In retreat

For its part, Vincent said its Australian services had been losing money for some time. Launched in 2001, the company’s Australian arm had been set up mainly to service the booming mining sector from its base in Darwin. With a staff of 80, its fleet included four Saab 340 and five Beech 1900 turboprops, as well as a single BAe 146. Though it had sought to expand into RPT services, its reliance on mining charters left it vulnerable to the relative downturn in mining activities. After three prospective buyers fell through, the airline said it was left with no choice but to ‘pull the plug’ to protect its operations in New Zealand, which it described as profitable.

“We’re not the first airline that has failed and won’t be the last probably,” chief executive Peter Vincent told the New Zealand Herald.

Of that there is little doubt. Indeed, while Vincent’s collapse stems in part from its own particular mix of circumstances, the failure of another airline comes as regional aviation operators and organisations continue to issue dire warnings about the state of the industry. In particular, the Regional Aviation Association of Australia has pointed the finger at government policies, saying an overgrown regulatory bureaucracy, ever-growing security costs and the former government’s carbon tax, among other things, have taken a heavy toll on bottom lines across regional aviation.

“On the government’s own figures…essential regional air services have been in seriousdecline for over two decades and negative policy initiatives such as these only serve to increase the downward trend,” the RAAA said in a policy statement late last year. “Government needs to develop policy that can slow or reverse this trend and guarantee regional Australia, outside of the major tourist and mining centres, the essential air services needed for its continued economic and social well-being and future prosperity. ” Narrabri would probably agree.

But whatever the viability of the Narrabri-Sydney RPT service, and whatever the course of government policy in the coming years, the fact remains that many regional routes are economically marginal, at best. And those same routes are most likely to be filled by small, undercapitalised carriers that exist in the niches left unfilled by the major players, meaning those small carrier will always have a tenuous hold on survival.

In the view of aviation consultant Bill Meeke, a former CEO of regional carrier Skywest, government policies are only one ingredient in an “Irish stew” of difficulties facing small carriers.

“It’s certainly true that general aviation, in all forms, is under constant pressure by way of ever

There’s also the problem of operators not really understanding what it takes to be successful.

changing regulations that put a massive cost burden on the operator,” Meeke says. “It’s the most regulated business you can find anywhere, as well as the most capital intensive and the one with the thinnest margins. But there’s also the problem of operators not really understanding what it takes to be successful. ” Running a successful RPT route requires an evaluation of a number of factors, Meeke says. What kind of competing transportation is available? How much demand exists, and does that demand come from customers capable of paying viable fares? What type of aircraft is the best fit? Meeke holds up the Adelaide to Port Lincoln route as an ideal example of a successful RPT. With substantial populations of customers at both ends, the route covers in barely a half-hour a distance that would take eight hours to drive.

In addition to choosing their routes carefully, successful carriers like Regional Express have been “ruthless at controlling costs” and equally ruthless about eliminating under-performing services. While government subsidies on some RPT routes may make such routes viable in the context of an otherwise successful business, the razor thin margins on such routes makes them a meagre staple.

Even for established carriers, the equation can be complicated. QantasLink, for example, recently announced a new RPT route between Brisbane and Miles, then pulled the route before it was scheduled to launch due to weak demand. Small operators, with much less margin for error, can afford few such mistakes.

“If you’re a small operator going after RPT services, you’re destined to fail,” Meeke says. Indeed, the narrow margins in regional aviation mean that even the best run small

An empty niche

Narrabri isn’t the only place looking for a new airline following Vincent’s collapse.

With most of Vincent’s flights operating out of Darwin, NT customers were left scrambling for alternatives. Workers at ERA’s Ranger uranium mine booked on Vincent FIFO services were forced to take buses to and from Darwin in the immediate aftermath of Vincent’s May 28 collapse. The airline had been flying up to 18 staff and contractors twice daily between Darwin and Jabiru, near the ERA site.

Other destinations serviced from Darwin included Lombardina, Fortescue and Halls Creek in WA, Bootu Creek in the NT, and Cairns. Vincent also flew from Brisbane to Roma and had announced plans to launch services between Sydney and Mudgee in June.

It remained unclear whether all of Vincent’s services could be absorbed by other carriers. Darwin-based AirNorth, for example, told the ABC that it lacked the small aircraft required to service the airstrips at Jabiru and Bootu Creek. carrier remains brutally exposed to changing conditions. “In my view, the only way you can make it work is when you have the critical mass of a QantasLink or a Rex. And sometimes, to reach that critical mass, you have to be bought by one of the big players that has the distribution system to feed you traffic. ” As, of course, happened to Skywest when it was absorbed by Virgin Australia.

In Meeke’s view, as long as there are niches to fill, small operators will continue to pop up and give it a go. A few will survive, and many will not. “The overall situation tends from time to time to get worse,” he says, “but it never changes. ” And indeed, no sooner had Vincent collapsed than local leaders began pointing out the opportunity it had left in its wake.

“What it means is there’s an opportunity for someone else to come into the market,” NT Chief Minister Adam Giles said. “Northern Australia is expanding and the opportunities are enormous and more and more players want to come and invest. With every piece of adversity comes an opportunity. ”