Issue 361: Disruptors

Among those creditors are local council-owned airports, which stand to lose not just prized airline services but, as is the case for Illawarra Regional Airport owner Shellharbour City Council, hundreds of thousands of dollars in unpaid fees and security charges.

‘That stress can contribute to clouded judgement.’

It was Dubbo Regional Council which originally tolled the bell on Jetgo’s problems by initiating legal proceedings in May seeking the airline be wound up so it could recover unpaid debts of more than $270,000.

“The loss of commercial RPT air services provided by Jetgo to Brisbane and Melbourne is intensely disappointing and a significant inconvenience to the passengers who had pre-booked flights and travel plans,” a Dubbo Council media statement issued on June 1 reads.

“However, in good conscience Dubbo Regional Council could not continue to allow unpaid debts to mount up, debts which were already in excess of $270,000.”

Of course it is not just major creditors like regional airports (and ultimately their ratepayers) who are hurt by the collapse of an airline, or the reported 10,000 passengers who had paid for flights they had yet to travel on.

It is Jetgo’s 112 staff who are now out of work who are most keenly feeling this corporate collapse.

Facing a sudden lack of income is hugely stressful, and I can empathise with those Jetgo staff now wondering how to make their next rent or mortgage payment.

I imagine too running an airline business in financial distress is also hugely stressful – how are we going to pay our staff next week, what do we tell our suppliers who keep ringing every day seeking payment of overdue bills? – and that that stress contributes to poor decision-making.

And that stress can contribute to clouded judgement over whether to continue trading, perhaps while searching for new funds/investors or hoping to ‘trade out’ of financial difficulties, when logic suggests (and the Australian Securities and Investments Commission demands) that the company be placed into voluntary administration so that further debts don’t accumulate. That clearly, is the hardest, but most important, decision a company director can make.

I don’t have any particular insight into Jetgo’s financial situation and its decision-making, and nor do I want to rush to judgement on the viability of its business model of using regional jets on long thin regional routes. At one level it’s fantastic that Jetgo tried to innovate and do something that had not been done before in the Australian airline market.

But often, sadly, there is a reason why it (in this case long-range regional jet services) hasn’t been tried before, because established operators like Qantas, Virgin and Rex can’t make the business case stack up.

And giving it a go is one thing. Accumulating millions of dollars in debt that leaves staff, passengers and ratepayers out of pocket is another altogether.

Sadly, like Ansett, Compass marks 1 and 2, Air Australia/Strategic Airlines, SkyAirWorld, O’Connor Airlines, Brindabella Airlines, OzJet, Skytrans, Macair and many more before it, Jetgo has become the latest casualty of poor decision-making and a brutally tough Australian airline market.

Where’s Warbirds?

There’s no Warbirds column in this issue of Australian Aviation as Dave Prossor has taken some time off for a well-deserved holiday. Also skipping an issue is the newly-reinstated Rotor Torque helicopter news section, but it will return!