How Sydney Seaplanes overcame its setbacks

Sydney Seaplanes CEO Aaron Shaw speaks with Business First and reflects on the growth of his business and the pitfalls it has overcome.

As we enter our eleventh year in the market as Australia’s largest seaplane operator, it’s only natural for me to look back – as I sit at our new terminal with a coffee in-hand and our fleet before me – at how far we’ve come since consolidating five shonky seaplane operators into a single business.

We’re due to post turnover figures of $8 million this financial year – a 15% increase on 2016 – bolstered by a 20% increase in passengers since last year and the introduction of a hospitality offering (that’d be the terminal I’m sitting in right now).

However we’ve not been without our setbacks. Whenever I’m asked about missteps or failures, one move in particular comes to mind.

We worked for a long time on offering a direct service to Newcastle. That service started in 2009 and we kept it going for three-and-a-half years (I’ll get to why we stuck by a failing venture shortly).

There are a lot of different compliance requirements compared to chartered flights, so it was a very long and involved process. The agencies we had to seek approval from to operate the service were as follows: CASA (Civil Aviation Safety Authority), as there were no other approved schedule seaplane services operating in Australia; DoTARS (Department of Transport and Regional Services), whereby we needed to seek exemptions from normal airport security measures; NSW Maritime and Hunter Development Corporation; Newcastle Ports Corporation; and the Australian Defence Force, since Newcastle

Harbour is located within Williamtown Airport airspace. We started with eight flights per day, which was a big mistake. We overestimated the interest by quite a bit. We should have started the service with a maximum of four flights per day; starting with eight was far too many and stretched our resources.

We didn’t conduct formal market research around firm demand and pricing, which we should’ve done.

We looked mostly at anecdotal or historical data about services previously offered and general statistics about daily travel between Sydney and Newcastle, plus major corporates likely to use the service. Our business modelling showed the service would grow to be a profitable addition to our services but we underestimated  the cost and overestimated the demand.

The service was pitched mainly at law, engineering, and medical professionals who wanted to be in and out of Newcastle quite swiftly. While we did get interest from the relevant demographics, including nib healthcare, it wasn’t enough. We committed a caravan [larger seaplane] to it.

Say we had five people flying to Newcastle, paying $200 per head. We only have one caravan, so committing to the Newcastle service meant turning away 10 people paying $400 per head for a dining experience. Also, that’s a 30-minute flight versus a 10-minute flight. We were doing that way too often. This business has high overheads as is, so losing money on our main plane wasn’t viable.

Because we’d invested all this time and money and effort, and we’d developed all these great relationships with our numerous regular customers, we were kind of reluctant to let it go. We tried to get government support to keep it alive. The Member for Newcastle at the time, Jodi McKay, who was also the NSW Minister for Tourism, told me no, and also that if we stopped the service she’d withdraw all support for Sydney Seaplanes. The DA for the terminal next door was pending at the time, so we couldn’t really risk losing government support or rocking the boat at all.

I regret that we weren’t able to attract a financial backer for the service. We had many wonderful and loyal customers that we grew close to and who relied on the service – I felt sorry about letting them down when we stopped it. Establishing the service was difficult and letting it go was difficult. That being said, we would definitely bring it back in a scheduled capacity if we had a way of underwriting it.

These days we focus more on either value adding or improving our existing successful products, thereby increasing revenue and profitability on these services through yield and load factor i.e. instead of spreading our customer base across a broad range of services, we seek to grow that base while simultaneously consolidating that growth onto a successful and proven product.

Business First is a peer-to-peer magazine: written by CEOs and other high level executives, with interviews with some of the country’s best leaders.

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