Audit, airlines, leasing, buses and back to airlines

Mandate

Rebuild the balance sheet after the border years, set a fleet strategy for the next decade and give the board a clear view of fuel, labour and weather risk.

Outcomes

• Cut the fuel hedge book from about A$240m to A$95m notional by hedging only fuel not passed through to charter customers.
• Bought six mid-life jets for A$138m to serve five- and seven-year charter contracts, earning a pre-tax return of about 14 per cent.
• Settled a 2023 pilots' agreement that reduced annualised attrition from 19 per cent to 8 per cent at about A$9m a year less than a flat increase.
• Reduced net debt excluding leases from 3.1 times underlying EBITDA in June 2021 to 1.2 times in June 2026.
• Raised owned aircraft from 11 of 39 to 21 of 44 while lease liabilities fell.

Decisions in context

I joined Saltbush in March 2021, when border controls had cut scheduled traffic deeply and charter flying for resources companies was carrying the business. Net debt stood at 3.1 times underlying EBITDA and most of the fleet was leased on terms nobody had compared with ownership. My mandate from the chief executive was to rebuild the balance sheet and give the board a fleet strategy it could defend for a decade. The first year went on fuel: separating the litres our customers already pay for from the litres we bear. The second went on fleet, including the purchase of six mid-life jets, and the third on the pilots' agreement. I lead 88 people with seven direct reports and attend every board and Audit and Risk Committee meeting without a vote. Revenue has grown from A$486 million in the 2021 financial year to A$742 million in 2026.

Reason for the move

Current role. Not seeking an executive move; considering one non-executive directorship with the Saltbush board's consent.

Mandate

Price contract renewals on full cost, fund the start of the electric-bus transition and prepare the business for sale.

Outcomes

• Priced the 2019 retender of the largest contract region at a 7.5 per cent margin; lost it, and group EBIT margin rose from 5.8 per cent to 7.1 per cent.
• Renewed two other contract regions on indexation terms that reflected the drivers' wage agreement.
• Financed the first 40 battery-electric buses and their depot charging through a contract variation agreed with the state authority.
• Prepared vendor due diligence for the December 2020 sale, completed above the fund's forecast price.

Decisions in context

I became Harlowe's chief financial officer when my predecessor retired at the end of 2015. The business ran metropolitan bus services for state governments in two cities under gross-cost contracts, which meant our revenue depended on running services efficiently rather than on passenger numbers. My work turned on three questions: whether each contract's indexation kept pace with our real costs, how to fund the first electric buses without a balance sheet the fund was unwilling to enlarge, and how to present the business to buyers. The 2019 retender of our largest region tested all three. We bid on full cost, lost, and handed about 380 colleagues to the incoming operator. The smaller business that remained earned better margins and sold well in December 2020. I stayed through the ownership transition and left in February 2021.

Reason for the move

The sale to a new owner had completed, and Saltbush offered the CFO role of a listed company whose fleet, fuel and labour risks I knew from both aviation and buses.

Mandate

Build contract-level profit reporting and a bid pricing model for a business whose margins were known only in total.

Outcomes

• Built profit statements for each of five contract regions and the coach business.
• Created a bid model that tested each contract's indexation basket against Harlowe's own cost history.
• Identified A$4.2m a year of performance deductions that better scheduling of bus maintenance could avoid.

Decisions in context

I came home to Perth in 2013, after six years in Dublin, because my parents in Geraldton needed us nearer. Harlowe gave me a role that used what I knew about long-lived assets and long contracts, in a business I had never worked in. Its finance team knew the group's margin precisely and each contract's margin hardly at all. With a team of twelve I built profit statements for every contract region and the coach business, and a pricing model that set each indexation basket against our actual wage, fuel and maintenance costs. The model showed that two regions had lost money for three years while the group looked healthy. It also showed that A$4.2 million a year of performance deductions came from buses held for maintenance at the wrong hours, which the depots fixed within a year.

Reason for the move

Promoted to Chief Financial Officer when the incumbent retired.

Mandate

Price leases on whole-life economics including return conditions, then manage lessee credit and the remarketing of aircraft across Asia-Pacific.

Outcomes

• Rebuilt the pricing model to value maintenance reserves and return conditions separately from the rent.
• Led the recovery and remarketing of nine aircraft from three failed lessees after 2008.
• Kept Asia-Pacific portfolio utilisation above 97 per cent through 2009 and 2010.
• Reduced average remarketing downtime from seven months to four.

Decisions in context

I moved to Dublin in March 2007 to price leases for Kilbarron, a lessor owned by two Asian financial institutions. For three years I priced about 70 transactions and rebuilt our model so that maintenance reserves and return conditions were valued separately from the rent, which changed how we quoted to smaller airlines. The financial crisis arrived a year after I did. From 2010 I managed a portfolio of 62 aircraft across Asia-Pacific with a team in Dublin and Singapore, and I led the recovery of nine aircraft from three lessees that failed. Repossession showed me how much of a lease's value lies in its records and return terms. We kept portfolio utilisation above 97 per cent through the worst years and cut the time an aircraft sat idle between lessees from seven months to four.

Reason for the move

Returned to Perth for family reasons, wanting an operating role rather than another lessor's position.

Mandate

Support fleet expansion after the 2001 industry collapse and run the fuel and currency hedging programme.

Outcomes

• Arranged the sale and leaseback of eight aircraft, releasing A$210m of cash in 2002–03.
• Ran the fuel hedge programme through the price rises from 2004.
• Introduced monthly reporting of hedge effectiveness to the treasury committee.

Decisions in context

I joined Corrella's fleet finance team in Brisbane in August 2001. Weeks later a much larger domestic airline collapsed, and Corrella grew quickly into the gap, adding aircraft faster than its balance sheet comfortably allowed. I worked on the financing of that growth, including the sale and leaseback of eight aircraft that released A$210 million in 2002 and 2003, and in 2003 I became manager of treasury and fleet finance with responsibility for fuel and currency hedging. The fuel price rises from 2004 taught me how a hedge programme set by formula can drift away from the exposure it was meant to cover, and I introduced monthly effectiveness reporting so that the treasury committee could see the drift. I left in 2007 because I wanted to understand aircraft from the lessor's side.

Reason for the move

Wanted to learn aircraft economics from the lessor's side, which no Australian role offered.

Mandate

Deliver statutory audits for mid-sized Western Australian businesses while completing chartered accountancy training.

Outcomes

• Qualified as a chartered accountant in 1999 through part-time study.
• Wrote the audit memo that led a charter airline client to provide for engine overhauls instead of expensing them as incurred.
• Ran fieldwork on about fifteen audits a year by 2000.

Decisions in context

I joined Lockyer Pearce as a graduate in February 1997, a few months after finishing my commerce degree, and qualified as a chartered accountant in 1999 through part-time study. As an audit senior I ran fieldwork on about fifteen audits a year for mid-sized Western Australian businesses: mining contractors, a regional trucking company and a small charter airline. The airline was formative. Its accounts recognised engine overhauls only when the work was done, so profit rose and fell with the maintenance calendar rather than with the business. My memo on the subject went to the client's board through the engagement partner, and the company began providing for overhauls over the hours flown. I left in 2001 because I wanted to work inside an airline on the decisions I had been testing after the event.

Reason for the move

Wanted to work inside an airline rather than audit its decisions a year later.