Zinc Airlines says Aussie aviation market ‘not impregnable’ as upstart attracts funding interest

A bold new entrant aiming to break Australia’s domestic airline duopoly is leveraging its founder’s considerable track record in the sector, saying he knows how to do it and is on his way to attracting the sizeable funding required.

Peter Kelly’s career spans back almost 50 years, starting at Ansett then Qantas where he led commercial strategy through Virgin Blue’s emergence and the review that led to the creation of Jetstar.

Smack in the thick of it during a pivotal era for the Flying Kangaroo, he spearheaded the Frequent Flyer program and Qantas Club lounges, then moved into advising the industry, helping found the now-defunct Cypriot carrier Cobalt Air.

Modelling Zinc Airline as a no-frills, ultra-low-cost airline like Ireland’s Ryanair, the carrier is based around the “once-in-a-generation structural shift” in Australia’s domestic market, the new Western Sydney International Airport opening to passengers on October 25.

“That will be our home base,” Mr Kelly told The Nightly.

“We will over time have a very substantial presence there, and we will deliver low-cost flying, bring more competition to the Australian market, so we will be a disruptor in many ways.”

Indeed, Australian Competition and Consumer Commission commissioner Anna Brakey recently described Zinc as a “credible” and welcomed potential addition to Australia’s highly concentrated airline market, along with Koala Airlines, led by another industry stalwart Bill Astling.

Mr Kelly is currently rattling the tin to raise $225 million, with the aim of commencing operations within 17 months of securing the cash.

“This is the hardest phase of all ... the phase we’re about to go into with two groups outside of Australia,” he said.

“We’ve actually had a reasonably good response, considering it’s such early days.

“There’s a massive amount of work that goes into them analysing our business plan and our financial model, and asking a zillion questions, and seeing that it’s really watertight and not a fiction.”

He said Zinc would prefer to have one large cornerstone investor and had not yet attracted interest in Australia but hoped to secure some among a handful of smaller-scale backers.

“Australia, with regard to investment is, shall we say, conservative, compared to say the USA or India or China or the Middle East,” Mr Kelly said.

“So the funding is likely to come from one of those places ... I can’t go into detail on any of this because it’s all confidential.

“The good thing is that there’s initial interest. But it takes many months to go through all the rigmarole associated with a large cap raise.”

Mr Kelly said the plan was to focus Zinc on the high-frequency, short-haul trunk routes connecting Sydney, Melbourne, Adelaide and Brisbane, which represented about 70 per cent of Australia’s domestic air travel.

“We wouldn’t go to Western Australia ... the problem with us competing to Perth is that we’d be flying against wide-bodied aircraft for Qantas for starters, and they can sustain those flights very well, because they’re so dominant within WA,” he said.

“When they’re flying a big wide body, particularly doing a night flight, their unit costs come right down.”

Zinc planned to be the low price leader undercutting Jetstar, Mr Kelly said, charging for all refreshments, offering slightly reduced seat pitch and saving money through having the same model aircraft in its fleet.

“We’re also looking to put frequency on the routes that we fly, so that when we get more aircraft, we’re not expanding our network, we’re just putting more capacity onto the same routes,” he said.

“That’s what people basically want: they want to go at the time that they want and they want it to be at the right price.

“We have to be sort of religious on maintaining a low cost base — that’s a discipline.”

Zinc would steer clear of what other new entrants had done before collapsing, Mr Kelly said, blaming a lot on structural impediments at Sydney Airport, which was Australia’s only slot-managed aiport, limited to 80 movements per hour, unable to expand and with a curfew that caused costly and infuriating diversions.

“Let’s take Rex ... because of Sydney Airport, they were only getting about seven to eight block hours per aircraft per day, when you need to get about 10.5,” he said.

“Now we will get about 12. That’s a massive difference in what it does to your unit costs, because the most expensive part of your operation is your aircraft, and you’ve got to sweat those assets.

“You really have to fly them hard, so to speak, and get a lot of hours out of them.

“When they’re sitting on the ground, they’re not making any money.”

Zinc would try to “break this myth that Australia is sort of impregnable because people have seen airlines fail in the past”, he said.

He named his latest creation thinking there could be nothing more distinctly Australian than the distinctive white suncream smeared across noses.

“Zinc aims to fly to and from the Gold Coast at an early stage ... quite a bit of zinc is required for the beaches there. In fact everywhere in Australia,” Mr Kelly said.