business provides aerial surveillance for UK agencies using Dornier 228s and BN-2B Islanders, but the Australian Coastwatch contract is by far the biggest surveillance operation in the group.

“It certainly gives us something to sell,” McCulloch said. The local company continues to work on possible upgrades to its surveillance aircraft and equipment, and the possible adoption of unmanned aircraft and satellite sensors eventually.

Nottage said the group constantly monitors potential replacements for the civil fleet, dominated by the 11 BAe 146s (including a single RJ10), but the British jets, with comparatively low operating costs, had proved their value and versatility.

The two 1999 build Avro RJ100s, to be leased for the Barrow Island services, represented a technology upgrade for Cobham Australia, he added.

Nottage Gonged

Peter Nottage has won a prestigious Guild of Air Pilots and Air Navigators award for his contribution to aviation in Australia.

The award, to be presented in London’s Guildhall on October 29, crowns an illustrious but sometimes turbulent career for Nottage, who deferred a university course in 1982 to begin an engineering apprenticeship with Lloyd Helicopters in Adelaide because the industry appealed to him.

“I never did get to uni,” he told Australian Aviation.

In 1985, after completing the four year apprenticeship, he moved to Gladstone in Queensland to support Lloyd’s tourism operations and, after an expected two year appointment to launch a new Lloyd helicopter business in China evaporated with the proposed project’s demise (but not before useful training with Bell in the US), he was appointed to support Lloyd’s offshore oil and gas platform services.

A brief stint in 1988 with the National Safety Council in Victoria followed, but Nottage had moved again before that organisation’s ignominious collapse in March, 1989 – enticed back to Lloyd Helicopters as an engineering manager in Adelaide.

That led to a role establishing helicopter operations in Burma for Lloyd. Then, after an internal upheaval, he became the engineering manager at the age of 27.

In 1993, Guy Lloyd – by then running the largest helicopter operation in the Asia Pacific region – sold out to Britain’s Bond Helicopters, and Nottage became Stephen Bond’s technical director in Australia.

He said, guardedly, he “struggled with the UK culture” and accepted an offer from Lloyd Aviation directors Adele Lloyd (Guy’s widow) and Warren Seymour to become head of engineering for the fixedwing company in 1995, and later moved into business development.

He stayed on when Cobham Plc acquired the company in 2000, becoming head of government and defence operations after the British company separated its civil and defence businesses, and taking over full management in January 2006 when the chief executive of civil operations, Daniela Marsilli, left the group.

Today he leads a diversified aviation services company well able to ride out economic headwinds.