Skywest secures Rio Tinto contract
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Geoffrey Thomas, Airlines | July 04, 2008
PERTH-BASED Skywest Airlines has beaten off seven other airlines to snare a lucrative Rio Tinto contract from National Jet Systems to serve the West Angelas and Barimunya mines in the Pilbara.
The win continues the almost Emirates-like momentum of Skywest since it snared the former head of NJS in Western Australia, Hugh Davin, just over 18 months ago.
In that time, Skywest has won a string of mining charter contracts, including the highly sought after Fortescue Metals Group, and its fleet of 100-seat F100 jets has essentially grown from two to seven.
Skywest executive chairman Jeff Chatfield, who masterminded the luring of Mr Davin to the airline, said yesterday that the board was delighted with the latest coup.
"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," he said.
The contract is for the provision of 15 scheduled jet charter services for three years with an extension option.
Importantly, the contract provision allows for price adjustments to reflect fluctuations in jet fuel prices.
The relationship with Rio Tinto builds on the contract won by Skywest in 2002 for services to the Argyle Diamond mine in WA.
But the Skywest win is a blow for NJS, owned by British-based Cobham, although Cobham Flight Operations and Services chief executive Peter Nottage told The Australian that business moved around in the highly competitive aviation industry.
"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," Mr Nottage 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."
But the Rio Tinto switch, the latest in a string of losses to Skywest, must concern NJS management. "Skywest now has NJS on the ropes," said one Perth-based industry observer, who added the BAe 146 aircraft used by NJS needed replacement.
In January, QantasLink forged a new relationship with Brisbane-based Alliance Airlines to operate a Fokker 100 in QantasLink colours in WA.
However, Qantas general manager regional airlines Narendra Kumar at that time rejected any suggestion the Alliance decision reflected any deterioration of the relationship with NJS.
Nonetheless, NJS had spare BAe 146 capacity after losing a daily fly-in/fly-out contract with Newcrest Mining and QantasLink turned its back on the 70-seat BAe 146 after operating a sizeable fleet with the company throughout the 1990s.
Adding to the complexity of the competitive situation is a move by Jetstar to open a crew base in Perth and increase its presence.
Some observers suggest that in the longer term Qantas may opt to bring the operation of its 11 Perth-based 717s, under contract to NJS for QantasLink, back under the Qantas Group's operational umbrella.
But Cobham noted the 146 and the F100 were out of production, with F100 production ceasing in the 1990s compared to 146s ending in 2002.
"I am very comfortable with our fleet age and reliability when compared to others in the marketplace," Mr Nottage said.
"Our 146 fleets range and size meets the needs of customers across a broad range of requirements. We continually monitor our fleet requirements and will continue to do so."
NJS won a five-year extension to its 717 operational contract in March last year and according to Mr Nottage the contract is working well.
The BAe 146 has proved to be a competitive aircraft over the 15 years, in large part because of the work NJS has done on the aircraft in rectifying engine reliability issues.
The aircraft's major advantage of a 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 Boeing 737-800 and A320.
But the BAe 146 is an early 80s analog-technology aircraft and some of the NJS aircraft are early builds, although a few were manufactured in the 1990s.
Mr Nottage told The Australian that NJS would "align the three BAe 146s with our business needs and capacity over the next few months and the lease on the three 146s falls due this year".
NJS did look at the state-of-the-art Embraer 170s and 190s three years ago but could not make the business case at the time. But with a softening of the world airline market - and thus lowering of lease costs - the situation could well be different.