1) If you press Numpad-3 over the 3D View in Blender you will a side view - this shows that the skeleton for our model is upright along the Z-axis and our mesh is 'lying on its back' along the Y-axis. The mesh is actually in the correct position since Y is up in Granny format that we are eventually exporting to. So we need to rotate the skeleton backwards 90 degrees to be in line with the mesh. These are the steps to acheive this.
2) In the 3D View, click View and then select View Properties. Now make sure the 3D Cursor is at position X:0,Y:0,Z:0. Also, set the pivot to be the 3D cursor as shown.
3) Right click on the skeleton to select it, then press TAB to enter Edit Mode and then A to select all bones.
4) Now press this sequence of keys: R, 9, 0, Enter, TAB. This will rotate the skeleton clockwise 90 degrees, confirm and exit Edit Mode.