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Mining downturn grounds FIFO aviation

Editorial
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The sky is the limit for the effects of the downturn in the mining industry.

Regional aviation that was boosted by fly-in, fly-out (FIFO) mine workers has slowed down as commodity prices dip, the AFR reported.

Alliance Aviation Services predicts a steady year ahead after it announced solid growth during the last financial year. Underlying profit climbed 13 per cent to $23.3 million.

“The broader economic environment is of concern, I think, to everyone in commerce in Australia,” Alliance managing director Scott McMillan said.

“We are adopting a conservative view.”

Alliance Aviation signed extensions for its existing mining contracts last month with Incitec Pivot and miner MMG for FIFO services.

While existing mines are not closing on the back of the mining slump, competition for tenders is becoming tougher for companies as new projects decrease.

In tough conditions where new projects are not emerging and existing mines are not expanding, opportunities for companies like Alliance to grow are through competitive tenders when contracts with other airlines end.

“We don’t actually have any contracts coming due this financial year,” McMillan said.

“There are some other contracts coming up during the course of the financial year that are not currently our customers. They will be competitive I think.”

Xstrata Copper extended its FIFO contract with Alliance Aviation last year, while the aviation company also entered a Letter of Intent to offer its services to Newmont Mining.

Falling commodity prices have stifled growth on commercial routes between Perth and mining centres such as Karratha and Kalgoorlie.

But Alliance has not faced the full brunt of mining job cuts in Australia as it gets paid by the flight instead of the number of seats utilised.

According to McMillan, Alliance is looking towards the oil and gas sector since the petroleum industry is showing good growth.

The mining industry flights comprise more than a quarter of profits from the domestic section of airlines like Qantas Airways and Virgin Australia.

According to Morgan Stanley, the resources sector slowdown had decreased Perth Airport’s traffic by one per cent in June.

QantasLink recently acquired a contract for Hancock Prospecting’s $9.5 billion Roy Hill iron ore venture in the Pilbara to offer their flight services.

It signed a three-year deal, which will see Qantas Airways' Network Aviation division fly to the site three times a week by mid-August using its Fokker F100s.

Qantas Domestic CEO Lyell Strambi said clients in the mining industry were apprehensive at the rising Australian dollar, with some worrying their mines would close.

“Recent conversations with customers have been a lot more optimistic and I think the Australian dollar change has made what might have been projects that were under water back viable again,” he said.

He said Qantas was now seeing several charter openings and were fighting “vigorously” for contracts.

“We will just have to see how that actually plays out,” he said on the mining slowdown.

“At this stage it has been quite mixed but recently has been more positive.”

QantasLink executive manager John Gissing said he was pleased with how direct flights were performing so far from Sydney to the coal seam gas district of Gladstone.

Earlier this year, Qantas said it is looking at adding another 14 aircrafts to its fleet over the next 12 months to meet the demands of FIFO mine workers.

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