Regional uprising

And it’s all happening now.

Add to that cocktail the move of industry veteran Hugh Davin, arguably one Australia most experienced regional airline executives, from Perth-based Skywest to head up Qantas’s FIFO and charter operations and you have a very stiff drink which will be giving some players a hangover.

QantasLink

The regional arm of Qantas has of course been expanding for years but that growth has been gaining momentum in recent years with more Q400s and 717s joining the fleet.

The Bombardier Dash-8 fleet now consists of 25 Q400s, 16 Q300s and 5 Q200s with three more Q400s to arrive next year. There are also 11 717s with two more to arrive shortly.

That fleet operates 2000 flights a week serving 55 destinations. And the number of destinations is set to climb in Western Australia with two Q400s to be based in Perth from November to serve Geraldton and support 717 services to Exmouth.

Qantas Executive General Manager Regional Airlines Narendra Kumar tells Australian Aviation that the two Q400s are just the start in WA. “We will go beyond that and it will be a function of market dynamics,” says Mr Kumar.

And the market dynamics will be fascinating with the Q400s up against Skywest’s Fokker 100 jets, after the Perth-based regional airline announced it would defend is lucrative Perth-Geraldton route by moving from Fokker 50s to the jet.

Skywest lost its monopoly on serving Geraldton – and Exmouth – after the State Government overhauled its protected RPT contracts late last year.

Mr Kumar touts the performance of the Q400 against jets on the short route saying it was almost as fast and the Q400s are factory fresh.

And Mr Kumur also is also upbeat about QantasLink’s commitment to regional Australia. “We have rolled out Next Gen check-in at 16 ports.”

FIFO

Qantas has for years only dabbled in FIFO charter operations when it happen to suit its RPT main game but its purchase of Network Aviation late last year flagged it was now serious about the growing sector.

It also lured former Cobham and Skywest senior executive Hugh Davin to head up FIFO and charter operations an appointment that was announced in late July.

To bolster Network’s FIFO fleet of two operational F100s and 7 Brasilias Qantas is souring 10 Fokker 100s understood to be from Avianca in Columbia.

The 10 aircraft are all ex-American Airlines machines and all later builds than most of the Fokker 100s in Australia.

They also have identical specifications.

According to Mr Kumur there are about 40 Fokker 100s in the market place that are “suitable.”

Once the aircraft are acquired, which is expected to be very shortly they will be upgraded to meet ADS-B standards by Fokker services with the first aircraft to arrive in Australia later this year.

And they will arrive in Network colours says Mr Kumar. “There are no plans to being them into the Qantas brand. Network is a standalone operation.”

Ahead of the arrival Qantas is working with Network to ready the airline for the rapid ramp up in operations.

“We are making sure that Network is primed for the growth by establishing a project management framework,” says Mr Kumur.

While Mr Kumur is coy on the precise timeline Australian Aviation understands that Network will go to the market to recruit staff for the expansion in September which will put a “significant strain on the available talent pool,” says one observer.

Like the resource industry there is a limited skills pool in the aviation sector and the push by Network to grow quickly in the market will cause significant ripples – particularly around Perth Airport.

Unlike other operations Network is small but about to get significantly bigger thus there will be few seniority problems for air crew joining the airline.

And many aviation staff will see the Network opportunity as an easier door into Qantas further down the track.

Mr Kumar also notes that the Fokker 100s will not be the only aircraft in the inventory as Qantas chases FIFO business. “We can upscale or down scale to meet the client’s needs and have the ability to match any requirement.”

And Qantas has a number of 737-400s that are to be retired shortly from the mainline fleet which could be dedicated for FIFO operations.

The appointment of Hugh Davin to head up Qantas’s FIFO push brings the veteran executive back into the Qantas fold but this time of the direct payroll.

Mr Davin left Skywest in 1993 and in 1994 set up National Jet Systems operations in Perth to launch its AirLink operation – later QantasLink.

That operation grew from two BAe146s to an operation that topped out at 18 jets including the 717s for QantasLink.

The number also included Be146s initially in NJS colours and later Cobham.

Mr Davin left Cobham to re-join Skywest in 2007 and was a driving force in building its fleet from just three F100s and five Fokker 50s to 11 F100s, one A320 and eight Fokker 50s by 2011.
And Cobham which has just celebrated the 20th year supplying services to Qantas has entered into negotiations for the renewal of its 717 operating contract. That contract expires next year.

In its own right Cobham has a fleet of 20 aircraft made up of one Avro RJ70, five 5 Avro RJ100s, three BAe 146-100s, 1 BAe 146-100QT, three BAe 146-200s and three -300s as well as two BAe 146-300QT. Supplementing those jets is one de Havilland Canada DHC-8-100 and DHC-8-300.

Virgin moves

At the beginning of this year Virgin Australia entered into a 10 year strategic alliance with Skywest, to operate up to 18 Virgin-branded ATR 72s from June.

The ATRs are to replace Virgin’s six Embraer E170s and expand the airline’s reach into regional Australia.

However Virgin will retain its E190s which are used on many main truck routes.

The plan calls for the ATRs to be operated by Skywest under a wet lease agreement however the June in-service and has subsequently been moved to October.

Initially the ATRs will be employed on a double-daily Brisbane to Gladstone route a daily Brisbane- Pt Macquarie service and double daily between Sydney and Port Macquarie.

The ATRs will also operate up to six times a day between Sydney and Canberra replacing the E170s.

Further details of Virgin’s ATR roll out are unclear but it is obvious the airline wants to tap what is a lucrative sector.

For some years Qantas broke down the QantasLink financial contribution to its profits but in recent years that has been melded into the domestic figures.

However Borghetti is well aware of the financial rewards that come from regional operations done well!

While Skywest will operate the ATRs, the aircraft are being purchased by a related Singapore based leasing company linked to Skywest.

Thus far four ATR 72-500s and four ATR 72-600s have been ordered.

Eventually it is planned to replace Skywest’s own Fokker 50s with ATRs.

Alliance plans

In July Brisbane-based Alliance Airlines, announced it would expand its Adelaide operations, opening a second maintenance facility to support its Fokker 100s.

Alliance already uses Adelaide to support its five Fokker 50s and will broaden its activities to include Fokker 100 and Fokker 70s maintenance. The airline has in service or ordered 18 Fokker 100s and two Fokker 70s.

To support the additional work in Adelaide Alliance is hiring another 10 engineers taking to 84 the number of staff employed in the South Australian capital.

Two more Fokker 100 aircraft were due to arrive from Europe in early August to undergo major maintenance checks prior to entry into service.

These two aircraft were part of a four aircraft buy that included two Fokker 70LRs and these four aircraft lifted its Fokker jet fleet to 18.

To support its FIFO operations in South Australia Alliance will base a Fokker 100 at Adelaide.

As well as FIFO operations Alliance has also secured some tourism work with local operators for charter flights to key South Australian tourist destinations that include The Flinders Ranges, Kangaroo Island and Lake Eyre.

Alliance opened its Adelaide based in 2007 with 18 staff and two Fokker 50s and that has grown to five F50s and now 1 Fokker 100 with 84 staff.

According to Alliance Managing Director Scott McMillan there is more growth to come.

“Our national operations have increased so substantially that our core maintenance facility in Brisbane will soon be fully utilised, and we need to establish a second major base to support our growing fleet of jets, which recently increased from 16 to 20,” McMillan said.

“Adelaide is the natural choice at this time in our development, having already grown into a significant technical support centre for our turboprop aircraft,” he said.

And Alliance is also expanding in WA taking over FIFO operations into Telfer from Perth.

But it is the airline’s purchase of the F70LR which can fly nonstop from all major regional centres and capital cities on the eastern seaboard to Western Australian mine sites that is intriguing.
Resource companies are finding sourcing labour in WA more challenging and while Qantas and others offer flights from major capitals to cities such as Karratha and Pt Hedland with 737 equipment this is the first significant use of a regional jet on a FIFO basis to mine sites.

According to Alliance its has already reached agreement with one major customer to operate the F70LRs nonstop from the east coast into a mine site in Western Australia’s northwest, and is in discussions with others.

“The decision to buy the Fokker F70LR aircraft was made after a review of the operating capabilities of a number of aircraft types,” said Mr McMillan.

“The capabilities of the F70LR and the ability to easily integrate the aircraft into our existing fleet made the F70LR a natural choice,” he said.

To support the fleet Alliance has awarded Fokker Services a three-year component management contract.

Under terms, Fokker Services will provide repair services on the basis of fixed price and turnaround time, ensuring predictability of cost and parts availability to Alliance.

During the Australian International Airshow at Avalon earlier this year, Alliance and Fokker Services signed an MOU making Alliance a partner in the FLYFokker program, which provides Fokker operators with comprehensive life cycle support.

Regional aviation in Australia at the 70 to 100 seat level is at the cross roads with takeovers, new players while incumbents are building fleets and networks.

Over the next 12 months clarity will come on the speed and size of Network Aviation’s – Qantas funded – expansion plans which may impact on the stability of the workforce of competitors.
Qantas’s strategy of basing Q400s in WA is a direct challenge to Skywest as will as Skippers Aviation.

Skywest –as any airline does – also faces challenges in rolling out the ATR operation and the market will be watching to see how quickly those aircraft can be brought into operation.