SKYWEST Airlines said yesterday...
 

Confidence on finances for Skywest

By Geoffrey Thomas



SKYWEST Airlines said yesterday it was confident it would be able to convince the State Government that the airline's finances were strong enough to warrant a continuation of its monopoly on some routes.

Chief executive Scott Henderson said he expected the company would have the necessary aircraft leases renegotiated by the end of the month and would have a rights issue completed by early next month.

The rights issue and accompanying placement is expected to be worth up to $2 million.

Planning and Infrastructure Minister Alannah MacTiernan warned Skywest last week it would lose its monopoly on some routes if it was unable to secure financing for its five F-50 aircraft and if written assurances were not forthcoming about its ability to pay its debts as they fell due.

Mr Henderson said yesterday these targets would be met. "We have told the Government that we will have a deal in place by the end of April," he said.

Skywest's five F-50s have a book value of $15.3 million, but the airline owes the Commonwealth Bank $13.3 million.

However, that book value is now over six months old and observers suggest the values may be as low as $12 million with the Iraq war and the outbreak of SARS stripping values from airlines and aircraft around the globe.

Analysts in Asia have warned that some of Qantas' 20-year old Boeing 747s and 767s may have to be written off.

The lease on the Skywest aircraft falls due on June 30 and a partial interim payment, due on March 31, was deferred, say airline sources, because it would have triggered the final payout.

Commonwealth Bank is believed to have told Skywest it would agree to renegotiate the leases if the airline was able to raise more equity.

Skywest is planning to raise capital through a rights issue and a placement. Skywest shareholders include chairman Pat Ryan, property developer Clive Hartz and winemaker Franklin Tate.

Paterson Ord Minnett will handle the rights issue.

Late last month Skywest was dealt a blow when respected director and shareholder Mike Calneggia resigned from the board.

Mr Calneggia, whose 6 per cent in the airline is valued at $350,000, did not elaborate on his departure.

However, Mr Calneggia, who was a driving force behind Skywest's recent restructure, was believed to have concerns about other boardroom issues.

Skywest faces significant challenges to stay in the air after posting a six-month loss of $975,000 to December 31.

On the short term radar is litigation with the airline's former chief executive Bill Meeke, who is suing for $1.3 million for breach of contract over his sacking last year.

A planned 7 per cent fare rise to bolster revenues looks questionable.

YES WELL MR THOMAS WROTE THE ARTICLE, SO IT MUST BE CORRECT............

With friends like this reporting the "truth" who needs a PR company.

I did like the quote from the Minister

"Planning and Infrastructure Minister Alannah MacTiernan warned Skywest last week it would lose its monopoly on some routes if it was unable to secure financing for its five F-50 aircraft and if written assurances were not forthcoming about its ability to pay its debts as they fell due."

If they dont secure the aircraft then how are they going to fly any routes??????

Jetpipe

I think the magical word is "five" if skywest don't secure the "five" F50 aircraft.

Keep your eyes on Great Western's RPT aspirations, might surprise us all.

;)

APOLLO. I WONT HOLD MY BREATH.

I would not be expecting much considering they amend their flight plans over head Geraldton when they haven't got any PAx to stop at Gero and their biggest load to date is apparently only 5 PAX........;)

Apollo 4

GWA have survived may a troubled time but never in the RPT field.
remember Western Airlines, where did they go and where are they now??

If the last report I read is true then Geraldton is open to competition now,so here is the chance for all the others to rush into the high profits of an RPT route.

Remember many a charter company has gone bust after moving into RPT because the next run will always be better than the last and profits they used to make every trip have dried up.

The big issue here is not wether Skywest can refinance the aircraft but wether they get a fair hearing in the press and are allowed to try?

Bendt,

GWA arent going into GEL anymore due to the Govt. not allowing it.
Flight plan amendments overhead GEL isn't because of no Pax, it is because a fuel stop is no longer required.

Skippers are keeping very quiet in all this... will be interesting to see if they decide to take a crack at the GEL/SHK routes.

Jetpipe: Fair comment.

EMB Bras: They are quiet aren't they !

:suspect:

I think Skywest have had nothing but a 'fair go' in the press recently. When was the last time someone posted a newpaper article bagging Skywest?

Don't get me wrong, I wish them all the very best in this trying time, but you must admit, they have had a lot of cash and protection from the government for the last 19 months.

The time for results has to be now.

Once again - best of luck.

i really hope that Skywest do produce the results as many communtities will be disadvantaged if they don't, i can't see anyone else providing the good service to these towns that Skywest does.

Geoffrey Thomas's article in today's West is enough to convince me (and I generally keep an open mind, innocent until proven guilty and all that) that he is most certainly doing a hatchett job on Skywest.
I happen to know that Skywest are travelling better than have done in a long time, the guys and girls have agreed to take pay cuts and improve productivity to save the company. This is a very dedicated and professional bunch who are committed to making their airline work (yes they are all share holders).
The West Australian would be perhaps more appropriately renamed the "The Meek Australian". Why doesn't this paper mention the other lawsuits Mr Meek has instigated? Is Mr Meek a "serial suer"? I recall reading somewhere about him suing his last employer also, and also recall that he sued (or attempted to sue) government over coastwatch contract some 10 or so years ago. I would not be surprised if there is more history. Why was there no mention of Skywest's recent milestone - 40 years in business (congratulations SKywest - that is something to proud of in any industry, but particulary aviation).
Geoffrey, give Skywest a break. Even if you dislike the board, give the staff a break. This kind of media can bring down an airline. It is hard enough to survive in this industry without this. Suggest you go and talk to the staff, and put personal feelings /friendships aside.

GOOD POINT!! :ok:

Not even close.
Is a typical PR BS use of semantics.

40 years if you include AND acknowledge from whence they came, but barely 18 for the name of the entity which was merged with others.

Meeke is a newbie in the pantheon of those who were part of the process of evolution and could have only got up "there" as part of the Stowe/Ansett schemings.

The problems they are now experiencing, without their Big Brother are exactly the same problems that faced their ancestors 40 years ago. I know because I was actually there.

Geoffrey might have a better kowledge of that background than you think.

When I get back form work today I will give you the history and lineage.

I have no problems with them saying "40 years" as long as they
recognise from whence they came and I can assure you it was not from Meekes 40 year old Skywest.

Just as a bit of a clue Skywest started as an operator out of Witenoom.

Carnarvon Air Taxis, one of the original companies involved, a good rundown on the history is in the back of the "ANSETT" history book, by Jim Thorn...

The interesting bit in GT's article on Saturday was about WMC.

From his comment the only reason Skywest did not get the contract was because Meeke had gone and I am sure it had nothing to do with the fact that they had had Qantas jets for the last year and frequent flyer points? All the things Skywest did not have at that time!

However it does seem odd that they managed to get Argyle without him? After all from GT's words he is/was the only one who knew anything about aviation at Skywest.

In regard to law suits try a search for Coastwatch in the law archives and see how many suits there have been during his reign?

Too right jetpipe! Hey GT you on holidays?? I guess perhaps your editor cut all the stuff you were going to say about Mr Meeke due to a lack of space etc etc. Its a shame that just a little couldnt have been squeezed in, you know, in the interests giving a balanced view of events. Don't Editors suck!

an analyst said......
Love to find one of Geoff's analysts

Good Old Trans West... What ever happened to the old fleet of TW. Spent many an hour in VH-TWX C402B (trixy) as she was effectionately known then.

Has anyone got a photo of the old Skywest office at Wittenoom?
Captain Ace can you help out with a photo?
Many a memorable night spent out the back or in the old Fortesque Hotel.

Alas I fear that the idiots running the board of Skywest now may have sealed its fate, sadly a great airline with pi$$ poor fiscal management or know how ...

:hmm:

Apollo 4,

lets not forget that many of the problems xr have faced in the last 18 - 24 months have not been entirely of it's own making, under the ansett banner skywest was profitable and having a hook up with a major carrier provided it with the on-carriage traffic that it desperately needed to survive.

With ansett gone, the board and mangement suddenly realise that someone in melbourne aint making the economic decisions anymore so it's time to fend for themselves.

henderson has publicly stated that loadings are better than ever for the first few months of the year, and the interline agreement with qf will only enhance this. Staff who are clearly committed to the survival of the company and are willing to increase productivity and take a wage cut to see the company through are helping as a range of economic and cost-cutting initiatives are brought into place. The WA govt quite rightly moved to protect xr on it's marginal routes (all except gel) which will help too. A jet of the right type in the F100 also gives them the opportunity to expand the mining contracts and charter side of the business.

So i don't think their fate is sealed at all, true there is a long way to go, but they have started to make steps in the right direction and lets hope for the sake of the industry that it comes off.

Top

You confirm what I am saying... The Ansett know how is gone and the current board have not a clue.

14th of September 2001 the pack of cards collapsed, the un-thinkable occurred.

Despite a monopoly on the south west routes XR is still in debt to the point where the Government is insisting on assurances that they can meet their debts on call. How can a monopoly be so critically in debt ? Why have management waited until now to make the fiscal changes and salary cuts ? Why did the board not listen to management when companies like Woodside Petroleum were guaranteeing 3 year contracts providing XR got a jet ?, instead waiting until the opportunity had been lost and even then running a F50 near empty up and down the western sea-board, why ?. Why are some of the XR flight crew moonlighting at other companies ?

XR is a golden goose who is in danger of being cooked once and for all. Aviation companies such as Skippers are waiting for their demise and I must say that the management of that company does have the expertise to cash in on a monopoly, they don’t know how to look after their effos or post a roster but they do know how to run an aviation business, why? Because they are experienced aviation personnel and aviators!!!

XR has sub-standard fiscal management and I venture to say that instead of management keeping the company going by pulling everything together, it is the employees below that are pushing everything... up hill making this airline possible.

:sad: :( :rolleyes:

Apollo 4

How come you know so much about the management at XR? Do you work there or did you go to the same school of fact finding as GT?

With a handle on avaition as good as you think you have I would suggested you stop quoting other peoples copy as facts.

If all the other companies are so much better run I trust you have looked at their CV's as closely as you have at XR's, or you might find that those who you feel know everything actually know nothing.

How many RPT routes has Skippers ever operated from inception? And how many have they been given by XR?

JW might be winning the charter market but RPT is a competely different ball game. That would really test the convictions of the managment and see if the funding held out every time a flight went out without a break even load factor.

Jetpipe

I guess I hit a nerve....

My answer is simple, How come you don't know so much about management at XR ? Are you in a coma? or just deep denial ? With the same conditions (MONOPOLY) I bet Skippers or even Network for that matter would have a field day and if XR don't straighten up and fly right they will probably get the chance....

Talk to the boys and girls at the coal face and then make an informed decision, before trying to shoot people down....

Oh I get it maybe you are one of the crew moonlighting over there with uncle Ron and just getting a bit touchy, really great management that you need to look for extra somewhere else.

:ouch: :ooh: ;)

Apollo 4

"I must say that the management of that company does have the expertise"
" they do know how to run an aviation business"

you think!? :8

Skippers struggles through everything, you think they manage that company well? Seriously i can't believe that you even said that.

yes the board new nothing about aviation and have had to learn fast over the time they have had XR. yes there have been changes, but they are skilled buiness men in their own fields and each of which brings certain skills, expertise and knowledge to the group, and they are learning aboout how to run an airline. their are some very skilled and talented people below them that are showing them the ropes so to speak. The Bill Meeke sell blinded them at the start, (TESNA going which was part of the origional plan...), and changes at the helm haven't helped the focus and stability, but I think that now with Scott H there, and that he has had time to settle in and understand it all, i think he will do great things for the company. the people that work there are the ones that have had the skill and dedication under the most trying of conditions and circumstances to over come all the odds, challenges and problems they have faced to still be here and to move forward. to try and keep a professional and highly regarded airline operating without droping the ball when AN went down and providing a service to the community is no easy task. I doubt very seriously that skippers could have pulled the same feat off. they still sstruggle with the concept of their own field of operation..

And if people want to work extra they can so long as it doesn't bust any F & D, or fatigues themselves. Nothing wrong with the pay and conditions at XR, nothing to do with management, it's the individuals decision. Plenty of people have other business, varying intersts, and projects on the side.

And you think that getting a high capacity AoC is any mean feat. Just was not pratical to achieve in the time frame and under the conditions at the time. plus the loss of a F/F program did not help and the uncertainty at the time didn't go towards obtaining the WMC contract...

Stick Pusher

“yes the board new nothing about aviation and have had to learn fast over the time they have had XR. yes there have been changes, but they are skilled buiness men in their own fields and each of which brings certain skills, expertise and knowledge to the group, and they are learning about how to run an airline”

As a potential investor I would love to see this statement in the prospectus….Not !!

With admissions like this there is no way that any SANE investor would hand over hard earned cash so that the board and management of XR can LEARN about how to run an airline.

It is all too easy to forget that if Bill Meake had not been included in the prospectus, Skywest would never have been raised form the dead in the first place, government would not have backed it and share holders would not have invested….. and if that had been the case, Skippers or the like would have jumped in. How can any responsibly run business fail in a MONOPOLY ?

As for having insufficient time to get a high capacity AoC, how much time did XR need ? They have only just decided to can the F50 up and down the Western Sea board, now let me see, the time frame …… 14/09/2001 to 20/04/2003 ????? again how much time does XR need ????

After having a chin wag with some of the guys at the coal face I would have to say one thing for XR and that is the troops seem very confident that Scott H can help them out of the sh1t and that sort of support is going to give them the best chance…

Investors I am sure would feel much more confident about investing if at least one member of the board actually had some aviation qualifications, know how or experience.


:D :D :D

We could go on for quite some time Apollo 4...

Who said my views would be in a prospectus...? By your tones I wouldn't expect you to invest regardless of anything. I don't see any admissions, just my views, not the companies. Are all airlines, or aviation companies owned or controlled by aviation specialists? I think not. (Skippers and Stan for one). What I trying to say, without you misunderstanding what I'm trying to say, is that it has been a steep learning curve. It was all based on a premise from a smooth talking salesman origionally, but alot has changed since AN+1. Don't think that the Meeke consortum was the only one trying to get their hands on Skywest when AN went under. Where is the failing...? 18 months later and they are still here, and under trying times and curcumstances. if you can run things better then send in your resume. I always said from DDay that it would take until the end of 03 to see where it was all going, so far I'm on track...

Your ignorance in knowledge in gaining an High Capacity AoC shows... With very limited resources for such a small company that it is not under the umbrella of AN and doesn't have a bottomless pit of money, i think that they are doing a great job and are doing their best. As for your inaccuracy and lack of knowledge of the Western Seabaord I suggest you remain on the Eastern side. I believe that they are still flying to western seaboard ports such as GEL / SHK / CAR / LM ring a bell... Your failure to understand their reasonings, I won't go into for various reasons. As to explain their corporate stratergy, that is up to them and of their choosing. if you had spoken to those at the coal face you would find the majority, if not all, basically feel what I have said. The employees have the aviation qualifications, know how and experience, and the whole team, (as a whole), has kept it going and will do so into the future. Investors want to see if they will make a buck, and with the reformed XR, I think they will. Time will tell, and as we all know there is no crystal ball in this game... (just look at 9/11 and SARS as examples...)

Stick pusher........well said my friend:ok:

Apollo 4

If I ever cross you in the street I will surely give you the FONGING of your life:ouch: Get your facts straight .... some of us wish to put back into the industry what we have gotten out of it:D :D not that a rocket scientist like you would understand.
Nuff said:E :E :E

StickPusher

Well I would hardly class Stan as non aviation…. Besides owning and operating the largest charter company in Perth for a decade or more and having vested interest in companies such as Rossair and the like, surely that cannot be counted as Non Aviation. Besides being as cunning as a sh1t house rat, if he was employing a management team a kin to XR they wouldn’t have lasted a month with out Stan kicking butts and making changes.

I guess the major point here is that XR reportedly was a profitable going concern prior to An’s demise, I find that hard to believe because here they are in their own right with the same monopoly and going backwards. Sure I accept that there are NOW concerted efforts by the (whole team) to turn things around, however this has come from the realisation of the inevitable consequences of failure if they don’t and not out of good corporate and fiscal management planning.

Remember, the charter operators are competing heavily every day while XR has it all to themselves, don’t write the likes of Skippers, GWA, and the dark horse Network off so easily, have a look at who started Skippers and who now owns Network…… That is the sort of experience and know how XR could do with but can’t afford.

GOOD LUCK TO ALL THE STAFF AT SKYWEST I HOPE IT GOES WELL FROM HERE ON OUT……..

:ok:

Apollo 4 - you are ignoring one fundamental factor.
"Monoploy" DOES NOT automatically mean profitable business opportunity.
If the routes were profitable, there would be no need for monopoly.
This is a very big state, with a very small population, ie long skinny routes.
It is debatable as to whether Skywest ever made profit. Under AN, many of the true costs of operating the business were hidden, ie, call centre, ground handling, sales and marketing, yield management etc.
Why would you call yourself a "potential investor" if you clearly have so much disdain for this company?
Perhaps Apollo 4 is one BM himself?

Detached

First rule of business sell the product for more than it costs and the difference is known as a profit.

When the people have no other option you cannot fail, providing what you are charging is reasonable and fair.

If the management can't reduce the over heads and maximise profits the company goes broke.

TWX
 

May I possibly suugest that the F50 is the wrong AC for Skywest (too heavy/too big). How do the operating costs compare with a smaller Dash 8. They seem to work for Sunnies/Eastern.


C402B TWX was at KakaduAir in the late 90s but was sold on the East Coast I believe:O

Apollo 4 -
First rule of basic economics - charge too high and people don't buy.
Most Skywest routes are driving distance - the comptetion is cars and buses. People have options and are by no means forced to buy the product.

I think Apollo should try another topic, as he knows very little about the WEST, XR, it's RPT ops, etc.

I AGREE WITH STICK PUSHER AND DETACHED OBSERVER.

Slice, I think you are correct, the F50 is too big, however the capital cost and lease rate of this aircraft type are now so low it is unlikely there would be any real advantage to a type change. Especially when you add in all the re-tooling and retraining costs that would be associated.

Detached


First rule of bankrupcy don't charge enough and end up at the admiistrators auction. If it is not making money then what is the point ? Airlines are not charity services.

At least there is a bit of lively debate going on now.

Thanks slice, VH-TWX was a great machine in her time never got a photo of her which is a pity.


:ooh:

i'm tending to agree with detached and stick pusher, and i think apollo 4 needs to do a bit of homework.

Good aviation knowledge alone does not make an airline. Rather, the trend is for sound business acumen and economic and accounting qualifications to be one of the key qualities of a good airline manager, just as in any manager in any other business.

The CEO of Skywest comes from a strong airline background with a proven track record in the industry, he reports directly to the board of directors as in any organisation, and apollo, if you are so sure of your expertise, maybe you should invest and get a seat on the board.

Skywest are doing it tough, no doubt, but airlines go through tough times, and just because they have a monopoly does not mean that they should be making profits.

Apollo 4, you would do well to educate yourself on the unique aspects of the WA regional route structure.

HERE IS A GOOD START - http://www.dpi.wa.gov.au/aviation/directions.pdf

THIS ONE ALSO GOOD


http://www.dpi.wa.gov.au/aviation/overview.pdf

these were written by experts, unlike you...


There are not too many similar routes in the world that have such vast distances and small populations, you think any of the wa based charter operators could walk in and make a killing on these routes? I beg to differ. The important thing to remember is that these communities rely on an air service that is reliable, efficient and affordable. Skywest deliver on the reliability and efficiency parts of this and fare levels are what you would expect from a route that produces minimum yields due to its structure. Aircraft type is good, and the costs of changing types at this stage of the game i think would not be viable.

As for dropping the F50 on the western seaboard? what the hell is all that about? You must be on the east coast surely as it seems you have no idea what you are on about.

The changes have been made, loadings are improving, staff are committed to making the changes work and i have no doubt the board are confident in their own business expertise to make this happen and turn the airline into a profitable position, the WA government has also moved in the right way to offer assistance where it can.

GO TOPEND, I'AM WITH YOU........

The facts-like then or not!
 

Some of you have accused me of giving Skywest a hard time.
The facts are quite the opposite!
When BM was running the airline I was very supportive of the airline but when he was dumped naturally I was critical of the way it was done and the fact that there was no one on the board with any airline experience.
The simple fact is that a number of shareholders simply wanted to float the airline to mums and dads and make a killing—that was their sole objective. They weren’t interested in staff—don’t kid yourselves!!
WMC have told a number of investors in Perth that they pulled the plug on Skywest when BM was dumped. The contract was ready to go.
And why did get Skywest get the Argyle contract because the bloody idiots undercut NJS by over $1 million and they didn’t have too.
NJS where only there because QF couldn’t provide a DAYTIME 737 for them to meet roster changes and Argyle wanted to encourage another operator. NJS was never really a competitor and one major shareholder in Skywest fought against the Argyle deal for the stupidity it was.
Now the word in the Eastern States is that “Alliance” is really thrilled to get the monthly lease payments from Skywest. There is no way two operators can make money out of a lease.
Now, for the bad publicity.
I have not bothered to report that four (4) Skywest engineers have rung me saying that the airline is cutting back too severely and they are really worried.
I didn’t bother to write that Skywest’s chief pilot failed (told not to take it) his F100 endorsement and is on sick leave.
I have also not reported that Skywest is having problems with engineers (lack of) for the F-100 and there are some very interesting backstabbing twists in that story.
Everything I have reported about Skywest is accurate in fact painfully so.
Don’t shoot the messenger.
And talk about Skywest’s 40 years there has been nobody that has helped Skywest more than BM.
Somebody mentioned BM suing. Yes he has and for good reason and has won every time and will do so over Skywest according to airline sources.
For the record:
He sued the NT government when it tried to overturn the awarding of a Aerial Medical contract for four aircraft to Skywest—BM won and saved your jobs.
He took on the Federal Government when they awarded the Coast watch to Robert Amann, when he had no planes. He won and saved your jobs!
He also revealed that National Safety Council boss John Freidrich was a fraud and didn’t even have an Australian passport or a visa for that matter.
And now Skywest will not settle a what I am told by Government sources is a legitimate claim for loss of wages etc etc. They, it would appear take on BM at their peril. (To qualify this is a view put to me by two state government sources)
As far as suing his former employer. Not true BM was his former employer he ran his own business BUT he has sued a major bank for bankrupting his business and that case when it comes to light will be a landmark case that will change banking in this country. And he will win that one too, according to an Eastern States QC who has briefed me.
So let’s get the facts straight. As Gaunty said: I know a great deal more about what is going on than has been reported.
And for the record the "analysts" are usually people like airline CEOs who don't wish to be named or indeed airline analysts or finance analysts who cannot be named for conflict of interest reasons..simply as that.
Best GT

I don't believe the N.T. Government would have had anything to do with who was awarded with the Coastwatch contract

Geoffrey Thomas

Absolutely well said !

Topend

Never ever go into business, you’ll go broke !