Third Airline Imminent (Alan Kohler)must read
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Third Airline Imminent (Alan Kohler)must read
Alan Kohler has exposed what is going down in the weekend
"Australian Financial Review" if he is right, will have huge
implications in Australian aviation, as the story is locked
I have typed out extracts to give the main gist of his outlook.
Wirraway
Update: This is now the complete article
Third airline raises stakes in delicate game of poker
Just two weeks before its business is sold, the board of Sydney Airports Corporation Ltd met on Wednesday at the epicentre of a fascinating, behind-the-scenes poker game being played out over a new third entrant into Australian aviation - which may happen sooner than anyone thinks.
Having paid a deposit of 10 per cent, or $19.2 million, on Monday to buy the Ansett domestic terminal, SACL management is now negotiating new leases over the terminal with Australia's only national airlines, Virgin Blue and Qantas.
They each want long-term leases for one of the two concourses, and they want them exclusive to make life more difficult for any new third domestic airline most likely Singapore Airlines, but possibly Emirates or Dragon Air.
These three airlines are believed to be negotiating with the Ansett administrators to buy the defunct carrier's operating certificate and other assets needed to start a new domestic operation.
Meanwhile, three consortiums are in the final stages of preparing bids for Sydney Airport. The deadline is June 12. But the bidders have no control over what may happen to the Ansett terminal in the meantime, and don't even have any up-to-date knowledge of what's being discussed. As official bidders, they get to see all significant correspondence, and can put questions in writing to the SACL board which are answered in writing, but the process is infuriatingly slow and formal.
At its meeting on Wednesday the SACL board would have received a presentation on the lease negotiations and apparently agreed to press on as if the company were not being sold as they must as directors. Chairman David Mortimer has not asked the Government or its representatives in the sale process whether that's OK, and the Government, amazingly, hasn't volunteered an opinion.
The bidders, meanwhile, are grinding their teeth in frustration, because one of the major assets they are buying could be stitched up within days of the deadline for final bids, even though they believe a third airline will soon want to rent part of the space.
Virgin Blue and Qantas both want exclusive, long-term leases to help keep the Australian market a duopoly (Virgin Blue especially wants this). SACL, on the other hand, has always said it wanted to buy the terminal so it could be turned into a "common user facility" and not rented exclusively to one or two airlines.
However, stories filtering out suggest that some sort of exclusive arrangements are being contemplated, possibly with some compensation arrangement if a third airline is to be given access to Sydney terminal gates to spoil the Qantas and Virgin duopoly party.
But is there a third player actually on the horizon? Enter Singapore Airlines.
I understand Singapore is the most serious of three parties negotiating with Ansett administrators Mark Korda and Mark Mentha to buy the Ansett airline operating certificate (AOC) and associated assets, which the two Marks have carefully preserved for sale.
This is a delicate business. No AOC has been sold like this before and there is no precedent for valuing it. Mentha and Korda kept it from being cancelled by the aviation authorities because they have retained the Ansett chief pilot on their payroll and kept the engineering facilities in running order.
As a package with the AOC, the administrators are offering for sale the reservation system, leases on 18 Airbus A320 aircraft, engineering facilities and valid enterprise agreements.
They say those agreements, plus the fact that all the fixed assets, such as the terminals and the head office, have now been sold, means that a reborn Ansett (with a different name, of course, and no airport terminals of its own) would have a lower cost base than Virgin Blue. Most of the staff, including pilots and flight crews, are still looking for jobs, by the way, and would be available.
The administrators' sales pitch is that this collection of assets is the best way for anyone to start a new airline in Australia, although buyers need to move fast: the AOC won't last long, the staff will start getting jobs and the planes will have to be given back.
The other thing to remember is that an AOC does not need to be bought. Anyone wanting to start an airline in Australia simply needs to apply for an AOC and meet the safety standards required. It takes between nine months and a year.
This means that anyone who is thinking of paying good money for Ansett's AOC must be in a hurry, otherwise they would take the 12 months and get their own. There are three parties talking to the administrators about buying Ansett's AOC. Singapore Airlines is one, Emirates is believed to be another and a third is based in Hong Kong, believed to be China National Aviation Corporation owner of 35 per cent of Dragon Air.
The key is Singapore. The Star Alliance, of which Singapore is a lead member, is being slaughtered in the Australian marketplace by Qantas and its One World partners. The way these alliances operate is that partners get discount fares on the Australian legs of their international flights into the country, while others pay full economy.
Singapore would do the same if the roles were reversed, but right now the feeder flights to and from the flights in and out of Australia by Singapore and its Star partners are costing a fortune, and the situation can't go on. Singapore must either get Virgin Blue into Star Alliance or start its own domestic operations.
But Virgin is an unlikely starter because joining Star costs tens of millions of dollars, and Virgin doesn't have the systems to handle it anyway. Joining Star would probably involve a fundamental change to the Richard Branson/Chris Corrigan business model.
So despite all Singapore's reluctance to risk an entry into the Australian market as a third start-up airline, reality is intervening.
For Virgin Blue's owners, Corrigan and Branson, Singapore's entry into Australia with a very low-cost base would be a disaster. Instead of looking at an enormously profitable 25 per cent to 30 per cent of a market shared with Qantas, they would be back to 15 per cent and once again struggling to cover costs.
That's why they are keen to tie up the Sydney terminal space through an exclusive arrangement. But even if SACL were prepared to give it to them, which must be unlikely since it would make SACL appear hypocritical as it has promoted the "common user" idea previously, the timing makes it impossible.
With the airport's sale just two weeks away it would be a courageous SACL board indeed that agreed to a 10-year exclusive lease, even though the Government hasn't actually told it not to.
Alan Kohler "Australian Financial Review"
"Australian Financial Review" if he is right, will have huge
implications in Australian aviation, as the story is locked
I have typed out extracts to give the main gist of his outlook.
Wirraway
Update: This is now the complete article
Third airline raises stakes in delicate game of poker
Just two weeks before its business is sold, the board of Sydney Airports Corporation Ltd met on Wednesday at the epicentre of a fascinating, behind-the-scenes poker game being played out over a new third entrant into Australian aviation - which may happen sooner than anyone thinks.
Having paid a deposit of 10 per cent, or $19.2 million, on Monday to buy the Ansett domestic terminal, SACL management is now negotiating new leases over the terminal with Australia's only national airlines, Virgin Blue and Qantas.
They each want long-term leases for one of the two concourses, and they want them exclusive to make life more difficult for any new third domestic airline most likely Singapore Airlines, but possibly Emirates or Dragon Air.
These three airlines are believed to be negotiating with the Ansett administrators to buy the defunct carrier's operating certificate and other assets needed to start a new domestic operation.
Meanwhile, three consortiums are in the final stages of preparing bids for Sydney Airport. The deadline is June 12. But the bidders have no control over what may happen to the Ansett terminal in the meantime, and don't even have any up-to-date knowledge of what's being discussed. As official bidders, they get to see all significant correspondence, and can put questions in writing to the SACL board which are answered in writing, but the process is infuriatingly slow and formal.
At its meeting on Wednesday the SACL board would have received a presentation on the lease negotiations and apparently agreed to press on as if the company were not being sold as they must as directors. Chairman David Mortimer has not asked the Government or its representatives in the sale process whether that's OK, and the Government, amazingly, hasn't volunteered an opinion.
The bidders, meanwhile, are grinding their teeth in frustration, because one of the major assets they are buying could be stitched up within days of the deadline for final bids, even though they believe a third airline will soon want to rent part of the space.
Virgin Blue and Qantas both want exclusive, long-term leases to help keep the Australian market a duopoly (Virgin Blue especially wants this). SACL, on the other hand, has always said it wanted to buy the terminal so it could be turned into a "common user facility" and not rented exclusively to one or two airlines.
However, stories filtering out suggest that some sort of exclusive arrangements are being contemplated, possibly with some compensation arrangement if a third airline is to be given access to Sydney terminal gates to spoil the Qantas and Virgin duopoly party.
But is there a third player actually on the horizon? Enter Singapore Airlines.
I understand Singapore is the most serious of three parties negotiating with Ansett administrators Mark Korda and Mark Mentha to buy the Ansett airline operating certificate (AOC) and associated assets, which the two Marks have carefully preserved for sale.
This is a delicate business. No AOC has been sold like this before and there is no precedent for valuing it. Mentha and Korda kept it from being cancelled by the aviation authorities because they have retained the Ansett chief pilot on their payroll and kept the engineering facilities in running order.
As a package with the AOC, the administrators are offering for sale the reservation system, leases on 18 Airbus A320 aircraft, engineering facilities and valid enterprise agreements.
They say those agreements, plus the fact that all the fixed assets, such as the terminals and the head office, have now been sold, means that a reborn Ansett (with a different name, of course, and no airport terminals of its own) would have a lower cost base than Virgin Blue. Most of the staff, including pilots and flight crews, are still looking for jobs, by the way, and would be available.
The administrators' sales pitch is that this collection of assets is the best way for anyone to start a new airline in Australia, although buyers need to move fast: the AOC won't last long, the staff will start getting jobs and the planes will have to be given back.
The other thing to remember is that an AOC does not need to be bought. Anyone wanting to start an airline in Australia simply needs to apply for an AOC and meet the safety standards required. It takes between nine months and a year.
This means that anyone who is thinking of paying good money for Ansett's AOC must be in a hurry, otherwise they would take the 12 months and get their own. There are three parties talking to the administrators about buying Ansett's AOC. Singapore Airlines is one, Emirates is believed to be another and a third is based in Hong Kong, believed to be China National Aviation Corporation owner of 35 per cent of Dragon Air.
The key is Singapore. The Star Alliance, of which Singapore is a lead member, is being slaughtered in the Australian marketplace by Qantas and its One World partners. The way these alliances operate is that partners get discount fares on the Australian legs of their international flights into the country, while others pay full economy.
Singapore would do the same if the roles were reversed, but right now the feeder flights to and from the flights in and out of Australia by Singapore and its Star partners are costing a fortune, and the situation can't go on. Singapore must either get Virgin Blue into Star Alliance or start its own domestic operations.
But Virgin is an unlikely starter because joining Star costs tens of millions of dollars, and Virgin doesn't have the systems to handle it anyway. Joining Star would probably involve a fundamental change to the Richard Branson/Chris Corrigan business model.
So despite all Singapore's reluctance to risk an entry into the Australian market as a third start-up airline, reality is intervening.
For Virgin Blue's owners, Corrigan and Branson, Singapore's entry into Australia with a very low-cost base would be a disaster. Instead of looking at an enormously profitable 25 per cent to 30 per cent of a market shared with Qantas, they would be back to 15 per cent and once again struggling to cover costs.
That's why they are keen to tie up the Sydney terminal space through an exclusive arrangement. But even if SACL were prepared to give it to them, which must be unlikely since it would make SACL appear hypocritical as it has promoted the "common user" idea previously, the timing makes it impossible.
With the airport's sale just two weeks away it would be a courageous SACL board indeed that agreed to a 10-year exclusive lease, even though the Government hasn't actually told it not to.
Alan Kohler "Australian Financial Review"
Last edited by Wirraway; 2nd Jun 2002 at 04:40.
Whispering "T" Jet
I understand Singapore is the most serious of the three parties negotiating with Ansett administrators Mark Korda and Mark
Mentha to buy the Ansett airline operating certificate (AOC)
and associated assets, which the two Marks have carefully
preserved for sale.
Mentha to buy the Ansett airline operating certificate (AOC)
and associated assets, which the two Marks have carefully
preserved for sale.
Trading of AOC's
I did not think a company could sell its AOC?
From the Civil Aviation Act....
27 AOCs
(1) CASA may issue AOCs for the purposes of its functions.
(2) Except as authorised by an AOC, or by a permission under section 27A:
(a) an aircraft shall not fly into or out of Australian territory; and
(b) an aircraft shall not operate in Australian territory; and
(c) an Australian aircraft shall not operate outside Australian territory.
(2A) An AOC may authorise the flying or operation of an aircraft, other than the operation of a foreign registered aircraft on domestic commercial flights, by authorising the flying or operation of aircraft included in a class of aircraft described in the AOC.
(2B) An AOC may be issued only to a natural person or to a body having legal personality.
(3) If a holder of an AOC makes a request in writing to CASA for the revocation of the AOC, CASA must cancel the AOC.
(7) The term of an AOC shall be as determined by CASA.
(8) An AOC is not transferable.
(9) Subsection (2) applies only to the flying or operation of an aircraft for such commercial purposes as are prescribed.
And this....
28BF Organisation, personnel etc.
(1) The holder of an AOC must at all times maintain an appropriate
organisation, with a sufficient number of appropriately qualified
personnel and a sound and effective management structure, having regard
to the nature of the operations covered by the AOC.
(2) The holder must establish and maintain any supervisory positions in the
organisation, or in any training and checking organisation established as
part of it, that CASA directs, having regard to the nature of the operations
covered by the AOC.
28BG Operations headquarters and suitable buildings
The holder of an AOC must at all times maintain:
(a) an operations headquarters, through which CASA can communicate
with any person responsible for any part of the operations covered by
the AOC; and
(b) suitable buildings, having regard to the nature of those operations, at
each aerodrome where members of the holder’s operating crews are
based.
---------------------------------
(Sorry 3 holer, same thoughts, same time... I just took longer to type them!)
From the Civil Aviation Act....
27 AOCs
(1) CASA may issue AOCs for the purposes of its functions.
(2) Except as authorised by an AOC, or by a permission under section 27A:
(a) an aircraft shall not fly into or out of Australian territory; and
(b) an aircraft shall not operate in Australian territory; and
(c) an Australian aircraft shall not operate outside Australian territory.
(2A) An AOC may authorise the flying or operation of an aircraft, other than the operation of a foreign registered aircraft on domestic commercial flights, by authorising the flying or operation of aircraft included in a class of aircraft described in the AOC.
(2B) An AOC may be issued only to a natural person or to a body having legal personality.
(3) If a holder of an AOC makes a request in writing to CASA for the revocation of the AOC, CASA must cancel the AOC.
(7) The term of an AOC shall be as determined by CASA.
(8) An AOC is not transferable.
(9) Subsection (2) applies only to the flying or operation of an aircraft for such commercial purposes as are prescribed.
And this....
28BF Organisation, personnel etc.
(1) The holder of an AOC must at all times maintain an appropriate
organisation, with a sufficient number of appropriately qualified
personnel and a sound and effective management structure, having regard
to the nature of the operations covered by the AOC.
(2) The holder must establish and maintain any supervisory positions in the
organisation, or in any training and checking organisation established as
part of it, that CASA directs, having regard to the nature of the operations
covered by the AOC.
28BG Operations headquarters and suitable buildings
The holder of an AOC must at all times maintain:
(a) an operations headquarters, through which CASA can communicate
with any person responsible for any part of the operations covered by
the AOC; and
(b) suitable buildings, having regard to the nature of those operations, at
each aerodrome where members of the holder’s operating crews are
based.
---------------------------------
(Sorry 3 holer, same thoughts, same time... I just took longer to type them!)
Last edited by compressor stall; 1st Jun 2002 at 09:33.
Moderator
The reference to AOC leadtime of 12 months is a bit on the long side .. with half decent project management and a competent technical team in each of the disciplines ... should take 5-6 months at the outside ....
Then again .. taking on the existing systems infrastructure might not be an advantage in any case ... unless the aim is be a rebadged version of the old model ...
The time and cost advantage in "buying the AOC" (which is a bit of a misnomer) lies in buying the IP, systems documentation, procedures, and any other useful assets which lie behind the certificate, not the certificate itself .. one then only has to address any areas which need updating for current regulations (to facilitate going through CASA's subsequent review process) and changes desired for philosophical differences between the two organisations. At the end of the process, and presuming that the exercise jumps all the necessary hurdles, CASA issues a brand new shiny AOC.
... but often a clean slate is the better stategy ?
Then again .. taking on the existing systems infrastructure might not be an advantage in any case ... unless the aim is be a rebadged version of the old model ...
The time and cost advantage in "buying the AOC" (which is a bit of a misnomer) lies in buying the IP, systems documentation, procedures, and any other useful assets which lie behind the certificate, not the certificate itself .. one then only has to address any areas which need updating for current regulations (to facilitate going through CASA's subsequent review process) and changes desired for philosophical differences between the two organisations. At the end of the process, and presuming that the exercise jumps all the necessary hurdles, CASA issues a brand new shiny AOC.
... but often a clean slate is the better stategy ?
Last edited by john_tullamarine; 1st Jun 2002 at 09:59.
Evertonian
Hmmm...I guess what's important here is the definition of "transfer".
I reckon there'll be lawyers everywhere, rubbing their hands together & licking their chops, just at the thought of this!
I reckon there'll be lawyers everywhere, rubbing their hands together & licking their chops, just at the thought of this!
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What A Surprise - NOT
john_tullamarine....at the risk of being argumentative, you have to be dead set kidding.....I know of at least three companies that have been/did wait, in excess of 6 months, just to put an addition to an existing AOC, and in one case, one particular mob are still waiting after 12 months to have their AOC amended to include RPT, all done most professionaly from the applicants point, pity not so from the CASA's end.....of course, they are not as high profile and probably don't or can't swing the necessary weight required to have these things fast tracked.
CS - 3 Holer It is my understanding, that whilst the AOC is not transferable, the company and/or identity that owns the AOC is, and thus the transfer is legit.....
Shades of Mel Gibson for mine
(8) An AOC is not transferable
Shades of Mel Gibson for mine
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Reference Dragon Air,heard they are down here interviewing now.
Interviewing about 30 candidates,20 of which are exAN A320 F/Os.
Has to do with their continued expansion out of Hong Kong.
Interviewing about 30 candidates,20 of which are exAN A320 F/Os.
Has to do with their continued expansion out of Hong Kong.
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I can see it all happening now:
1. Lots and lots of media hype, Ozzie public finally gets a good deal etc. etc.
2. One of the airlines stumbles!
3. Great speculation in media and Pprune, bla bla bla!
4. ACCC steps into the limelight and makes announcements and more bla bla bla!
5. One of the airlines falls over followed by more great debates in the media.
6. the winners are: the media.
7. The losers are: everyone else.
Surely the lesson has been learnt that Australia can't support three airlines!
1. Lots and lots of media hype, Ozzie public finally gets a good deal etc. etc.
2. One of the airlines stumbles!
3. Great speculation in media and Pprune, bla bla bla!
4. ACCC steps into the limelight and makes announcements and more bla bla bla!
5. One of the airlines falls over followed by more great debates in the media.
6. the winners are: the media.
7. The losers are: everyone else.
Surely the lesson has been learnt that Australia can't support three airlines!
Moderator
nasa,
Can't comment as to your unspecified examples of course but the fact remains that, if the homework, project management, and strategy is sound, and the assessment priority is assigned by CASA, there ought be no reason why an AOC cannot be processed in 5-6 months from scratch. I suggest that your examples will have relevant circumstances which account for the delays.
So far as the AOC is concerned, any such transfer as is being discussed in this thread will involve an issue of a fresh AOC ... I am not aware that there is any alternative to that.
Can't comment as to your unspecified examples of course but the fact remains that, if the homework, project management, and strategy is sound, and the assessment priority is assigned by CASA, there ought be no reason why an AOC cannot be processed in 5-6 months from scratch. I suggest that your examples will have relevant circumstances which account for the delays.
So far as the AOC is concerned, any such transfer as is being discussed in this thread will involve an issue of a fresh AOC ... I am not aware that there is any alternative to that.
I find it very hard to believe that SQ are interested in kicking off their own operation here. Sure they need feed traffic, but why would they sit idly by for 9 months whilst AN died a slow and painful death?
If they are now allegedly interested in expediting the establishment of a third domestic carrier, it makes me wonder about their management strategy.
Also, I seem to recall Brett Godfrey mentioning in an interview that the Virgin group had an agreement with SQ that it would not mount any challenge to VB in Australia.
Still, stranger things have happened.................
If they are now allegedly interested in expediting the establishment of a third domestic carrier, it makes me wonder about their management strategy.
Also, I seem to recall Brett Godfrey mentioning in an interview that the Virgin group had an agreement with SQ that it would not mount any challenge to VB in Australia.
Still, stranger things have happened.................
AOC Transfer
In relation to the transfer of an AOC.
If a company that holds a current AOC is sold the AOC is part of the deal; this is not a transfer as the entity (Company) remains the same.
Assuming that an approved Chief Pilot is in the job and that no other issues exist that will attract CASA's attention the AOC remains valid.
Gibbo
If a company that holds a current AOC is sold the AOC is part of the deal; this is not a transfer as the entity (Company) remains the same.
Assuming that an approved Chief Pilot is in the job and that no other issues exist that will attract CASA's attention the AOC remains valid.
Gibbo
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Anderson says don't shut out new airlines in terminal
"Melbourne Age" latest news
Anderson says don't shut out new airlines in terminal
AAP|Published: Sunday June 2, 3:40 PM
Sydney and Melbourne airports should not close the door to new entrants in their negotiations on the future of Ansett terminals, Transport Minister John Anderson warned today.
The Sydney and Melbourne airports have taken back control of the failed carrier's terminals and are negotiating leases with other airlines, with Virgin Blue particularly keen to take over the facilities.
But Qantas is also in the race, with weekend newspaper reports suggesting the two local airlines were keen to sign exclusive long-term deals to shut out any new domestic entrant such as Singapore Airlines.
Mr Anderson said the airports should try to be as flexible as possible.
"Given the way the airports now have control of those terminals again, it's in their interests to make certain that they encourage maximum business, and that ought to include the flexibility to allow for new entrants," he told the Ten Network.
"So we probably need to pursue that one over the next few days."
Regional airlines such as former Ansett offshoots Kendell and Hazelton have also put up their hands to use the terminals.
Note: The original post has now been updated
to the full article
Wirraway
Anderson says don't shut out new airlines in terminal
AAP|Published: Sunday June 2, 3:40 PM
Sydney and Melbourne airports should not close the door to new entrants in their negotiations on the future of Ansett terminals, Transport Minister John Anderson warned today.
The Sydney and Melbourne airports have taken back control of the failed carrier's terminals and are negotiating leases with other airlines, with Virgin Blue particularly keen to take over the facilities.
But Qantas is also in the race, with weekend newspaper reports suggesting the two local airlines were keen to sign exclusive long-term deals to shut out any new domestic entrant such as Singapore Airlines.
Mr Anderson said the airports should try to be as flexible as possible.
"Given the way the airports now have control of those terminals again, it's in their interests to make certain that they encourage maximum business, and that ought to include the flexibility to allow for new entrants," he told the Ten Network.
"So we probably need to pursue that one over the next few days."
Regional airlines such as former Ansett offshoots Kendell and Hazelton have also put up their hands to use the terminals.
Note: The original post has now been updated
to the full article
Wirraway
Last edited by Wirraway; 2nd Jun 2002 at 06:17.
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Anderson tips take-off of new airline
ABC News Online
Posted: Sun, 2 Jun 2002 14:45 AEST
Anderson tips take-off of new airline
The Federal Transport Minister is predicting a new airline will soon begin operating in Australia.
John Anderson has welcomed the growth of Virgin Blue, which will have flights to all Australian capitals from the end of August.
He has told Channel Ten, Qantas could soon face another competitor.
"I also think there's the very real possibility in the current framework that you will see another," he said.
"I think the climate is right, I think our policy framework is right, I think that would be a good thing.
"Given that many of the inefficiencies that held the sector back before have now been challenged or broken, the private sector will see to it that you see a growing sector."
Posted: Sun, 2 Jun 2002 14:45 AEST
Anderson tips take-off of new airline
The Federal Transport Minister is predicting a new airline will soon begin operating in Australia.
John Anderson has welcomed the growth of Virgin Blue, which will have flights to all Australian capitals from the end of August.
He has told Channel Ten, Qantas could soon face another competitor.
"I also think there's the very real possibility in the current framework that you will see another," he said.
"I think the climate is right, I think our policy framework is right, I think that would be a good thing.
"Given that many of the inefficiencies that held the sector back before have now been challenged or broken, the private sector will see to it that you see a growing sector."
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The choices are fairly simple. Either Virgin takes on a full service component and Star Alliance membership, or a third carrier under the Silk Air (SQ) banner will be here in the near future.
Are there any developed western countries where at least two full service carriers don't compete against each other ? This is in addition to any discount carriers.
A third carrier would affect Virgin to some degree, but the competition target would largely be QF.
A lot of passengers are purely choosing Virgin as it is the only alternative to QF.
The terminal issue is interesting, but now SACL has the lot, I believe a third carrier would have to get almost guaranteed access to terminal gates.
Are there any developed western countries where at least two full service carriers don't compete against each other ? This is in addition to any discount carriers.
A third carrier would affect Virgin to some degree, but the competition target would largely be QF.
A lot of passengers are purely choosing Virgin as it is the only alternative to QF.
The terminal issue is interesting, but now SACL has the lot, I believe a third carrier would have to get almost guaranteed access to terminal gates.