Virgin rebrands Skywest fleet

Glance around Perth Airport and the signature blue tails of Skywest planes are rapidly being replaced by the vibrant red of Virgin Australia.

Virgin Australia Regional Airlines chief executive Merren McArthur, says VARA, which took over Skywest in 2013, is sailing into blue skies operationally and commercially.

"We are adding more aircraft and our charter business is up more than 30 per cent over the past two years," Ms McArthur said. "And we are forecasting continued growth."

Virgin's move on Skywest was a month after Qantas bought Network Aviation, then WA's third-biggest regional carrier, for about $30 million.

The move appeared to finally bind WA's fragmented and often chaotic airline industry.

Forty-eight airlines had merged, failed to get off the ground or gone bankrupt in the State since 1960.

VARA has been expanding, adding two more Fokker 100s to a fleet of 12.

Ms McArthur says despite the resources slowdown, a shift from construction to production had increased overall fly-in, fly-out work, resulting in more passenger movements.

"Construction is driven by four-week shifts, whereas production shifts may be half that," she says.

VARA plans to grow its charter business outside WA.

Ms McArthur says the low capital cost of a Fokker 100 ($4 million to $6 million) makes it ideal for charter flying, while Virgin Australia's modern Embraer fleet is suited to regular public transport (RPT) flying. Orphans of the VARA fleet are two A320s.

"We are looking at expanding the A320 fleet," Ms McArthur says. "It's a good aircraft with great uplift in the heat and for the type of runways we have to use. We may increase the number of A320s depending on contracts. The great thing about charter is that the lead time for winning a new contract is about six months, which lines up with the timeframe for procuring the aircraft."

Last year, with the approval of the WA Government, VARA reduced loss-making services to Albany and Esperance from three a day to two.

Esperance MP Graham Jacobs claimed the high cost of airfares had been a major constraint on the town's tourism growth.

Ms McArthur contests that, saying average fares have been reduced and VARA participated in local marketing and community initiatives. Despite fare cuts, passenger numbers have risen by 1.1 per cent.

"This is not sustainable," Ms McArthur says.

According to the WA Department of Transport regulated routes review position paper, Albany passenger movements in 2012-13 were 57,919 and for Esperance 44,813. Services to non-mining towns continue to be a major problem in WA.

Tourism Council WA chief executive Evan Hall is concerned about the ongoing viability of regional aviation services.

Since 2011, three airlines - Skippers Aviation, QantasLink and VARA - have operated on the protected air routes under deed arrangements with the State Government (with the exception of Perth-Derby, protected under an exclusive aircraft licence). The deeds run until February 2016 with an option to extend for up to five years.

The Government's starting position is not to regulate RPT air routes where feasible.

Observers fear that in a deregulated environment, Qantas and VARA will quit smaller towns like Albany and Esperance.

However, Perth-Learmonth (Exmouth) is not at risk. Over the past few years, it has grown dramatically with about 86,000 passengers flying in 2012-13.

It was partially regulated in 2011 with QantasLink and VARA competing, but VARA quit the route after QantasLink secured the corporate contracts.

But the government's position is there is potentially enough demand to satisfy two operators.

With almost 58,000 passengers a year, Perth-Albany is the second busiest regulated run in WA.

The Government says regional air routes in other States sustain regular air services with lower traffic volumes and no regulation or subsidy.

Since Virgin took over Skywest, Ms McArthur said staff numbers had grown by 10 per cent to 840.

"We have fully integrated management," she says.

Ms McArthur said WA was the "most aviation dependent (market) in the world".

"By acquiring Skywest, we inherited the DNA of WA," she says. "The WA market is very different to the rest of Australia with longer distances and thinner routes and many remote destinations." The remoteness creates unique challenges but VARA is confident it can meet them, she says.