A Western spar

Not to be outdone, Skywest announced on January 10 that it had signed a wide ranging 10 year strategic alliance with Vir-gin Blue which, among other things, will see it operate up to 18 turboprops across Australia under wet lease to Virgin Blue.

While apparently independent an-nouncements, industry rumour suggests that there is at least some connection between the two agreements.

Qantas is understood to have approached Skywest to establish a charter joint venture prior to its acquisition of Network, and CEO Alan Joyce had been reported in a number of pa- pers during the previous year as saying that the carrier was planning to enter the fly-in/ fly-out resource charter market.

-major shift for Qantas, which in the past has placed its focus in WA on its growing intrastate RPT network, including its Qan-tasLink branded services.

Despite its strong links with major resource companies such as Woodside and BHP Billiton, during the 1990s Qantas left most of the mining char-ter market to its regional partner National Jet Systems (now Cobham).

With Qantas now finalising its pur- chase of Network, Joyce has shown that he expects the resource charter market to grow in importance for Qantas.

“This is an important market, and a growth market, and Qantas will now -of the resources sector,” he said.

“This will significantly enhance the scope of what Qantas can offer the mining sector, bring-ing new competition to the marketplace.

” Nevertheless, Qantas says that Network will retain its branding and management, although a number of Network systems will be aligned to those of the Qantas Group.

Network will remain a commit-ted charter carrier, with plans to grow the business to meet the demand of the new resources boom.

“It presents strong growth opportunities — cantly growing its fleet and its operations,” said Joyce.

Although it is one of the smaller players in the WA resource charter market, Net-work has been a local success story.

Started in 1998 by a former Skippers Aviation senior manager, the carrier has transi -tioned from operating Cessna Conquests and Beechcraft King Airs to a fleet of six Embraer EMB-120s and two Fokker 100s -the way, it has gained a number of blue- chip contracts for major clients, flying to -Despite Qantas saying that Network will be focused on the resource charter market, it is expected that the new subsidiary will also be well placed to bid in future to oper-ate 100-seat jets on behalf of QantasLink.

Currently, Cobham operates 14 Boeing 717s on jet routes across WA and into Darwin and Cairns for QantasLink, but it -expire within the next few years, possibly triggering a new competition.

Qantas has also announced further expansion to its RPT services in WA, with the airline recently awarded a licence to be—mouth route as part of the change to WA intrastate air services.

Running three times weekly using the Cobham operated Boeing 717s, the new services will compete against Skywest on the Perth-Geraldton route.

With the likelihood of more competi – tion on both its RPT and charter services, Skywest surprised the market with its an – Skywest, while Qantas is also examining options to possibly compete further against nouncement of a larger network using the new turboprops.

“The combined strength of our networks, along with the additional capacity we will deliver with new aircraft, will provide travellers with more frequent flights, better schedules and competitive fares,” said Vir-gin Blue CEO John Borghetti in announc-ing the regional partnership.

The announcement came as somewhat of a surprise for many in the industry, with most speculating that Virgin Blue would look to a closer arrangement with Regional Express, either through a codeshare or even an acquisition of the Saab 340 operator.

Nevertheless, Virgin and Skywest have history together, with Skywest a participant in the Velocity Rewards loyalty program.

Last year the two carriers also entered into a codesharing agreement which saw Vir -gin’s code added on a number of Skywest’s RPT services, and at that time the two companies noted that they were looking at other areas of cooperation.

Under the new arrangement, which will commence mid year, Virgin Blue will lease -Skywest under a cost-plus model, while Sky-west will also have the ability to sell seats on some routes where it codeshares.

Skywest chairman Jeff Chatfield told reporters in a conference call following the announcement that there were major benefits to Skywest from the agreement.

“It’s a very good deal for Skywest in the sense that it gets paid a cost-plus fee to fly the plane, it has upside in the ability to sell tickets on the network, and it doesn’t have the risk of rolling out such a big network.

It hasn’t had to buy and guarantee the purchase of 18 new aircraft,” he said.

At the time of writing, Skywest said that the new 70-seat aircraft would be on standard operating leases from UK lessor –west.

It is expected that the main compe-tition will be between the ATR 72, which Skywest has previously examined, and the Bombardier Q400 which is operated by rival QantasLink extensively on its east coast regional services.

“The aircraft under consideration are brand new, modern turboprops – we’re -of those at the moment,” said Chatfield.

“What we’ve done is run an extensive expression of interest process with them to get their best offers and make sure that -and to do what we want it to do.

” Chatfield also added that the size of the purchase also meant that whichever aircraft is selected would also be likely to replace its existing fleet of eight Fokker 50 turbo-props, which are primarily used on RPT and some charter services in WA.

In the short term, the Virgin Blue regional operation will only involve six aircraft with the remainder expected to be deployed over the next three years.

Neither -aircraft will initially operate on, but it is expected that they will initially take over on –quarie and the Melbourne-Mildura routes, replacing Embraer E-170 jets which are due to be phased out over the coming year.

Blue against QantasLink and Regional Express in some markets.

The new operations will effectively double the size of Skywest, and will dwarf its regional airline network in WA.

“I think that the schedule of the regional network It is expected that the remaining 12 aircraft will be for growth, possibly pitting Virgin on the east coast will probably be higher than our number, given that some of the places are very high volume schedules, and some of our ports are low volume sched-ules,” said CEO Mark Shelton.

Shelton added that the addition of the Virgin Blue wet lease operation will open up a number of new operational vacancies within Skywest, although it will continue to manage the operations from its existing Perth base.

“We will use a lot of our own manage-ment, training, maintenance control and things like that, but as far as flight attend-ants and pilots, ground ops, there will be recruitment of additional staff,” he said.

This will all be in addition to the existing Skywest RPT and contract charter opera – tions, which Chatfield says will continue to be a major focus for the Perth based airline.

“We have been very busy growing the Skywest business organically without the Virgin arrangements, and we will continue to do that,” he said.

That growth is expected to include a significant push into regional international -that the airline is looking at the possibil-ity of flying from Geraldton to Denpasar.

Skywest has also flagged plans to operate direct Broome-Singapore services in the near future.

Chatfield also noted that the closer relationship with Virgin would also be a major plus for many of its resource clients, particularly due to the ability to offer east coast connections from Virgin through to Skywest charter services.

“We think it will help deal with bigger resource companies, because clearly the biggest resource companies in the world are our customers and their travel requirements are broader than what we currently offer,” -“Having an east coast presence over the next five to ten years as the resource sec-tor over here continues to grow will be to our advantage.

Mining The Opportunities

With the two announcements, it appears that Qantas and Virgin have set forth a new battle ground for dominance in regional areas with their new smaller partners.

–work to the size where it can handle more traffic, and it is expected that will see it contest a number of contracts as they come -connect passengers from across the Qantas network.

Similarly, Skywest will be in a position to offer trunk route connections on Virgin Blue services, while its cost base is likely to benefit from the larger scale of its operations.

If connectivity does become a defin-ing issue for the large mining companies in WA, it appears that the independent charter operators such as Alliance Airlines, Skippers Aviation and, to a lesser extent Strategic Airlines, may be at something of -that some of these airlines will either main –some cases look to launch their own direct services from the Pilbara to the east coast as Strategic did last year with the start of its Brisbane-Port Hedland flights.

Whatever happens, it appears that the relatively stable markets for mining charter and regional RPT across Australia are in for what could be a major shake up.