interesting article from Fridays Aust...
From The Australian:
Skywest catches resources tailwind
Steve Creedy, Aviation writer | August 10, 2007
PERTH'S Skywest Airlines is entering an era of expansion as it catches a strong updraft from Western Australia's booming economy and the growth of fly-in/fly-out mining.
The after effects of the bitter takeover battle waged by Perth-born Jeff Chatfield and his Singapore-based company, Captive Vision Capital, have faded and the airline is planning to double its fleet of Fokker 100 jets to six.
It is also scouting out replacements for its seven ageing Fokker 50s, boosting its network and planning an ambitious move to connect the Goldfields town of Kalgoorlie to the east coast.
Former Jetstar Asia executive Paul Daff has had his feet under the chief executive's desk for three months and says the growth is a combination of the boom in fly-in/fly-out mining contracts and rising regular public transport traffic.
Mr Daff said he worked closely with managing director and industry veteran Hugh Davin and chief operating officer Mike Hoare to make sure Skywest benefited from the boom in Western Australia.
"We've ramped up quite a lot of our regular public transport routes to places like Geraldton, Albany, Broome and everywhere else as well," he said.
"When Qantas pulled out of Kununurra, we ramped up Kununurra with the F100 and even Exmouth, which used to be a Fokker 50 route, is predominantly an F100 route now. We went back into Port Hedland."
Skywest has a diverse route network that takes it as far as Darwin and Bali and involves carrying about 350,000 passengers a year.
Mr Chatfield said yesterday the group was also considering services to Singapore.
Mr Daff said the planned Kalgoorlie-east coast route would be for passengers, partly driven by demand from the Goldfields region.
The airline hopes to link in the mining companies with the direct services. With record-low unemployment, mining companies are struggling to find labour and are starting to look more at the east coast.
"To get to Kalgoorlie at the moment you've got to come all the way across to Perth and then double back," Mr Daff said. "We see it as an opportunity.
"It's only going to be three days a week, but we'll see how it goes and it's an incentive that the Kalgoorlie Council has encouraged us to look at that route."
The airline has yet to decide between Melbourne and Adelaide. Mr Daff concedes Melbourne has more appeal in passenger volume and it is where the mine companies are based.
Adelaide also has benefits because the shorter flying times allow Skywest to rotate aircraft for other services.
"Adelaide has some operational efficiencies, but we're leaning towards Melbourne. The Kalgoorlie community is also leaning towards Melbourne, but it has some operational issues for us," he says.
"We plan on making an announcement on August 27 about the exact start date and which city it will be, Adelaide or Melbourne," Mr Daff said.
The airline is also tendering for more mining work to underpin its expansion.
It is well aware that the $80 billion in major resources projects under way or planned for Western Australia translates into a lot of bums on scheduled charter seats.
With two of the new F100s arriving in October and a third in March, Mr Daff said, it would be hard to justify acquiring the aircraft solely for passenger routes.
"We can justify the majority of the aircraft acquisitions on a contract for a mining company and then, in the spare time when they're not being used we can fly them to the communities. We think it works very well for us."
He is well aware, however, that Skywest is not the only airline attracted by the west's boom.
Of Virgin Blue's decision to acquire Embraer regional jets, Mr Daff said Virgin could cause problems in the longer term.
Virgin, however, is focusing its Embraer operations in the east, he said. "I guess the issue we have here in the west is that most of our routes are very long and thin and that obviously creates some issues for the likes of Virgin.
"When we have an aircraft go unserviceable it goes in a bad way because you end up with aircraft stuck in the middle of nowhere for a couple of days.
"That risk factor for the likes of Virgin is quite high because they would want to rotate their Embraers through to do quite a lot of services to get utilisation up."
Skywest was sticking with the F100s because of their low capital cost, which he estimated at about a fifth that of a new Embraer regional jet of similar capacity.
Virgin would need to spend a lot of hours in the air to spread its higher fixed cost and create a base in Western Australia.
"I think they will, long term," he said. "But they will probably focus their Embraers on the east coast for, my gut feel tells me, at least 12 to 18 months.
"The other one we have to worry about is AirNorth. It also has an Embraer and it has indicated it might start operating that on one of our routes, such as Kununurra to Perth.
"That obviously presents some challenges for us."
Concerning the new player on the scene, Singapore-backed Tiger Airways, Mr Daff said he was glad the action was mostly happening in the east.
"I know it's coming here soon," he said. "But again, the A320 probably isn't the right aircraft for internal WA.
"With the exception of Karratha, there really isn't a route that has enough volume to warrant an A320 a couple of times a day, or even once a day."
Labour shortages may also make it difficult to set up operations in Western Australia, Mr Daff said.
"Finding staff in Western Australia, with its 2 per cent unemployment is near impossible at the moment," he said.
Skywest is due to publish its annual results in September-October, but profits continued to look healthy, Mr Daff said.
Figures published for the nine months to March showed net profit was 475 per cent higher than for the previous corresponding period, with total revenues up by a third.
Scheduled charter revenue rose 62 per cent, while regular route revenue increased 25 per cent and average fares were up 15 per cent.
"You'll see quite a large profit increase but - and I'm going to sound like Geoff Dixon here - it's still not where it needs to be," Mr Daff said.
"We're still not getting the return on the capital investment that we need to, but compared with where Skywest has been in the past few years, it's actually a good result. Partly, that result is driven by just getting better use out of our assets.
"When I came on board, some of the aircraft were flying only four or five hours a day.
"Because everything has ramped up here quite a bit in the marketplace, we're now flying those aircraft a lot harder and getting much better economies of scale."
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