Regrowth

Importantly, the outlook for regional Australia is also encouraging, with Qantas saying the decline in the resources sector was starting to level out and Rex experiencing some uptick in its fly-in/fly-out operations.

However, regional Australia is not just represented by people digging stuff out of the ground and shipping it overseas. There are plenty of non-mining communities who need and are willing to support air services if the fares are not too expensive.

On this front, a parliamentary inquiry in Western Australia on ticket prices for regional routes has put the focus on high airport charges at some regional ports.

And regional aviation, along with the rest of the industry, is grappling with how to best tackle the issue of fatigue risk management in the wake of the Civil Aviation Safety Authority’s (CASA) move to delay implementation of Civil Aviation Order (CAO) 48.1 until after an independent review.

Australian Aviation looks at some of the issues facing the sector in the period ahead.

REGIONAL PILOTS TO PARTICIPATE IN STUDY ON ALERTNESS AND FATIGUE

In its August announcement deferring the introduction of CAO 48.1, CASA said a team of specialists brought together by professional consultancy services company Dédale Asia Pacific would look at the proposed new rules and how they stacked up against other aviation regulators around the world.

The Regional Aviation Association of Australia (RAAA) is contributing to the independent review through a study of pilot alertness being conducted in partnership with Circadian Australia and CASA.

The study, to get underway shortly, involved 34 pilots flying with RAAA member airlines wearing a Readiband tracker on their wrist over a six-week period.

The tracker measures when the pilot was awake or asleep and the nature of their sleep.

“It records vibration. Nothing else. No GPS. No steps. No heart rate. It’s not a consumer device, it’s a business device and it is a class one medical device,” Circadian Australia chairman Mark Holmes explained to Australian Aviation.

“Basically, your wrists are the first and last thing to stop moving at night. It collects data to show how much you are moving or not moving during the night when you are asleep.”

The data is transmitted via bluetooth to a pilot’s smartphone via an app, uploaded to a server and then analysed to determine how well the person slept and their level of alertness now and into the future .

“If your data shows that you are going to be at a level of alertness that impairs you ability to fly safely, impairs your reaction time, your cognitive effectiveness, then planning so far ahead you can be proactive,” Holmes said.

“Effectively what it is is having a fuel gauge on your phone that tells you how much alertness you have got in your tank.”

“There wouldn’t be a pilot who takes off without checking all of his instruments on the flight deck, including his fuel gauge.

“Until now, the pilot would have no idea what his fuel gauge is in terms of his sustainable alertness for the next five, 10 or 15 hours. Now they do.”

“It takes the guess work out of knowing am I good to go or not and for how long.”

RAAA chief executive Mike Higgins said the association’s airline members had a difference set of operational environmental factors to the big operators such as Jetstar, Tigerair Australia Qantas and Virgin Australia.

“We are all for rules for managing fatigue, don’t get us wrong, but they have got to be fit for purpose,” Higgins told Australian Aviation in an interview.

We are all for rules for managing fatigue, don’t get us wrong, but they have got to be fit for purpose. Mike Higgins

“We are arguing on behalf of our members, who don’t fly multiple timezones, who don’t get up at 3 o’clock in the morning, who don’t land after 11 o’clock at night.

“Therefore any fatigue management rule should look at each individual sector of the regional airline industry and because we operate primarily in one time zone and so forth we should have a particular set of rules for managing fatigue.”

Higgins noted an analysis of the impact of CAO 48.1 at the Royal Flying Doctor Service (RFDS) in Western Australia showed it would need to add about 17 more pilots to its ranks of about 50 currently to be compliant. That would add another $2 million to its costs.

The introduction of CAO 48.1 has been pushed back to to October 31 2018, with air operators having to submit their draft operations manual changes or an application for a fatigue risk management system to CASA by April 30 2018.

“It is way too onerous for us and I don’t think it goes anywhere near addressing the legitimate concerns of Qantas and Virgin,” Higgins said.
“Thankfully CASA is doing this independent review.”

AUSTRALIA’S LARGEST INDEPENDENT REGIONAL OPERATOR BOUNCES BACK TO PROFITABILITY

Regional Express (Rex) reported statutory net profit after tax of $12.62 million for the 12 months to June 30 2017, a return to the black following a net loss of $9.56 million in the prior corresponding period when it booked an impairment charge relating to the loss of a Defence contract.

Revenue rose 7.3 per cent to $281 million, Rex said in a regulatory filing to the Australian Securities Exchange on August 29.

Rex executive chairman Lim Kim Hai said it was a “truly solid performance” in 2016/17 and he expects clearer skies ahead amid lower fuel prices and an improving local economy.

“I see a bottoming out of the declines we experienced in the prior six years with a modest but clear recovery of passenger numbers in FY17, which no doubt mirrors what is happening in the Australian economy,” Lim said.

“Early indications from the first two months of this new financial year confirm the trend we saw in FY17.”

Operational profit before tax, which excludes one-off charges and was regarded as the best indication of financial performance, was $17.8 million, more than four times the $4.3 million result in the prior year and better than company guidance issued in June for an improvement in excess of 250 per cent.

Passenger numbers rose nine per cent to 1.192 million, while passenger revenue per available seat kilometre (RASK) – a measure of demand – improved two per cent.

Meanwhile, the average fare increased to $213.9, from $207.6 in the prior corresponding half.

Capacity, measured by available seat kilometres (ASK), expanded 6.4 per cent, with 2016/17 the first full year of Rex’s operations in Western Australia operating two government-regulated routes that began in February 2016.

Load factors improved 2.6 percentage points to 57.3 per cent.

In terms of the outlook, Rex said the expected the “modest recovery” in the Australian economy would translate into further passenger growth.

This would lead to profits increasing in the “mid-teens percentage” range compared with the prior year.

“We’ve often had some rather cloudy forecasts for the future but this one is bright,” Rex deputy chairman John Sharp said during the company’s full year results presentation.

Further, Sharp said there were good prospects for Rex’s fly-in/fly-out (FIFO) operations, given the recent profit results from the major miners.

“Mining fly-in/fly-out operations show a sign of firming up and the numbers of those increasing,” Sharp said.

“You would have noticed that BHP’s profits have been very substantial in the last week or so, (Andrew) ‘Twiggy’ Forrest’s business Fortescue Metals reported a very significant profit growth and that’s a reflection of the fact the price of iron ore and coal and other minerals has all gone up in the last 12 months.

“Those companies are now trading more profitably and as a result more activity is taking place and that means more fly-in/fly-out opportunities for companies like Pel-Air and Rex.”

Alliance Aviation Services’ results published in early August also noted a pickup in mining-related flying as the resource sector showed signs of recovery.

“There is positive sentiment in this industry with a number of customers talking about reinstating additional services,” the company said at the time.

Qantas chief executive Alan Joyce noted his airline’s bottom line was still weighed down by the mining downturn experienced in 2016/17. However, the tide was starting to turn.

“We are now seeing the resources sector now starting to level out,” Joyce said during Qantas’s full year results presentation on August 25.

There is also growth in some non-mining routes, with Illawarra Regional Airport, also known as Albion Park, to get regular public transport flight for the first time in almost a decade when Jetgo commences nonstop services to Melbourne and Brisbane from October 30.

And in another example, Fly Corporate is expanding from Orange in the NSW Central West, adding Orange-Melbourne Essendon flights from October 9 on top of an existing service to Brisbane.

“The service by Fly Corporate to Orange is exactly the kind of service that will flourish at Essendon,” Melbourne Essendon Airport chief executive Chris Cowan said.

AIRFARES UNDER THE SPOTLIGHT

Rex’s full year results showed its average fare increased to $213.9 by June 30 2017, from $207.6 in the prior corresponding half.

The West Australian Parliament’s Economics and Industry Standing Committee inquiry into regional airfares in that state has heard the anger being felt in remote communities about the high cost of air travel to Perth and beyond. Some even described themselves as being trapped in the town because they were unable to afford a plane ticket.

The City of Kalgoorlie-Boulder has even raised the prospect of starting its own airline if Qantas and Virgin Australia did not lower their fares.

The City of Kalgoorlie- Boulder has even raised the prospect of starting its own airline.

Virgin’s submission to the inquiry noted demand on the bulk of its intra-WA services was mostly from the corporate and government travellers, particularly fly-in/fly-out workers on mining and resources projects, and efforts to stimulate demand among leisure or non-business travellers had proved ineffective.

“We would highlight that most of the intrastate routes we serve in Western Australia do not deliver acceptable commercial returns to Virgin Australia at current pricing levels,” Virgin’s submission said.

“Without the demand from these corporate clients, it is highly probable that capacity and frequency on many intrastate routes would be lower, and it is also possible that airfares would be higher.

Further, Virgin said impediments to offering lower airfares on regional routes included airport charges, which were “on average around double those levied by the regional ports” in New South Wales and Victoria on a cost per-passenger basis.

“Regional airport operators should critically examine whether current levels of airport charges are in fact meeting the expectations of communities,” Virgin said.

“Communities that are concerned about prices of air services may wish to see airport operators bring down the cost of airport charges in order to provide scope for airlines to offer lower airfares on regional routes.”

Qantas too in its submission noted the high charges it faced at the eight regional airports it had regular public transport services to – Broome, Geraldton, Kalgoorlie, Karratha, Learmonth, Newman, Paraburdoo and Port Hedland.

“Based on a per passenger charge calculation, these airports are all in the top 15 most expensive airports in the Group’s domestic network, making Western Australia’s regional network the most expensive in Australia,” the Qantas submission said.

Qantas recommended “additional non-regulatory oversight on Western Australia’s regional airports to ensure local councils and privately-owned airport operators are pricing airports rationally”.

“By doing this, airports are discouraged from charging exorbitant airport charges in isolation and encouraged to operate airports more efficiently when considering the flow on impact of their unilateral decisions,“ it said.

Qantas has introduced a 12-month trial for residents in six regional WA cities, who will be eligible for discounts of 10-30 per cent for return economy travel between their local airport – Broome, Kalgoorlie, Karratha, Paraburdoo, Port Hedland and Newman – and Perth for up to four times a year.

The airline said in a statement the six markets were chosen because residents were “competing with a very high volume of corporate travel, specifically from the resource industry”.

Qantas domestic chief executive Andrew David said the per kilometre cost on a small aircraft was “significantly higher than a larger aircraft”.

There will be a similar initiative for residents in Mount Isa to Townsville and Brisbane and residents in Cloncurry for travel to Townsville.

RAAA’s Higgins said councils that owned and operated airports needed to recognise the impact high charges had on air services.

“We view the airport as an infrastructure that underpins the provision of a service that’s vital to that community,” Higgins said.