Regional headaches – taxes v reality

Some are simply too close to major centres to be viable, but others have possibilities. Any worsening of economics would leave them abandoned and marginal ports could join them.

The RAAA and several small operators – including those pulling their weight with reborn services, some running below economic loads – have issued dire warnings based on the carbon tax’s impost.

Lost is an understanding that these airlines are essential urgent transport tools for many places, and in the northern wet season the only links except for emergency supply or evacuation flights. The tax fears, Rex’s recent announcement that no fewer than seven of its routes are under review, and the ATR’s imminent arrival require close consideration.

Indeed, surely a nationally uniform policy, aimed at producing a watertight regional airline system that accommodates very differing needs while being survival proofed against new and old threats, is needed more than ever? NSW’s and WA’s route allocation criteria and Queensland’s protection/subsidy for certain intrastate routes appears a good starting point for such a policy. The ball will rest at state level for implementation, and it must be noted that some states spend vast sums subsidising long haul rail passengers, which hits air. Queensland is a case in point, but it also subsidises 26 towns’ air services.

Also, it should not be accepted that existing or recent equipment usage and operating patterns must be saved, rather all options need be considered.

A case study of a couple of the vulnerable Rex routes is worth considering.

Sydney-Bathurst is reportedly safe after a new council agreement, but even the much increased Rex loads only fill Saabs to sub- 50 per cent load factors.

To the west in central NSW, it would be very tempting to close Parkes-Sydney (sub- 50 per cent load factor) and have passengers drive the short 55km to Orange. But Parkes’ 29,000 passengers a year could enable a shrewd 19-seat operator to replicate Rex’s Saab schedule or slightly improve that frequency – provided the 19-seaters gained passenger acceptance.

Meanwhile, Taree and Grafton have populations that slowly increase but passenger loads that decrease. The Taree- Sydney leg runs around 60 per cent revenue load factor (near Rex’s network load factor), but the similar length Taree- Grafton segment is around 30 per cent – an overall sub-50 per cent revenue load factor.

Virgin’s substitution of slightly smaller ATRs for E‑170s on nearby Port Macquarie-Sydney should not raise fares much but could still hit Taree hard – just as Coffs Harbour flights hit Grafton traffic. Again, the introduction of 19-seaters may save the day, provided not too many passengers are lost due to lack of toilet, flight attendant and cabin service. Present numbers would support two aircraft on separate patterns providing the key am/pm same day return from each port, plus some shared off peak links in between.

But the same old snag arises – equipment life. The Metro fleet has been run down and many converted to freighters or broken up. Subject to two major inspections, they have a 50,000 hour life. The few Jetstream 32s are considered to have around a 65,000 landing life, while the Beech 1900Ds – perhaps the best cabin of all – has no ultimate life.

As we have often discussed, there is no business case for a manufacturer to build a new 19-seater, as it would almost certainly be uneconomic due to high capital costs demanding 3000hr p/a utilisation, versus the 1200-1500 hours the typical lower use peak time oriented utilisations generate.

If a viable policy basis for Australian regional airlines can be found it must be legislated, not just regulated – which can be easily changed – and afforded some support, as happens in Queensland.

That then would just leave airport access and charges to fix.