The rise and rise of Perth-based Skywest Airlines is quite possibly the best turnaround story in Western Australia's aviation history.
The rise and rise of Perth-based Skywest Airlines is quite possibly the best turnaround story in Western Australia's aviation history.
And the momentum continued last week with the company beating seven other airlines to snare a lucrative Rio Tinto contract from National Jet Systems to serve Rio West Angelas and Barimunya mines in the Pilbara.
The contract is the latest in a string of resource contract wins - including the highly sought after Fortescue Metals Group deal last month - the airline has landed since chairman Jeff Chatfield lured NJS' former chief executive in WA, Hugh Davin, 18 months ago.
Mr Davin left Skywest in 1993 for NJS after 23 years with the company because of concerns about the airline's direction in the resource charter and coastal surveillance market.
At the time, Mr Davin was general manager of Skywest Aviation, which had a fleet of 48 small regional aircraft, feared the airline would lose its lucrative Coast Watch contract.
During his 13 years at NJS, Mr Davin built up the fleet in WA from just two 70-seat BAe146s to 11, won the Coast Watch contract from Skywest and retained it with two successive tenders, and forged a strong connection with QantasLink, which led to a major contract to operate that carrier's now 11-strong 106-seat Boeing 717 fleet.
When Mr Davin left NJS in December 2006 it operated 20 jets in WA and 10 Dash-8s for the Coast Watch operation.
Joining Mr Davin, now managing director at Skywest, is Paul Daff, who was lured from Jetstar in Singapore, and veteran airline executive Mike Hoar.
The management team has turned around Skywest's operational performance.
The numbers provide the best illustration of this. Since the dark days of 2003, capacity has grown five-fold up to June 2007, while net profit has grown 14.5 times and revenue lifted three times. June 2008 figures are expected to show even more improvements.
It's a people business, according to Mr Davin.
"At Skywest we have a superb team and the place is so energised and we are attracting the very best in the industry," he said.
"And you know, on the customer side, many of the mining company CEOs I talk to today are the same geologists I used to fly into remote drilling sites back in the late 1970s. I remember them and they remember me," Mr Davin told Business Class.
The Civil Aviation Safety Authority has been so impressed by Skywest's revival that it awarded the airline a three-year rollover of its high capacity jet AOC recently.
The revitalised Skywest is in stark contrast to the airline that suffered five years of bitter ownership and management strife dating back to the collapse of its then parent, Ansett Australia, in 2001.
After Ansett went into receivership, Skywest was sold in a bidding war with the winning syndicate, fronted by former Skywest CEO Bill Meeke, paying $6.75 million.
But the offer was based on infrastructure and passenger feed support from a consortium attempting to revive Ansett.
When that effort, dubbed Tesna, collapsed in February 2002, Skywest's new owners struggled, with some shareholders demanding a quick and profitable exit while Mr Meeke wanted more capital to launch into large scale 100-seat Fokker 100 jet operations.
Within six months he was dumped in a boardroom coup and the airline was thrown into a four-year battle over ownership issues, breach of contracts and a public listing.
During this period the carrier was locked out of most resource contracts and the state government threatened to end its monopoly contract for 46-seat Fokker 50 turbo-prop passenger services to regional towns, with most charter contracts ending up with rival NJS.
At the height of the problems, its two 100-seat F100s, secured in 2003, were in use for just five hours a day.
In January 2005, Singapore-based Captive Vision Capital emerged as the controlling shareholder and CVC chairman Jeff Chatfield was appointed chairman of Skywest.
CVC is a subsidiary of majority-Australian-owned Advent Air Ltd, incorporated in Singapore but listed on the London Stock Exchange.
Mr Chatfield told Business Class the Skywest board was delighted that Rio Tinto had chosen Skywest Airlines.
"Providing services of this magnitude to one of the world's largest mining companies is proof positive that our strategy of focusing on the mining and resources sector is bearing fruit," Mr Chatfield said.
The Rio Tinto contract is for the provision of 15 weekly jet charter services for three years with an extension option.
Importantly, the contract provision allows for price adjustments to reflect increases and decreases in jet fuel prices.
The win for Skywest is a major blow for NJS, which is owned by UK-based Cobham Flight Operations and Services.
Cobham CEO Peter Nottage said the aviation business was highly competitive and business moved around.
"Cobham manages the movement of any business very well because it has the good fortune to be the largest, most flexible and most reliable contract aviation firm in Australia," he said.
"Cobham has $1.3 billion worth of business under contract through its NJS and National Air Support businesses [Coast Watch] and will continue to build its business around our reliability, our excellent safety record and our business viability."
However, the Rio Tinto loss, the latest in a string of losses, must be of great concern to NJS management.
"Skywest now has NJS on the ropes," said one Perth-based industry observer, who added that the "the BAe146 used by NJS needs replacement".
The BAe146, which earlier had a turbulent career with Ansett, has proved to be a very competitive aircraft over the past 15 years, in large part because of the work NJS has done on the aircraft in rectifying engine reliability and fume issues.
The aircraft's major advantage, its short-field performance - due to its four engines and high wing - has recently been negated with a number of key resource companies extending runways to accommodate larger jets such as the Fokker 100, 180-seat Boeing 737-800 and A320 types.
Mr Nottage defends the BAe146 saying that he is very comfortable with the company's fleet age and reliability when compared with others in the marketplace.
The Fokker 100 has gained strong favour for mining contracts. Skywest will add an additional Fokker 100 - its eighth - for the Rio Tinto contract and insiders suggest a ninth is being sourced.
"[Skywest] is also on track to secure its first A320," Mr Davin said.
This will be delivered early in 2009 and is thought to be the first of an initial fleet of four.
Mr Davin said the airline was also looking at various engineering expansion plans and was working with Westralia Airports Corporation to accommodate the expansion of activities.
