East-West Airlines (Australia) - History

History

East-West Airlines was founded in 1947 with funds from about 800 mainly small investors with the aim to "fight the city based airline monopolies" and traded forthwith as an unlisted public company. It grew in the following years from an intrastate operator to Australia's third largest domestic carrier which owned by 1982 ten Fokker aircraft. By that time East-west was also about to acquire its first jet aircraft. It was however still reeling from a venture into the Northern Territory in 1980, which incurred heavy losses. This caused also a falling out among board members. East-West, already in 1981 in an era still governed by the Two Airlines Policy, became the first "third" carrier operating between Sydney and Canberra.

Bryan Grey a former airline executive with Ansett and Air Niugini formed early 1982 in Sydney together with former Citicorp Australia merchant banking executive Duke Minks, East-West Development Pty. Ltd., which had own assets of AUD 50,000, with the specific purpose to acquire East-West Airlines. With a loan of AUD 8.5 million from the Nauru Phosphate Royalties Trust they purchased East-West in a share buy-out. The take over was deemed controversial, as discussions queried how far the involvement of Nauruan capital constituted quasi a foreign takeover.

In the following years East-West competed vigorously with major airlines Ansett and Australian Airlines on inter-capital routes. The Australian aviation industry was highly regulated at the time under the Two Airlines Policy, which prevented East-West from flying directly between major capital cities, so they instead offered services between major cities via regional centres. Routes included Melbourne to Sydney via Albury or Sydney to Brisbane via Newcastle and Coolangatta. East-West primarily flew Fokker F27 prop-jets and F28 jets but would eventually operate larger Boeing 737-300 aircraft for passenger operations and Boeing 727-200s for cargo interests. East-West sold in June 1983 return tickets between Sydney and Melbourne via Albury, which took about two hours 45 minutes, for AUD 120, which was about half of the standard fare of AUD 248 for direct flights by the duopoly carriers, taking one hour 15 minutes. However, also Ansett and TAA offered discounted fares down to around AUD 140. According to Brian Grey the service attracted about 4000 customers per month.

Because of its operating structure, East-West was able to significantly undercut other airlines. East West Airlines aggressive "Third Airline" campaign forced the Australian Government to eventually scrap the Two Airline Policy. The Hawke-lead Labour Government worked to protect the anti-competitive agreement which had kept Australian air fares seemingly inflated for many years.

Managing Director Bryan Grey along with marketing consultant John Williams created a massive nationwide media campaign and thus attracted many first time flyers with what could be described as Australia's first truly discounted fares in a now deregulated arena. East West set the scene for other airlines to enter the Australian domestic market years later.

In December 1983 East-West was sold, for Template:$A according to estimates, to Perth-based Skywest Holdings Pty Ltd, a subsidiary of Griffin Holdings which was belonged to the Western Australian entrepreneur Robert Frederick "Ric" Stowe, who made his fortune with coal mining, which also owned Skywest Airlines. In particular the NSW government opposed the deal. Former owner Bryan Grey should in 1990 field the short-lived Compass Airlines as first entrant into a then deregulated domestic aviation market.

Under the new ownership East-West was retained as an independent entity. Skywest Holdings announced in May 1985 to fully merge both Skywest Airlines and East-West, but this was not carried out bar some harmonisation of timetables. In 1985 East-West commenced proceedings to challenge at the Federal Court the Two Airline Policy.

Mid July 1987 East-West and Skywest were sold to formally, to circumvent possible issues with government regulations, to the Perth car dealer Perron Group which sold them by the end of the month on to Bodas Pty Ltd, a company set up by Ansett's owners, Sir Peter Abeles' TNT and Rupert Murdoch's News Corporation for a reported AUD 150 million. It continued to operate as a separate entity until 1993 when its operations were fully merged into Ansett.

It should be noted, that the deregulation took place under Prime Minister Bob Hawke who held office between 1983 and 1991. The government was owner of Trans Australia Airlines and the Prime Minister maintained a personal friendship with Ansett's owner Sir Peter Abeles, knighted in 1972.