Under contract

The fifth aircraft in the latest batchof 717s in the QantasLink fleet went into service in June, with the type replacing Boeing 737s on Sydney- Hobart and Melbourne-Hobart services.

It takes the 717 fleet, which is crewed and maintained by Cobham, to 18 aircraft.

Peter Nottage, chief executive of Cobham Aviation Services – which embraces a range of Australian and international aviation operations – says the introduction of two-class 717s involved Cobham undertaking“quite a bit of work” to reconfigure the interior.

The new additions to the fleet have 12 business class and 98 economy class seats, with repositioned toilet and galley to help to produce what Nottage calls “the optimal layout” for the aircraft.

Cobham also was charged with designing and installing an inflight entertainment system for the five aircraft.

While there have been instances of two-class configuration on 717spreviously, Nottage believes the inflight entertainment system, using iPads, is probably a world first for the aircraft.

As part of a contract extension with Qantas to 2018, Cobham has established a new base in Canberra, which has a major presence on 717 routes, and new bases in Sydney and Hobart. The additional aircraft have taken Cobham’s staff for the 717 operations to about 550, including 60 new pilots and about 100 additional cabin crew, as well as 20 more engineers.

Although Qantas engineers provide some line work on the 717s in Canberra, about 95 per cent of the maintenance is done by Cobham’s engineers under the QantasLink contract, which began in 2005 with eight aircraft as replacements for BAe 146s operated by Cobham for QantasLink.

Nottage will not be drawn on the value of the contract or its contribution to the company’s revenues, but admits it accounts for “a substantial” proportion of Cobham’s work in Australia and has provided the company with steady growth over the years, while producing a cost-efficient solution for QantasLink operations.

Meanwhile Cobham has enjoyed a “seamless” transition to Qantas Freight from the disbanded Australian air Express joint venture, following the withdrawal of Australia Post.

The four 146s employed on the overnight freight services offer major advantages with their ability to fly into Sydney and Adelaide during curfew hours.

While Nottage claims very good relations with Qantas over the 717 and overnight freight contracts, the national airline has become a competitor for another of Cobham’s key sectors – serving the resources industry, particularly with fly-in/fly-out services. Both Qantas, through its acquisition of Network Aviation, and Virgin Australia through Skywest, are targeting contracts with resources companies.

“It’s always been a highly competitive sector,” Nottage says, philosophically. “We remain very committed to the resources industry and we have a good position in the sector. ” However, Cobham recently lost a lucrative BHP Billiton contract to an Alliance Airways consortium to serve the Pilbara iron ore mining operations – at a time when investment in the resources sector is slowing.

“There isn’t the growth we’ve seen in the past. The big, new capital programs are winding back, but companies are still investing to sweat their assets harder. ” Consequently, he believes, the sector is not plummeting, just plateauing, at present and there is scope for some growth.

“But we won’t chase growth at any cost. We don’t have surplus capacity and we want sensible commercial returns. ” Already two aircraft from the BHP contract have been redeployed to Karratha to meet additional work from major customer Chevron in its development of the giant Gorgon petroleum venture and the associated Barrow Island project.

And Cobham has won an $85 million five-year extension of its FIFO services for the Ok Tedi mine in Papua New Guinea.

The company employs a total of 13 aircraft – BAe 146s, Avro RJs and Dash 8s – on resources contracts in Australia and PNG, and probably will replace some of the older 146s with bigger, younger Avro RJs later this year. The present five RJs in the resources fleet were built between 1996 and 1999. Production of the type ended in 2001.

The sector is not plummeting, just plateauing, at present and there is scope for some growth.

Another major Australian operation for Cobham is the $1 billion Coastwatch surveillance contract for the Australian Customs Service under Project Sentinel. The company is almost halfway through the present 12‑year contract, with a two-year extension inked in to 2020.

The work involves a “reasonably consistent level of activity” for the fleet of 10 Dash 8 aircraft, which average 2,500 missions and 15,000 flying hours annually.

Nottage says the aircraft and crews perform “really well” and provide a cost-effective capability for the Australian government, in the searches for people smuggler boats, illegal fishing boats, and ships causing pollution in Australian waters.

The tasks change, and the aircraft carry out ad hoc work for the Australian Maritime Safety Authority (AMSA) regularly. Five of the Dash 8s are equipped with wide cargo doors so that rafts or supplies can be dropped in rescue operations, if necessary.

AMSA’s own SAR contract is also up for renewal and Cobham is competing for this work. The resultof the tender process is expected to be known later this year.

However, prospects of gaining overseas surveillance work, based on the success of the Coastwatch operation, have failed to materialise so far, despite significant international interest in the Cobham model.

Nottage says many prospective countries prefer to use their military arms to undertake offshore surveillance, but despite the lack of success so far, he says the winning of international surveillance contracts remains a focus for the company.

Such prospects should be enhanced by a restructure by British parent company Cobham Plc, which has seen Cobham Aviation Services emerge as a separate global business under the leadership of Nottage, backed by several of his Adelaide-based executives and a small group of UK executives.

CAS has 28 operating bases in 10 countries, a fleet of more than 130 aircraft and total staff of about 2,500. Last year it topped global turnover of $700 million.

Apart from its Australian operations, CAS does surveillancework and military training in Britain and runs the UK MoD’s Defence Helicopter Flying School, mainly at RAF Shawbury. The contract involves 48 helicopters – 36 AS350 BB Squirrels and 12 Bell 412EP Griffins – used for training of RAF, RN and British Army pilots and aircrew from basic to advanced flying and also covering such aspects as SAR.

Nottage sees rotary-wing services as a very good growth prospect and a complement to fixed-wing services.

Last year Cobham bought out 50/50 partner Bristow to take full ownership of UK-based FB Heliservices, which operated the Defence Helicopter Flying Shcool and has bases as far apart as the UK, Europe, the Caribbean and South Africa.

Under Cobham’s full ownership, it has since won two “beachhead” contracts in the Middle East, to provide “war games”, otherwise known as operational readinesstraining, for the Royal Saudi Air Force, with operations due to start in November, and is finalising a three-year support role for the Qatar Emiri Air Force and its fleet of 18 AgustaWestland 139 helicopters, under a Letter of Intent.

“We see good opportunities in the Middle East and that is our prime growth area,” Nottage says.

The full ownership of the helicopter group, renamed Helicopter Services, has enhanced the operational and geographical diversity of CAS, which he believes has a sufficiently broad portfolio to overcome cyclical downturns in the aviation industry and tight government budgets.

“By design, we are not overly exposed to one sector,” he says.

Helped by the “big wins” in Saudi Arabia and Qatar, and the expansion of the QantasLink 717 contract, he believes Cobham Aviation Services can continue to build on its recent annual revenue growth of three to five per cent.

Part of the family

Cobham Aviation Services is the second largest division of the parent company’s four operating units, behind its global aerospace and security division.

In the financial year to March 31 2014, the company generated overall revenues of £1. 79bn ($3. 3bn), of which Cobham Aviation Services accounted for 21 per cent, with the Australian businesses in turn delivering 65 per cent of that revenue.

The division’s operating profit jumped 26 per cent to £48m ($87m).

Cobham Plc’s chairman, John Devaney,in the company’s annual report, said Cobham was battling with “a challenging defence and security market” but he expected stronger commercial markets in the year ahead.

The company was continuing its transformation of the businesses to streamline and simplify operations, he said.

Chief executive Bob Murphy said the company was making significant progress in transforming its business to improve performance and returns.

The £74m ($135m) move to full ownership of the helicopter joint venture continued the process of achieving a more balanced portfolio of global businesses, he said.

In Australia, the aviation services business was linked to the long-term growth of demand for natural resources. The group had made good progress in that field, including the $85m extension of the Ok Tedi contract to 2019.