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Upgrade or downgrade of Kangaroo Island airport? A reality check and a letter to Min. Albanese — Cr Walkom, 2013.07.13
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Kangaroo Island is indeed fortunate to have professional and effective transport operators to this island of the calibre of Sealink and Rex. Imagine the situation on this island without one or other of these. It does not bear thinking about, yet we seem hell bent on complaining about both.
So when we grizzle about high airfares and high ferry fares we secretly hope they will both remain right – we just want cheaper? Of course there are some who believe that bigger airport = bigger planes = more tourists but is that likely for KI? Why would not the same argument apply to ferries? Bigger seaport = bigger ferries = more tourists? Not many would support that argument, choosing instead to optimise existing spare capacity.
Sealink have just got started on their new Terminal at Penneshaw so we can expect them to remain very competitive with their quest for visitor numbers to keep their profits acceptable.
KIFA originally announced that they were to organise a doubling of visitors to KI in 10 years, had a heavy fall at the first hurdle and quietly changed that target to double tourist income in 10 years which probably means, with inflation, about only another 40,000 pax in 10 years – not the extra 185,000 most still believe is their target.
So who might get what. Sealink have been very successful in crumbing the majority of pax over the last 10 years with roughly 40,000 coming off the previous air traveller numbers. They would need a reason to start promoting air travel – perhaps shares in REX?
The airport is currently running at about 20% capacity on one airline, and that airline REX will readily increase schedules if the demand is there. Indeed they have been very flexible in adjusting their schedules to facilitate better usage. REX have always maintained they are a specialist in regional air services, not package tours and repeatedly advised they will not get into that field.
So we already have much spare capacity with the existing Kingscote Aerodrome and are struggling to justify existing REX schedules. If Albo accepts our offer of naming rights to the airport and hands out say $12m to upgrade it, we still get the extra cost of operating the extra essential security services – $20/pax one way. So the cheapest fare of $110 goes to $130 but let’s assume competition from a second airline will pare that back to the $110 fare – no gain yet.
But realistically, how do you think the expected extra 40,000 visitors in 10 years will have divided up? REX +5000, Qantas +10000, Sealink +25000. And how long would Qantas or other stay flying to KI on those numbers? They would never start.
And then there is the cost of operations and maintenance of the new aerodrome – an increase in council rates of 21% to support airport operations unless the venture quickly achieves a very optimistic doubling of air passengers. I can really see the ratepayers going for that.
Whether or not numbers increased for Ayers Rock and Port Lincoln is irrelevant as that is an invalid comparison with KI: both those destinations do not have a ½ day road/ferry competitor like the KI airport has — road to the rock time is ‘off scale’ and to Lincoln it is a day each way. KI competition is between Sealink and the airport so who will you put your money on? Don’t get too excited about a new airport just yet.
Cr Graham Walkom
Cr Walkom – Question on Notice – Kingscote Aerodrome Augmentation
Council Meeting Date 10 April 2013
Author of answers: Andrew C Boardman, Chief Executive Officer – Hours to compile 5.0
The following are Questions on Notice from Councillor Walkom:
1. Is it correct that council owns the Kingscote Aerodrome?
Answer: Yes.
2. Are the current airport operations financially viable at this time? What are the annual profits (losses) for the aerodrome over the past six years? What are the annual passenger numbers to December 2012 for the past six years?
Answer:
The Airport Operation make a small loss after covering all operating costs including just over $246,000 in depreciation
Airport Operating Account 2008-2009 2009-2010 2010-2011 2011-2012
Operating Income Total $501,617 $509,878 $446,121 $417,064
Operating Expenditure Total -$553,152 -$566,717 -$535,144 -$596,185
Net Profit (loss) -$51,535 -$56,838 -$89,023 -$179,121
Dec-09 Dec-10 Dec-11 Dec-12
Passenger Numbers 54,609 52,530 45,563 44,564
3. Has council approved/agreed that KIFA undertake various assessments regarding augmentation of the Kingscote Aerodrome?
Answer:
As the Councillor would be aware, Council have undertaken both the initial review of the likely impacts of route alternatives (Pacific Aviation Consulting Report in 2012) and the subsequent Engineering assessments undertaken in late 2012 and presented to Council inearly 2013 (Tonkin Consulting). Both pieces of work were commissioned and funded by Council in the first instance with KIFA agreeing to reimburse Council for the work in recognition of both the cost impost and the potential importance of this work to achieving the goals for growth potential being affected by access and infrastructure constraints. The greater business case document that has been developed by KIFA (and delivered by KPMG as Lead Consultants) in conjunction with Council, SATC, Tourism Australia, Econ Search and other parties has been consolidated by KPMG for submission by KIFA Board and GM to Federal Government.
4. Did KIFA have the approval of this Council to make a press announcement on the proposed Kingscote Airport upgrade to the Sunday Mail (24 March 2013) and The Islander (28 March 2013), contrary to Council’s current order to keep all documentation relating to the Airport confidential, pursuant to Section 91 (7) (b) of the Local Government Act 1999?
Answer:
To our knowledge no documentation presented to, and considered by, Council has been made public by KIFA in either articles mentioned. The concept of an Airport Upgrade is not confidential and therefore can be discussed freely. The reports and associated documents presented to Council are retained in confidence under the commercial in confidence provisions as there is detail within the reports which should not be made freely available at this time.
5. If so, who gave the consent to KIFA and when did this resolution to keep the matter inconfidence cease?
Answer: See above.
6. If not, what action can Council take to ensure that all dealings with KIFA (as appropriate) can be kept in confidence in the future?
Answer:
If Council (or KIFA) require specific Confidences to be kept then we would expect each party to notify the other of the need for strict confidence provisions.
7. Have other options equivalent to when Air South operated a second RPT service been fully reviewed and cost compared as an option to increasing the size of the airport terminal and runway?
Answer:
There are no other RPT service operators who have expressed an interest in providing a second RPT service to Kingscote from Adelaide or from further afield. Currently there are a number of Charter providers who are flying in from both Adelaide and from Melbourne – aircraft ex-Adelaide / Regional SA are almost always smaller aircraft not suited to RPT use.
The larger aircraft are either high-end Charter aircraft (Executive-type configuration) or are similar in configuration to the Qantaslink Dash 8-200 (39 pax; 5 in service Australiawide), Dash 8-300 (50 pax; 16 in service Australia-wide) / Fokker F50 (50 pax; 6 in service Australia-wide). The former have arrived with small parties on board destined for the highend resorts on the Island and the latter are used for touring parties with Australian Air Holidays. Both the Dash 8-300 and F50 just exceeds the current weight / tyre pressure thresholds for the airport and therefore land under concession and, in the case of Australian Air Holidays Charter, the Tour Operator has had to assume the security scanning provisions for the passengers for them to be compliant with our Security Restrictions.
As has been discussed in the past there are very few aircraft currently flying in Australia that can offer a meaningful RPT service in competition to the SAAB 340’s of REX and these aircraft have not been manufactured since 1999 – the Airport Upgrade review is as much about looking to the future capabilities of the airport to support RPT services from Adelaide as it is about the potential for growth due to the ability to service inter-State aircraft.
8. Does the upgrade proposed by KIFA fit fully within the current Kingscote Aerodrome Strategic, Master, Civil Infrastructure Management, Infrastructure and Asset and Long Term Financial Plans
Answer:
Yes – the Airport Upgrade is envisaged as being required at a point in the future – whether driven by volume demand or servicing aircraft demand. The expense is not captured in either the Asset Management or Long Term Financial Plans as it has been recognised that this Council does not have the financial capacity to fund such an upgrade.
9. Has a cost benefit analysis been done with respect to council’s interests? If not when will this be done?
Answer:
Yes – the last report presented to Council (at the March Meeting of Council) contained operational statements for a 20 year period post-upgrade.
10. Have any of the private tourist operators advocating an upgrade offered to contribute to the upgrade costs? Have any offered to contribute to any additional operational and depreciation costs that council may incur?
Answer:
No and No. There has been no formal approach to Tourism Operators concerning the upgrade at this time. We have not yet considered whether Council would accept Private Sector involvement / investment into the Upgrade.
11. What is the project management timeline for upgrading? In Particular what is the completion date for any funding and upgrade?
Answer:
This has not yet been determined. Work is contingent on funding and funding may come with specific requirements for timeline to completion.
12. If KIFA want a larger airport, will KIFA be contributing to the ongoing increased operation and depreciation costs?
Answer:
This is a question for State Government to consider and determine – it is recognised that it is common sense to assume that some form of funding contribution from State would be needed to be visible for Federal Government to consider funding the balance of the upgrade.
13. What is the timeframe for council’s next review of the Airport Strategic Plan?
Answer:
Given the work carried out over the last 6 months and the potential for a State Government supported funding bid to Federal Government it is likely that the Airport Strategic Plan would be reviewed post this activity.
[webmaster comment: which means what ? These are the kind of “answers” which have a null information content]