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Skywest - F100 for Argyle?

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Old 15th Aug 2002, 05:07
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Skywest - F100 for Argyle?

West Australian today reports that Skywest have been awarded Argyle contract with F100 aircraft in some kind of partnership with Flightwest.
Sounds as though there is speculation about their ability to get it off the ground - anyone have the inside story?
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Old 15th Aug 2002, 09:26
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Arrow

I believe that the use of flightwest is merely just to get the ball rolling, whilst skywest sets up, trains, etc and jump all the CASA hoops. I don't think there is any problems, it's just because the start date is in about 10 weeks. It's a commercial arrangement and as far as I know it is Skywests contract. That story in the West is just Geoff Thomas going on as usual because he reported that Skywest had blown there chances with Argyle and he, again, has got it wrong and is trying to cover his mistaken, bad reporting again. He never seems to give skywest a go, and as for the analyst... well why doesn't he just use his name?

Good on Skywest! I hope they go well and recover bigger and better after last year and keep QF honest in the west! We need more companies to survive not to die...

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Old 15th Aug 2002, 11:43
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well, if that is true and they have that argyle contract that is good news for them,they are a good little company, have suffered lots since ansett's collapse as they relied heavily on the feeder traffic that ansett generated for them. would be good to see them expand into jets as at the mo qf have the monopoly on lots of routes (karratha, broome, hedland etc) they need some competition on these routes, if virgin can start into coffs why wont or cant they start into some regional wa centres, i think they would get the support, anyone have any views on this
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Old 15th Aug 2002, 13:10
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Thurs "West Australian"

Skywest changes course for Argyle
By Geoffrey Thomas
http://www.thewest.com.au/20020815/b...-sto68029.html

SKYWEST Airline has stunned the local aviation industry by edging out National Jet Systems as the preferred bidder in the battle to win the fly-in, fly out contract for Rio Tinto's Argyle diamond mine.

The Skywest coup comes after Qantas picked up the Argyle contract last year in the wake of Ansett's collapse. It has used Boeing 737s but its schedules apparently do not suit Argyle.

Analysts pointed out last night the deal was not binding and questions remained over the commercial nature of the transaction, which involved only limited flying for the 91-seat Fokker 100 twin-jet, which is to be leased from Alliance Airlines in Brisbane.

NJS, the most experienced mining contract charter operator in the State, had bid for the contract with a four-engine BAe146 aircraft.

Skywest Airlines chairman and chief executive Patrick Ryan confirmed a 91-seat Fokker 100 aircraft would be wet-leased for one year for the required 20 hours of flying per week for the Argyle contract.

The wet-lease means Alliance Airlines will provide the crews and support for the aircraft because Skywest is waiting on Civil Aviation Safety Authority approval to operate Fokker 100s.

Details of the deal are sketchy with neither Mr Ryan nor Alliance Airlines prepared to discuss the precise nature of the transaction which apparently sees the Fokker 100 being under-utilised.

Analysts said that under normal circumstances a jet aircraft would need at least 45 hours of flying a week to break even.

Mr Ryan said the Alliance aircraft would be based in Perth and leased for more hours as Skywest secured additional work.

This has led some analysts to speculate that Alliance Airlines is taking a commercial risk on Skywest securing more business. Alliance denied this and said the deal was on commercial terms.

One Melbourne-based analyst suggested Skywest might be on a timetable to increase the hours over the next 12 months, but Mr Ryan denied this.

"We are under no pressure whatsoever to take the aircraft for more hours," he said.

Mr Ryan said the airline would look at other opportunities, which analysts have taken to mean it would target Woodside and Western Mining. But that move could bring them into conflict with the State Government which has given the airline protection on what is termed turbo-prop routes such as Geraldton, Albany and Esperance for its 46-seat Fokker 50 operations.

Alliance Airlines, owned by Queensland Airline Holdings, is the new airline to emerge from Flight West which collapsed in June last year.

It is owned by a consortium of aviation identities including Stephen Bond, the owner of Lloyd Helicopters, Hugh Jones, chief executive of New Zealand's Airwork and Steve Padgett, chairman of the Aeromil Group of Companies.

Argyle requires Skywest to start services on November 3.
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Old 15th Aug 2002, 13:55
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Schedule should be three return flights per week, with two of them being overnights.....

The departure and return times are purported to be much better than QF were prepared to budge on.....
QF is a 3:30am arrival - - YUK!

Ah well, it was nice to have movies and QF club whilst it lasted
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Old 15th Aug 2002, 14:38
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"The question you have to ask yourself, Bloggs, is WHY NJS [as opposed to QF] 'got edged out'.

Will LER, TEF be next?"
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Old 16th Aug 2002, 00:29
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No mystery there Bloggs. Like most things these days, it probably got down to money!
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Old 16th Aug 2002, 00:40
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Dear Stick Pusher:
There is far more to this deal than can be published and as this is a piublic forum and I post under my name unlike most I cannot advise you the full story. Suffice to say the old saying applies:
"Only one airline makes money out of an aircraft"
And in today's environment that is also rare. How two can make money out of this deal is impossible to see. My money is on Alliance making money.
With regard to Qantas, its 737 op was back of the clock which did not suit Argyle.
With regard to Skywest: If you check back over my reports you will see that I have long supported Skywest as they are a great operation BUT what I have reported, as with Ansett, have been the facts.

Best GT
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Old 16th Aug 2002, 00:59
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I always thought the Fokker 50 had 50 seats !!!Duh !!!
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Old 16th Aug 2002, 01:35
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GT,

Nice article, raises some very interesting questions which must be asked by someone, not least of all Rio Tinto.
One must wonder if in the fallout from BM's untimely demise, there still remains adequate aviation business smarts within the Skywest camp. It is easy to perceive that things have happened very quickly and Skywest are shooting from the hip in regard to what they can do.
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Old 16th Aug 2002, 06:54
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For a detached observer you are remarkably on the mark. Look at tomorrow's West (business section) and more of the story will unfold. Best GT
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Old 16th Aug 2002, 08:19
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What's the story with the WA govt. and Skywest ??
I thought we lived in an era of deregulation, and most contributors on this forum calling for QF to have competition on KA, BRM, PD etc, what about competition on Geraldton, Albany, Esperance etc ??!!
How does a company with a dubious at best operating profit jag a major mining contract, with no prior jet experience and using one jet for 20 hours a week ?
Surely Dr. Gallop has had no influence on this ?? no, that would'nt be fair on the other operators would it ?

Topend3, all that introducing another operator into KA, PD, (maybe not BRM) will do, is the same as when Airlink started in WA, it will make sure one operator makes less money and the other makes no money.

and no, I do not wan't to see skywest go under, just a level playing field for all.
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Old 16th Aug 2002, 09:44
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Well said 'I'm with Stupid'
Why the hell should the government protect Skywest?!? How long will this mess go on?
There has to be more to this... gotta be a very friendly link between Gallop/Mactiernan/Skywest somewhere doesn't there.

Last edited by EMB Bras; 16th Aug 2002 at 10:04.
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Old 16th Aug 2002, 11:01
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yeah lets open up all those marginal ports like Exmouth, Carnarvon and Geraldton and let two bob operators in there and hey, while we're at it, lets lengthen the dole queues. Are Skywest no doing the right thing in those towns? Are they offering discount airfares? Yes they are so why open it up and have all operators walk away after 12 months and another carrier or two hit the canvas.
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Old 16th Aug 2002, 14:42
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But what about somewhere like Kalbarri that wants a regular service and isn't getting it, yet no other operators are allowed in because the 'turboprop routes' can't sustain competition?
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Old 16th Aug 2002, 17:57
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Sat "The West Australian" 17/8/02

Skywest charts a difficult flight plan

By Geoffrey Thomas

THERE is a saying in aviation that only one operator makes money out of an aircraft and in the post-September 11 environment, even that is debatable, with airlines around the world haemorrhaging red ink and filing for bankruptcy.

On Wednesday, Skywest won the three-year Argyle contract valued around $7 million and, while it appears to be a lifeline, the airline has been forced into a six month wet-lease from Alliance Airlines in Brisbane to meet the early November start-up date.

The wet-lease on a 91-seat Fokker-100 jet includes pilots and engineering support and includes a six-month option as Skywest considers acquiring its own jets.

Skywest chairman and acting chief executive Pat Ryan said yesterday that part of the deal with Alliance was an up-front payment of several months of lease payments for the Fokker-100, which are estimated by analysts to be in the region of at least $400,000.

Balancing that, however, is an unspecified advance payment from Argyle Diamonds to assist Skywest launch the service.

The actual aircraft is yet to be acquired by Alliance but there is an abundance of Fokker-100s available, although many require expensive overhauls called "C" checks.

Analysts are perplexed by the deal and who is losing money because the aircraft will be flown for only 20 hours a week, whereas Qantas subsidiary National Jet Systems aircraft fly 60 hours a week and Qantas jets fly 84 hours a week.

"Alliance Airlines are street-wise and it's hard to see any downside for them," one analyst said.

According to sources at Perth Airport, NJS bid about $8 million, $1 million higher than Skywest, mainly because the airline was using a smaller RJ70 with 70 seats to meet the contract, which required four trips a week, whereas the 91-seat Fokker-100 requires only three flights. But the question being asked is why Skywest tendered so low, given NJS' limitations and reluctance to introduce a bigger jet to meet the requirement.

Insiders say that the bid was put together after Bill Meeke was dumped as chief executive and there are concerns that there is little upside for Skywest in the deal.

But Mr Ryan says there is plenty of upside and confirmed the airline would be looking for more opportunities with the Fokker-100, including part of the Woodside contract.

Approximately 70 per cent of the Woodside contract is allocated to Qantas, with 30 per cent which can be given to any new competitive bidder.

"We will be looking at the Woodside contract," Mr Ryan said.

But he conceded that is where the difficulties start for Skywest.

The State Government has just handed Skywest exclusivity for 18 months for what are called turbo-prop routes to destinations such as Albany using 46-seat F-50s, despite strong protests from Skippers Aviation.

"We will be talking to the Government about this issue," Mr Ryan said.

Insiders in the Government suggest Cabinet is going to have a serious problem on one hand giving Skywest protection and then allowing it to compete on the plum WA routes from Perth to Karratha.

To gain Woodside work, Skywest must operate the jet on a revenue passenger transport (RPT) basis, not a charter flight.

While the airline already operates F-50 RPT flights to Karratha these are not considered any competition to a Qantas Boeing 737.

A change of aircraft to a Fokker-100 is a very different proposition.

And taking on Qantas kills off any alliance deal, which had been under discussion for feeding passengers to each other's destinations.

But Skywest needs to get this work to make the Fokker-100 turn a profit, say insiders close to the deal, while Mr Ryan has confirmed the airline is still not yet in the black.

Asked if Skywest would be profitable next month as indicated earlier, Mr Ryan said he was still waiting for new budgets to be prepared but was optimistic.

"I would be disappointed if we were not profitable," he said.

And also disappointed and angry are Skywest's F-50 pilots, who like many in the industry are not clear what the wet-lease from Alliance means to their career paths.

"Management are going to have to give us some assurances real fast or there will be industrial strife," said one.

© 2002 West Australian Newspapers Limited
All Rights Reserved.
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Old 16th Aug 2002, 23:53
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Thumbs down Geoffrey Thomas talks down Skywest

Geoffrey Thomas seems to have a real talent for talking down Skywest. The only thing Skywest's F-50 pilots are disappointed and angry about is the way Geoffrey Thomas doesn’t seem capable of writing anything positive about their company. The majority, if not all are fiercely loyal and dedicated to ensuring the company is a success and grows into what they all know it will become. It would be nice if for a change you named your “insiders” & “industry analysts” as for “one pilot” said please!
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Old 17th Aug 2002, 02:47
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IFF

GT and I don't always agree on this 'n that but in this case he is 100% spot on.
I think GT is actually pulling his punches a little and not surprisingly if you understand how this little village perched on the West Coast, called Perth, works. As a little village and, if you don't want to get tarred and feathered and run out of town, you'd better tread carefully.

I you had, like I, and an increasingly diminishing number of persons who have been around West Dunnuda for the last 30 or so years, you would see a distressingly familiar scenario of too many trying to access too little, AND with Govt and Big Business (read Woodside et al) dancing together in a conspiracy that will bring them ALL undone.

It seems that NOONE has learnt ANYTHING over the last 20 years or so and they keep ,making the SAME DUMB mistakes.

GT got the fundamentals dead set, they have never and will not change for the foreseeable future or until our population doubles at the least, AND there is a rush to repoplulate the regions.

The scenario as correctly described is a dead set return to square one fundamentals.

It's a long story but Skywest were at the best staggering along, heading for oblivion before Rick Stowe bought them along with Transwest, then through his purchase and resale of East West to Ansett, they became part of the Ansett stable and the rest is history.
The point being the owners then needed to and did have BIG pockets, patience and a grand strategy of sorts.

The new Skywest does not appear to have any of these and their alliance with Alliance has a touch of desperation about it. If Skywest do have a strategy it is hard to see and on the evidence fatally flawed, I reckon I could write Alliances.
GT was too kind with his use of "street-wise"

I am reminded of the Uncle Remus folk tale of my childhood.
Brer Rabbit and the Tar baby. There's a lesson in there somewhere for the Directors of Skywest.

Guess with whom Skywest are going to be competing in the purchase of increasingly scarse F100 resourcs for a start.

The miners have a lot to answer for with their FIFO policies and with weak Government gunning for development at any cost we have managed to depopulate our regions, concentrate our popn in the City and in the process deny RPT services to remote areas that would otherwise be available..

Skippers must bear some responsbility for this as well.

There must be a fundamental rethink of thethe problem, but I digress.

The new owners of Skywest do not seem to have a grasp on the fundamental realities of this "peculiar" market.

Bill Meeke and I have been known to go head to head on the odd occasion, but he DOES know how this market really works and if we disagree on anything in regards to this market it is only around the edges and perhaps in the manner of tis execution.

I don't know the how and manner of his removal but his prsence may well have been the lesser of two evils.

I just know the Skywest investors will be getting REALLY excited about the China gas deal and what it will mean AND Mr Ryan is not without clout in the Government and Oil & Gas Halls of Power in securing a seat at the table for Skywest.

But first things first, because the revenue stream from that is a long way off, too far in anay event to save Skywest, and the investors pockets in any aren't deep enought to fund the wait, beyond the next 6 months anyway.

The Skywest Pilots??

The majority, if not all are fiercely loyal and dedicated to ensuring the company is a success and grows into what they all know it will become.
Quite so and no doubt of that, but it doesn't matter how professionally you operate and how much you wish, it is out of your persoanl control. Unless you have a seat on the Board and can influence the role of the Government meddlers, all of your laudable efforts are as the sound of empty drums and tinkling bells.

If there is any action required by your guys, it is to ask your Board to get some real advice about how this business really works and an understanding about why we are where we are today.
Then I am sure Mr Ryan is clever enough to work it out from there.

It's a loooooong way from hooking a marlin and the initial heat and excitement of the moment to getting it safely alongside. It requires a lot of patience, courage, understanding its wiles and experience, especially when they see the boat and make that unexpected dash.

There is no quicker way.
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Old 17th Aug 2002, 07:56
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Good luck to Skywest and I hope they do well.

My only concern is what contingency plan they have in place to meet aircraft unserviceabilities. If it is to use NJS or Qf then they can expect to be gouged, I hope for their sake they do not experience protracted unserviceabilities.
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Old 17th Aug 2002, 10:09
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3 year $7m contract:
20hours/week x 50 x 3 = 3000hours

$7m/3000hours = $2333-33c per hour for a F100.

Me no think so........More utilisation from day one or else.
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