New Bali Player Strategic Hits Financial Turbulence


Queensland-based Australian full-service carrier Strategic Airlines, which started its landmark Brisbane-Bali non-stop service with a wide-body Airbus 330 last Saturday, is under financial pressure after losing a lucrative defence contract.

It lost the A$30 million (US$29.4 million) Australian Defence Forces (ADF) contract following announcement of a federal police inquiry into whether criminal offences occurred in the awarding of the defence tender to its charter division, Strategic Aviation, in 2005.

The contract was to fly troops and military cargo to Kuwait and the United Arab Emirates.

In financial reports just released, the company suffered widening loses in the last financial year (July 1-June 30 in Australia) and was cash-flow positive only because it received a loan of more than A$6 million ($5.8 million) from the charter business.

The figures were revealed in accounts filed with Australia’s corporate regulator.

Strategic is now reliant on making a profit from commercial flights in Australia and Southeast Asia, including on the popular Bali from Perth route. It has been flying to Bali from Brisbane via Port Hedland in Western Australia and Townsville in north Queensland.

The airline announced in January that it would end its Port Hedland service on March 23 because limits of international passengers through the terminal there made the route uneconomical.

In a further corporate blow, one of its two shareholders, Melbourne businessman Shaun Aisen, severed his ties with both the commercial airline and charter business last month.

His departure left full ownership of Strategic in the hands of its chief executive, Michael James, a 34-year-old former Ansett employee.

Last Friday James told the Australian press: “We haven’t been contacted by the (Australian Federal Police). We are quite happy to answer any questions because we believe there is no wrongdoing whatsoever.”

The Bali Times sought comment from the airline this week but none was forthcoming.

Strategic Aviation warned in separate accounts lodged with the regulator that the loss of the ADF contract will “impact significantly” on its results this financial year.

It leaves the overall business reliant on commercial operations by Strategic Airlines, which has been rapidly expanding its Australian and international network since gaining its air operator’s certificate in September 2009.

Strategic also flies from Australia to Phuket in Thailand.

The recently filed corporate accounts show that Strategic Airlines’ losses widened to A$9.3 million ($9.1 million) for the year to the end of June, from a A$2.1 million ($2.05 million) loss a year earlier.

The Brisbane-based airline said in its accounts that its future viability depended on its operations and the “continuing financial support” of Strategic Aviation.

Even before it lost the ADF contract, Strategic Aviation’s accounts show it had slumped to a loss of A$16 million ($15.68 million) last financial year — from a A$17 million ($16.66 million) profit a year earlier — after booking a A$20 million ($19.6 million) impairment charge and increased charter costs. Total revenue fell 15 percent to A$79 million ($77.4 million).

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