Australia’s ‘Fly-In-Fly-Out’ (FIFO) market has come into its own in the past decade. The business plan allows workers in its huge mining industry to make their permanent homes in existing population centers, rather than incurring the cost of creating new communities adjacent to where the mineral assets are found. Brisbane-based Alliance Airlines has capitalized on the opportunity.
Each month, thousands of Australians fly from Perth up to the Pilbara region, in Western Australia’s remote north, to work shift-weeks in mining and energy. The country is the number-one global exporter of iron ore, bauxite, lithium, rutile and zircon, according to Geoscience Australia. In 2016, the nation exported approximately 800 million tonnes of iron ore, around 80 percent of it to China, while Australia could soon become the biggest exporter of liquefied natural gas. Coal is a big part of the mining story in the east of Australia.
To serve the resources industry, Alliance Airlines operates extensive flights around Australia, as well as New Zealand, but especially in Western Australia, using a "single OEM" model. Today, it claims to be the world’s largest operator of Fokker aircraft.
Although Alliance does not specify who its clients are, it charters several flights to Australian mining companies, represented by the likes of BHP Billiton and Rio Tinto, as well as many smaller players. The company claims to be “Australia’s major [FIFO] air charter operator and the largest supplier of ad hoc air charters for the Australian resources industry,” and it credits the Fokker fleet for “being able to access smaller airstrips that are typical of many mine sites.”
Operating 32 Fokker aircraft, Alliance has five F50 twin truboprops, eight F70 and 19 F100 jets. Following an earlier transaction for three of its Fokkers, in November 2015, Alliance announced an A$15 million (US$10.9 million at the time) transaction with Austrian Airlines, taking its entire Fokker fleet of 21 aircraft.
“The rationale for the transaction was a mix of aircraft for our own fleet, trading in Fokker aircraft with other operators, and parting out aircraft to support our existing fleet,” Lee Schofield, CEO, Alliance Airlines, told AIN.
“We had 13 of them left and added one to the Australian fleet [in January] to take that fleet from 31 to 32. We still have 12 left. We treat the Austrian aircraft effectively as stock on the shelf.”
The last Fokker was built in 1999, and Schofield pointed out an obvious question he apparently hears regularly. "'Your fleet’s not getting any younger. What are you doing about that?’
“Aircraft age is only partly determined by calendar age. We are only a third of the way through our usable life, on average. On our younger fleet, we get 8,000 cycles… [or] between 1,000 and 1,200 hours per year per airframe. At that rate of utilization, we are not going to be operating them for another 45 years. We hope to continue with low capital costs and relatively low maintenance costs.”
Schofield does not rule out eventually moving the single-OEM model to another manufacturer. “We monitor the replacement market all the time, to see what’s going on there, or what the opportunities are, because at a point in time, we will need to change. I think what will drive it will be… a speculative deal for 40 aircraft to replace our entire fleet.”
Two aircraft are to be converted for VIP operations, an F100 and an F70 (a former Government of The Netherlands aircraft). “We are going to have two VIP-configured aircraft in the coming months. With a 24-seat configuration, when boards need to get around, it will be a great product we can offer and also fill in niche in the VIP charter segment,” he said.
In addition to flying the resources industry workers, Alliance provides capacity to other airlines, predominantly Virgin (Australia Regional Airlines); and related services, such as selling spare parts, leasing, and aircraft trading. It also manages three airports on behalf of the mining companies, Moomba, Balera and Cape Preston.