Darwin set to be Jetstar’s aviation hub

Darwin is one step closer to becoming an aviation hub with Jetstar’s new services, but the emissions trading scheme and high security costs may stand in its way.

Jetstar has launched direct services from Darwin to Sydney and Ho Chi Minh City, China, which will operate five times a week out of Darwin Airport.  

The new services now enable passengers from Cairns, Sydney, Melbourne and Adelaide to transfer from domestic services to Singapore and Ho Chi Minh in both directions.

“Darwin is now connected to all eastern seaboard capital cities by Jetstar…Today is an important milestone in the development of our Darwin hub to connect Australia with South East Asia,” said Bruce Buchanan, Jetstar general manager commercial.

The carrier is planning to build its Asian hub in Darwin, with up to seven aircraft to be based in the region by 2013.

However, the company said the Darwin hub plan could be thwarted if the Federal Government does not exempt domestic aviation from its emissions trading scheme.

Mr Buchanan told Fairfax that the scheme would force up the company’s fares, while its international rivals maintain competitiveness.  

“Our hub strategy funnels traffic through Jetstar’s domestic network from ports such as Melbourne, Sydney, Brisbane and Adelaide up through Darwin and then into near Asian ports such as Ho Chi Minh City and Singapore,” he said.

“The domestic legs of these Jetstar flights will attract a carbon charge while international carriers flying over the top of Darwin and hubbing in Asian ports will not be subject to any carbon charge at all.”

The recently announced Darwin hub plan is expected to create 570 jobs and attract an additional 250,000 tourists to the region.

While welcoming the new services, Darwin Airport CEO Ian Kew said relatively high security costs at the airport could be another barrier to future development.  

According to Mr Kew, the government-mandated security measures account for 57 per cent of total airport costs for international passengers at Darwin Airport. Security costs at Australia’s major gateways range from 12 to 30 per cent of total airport charges.

“The Territory is particularly dependent on air links for tourism and air freight.

“While airlines such as Jetstar have added services…the main factor impacting on our competitiveness is that we are a small regional airport that is required to have major city airport security – that creates a disproportionate impost,” he said.

Maersk sets new BAF for Europe-based trades

Global shipping line Maersk Line has launched a new bunker adjustment factor (BAF) formula to better cope with fluctuating oil prices.

The new BAF will apply to Far East – Europe, Intra European, and Europe – Middle East and South Asia trades to be revised on a monthly basis.

“Our aim is to provide a simple, fair and transparent BAF for our customers, allowing us to share the risks and opportunities from the fluctuating bunker prices,” the company said.

“We will apply the formula on a revenue-neutral basis. This means that any reduction/increase in BAF will be offset by an equivalent increase/decrease in the base rate.”

The new BAFs for its Far East – Europe trade are USD 720 per 20-foot container for west-bound services and USD 240 for east-bound services. Intra Europe services adopt BAFs varying between USD 200 and 400, and Europe – Middle East and South Asia routes are subject to a BAF of USD 465.

The formula applies to both dry and refrigerated containers.

”With the BAF calculator, you can calculate your own port-to-port specific BAF and make simulations of upwards and downwards movements in bunker prices,” the company said.

Meanwhile, Maersk Line has announced its commercial cargo service to and from Iraq was reopened to cater for the rising demand for Middle East services.

“As of 1 September 2008, we have reopened the acceptance of commercial cargo to and from Iraq. This move is in response to the growing demand from our customers and the increased number of projects and volumes in and out of Iraq,” it said.

The company’s sub-contractor Inchcape Shipping Agency will be responsible for the Iraq service.

For more information on the Maersk Line BAF formula and calculator, visit www.maerskline.com/baf.

Truckers’ depression could lead to accident: research

Truck drivers’ untreated mental health problems can threaten their lives, according to new research.

A survey of more than 1,300 truckers operating in NSW, conducted by the University of Queensland, has found that six per cent of drivers are suffering depression.

“It has been shown in Australia that depression has increased the odds ratio for a car crash,” Michael Hilton of the Queensland Centre for Mental Health Research told AAP.

The research showed only nine per cent of the drivers with mental health issues were seeking treatment, with the industry’s male-dominant culture being one of the major obstacles to improving truckers’ mental health.

“Males generally access treatment much less than females and males have less mental health literacy,” Dr Hilton said.

“We have a very stereotypical macho group, we need to train and educate these males.”

However, Dr Hilton argued more research should be done before applying the results to other transport operators.

“We need to know whether this is just in truck drivers or whether this is occurring in other aspects of the transport industry such as taxi drivers, bus drivers and train drivers,” he said.

Fatigue expert from the University of NSW Ann Williamson told AAP that while establishing the linkage between mental health and crashes would require more caution due to the “self-reporting” nature of the research, the relationship is worth looking into.

“One thing that isn’t surprising is that truck drivers are less likely to seek help for health or mental health problems,” she said.

“It’s expected that all they do is work and rest and when you work long hours driving long distances, making appointments to see a GP or counsellor is much more difficult.”

Asciano punished, but is it deserved?

Former Toll infrastructure component Asciano Group has reported its preliminary unaudited results for the period ended 31 December 2007.

Revenue from continuing businesses for the period to 31 December increased by 8.3% whilst underlying earnings before interest, tax, depreciation and amortisation increased by 21%.

Reflecting a number of special items relating to the demerger of Asciano from Toll Holdings, and the restructure of Asciano’s grain business, Asciano reported a net loss after special items and tax for the period to 31 December 2007 of $71m.

Commenting on the results, Asciano managing director and chief executive officer, Mark Rowsthorn, said: “The growth in underlying earnings and the associated improvement in margins reflect a strong half-year for Asciano.

"Operationally, our Patrick Ports businesses have continued to trade well during the period. Continued robust demand from customers has underpinned growth in our Container Ports business. Our Auto, Bulk and General ports have benefitted from strong vehicle and steel volumes in particular, together with ongoing efficiency improvements.

 

"Similarly, the Pacific National Intermodal business has enjoyed solid growth during the period, with record volumes and revenues from the Express business.

"The results from the Pacific National Bulk business reflect continuing capacity constraints in the Hunter Valley coal supply chain, together with the ongoing impact of the drought on the rural rail business."

In respect of the outlook, Mr Rowsthorn commented: “Asciano remains extremely well-placed to deliver growth and value to our securityholders. In the short term, addressing the capacity constraints in the Hunter Valley coal supply chain, and completing the restructure of the Pacific National rural rail business remain high priorities for Asciano. Specifically, Asciano has commenced the downsizing program in our grain business. While discussions continue with the grain industry, in the absence of volume risk being mitigated through the introduction of take-or-pay contracts, Asciano will close the business.

"In the medium to longer term, we have a clear strategy in place to drive increased returns for securityholders, focus on core business, leverage our operating capabilities into growth opportunities, and to optimise our capital structure.

"Our diverse business base, and particularly our exposure to growing commodity exports, containerised and motor vehicle imports, and domestic freight, should see Asciano continue to generate organic EBITDA growth in the range of 10% to 15% per annum over the longer term.”

Asciano has also provided further detail on its existing debt arrangements. In particular, Asciano notes that:

• Total outstanding bank debt as at 31 December 2007 was $4,930m.

• Asciano believes that this debt level is appropriate given Asciano’s underlying assets and cashflow profile.

• Asciano is complying with all covenants within its existing debt facilities, and the facilities do not contain any ‘share price’ or ‘market capitalisation’ covenants.

• Following recent extensions to Asciano’s short-term facilities, Asciano now has no debt maturing until 2009, and 92% of Asciano’s total outstanding debt matures during or after May 2010.

• Asciano has existing interest rate hedges in place today equivalent to 70% of its outstanding debt, with a weighted average maturity of hedges of 3.5 years.

• There is minimal outstanding debt against Chief Executive, Mark Rowsthorn’s stake in Asciano with no risk of margin calls, and the independent directors have no loan facilities of any type over their Asciano holdings.

Most of Asciano’s troubles can be traced back to the ill-advised raid on the much bigger Brambles business, whose shares Asciano is now obliged to hold on to owing to their much-reduced value. Mr Rowsthorn has put the holding cost of this shareholding at over $ 10 million p.a.

Investors punished the company today, with Asciano shares falling to an all-time low of $ 3.61 before recovering slightly to close at $ 4.01.

Sydney Airport to spend big money

Sydney Airport has planned some $1.5 billion of growth capital expenditure over the next 10 years. This is in addition to the $850 million capital expenditure that has already been made since the Airport was privatised in July 2002.

Russell Balding, Sydney Airport’s CEO has outlined the airport’s recent and planned expenditure.

"Some of the benefits of our investment program are already evident. For example, the $120 million which was spent on upgrades so that the airport was ready for the A380. [Sydney Airport is] still one of the very few airports in the world that can accommodate the A380 and because we are located in one of the best cities in the world Singapore Airlines chose Sydney for the world’s first passenger flight of the new A380 when it flew between Singapore and Sydney in October last year. This was a milestone in global aviation history and we invested $120 million to secure that service."

The airport has also commenced a $500 million expansion and upgrade of the International Terminal. This will be the first significant upgrade since the 2000 Olympics and will comprise three major components:

• The terminal will be expanded by more than 7,000 square metres providing centralised security screening and passenger processing for Australian Government agencies along with world class passenger facilities on the departures level;

• There will be a new outbound baggage handling system; and

• Expansion of the arrivals baggage system to handle more passengers.

$80 million to build an extension to the runway safety area at the western end of the east-west runway to comply with a new CASA safety regulatory requirement is also on the drawing board. This is a very complex engineering project as it involves effectively bridging over the existing heritage-listed sewer outfall pipeline as well as over  the M5 East tunnel.

The construction of this project will have operational impacts on the east-west runway and the runway will have to be closed during part of the construction period, causing major disquiet amongst local residents.

"The other major initiative that we will be undertaking through the course of 2008 is updating the existing 20 year Sydney Airport Master Plan," Mr Balding said.

The current Master Plan was prepared and approved by the Australian Government in 2003. A formal review and update of the Master Plan is legislatively required.

The Master Plan, looking forward twenty years to 2029, will consider issues like air traffic and passenger forecasts, airfield and terminal development, and air services considerations such as navigational aids and other emerging technologies.

"It will consider how we can sustainably manage aviation growth by employing new technologies that minimise aircraft noise and other environmental impacts. It will establish the strategic direction for the efficient and economic development of the airport. It will also seek to reduce potential conflicts between uses of the airport site, and to ensure that uses are compatible with the areas surrounding the airport," he said.

Toll consumes BALtrans

Toll’s takeover offer of BALtrans Holdings Limited closed on Friday with acceptances of more than 99% being received.

Toll’s managing director Paul Little was "pleased that BALtrans is now a part of Toll’s Global freight forwarding strategy.

“BALtrans is a well regarded global freight forwarder with a strong Asian base. We look forward to the integration progressing – BALtrans helps Toll build its global reach and to become a significant player in the global freight forwarding sector.” Mr Little said.

Mr Little has also been appointed as a director and the executive chairman of BALtrans Holdings Limited.

BALtrans shares will be suspended on the Stock Exchange of Hong Kong from this morning until delisting, which will follow the completion of compulsory acquisition of the remaining shares not held by Toll. It is anticipated that BALtrans will become a wholly owned subsidiary of Toll by the middle of next month.

The Toll Group is one of the Asian region’s largest providers of integrated logistics services with global reach and generating annual consolidated revenue approaching A$5 billion and operations throughout Asia.

Sunday not on, say importers

DP World Melbourne’s plan to include Sunday as one of the three days of availability for import containers is inappropriate, the Customs Brokers and Forwarders Council (CBFCA) says.

DP World has told the CBFCA that its Sunday operations at West Swanson Terminal will be treated as a normal day for receipt and delivery purposes from October this year, following a three month grace period.

The company said the move is not a means of increasing revenue but a way of influencing the behaviour of importers and transport service providers to meet terminal operational needs. 

While supporting the need for long-term strategies to achieve operational efficiencies, the CBFCA said the policy is an inappropriate imposition on industry.

“There is available capacity in the evenings and on Saturday to process container volumes before 24×7 receival and delivery needs to be mandated,” the CBFCA said.

Immediate concerns raised by the CBFCA include difficulties faced by some transport companies to manage extended shift arrangements, mismatch of Sunday working hours between the terminal and other industry stakeholders, and the fact that the Australian Customs Service does not operate its container examination facility on Sundays.

The CBFCA has offered DP World an opportunity to work collaboratively in order to identify best practice policies to meet the ongoing operational needs of all stakeholders.

Any relevant developments will by published by the CBFCA as they occur.

 

Toll finally bails out of NZ rail

Logistics solutions provider Toll Holdings has announced the completion of the sale of its New Zealand rail and ferry operations to the New Zealand Crown.

Toll managing director Paul little said the transaction, which was announced in May this year, has now been finalised and the transition arrangements were well progressed.

“We remain absolutely committed to the development of our remaining logistics operations in New Zealand, which have recently been enhanced by the acquisition of United Carriers,” he said.

The company is seeking additional New Zealand-based acquisitions to extend the scale and reach of the ongoing operations, with one of its focuses put on rail.  

Mr Little said the company believes rail can be a long-term sustainable business with the Government aiming at increasing the use of rail as freight flows continue to grow.

“We recognise the efforts of the entire workforce in significantly improving the business over the past four years, and positioning rail as the most efficient modal alternative for future transport demand throughout the country,” he said.

According to Mr Little, cash proceed from the sale of equity in the operation of NZD 690 million will be used to retire debt as well as increasing the company’s cash reserves.

Interstate truckers to boycott Queensland

The Transport Workers Union (TWU) said the Queensland Government’s fuel subsidy scheme disregards interstate truck drivers and they could consider boycotting the state.

The State Government has recently announced changes to the 8-cents-per-litre deduction scheme to ensure the $540 million per annum subsidy goes directly to motorists with a Queensland driver’s licence. 

TWU state secretary Hughie Williams said while interstate truck drivers are already suffering from soaring fuel prices, they are excluded from the discount scheme.

“When they see this fuel discount that’s going to disregard interstate truckies, don’t be surprised if they simply say we won’t deliver freight to Queensland, and that could be a very serious problem,” Mr Williams told the ABC.

“Thousands of tonnes of goods and produce is being carted in and out of Queensland and those people spend many weeks of their time in Queensland.

“They’re going to get very, very annoyed and they’ve got every right to be very annoyed about it."

Asciano rises on Brambles sale

Asciano has finally rid itself of the remnants of its ill-advised takeover of pallet giant Brambles, raising $484m in the process.

Asciano Group managing director and chief executive officer Mark Rosthorn has confirmed that the company sold its remaining stake of approximately 48.7 million shares in Brambles Limited at an average price of $10.11 per share. The shares have been sold to a range of institutional investors. The company will use the majority of the proceeds of the sale to retire existing debt, with the balance available for general working capital purposes.

Mr Rowsthorn said: “The sale of our Brambles shares achieves two key objectives for Asciano. It allows us to retire a $406 million debt facility, improving our overall level of gearing and enhancing balance sheet flexibility.

"Importantly, the sale also allows Asciano to focus on our core businesses and on enhancing securityholder value through continuing to apply our operating expertise and pursuing key growth initiatives within our existing operations."

Asciano expects the impact of the Brambles stake on its 2007/08 full-year results (including realised losses net of dividends), to be a non-recurring loss of approximately $85 million before tax and funding costs.

“It is obviously disappointing to have sold the shares at a loss," Mr Rowsthorn said. "However, we believe that the strategic advantages to the Company of divesting the Brambles stake outweigh the one-off impact on our results, particularly in the current market environment.”

Analysts believe the holding costs incurred in carrying the Brambles shares has severely restricted the company’s capacity to grow by acquisition, at a time when private equity firms and overgeared operators are looking to offload prime transport and infrastructure assets at rockbottom prices.

Some commentators expect Mr Rowsthorn will use the company’s new-found cash to make strategic investments in the coal supply chain, whilst others have forecast a move to build up Asciano’s global reach by acquiring European and/or Asian transport and logistics companies.

Asciano is currently trading at $4.35, up from an all-time low of $3.57. Brambles has also edged higher, its shares being traded around $10.30.

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