Qld Airports

Gold Coast Airport is the fastest growing of its type in the nation, connected to major Australian cities and handling more than 6.5 million passengers each year. It is the fifth busiest airport in Australia and sixth busiest internationally, with direct connections to New Zealand, Singapore, Kuala Lumpur, Japan and Hong Kong.

About 600,000 people now call the Gold Coast home, neighbours to a further 2.4 million in the state’s capital.

The airport in the central western hub of Longreach (population just short of 3,000) has something of a more modest profile, with a link via Qantas to Brisbane, and via Rex to Townsville, servicing the historic Outback towns of Barcaldine (Qantas) and Winton (Rex) on the way. That represents nine one-way flights a week. To put it in further perspective, the number of passengers passing through Longreach each year is the equivalent of about two days throughput on the Gold Coast.

Despite that contrast, Gold Coast airport owner Queensland Airports Limited was quick to add Longreach to its portfolio when the airport lease, previously under the auspices of the Longreach Regional Council, became available in 2012.

To the casual observer it may seem a strange commitment, but when you add Longreach to QAL’s other ports in Mt Isa and Townsville – by accident or design forming a north and central western Queensland geographic triangle – it begins to make more strategic sense.

And while the crux of the QAL portfolio is built around airport asset diversification, or as CEO Chris Mills put it: “If one part is firing and another isn’t, a portfolio of airports means you will have one that’s performing more strongly when another might not be,” the Longreach acquisition was something different.

Mills said it was more about testing how its ownership model applying to federal leases at the Gold Coast, Townsville and Mt Isa would work in a council lease environment.

“It was about QAL’s ability to say we have a centralised corporate structure based on the Gold Coast: a team of HR, legal, business development, providing a resource available to any of our airports.

“I guess it means once you have already invested in that corporate structure centrally you can bolt on more airports without adding further significant overlay. It’s really leveraging off the fact we have that resource in place.

You can bolt on more airports without adding further significant overlay.’ CHRIS MILLS

“For example, it means that when a team is travelling around talking to airlines about new route opportunities for the Gold Coast or Townsville, it is also engaging with airlines around Mt Isa and Longreach.”

For Longreach, growth potential has much to do with the development of tourism in the central west, though Mills acknowledges it is still far more likely visitors will arrive in the town by road or rail to take in attractions such as the Stockmans Hall of Fame or the Qantas Founders Museum. Both Longreach and Winton, home of the Waltzing Matilda centre and gateway to the dinosaur trail, are key stops on the caravan-towing Grey Nomad route around and across Australia.

According to Mills, just eight per cent of visitors to Longreach travel by air. That said, airport growth was decent over FY18: 33,000 passengers, an increase on the previous year of 4.7 per cent.

“We would love to see the western Queensland tourism sector take off, and are supportive of that.”

In the meantime successful operation of a council lease at Longreach puts up a flag signalling that QAL is well-qualified to take up further regional airport opportunities should the opportunity arise. “It is challenging for small airports to have a sustainable ownership model,” Mills said.

“I know that is why many councils who operate and own regional airports are struggling from a funding perspective and are looking for assistance from government to continue to provide those services.” Admitting that he was choosing his words carefully, Mills said QAL would always “run the ruler” over a prospect to identify whether it would be a good fit.

“To put some context around that, I can’t see us necessarily looking too far afield because the advantage of having a centralised corporate resource starts to become more difficult if you talk about remote locations.

“It’s one thing to say I can jump on a plane and travel to Townsville and Mt Isa or Longreach, but if I had to travel a significant distance it would start to reduce those advantages.”

The cab drivers in Mt Isa are attuned to the arrival and departure schedule at the city’s small but efficient airport. There are enough flights to keep the meters ticking over and not so many that the cabbies lose track of what is coming in from where and when. The line-up on the rank appears as if by magic ahead of the next flight in. At first, the brightly-lit, modern, open plan terminal seems dominated by workers flying home, still wearing their hi-vis gear after finishing another stint at the mines, but a closer look reveals an eclectic mix: suited public servants and business people heading back to Brisbane or Townsville on Virgin or Qantas jet services, families with young children bound for remote towns on the subsidised routes flown by Regional Express, and explorer types at the end of a holiday with a difference.

It is a representation in human form of the diversity that is the cornerstone of the philosophy that QAL applies to its assets.

The group acquired both Mt Isa and Townsville airports in 2005 and there is a strong link between the two centres. As Mills puts it, strong economic conditions in Mt Isa typically means strength in Townsville activity.

According to QAL, there are more than 40 one-way flights per week from Mount Isa, to eight destinations. The airport’s passenger mix is predominantly business-based, accounting for more than 80 per cent of all travel. There is also a high frequency among the fly-in/fly-out market.

After some concern sparked by the downturn in the resources sector, the airport is back on track with 19 consecutive months of growth in passenger numbers, up 7.5 per cent in the last year alone to almost 196,000.

Townsville Airport, meanwhile, is the north Queensland jewel in the QAL crown.

Australia’s 11th busiest airport is the gateway to the region with an average of 180 direct flights one way per week and a record 1.67 million passengers in the last financial year. Direct flights service Brisbane, Melbourne, Sydney, Cairns, Darwin and other regional centres around Queensland.

It also handles about 7,500 freight movements and 31,000 GA movements a year.

QAL says the airport is also a major economic “enabler” for the area, supporting more than 3,000 jobs and contributing $420 million a year to the regional economy.

“Townsville has a diversified economy, and that means we have a diversified passenger base.” There’s that word again.

Coincidentally, the QAL Group CEO has an equally diverse professional history.

At first take it might seem strange that the person in charge of Australia’s largest regional airports operation does not have a background in aviation. But then Mills has plenty of other experience to offer, leading the team driving QAL’s consistent performance since taking the reins in 2014.

His CV includes qualifications in business, technology and finance, with roles in tourism, leisure and property development including Brisbane’s South Bank and the Gold Coast Commonwealth Games Village.

“That’s why I was attracted to join QAL because it was an opportunity that hit on a few key areas I had been involved in previously,” he said. While early on he faced something of a learning curve, he found his experience in other areas translated easily into the world of airport management “whether that’s property, general operations or yield management… .” He said one thing that did take him by surprise goes to the heart of the current Productivity Commission Inquiry into the Economic Regulation of Airports – around perceptions about the relationships and roles of airports and airlines “and particularly the perception that airports control the discussion with their airline partners.

“The Productivity Commission is focusing on whether airports exercise market power in their activities. My view, particularly with regional airports, is that it’s pretty clear we don’t.”

At the same time, QAL accepts that while regional airfares can be high – as highlighted in evidence to the ongoing Senate Inquiry (into the “operation, regulation and funding of air route service delivery to rural, regional and remote communities”) – it is not, as many suggest, because of airport charges.

“As highlighted in our Senate Inquiry submission, airport charges are derived from the capital costs of delivering and updating airport infrastructure that is both necessary and legally required, and represents a small portion of the airfare. Airport charges are typically about five to 10 per cent of the average airfare.

“Specifically, passenger charges are calculated based on these capital and operating costs, divided by forecast passenger numbers.

‘My view, particularly with regional airports, is that it’s pretty clear we don’t.’ CHRIS MILLS

“These charges are generally reviewed when airports are considering the upgrade or redevelopment of facilities to accommodate airport growth.

“At our airports, our focus is on increasing the volume of passengers, and it is volume that delivers greater benefits to rural, regional and remote communities.”

It is also a focus on asset stability which takes Mills back to the strategy of diversification intrinsic to the Gold Coast, Townsville and Mt Isa properties. “There is quite a contrast across the airports – their infrastructure and the various economies.

“When you look at any business, one of the decisions you make in terms of growth is how you build resilience. Look at the evolution of the Gold Coast, increasingly shifting in terms of business and leisure, but principally a leisure market.

“Mt Isa and Townsville were both showing really strong growth with a peak in 2012 then the resource sector fell back. At the same time the Gold Coast was growing. That’s one indicator of why it pays to diversify your portfolio; to have one that’s performing more strongly when another might not be.”

‘That’s one indicator of why it pays to diversify your portfolio.’ CHRIS MILLS

So what next in terms of infrastructure and service growth in North Queensland?

Townsville is focusing on its latest 20-year airport masterplan – signed off by the federal government in 2016 – with a current spend of $20 million out of $80 million allocated to the ‘Project Alive’ terminal redevelopment and associated works.

According to QAL the redevelopment will overcome capacity issues while making the airport more modern, welcoming and generally user‑friendly.

To date, “The airside component has delivered two additional aircraft parking positions on the apron and rejuvenation of parts of the existing 28-year-old apron surface.”

While QAL continues to work on potential for expansion of services to and from Townsville, including the possibility of a Singapore service, Mills and his team are also looking for growth in other airport‑associated business opportunities.

He points to the Flying Colours aircraft paint operation, part of the Northern Australia Aerospace Centre of Excellence (NAACEX) as one of the great Townsville success stories.

NAACEX covers about 17 hectares of airport land and is being developed into a unique aero-hub, housing a cluster of aerospace and support industries that will service both commercial and defence clients. Mills said the precinct is underpinned by four large purposebuilt hangers.

“I am a great fan of Flying Colours,” he said.

“Here is a business, out of Townsville, that provides services to both national and international operators; a quality service competing with others in the Asia Pacific.

“It is unfortunate that over the years we have seen the loss of maintenance capacity from Australia to Asia Pacific. Flying Colours demonstrates that with quality you can still pick up business.

“We were able to attract them as a tenant here with our facilities and the airport. I would love to see if we could grow maintenance opportunities in that area.”

Mills said he would like to see that include wider MRO.

“State and federal governments could get behind regrowth in MRO which has largely gone to Asia in recent years.

“Even if we picked up a small percentage of business from offshore we would see growth in the industry and jobs for Australia. I’d hate to see a further decline and business to disappear.”

He also pointed to the airport’s continuing link with the Department of Defence under the terms of a joint user agreement and potential for more jobs related to defence industries.

At Mt Isa, Mills believes there are opportunities for growth in tourism, for example connections to the picturesque region around Adels Grove. “Isa could be the gateway to some untapped parts of Queensland,” he said.

Finally, what of the prospect of a service between the two key QAL hubs of the Gold Coast and Townsville? The two cities have not been linked since the demise of JetGo which ran a service via Rockhampton.

“We discuss new market opportunities with our airline partners regularly and in our view there is an opportunity to link Australia’s premier tourist destination … with the largest city in Northern Australia,” he said.

“We’re seeing domestic capacity growth quite constrained at the moment, so it’s hard to say when this might be secured.

“But in our view something in the 100-seater range would be ideal.” Gold Coast Airport handles more than 6.5 million passengers each year. qal