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TOWARDS A NATIONAL AVIATION
POLICY STATEMENT
SUBMISSION BY
QANTAS AIRWAYS LIMITED
JULY 2008
OVERVIEW
The Government’s development of an Aviation White Paper is an important and
timely opportunity to comprehensively consider the policy and regulatory
framework that will help guide the industry's development through the next
decade and beyond.
The appropriateness of an integrated national policy statement is underscored by
the importance of the aviation industry to the Australian economy, the significant
changes shaping it at a global and local level, and the long lead times required
for planning and investment.
Previous aviation policy reviews, and a good deal of ongoing public focus, have
centred on questions of international market access. While these issues are
undoubtedly important, they need to be seen in the context of pressures for
change and developments in the industry more broadly.
A review conducted 10 years ago would not have foreseen the impact of new
domestic airlines, the rapid rise of government-funded Middle Eastern carriers
and the intensified battle amongst competing hubs, the demise of Ansett, or the
black milestone of September 11 and consequent massive upgrading of aviation
security operations and costs. Nor would it have predicted the dichotomy
between the unrelenting drive for premium product and service on the one hand
and the commoditisation of air travel on the other, emphasised by the growth of
ultra low cost carriers.
Equally, a review held less than two years ago could not have foreseen the
dramatic escalation in fuel prices that is today taking airline economics into
uncharted territory and threatening the viability of even the most efficient carriers,
who are being forced to trim routes and capacity, increase fares and reduce staff.
One thing is certain: while the force, shape and direction of change is difficult to
predict, the need to deal with it has been a constant feature of the industry's
history - and will be in the future.
In the coming years, existing pressures for change - and factors reshaping the
industry - are likely to intensify, and new ones are bound to emerge.
Aviation lacks a level playing field. While liberalisation of market access will
continue internationally, it will occur in a piecemeal fashion. The differing
attitudes of governments to aviation, its relative importance to their national
interest and their role in the industry mean that the range of factors distorting
competition will remain.
I
The cost headwinds will continue. Higher input and infrastructure prices, an
ongoing focus on security and pressing environmental considerations will require
the industry to achieve unprecedented efficiencies.
The need to operate more efficiently and compete effectively in new and existing
markets and achieve greater scale will see the pressure to participate in industry
consolidation more keenly felt. However, opportunities that may be attractive to
airlines will not necessarily sit comfortably with the regulatory frameworks
governing aviation and competition policy, or the various ownership interests and
strategies of national governments.
The industry’s ability to successfully navigate these challenges will largely
depend on its responsiveness to change and ability to adapt. Policy settings that
are flexible, practical, coordinated and forward-looking will best place the industry
to do this.
Australia is served - internationally, domestically and regionally - by a network of
air services that facilitates the movement of people and goods at highly
competitive fares.
The continued contribution of aviation to Australia’s economic growth and
development – and the important role of a locally based industry within this –
requires policy settings that balance the economic, tourism and social objectives
which aviation supports, and that take account of Australia’s individual
circumstances, while recognising the global industry context.
For the Australian industry, this includes the ability to secure capital to support
investment in new and more efficient aircraft, to generate returns to
shareholders, and to operate on a fair and internationally competitive footing.
A stable policy and regulatory framework should deliver competitive yet
sustainable market access, foster investment in efficient, modern and affordable
infrastructure, less emissions-intensive technology and skills that support
aviation.
It should be underpinned by practical, cost-effective and harmonised standards
that ensure the operation of safe and secure air services, while protecting the
interests of consumers.
The links between the aviation-related issues that have a bearing on the shape of
the industry are clear. For example, viable services to regional and remote
destinations rely on airlines being able to invest in cost-effective aircraft and
attract highly skilled pilots to safely operate these aircraft between airports with
reasonable charges that can connect travellers with international markets.
II
Similarly important is consideration of the way in which the aviation framework
interacts with Australia’s broader policy settings in areas such as taxation,
competition and industry development, and recognition of their influence on the
competitiveness and strength of the industry.
The Qantas Group therefore welcomes the opportunity to contribute views across
the range of subject areas covered by the Issues Paper.
An executive summary of our views is set out at pages V-XIV and
recommendations for government stemming from these can be found at pages
XV-XXVII. Detailed discussion of the issues canvassed is presented at pages 1-
158 by Chapter reference reflecting the topic headings in the Issues Paper.
III
CONTENTS
EXECUTIVE SUMMARY V
RECOMMENDATIONS FOR GOVERNMENT XVI
1 MARKET ACCESS AND SKILLS ISSUES 1
1.1 INTERNATIONAL SERVICES 1
1.1.1 Serving the national interest 1
1.1.2 Access to Australia’s international markets 2
1.1.3 Principal elements of Australian policy 3
1.1.4 Additional policy considerations 4
1.1.5 Foreign carrier use of seventh freedom rights ex Australia 7
1.1.6 Cabotage 8
1.1.7 Accessing regional Australia 10
1.1.8 Open cargo policy 12
1.1.9 Designation 14
1.1.10 Future industry structure 14
1.1.11 Future market access priorities 18
1.1.12 Passenger processing and facilitation issues 19
1.2 DOMESTIC SERVICES 24
1.2.1 Deregulation and the delivery of interstate services 24
1.2.2 Airline ownership and access to capital 24
1.3 REGIONAL AND GENERAL AVIATION 27
1.3.1 Serving regional and remote communities 27
1.4 ADDRESSING SKILLS NEEDS IN THE AVIATION INDUSTRY 28
1.4.1 Qantas Group investment 29
1.4.2 Role of government 31
2 AVIATION INFRASTRUCTURE 41
2.1 AIRPORT PLANNING AND DEVELOPMENT 41
2.1.2 Land use planning and development at major airports 43
2.1.3 Non aeronautical development on airport sites 45
2.1.4 Emerging / regional airports 47
2.1.5 Safeguarding Australia’s key airport infrastructure 48
2.1.6 Future airport needs 50
2.1.7 Current and future infrastructure pressures 54
2.1.8 Limiting the effects of aircraft noise 57
2.1.9 Pricing of airport services 59
IV
2.2 AIR TRAFFIC MANAGEMENT 74
2.2.1 Enhancing air traffic management 74
3 SAFETY 79
3.1 SAFETY REGULATION AND REGULATORY REFORM 79
3.1.1 Regulatory reform process 79
3.1.2 Governance arrangements for CASA 81
3.1.3 Relations with industry 82
3.1.4 Inter-agency relations 82
3.1.5 Maintenance of industry standards 83
3.1.6 Harmonisation 84
3.1.7 Future focus 85
4 CUSTOMER AND COMMUNITY PROTECTION 87
4.1 AVIATION EMISSIONS AND CLIMATE CHANGE 87
4.1.1 Qantas Group climate change policy 88
4.1.2 Government policies and environmental sustainability 90
4.1.3 Emissions trading 93
4.2 AIRCRAFT NOISE 94
4.2.1 ANEF system 94
4.3 CONSUMER PROTECTION 95
4.3.1 Existing standards and procedures 96
4.3.2 Reasonableness of existing terms and conditions 99
4.4 DISABILITY STANDARDS 102
4.4.1 Qantas initiatives 102
4.4.2 Interaction of Transport Standards and the Disability
Discrimination Act with other legislation 107
4.4.3 General comments 115
4.4.4 Mode specific guidelines 116
4.5 COMPENSATION ARRANGEMENTS IN THE EVENT OF AN
ACCIDENT 117
4.5.1 Passenger liability 117
4.5.2 Baggage/ cargo liability 119
4.5.3 Family Assistance Code 120
5 AVIATION SECURITY 137
5.1.1 The evolving threat environment 137
5.1.2 Advancing the Australian regulatory framework 139
5.1.3 Aviation screening 142
5.1.4 Progressing regional AVSEC regulation 147
V
5.1.5 Harmonising security technology 151
5.1.6 Access control and background checks 153
5.1.7 An integrated approach to infrastructure security 155
5.1.8 Air cargo security 156
5.1.9 Categorisation of airports 156
5.1.10 Airport policing 157
VI
EXECUTIVE SUMMARY
1 THE AUSTRALIAN AVIATION INDUSTRY
1.1 International Services
1.1.1 Australia’s ability to sustain a viable, fully privatised, internationally
competitive aviation industry over the longer term should not be taken for
granted. If Australia’s carriers are unable to capture a healthy share of
expected international market growth, particularly in the Asia Pacific
region, the industry risks being marginalised over time and will find it
increasingly difficult to invest, grow jobs, operate marginal routes, serve
regional destinations and support tourism.
1.1.2 Key features of the Qantas Group’s activities serve to underline the
breadth and importance of an Australian-based industry’s contribution to
the national interest. Access Economics estimates that every additional $1
million in revenue generated by the Qantas Group results in an additional
$2.1 million in Australian output - of which $1.1 million represents flow-on
benefits to non-aviation related activity - and an additional 8.4 jobs
(including both aviation and non-aviation jobs).
1.1.3 Both the design and implementation of Government policy on international
air services are major factors shaping the competitive environment.
Australia’s aviation policy has been evolving, under successive
governments, with progressive liberalisation based on pro-competition and
consumer-oriented principles.
1.1.4 Qantas broadly supports the current policy settings. However, these
contain a delicate balance of competing interests, and rely heavily on
market efficiency principles that do not always recognise the lack of a level
playing field in international aviation, and the complexity of the bilateral
system. These factors mean that:
• Australia has limited leverage by virtue of its market size and relatively
remote end-of-line location;
• Hub based carriers have significant advantages over Australian based
airlines;
• Competition is distorted by a range of structural issues including
government ownership and support and more favourable taxation
frameworks.
V
1.1.5 While it is possible that it will be beneficial to grant seventh freedom rights
for passenger services in the future, this should be considered on a case-
by-case basis and only encouraged when there is a clear and useable
commercial value in the trade for Australian carriers.
1.1.6 The grant of consecutive cabotage rights to foreign carriers would have a
severe impact on the ability of local airlines to retain the breadth of their
current networks, in particular marginal or loss-making regional routes.
Australia’s investment cabotage policy allows generous access by foreign
entities to the domestic market, while enabling a more sustainable and
stable operating environment for the local industry and ensuring that
entrants establish a long term presence that contributes to the Australian
economy and employment.
1.1.7 The ‘Regional Package’ has met with little success in encouraging foreign
carriers to operate services to locations other than Australia’s main
gateway points due to the economic characteristics of regional routes, ie
lower volume, predominantly leisure based traffic and disproportionately
higher costs of operating.
1.1.8 Australia’s approach to the liberalisation of cargo rights has served
Australian carriers well, having capitalised on open fifth freedom rights to a
number of major markets, and has supported Qantas’ investment in long
term leasing of dedicated freighter aircraft. Qantas Freight’s ability to
develop a more extensive international network and build competitive
frequency on key cargo routes will be closely linked to Australia’s ability to
secure seventh freedom rights.
1.1.9 Designation criteria based on ownership and control by a country’s
nationals limits airlines’ access to capital, in what is a highly capital
intensive industry. This has the greatest impact on those carriers based in
small capital markets and who are not government owned or supported.
The criteria also restrict airlines’ ability to consolidate, as has occurred in
other industries without these types of restrictions.
1.1.10 The Australian aviation industry has and will continue to evolve as a result
of new business models, new routes and new technology. These
developments present a range of opportunities which will require further
liberalisation in a number of Australia’s bilateral air services arrangements
to allow local carriers to take advantage of them.
1.1.11 Changes to the taxation framework could significantly improve the
international competitiveness of Australia’s airlines, and in doing so, go
some way to offsetting the structural disadvantages faced by the local
industry.
VI
1.1.12 Passenger frustration at processing procedures at Australia’s international
airports is increasing, in particular at secondary screening points, and has
the potential to impact Australia’s competitiveness as a tourism
destination.
1.1.13 Improvements in technology will enable border agencies to concentrate on
passengers of interest while allowing the majority of travellers to pass
through airports freely, leading to a reduction in charges such as the
Passenger Movement Charge (PMC) over time.
1.2 Domestic services
1.2.1 Qantas is the only carrier in the Australian domestic market which is
limited in its ability to source capital due to requirements to comply with
the provisions of the Qantas Sale Act 1992. The Qantas Sale Act 1992
inhibits Qantas’ ability to access capital to fund investment for growth and
ability to participate in industry consolidation. Removing these restrictions
need not compromise the ability of Australian carriers to serve the national
interest.
1.3 Regional and general aviation
1.3.1 The operation of profitable scheduled airline services on routes to some
regional and remote communities presents significant challenges. While
competition should occur whenever possible, it may be appropriate to
license operations to one airline in the interests of continuity and
sustainability of services.
1.4 Addressing skills needs in the aviation industry
1.4.1 The global aviation industry has been undergoing rapid growth, resulting
in rising demand for highly skilled occupational categories such as pilots
and engineers.
1.4.2 Regional and remote communities are one of the key stakeholder groups
most affected by these dynamics within the aviation industry.
1.4.3 The Qantas Group continues to invest significantly in initiatives that
address skills needs in these specialist areas, as well as across our entire
workforce, including through expenditure of over $280 million annually on
training.
1.4.4 There are opportunities for the Government to assist and augment the
investment in skills training made by industry through enhancing and
building on existing federal policy settings and programs, in addition to
extending state-based initiatives.
VII
2 AVIATION INFRASTRUCTURE
2.1 Airport planning and development
2.1.1 Airport infrastructure is vital to ensure demand for air travel to/from and
within Australia and the associated economic benefits are delivered.
2.1.2 Current regulatory structures do not appear capable of resolving the
continuing challenge in ensuring the efficient supply of needed airport
capacity.
2.1.3 Optimisation of airport capacity needs coordination of many elements,
including runway capacity, taxiway layouts, terminal capacity, off gate
apron for layover aircraft, hangars, maintenance facilities and transport
access (including road access and car parking) for passengers and airport
workers. It is also essential to coordinate airspace usage surrounding the
airport.
2.1.4 Consultation between airport owners and airline operators is currently not
leading to efficient and timely outcomes to meet passenger needs.
2.1.5 Currently there is a lack of coordination between airports, local and State
governments on:
• the timely resolution of planning and regulatory issues;
• the provision of necessary supporting infrastructure including road/rail
connections; and
• safeguarding airspace/safety zones for future airport development.
2.1.6 Poor coordination of airport planning has led to:
• unnecessary complexity and stress for passengers and visitors using
airports;
• increased traffic congestion and unnecessary impact on communities
surrounding airports; and
• failure to optimise the economic benefits that airports can provide to
their communities.
VIII
2.1.7 The current regulatory regime gives rise to high returns to airport owners
which are often ultimately collected from consumers. This occurs because
airports, in most cases, have monopoly power which they use to extract
uncommercial rents.
2.1.8 Greater clarity must be provided to establish the criteria for inclusion or
exclusion of airports in the Price Monitoring Regime.
2.2 Air traffic management
2.2.1 Communication, navigation, surveillance and air traffic management
(ATM) need to be continuously improved in line with technical advances.
2.2.2 The needs of Regular Public Transport (RPT) operators, which are
responsible for the carriage of the overwhelming majority of air travellers
in Australia, should be paramount in the development of airspace policy.
2.2.3 Australia is ideally suited to take advantage of developments in satellite
technology for air traffic management.
2.2.4 Industry and government groups should continue to work collaboratively in
developing strategic plans for the introduction of new ATM technology.
2.2.5 Although much progress has been made with enhancing industry
standards, such as the introduction of Automatic Dependent Surveillance
Broadcast (ADS-B), regulatory frameworks have not kept pace with these
developments resulting in less than optimal safety and operational
performance outcomes.
2.2.6 The Australian Strategic Air Traffic Management Group (ASTRA) plan
provides an appropriate vision for the future of ATM in Australia.
2.2.7 Industry is currently inhibited by the vast areas of airspace controlled by
the military in proximity to major capital city airports.
2.2.8 Australia should continue to participate in global and regional forums to
ensure that international standardisation and harmonisation of air traffic
control systems is progressed, with the most effective representation
possible.
2.2.9 Government and industry need to cooperatively develop strategies to
again make air traffic control a career of choice within the aviation world.
IX
3 AVIATION SAFETY
3.1 Safety regulation and regulatory reform
3.1.1 Completion of the Civil Aviation Safety Authority’s (CASA) regulatory
reform program is a priority and should be underpinned by a whole of
government approach.
3.1.2 Outcomes based legislation should deliver consistency, and wherever
possible, harmonisation with world’s best practice.
3.1.3 Continuous improvement of the framework should be supported by
sufficiently qualified resources, including industry experts where
appropriate, and a formal Quality Management System.
3.1.4 Other opportunities which could be included in CASA’s regulatory reform
program to achieve:
• Greater conformity with other national aviation authorities;
• Greater levels of mutual recognition between Australian governmental
agencies associated with aviation; and
• More Australian support for safety and regulatory initiatives in the
Asia/Pacific region.
3.1.5 Current governance arrangements at CASA are resulting in an
inconsistent application of policy and regulations in the field.
3.1.6 The Standards Consultative Committee (SCC) provides a positive
consultative process and may be the appropriate forum to provide
feedback into a CASA Quality Management System.
3.1.7 CASA should not conduct or participate in safety investigations, which
should remain the sole province of the Australian Transport Safety Bureau
(ATSB), although independent and parallel review of safety compliance in
incidents and accidents remains an important CASA function. Relations
between CASA and the ATSB could be improved.
3.1.8 The Office of Airspace Regulation should be more responsive and
accountable to industry needs.
X
3.1.9 Greater CASA commitment to effectively develop, finalise and implement
mandated Safety Management System (SMS) requirements in conjunction
with industry is desirable.
3.1.10 After safety, international harmonisation should be CASA’s priority.
4 CUSTOMER AND COMMUNITY PROTECTION
4.1 Aviation emissions and climate change
4.1.1 Along with safety and security, environmental responsibility is at the top of
the aviation industry’s agenda. The industry has coordinated efforts to
address environmental challenges while continuing to grow and contribute
to economies in a sustainable way.
4.1.2 The Qantas Group’s response to climate change is based on ‘four pillars’:
• measurement, target setting and transparency – the Group has set a
range of performance improvement targets for achievement by 2011;
• mitigation – implementation of a range of initiatives such as investment
in new aircraft technology, Required Navigation Performance
procedures, User Preferred Routes and a Group-wide employee
environmental improvement program ‘begreen’;
• adapting for the future – investment in research and the eventual
commercialisation of an alternative jet fuel, participate in the
development of further airframe/ engine technology advancement; and
• offsetting.
4.1.3 A range of government-led measures, such as enhanced infrastructure
and incentives, can assist in reducing emissions while enhancing the
global competitiveness and sustainability of the Australian aviation
industry.
4.1.4 Global and regional Emissions Trading Schemes (ETS), although
important, should complement a government policy to accelerate the
transition to less emission intensive technology.
XI
4.1.5 Any ETS should be market-based, avoid creating competitive distortion
among airlines, industries and regions, have the broadest possible
coverage over a long time horizon, and be designed for harmonisation
while recognising local characteristics including geographic location,
population size and national carbon footprint.
4.2 Aircraft noise
4.2.1 While the Australian Noise Exposure Forecast (ANEF) system goes some
way to providing an effective tool for planning purposes, it does not clearly
articulate the impacts of aircraft noise around an airport and must be
supplemented with broader scenario examination tools.
4.2.2 National standards and local airport/community partnerships both have
important roles to play in noise management.
4.3 Consumer protection
4.3.1 The Qantas Group leads the way in applying best practice consumer
protection standards in the Australian aviation industry. This focuses on
promoting products and services in an open and transparent manner to
allow the consumer to make fully informed decisions, and providing those
services in a manner that strikes an appropriate balance between the
needs of consumers and the commercial and operational realities of the
airline business.
4.3.2 Existing consumer protections and procedures for dealing with
passengers are more than adequate.
4.3.3 Qantas and Jetstar’s terms and conditions of carriage are reasonable and
strike a fair balance between protecting business interests and providing
customer flexibility.
4.3.4 Australian consumers continue to benefit from high levels of service and
low fares. Where passengers value added comforts or benefits to their
travel experiences they can access fares with these attributes. It would
hurt consumers in the form of higher fares if these optional extras were
mandated to be included in all tickets.
4.4 Disability standards
4.4.1 The Qantas Group remains committed to the carriage of passengers with
disabilities in a safe non-discriminatory manner with dignity while ensuring
the health and safety of Qantas staff.
XII
4.4.2 The Qantas Group’s commitment to customers with disabilities is reflected
in a range of initiatives including a review of our mobility aid policy,
initiation of the development and design of an ‘Eagle Lifter’, establishment
of an internal Working Group and Customer Forum, and staff training and
education.
4.4.3 Airlines face significant challenges in balancing passenger rights between
conflicting legislative requirements arising from the interaction of the
Disability Discrimination Act 1992 and the Disability Standards for
Accessible Public Transport 2002 with other Federal and State legislation.
This is an increasing concern in the context of the highly competitive
operating environment and the development of new airline business
models.
4.4.4 The Disability Discrimination Act 1992 and the Disability Standards for
Accessible Public Transport 2002 do not achieve the aims of the
legislation in the context of air travel. The Group supports the
development of an industry-focused set of requirements to accommodate
people with disabilities that address the unique requirements, restrictions
and environment within which air travel is provided. Ideally this would take
the form of mode specific guidelines to the Disability Standards for
Accessible Public Transport 2002. Alternatively, amendments to the
Disability Standards for Accessible Public Transport 2002 are required to
address the issues faced by airlines in the provision of services to people
with disabilities.
4.4.5 There are opportunities to improve the interaction of the Disability
Standards for Accessible Public Transport 2002 and the Disability
Discrimination Act 1992 with other legislation in relation to the training of
assistance animals, disability aids and mobility aids.
4.5 Compensation arrangements in the event of an accident
4.5.1 The current domestic regime under the Civil Aviation (Carriers Liability)
Act 1959 is an effective and appropriate mechanism for handling
passenger liability claims and the maximum compensation limit per
passenger is set at an appropriate level.
4.5.2 On balance, the current regime is preferable in a domestic carriage
context to the application of the Montreal Convention to such carriage.
4.5.3 While the current regime is an appropriate model for compensating
passengers, there would be significant benefit in clarifying aspects of the
existing legislation.
XIII
4.5.4 The existing arrangements for baggage and cargo liability work very
effectively, and the minimum insurance standards are appropriate.
Extension of insurance requirements for third party surface damage may
disadvantage smaller operators.
4.5.5 An area of third party damage claims that requires attention is the
Damage by Aircraft Act 1999. The Act currently imposes strict and
unlimited liability on the aircraft operator with no defence. As it is not
possible to purchase insurance for an unlimited amount, this exposes
operators to the risk of a claim for surface damage exceeding the levels of
insurance available, and the lack of any defence to such claims further
exposes the operator to uninsurable liabilities.
4.5.6 Qantas fully supports the Voluntary Family Assistance Code and in the
event of an aviation accident would intend to comply with the Code.
5 AVIATION SECURITY
5.1 The increasingly complex nature of the aviation operating environment
requires an equally agile regulatory and operational framework to enable
industry and government to better engage with both potential and realised
threats.
5.2 From an industry and public perspective, the current aviation security
system is often hampered by inconsistent practice, duplicated effort and a
range of activities that can create a confused sense of the collective
outcomes being sought.
5.3 The aviation security system of the future must clearly establish the
purpose of aviation security in Australia and consider the protection of
people and aircraft in the air and on the ground as part of a holistic and
integrated aviation security strategy. To effectively deliver such a strategy,
key features would include:
• a simplified and transparent regulatory framework;
• a single national screening authority;
• a single national training and unified licensing authority;
• new patterns of interaction between the aviation industry and
Government, with competitive neutrality at its core;
XIV
• improved methods of sharing threat and risk information and relevant
intelligence with aviation security participants;
• a framework for an integrated approach to the command, control and
coordination of national aviation security measures and responses;
• an enhanced national approach to the regulation of the design of
transport infrastructure that internalises best practice security guidelines;
and
• a national plan for the development of transport infrastructure to respond
to the passenger, freight and structural capacity growth anticipated out
to 2025.
5.4 A high performing ‘AVSEC’ system would be built on a regulatory and
operational framework that clearly imbeds these features within a
philosophy characterised by innovation, flexibility and partnership.
XV
RECOMMENDATIONS FOR GOVERNMENT
1 THE AUSTRALIAN AVIATION INDUSTRY
1.1 International services
1.1.1 Continue a carefully sequenced case-by-case approach to further
international air services liberalisation, with priority given to the needs of
Australian carriers and markets requiring additional origin/destination
capacity. The sixth freedom advantages of hub players should be offset by
obtaining additional fifth freedom opportunities for Australian carriers. Any
further growth opportunities for aggressive ‘national agenda’ carriers with
small home markets should be conservatively measured and phased.
1.1.2 Closely monitor progress of multilateral developments and investigate
opportunities to accede to such arrangements if they result in balanced
outcomes for Australian carriers.
1.1.3 Focus on removing restrictions on fifth freedom rights in Australia’s
bilaterals with other countries before giving consideration to the value for
Australian negotiating seventh freedom passenger rights on a case by
case basis.
1.1.4 Avoid granting consecutive cabotage rights which will inflict significant
damage on the local industry, the economy and Australian jobs.
1.1.5 Press for reciprocity of investment cabotage rights when negotiating
bilateral air services arrangements.
1.1.6 Consider reviewing the charging regimes in place at regional ports in order
to attract greater visitation by carriers.
1.1.7 Encourage State governments to develop marketing initiatives to attract
visitors to regional ports in lieu of providing subsidies to airlines, and
review the imposition of opportunistic charges on airline operations.
1.1.8 Pursue further liberalisation of cargo arrangements to achieve balanced
outcomes which support the growth and competitiveness of Australian
operators, including through the negotiation of seventh freedom rights.
1.1.9 Continue to negotiate criteria for designation in Australia’s bilateral
agreements based on principal place of business and regulatory control.
XVI
1.1.10 Consider changes to the taxation framework to:
• Reduce the current statutory cap on aircraft effective life of 10 years to
a level more commensurate with international competitors, eg three to
five years.
• Reintroduce the investment allowance to support fleet growth and re-
investment.
• Reintroduce the balancing charge offset, but limited in application to
the reduction in the depreciable value of replacement assets.
• Revise Australia’s double tax treaties to ensure that Australian airlines
are not disadvantaged relative to competitors.
1.1.11 Continue to support a coordinated approach between industry and
government to address passenger facilitation issues at Australia’s
international airports.
1.1.12 Consider providing increased funding to the Australian Quarantine and
Inspection Service (AQIS) to address secondary screening delays and
encourage an approach driven by risk management principles in lieu of
inspection targets.
1.1.13 Encourage the continuation of work towards a common border with New
Zealand.
1.1.14 Introduce transparency of the use of funds from the Passenger Movement
Charge.
1.2 Domestic services
1.2.1 Consider lifting the foreign investment restrictions in the Qantas Sale Act
1992 to allow Qantas to access capital more freely.
1.3 Regional services
1.3.1 Explore the development of an overarching federally-based framework in
relation to serving regional and remote communities, to allow airlines to
work with a common approach across all areas of Australia.
XVII
1.4 Addressing skills needs in the aviation industry
1.4.1 Extend state based initiatives to encourage aviation based careers on a
national basis.
1.4.2 Provide funding to assist the introduction of a Qantas Engineering
Summer School Program.
1.4.3 Work with industry to promote Australia internationally as an aviation
centre of excellence, and a provider of safe work environments and high
tech skills development.
1.4.4 Add ‘Pilots’ to the ‘Migration Occupations in Demand List’ to address the
skills shortage.
1.4.5 Remove the FEE-help cap for aviation qualifications.
1.4.6 Form a combined government and industry taskforce to explore the
proposal of a national industry run flying school and a system of transfer
pricing or bonding for pilots.
1.4.7 Enhance the Tools For Your Trade initiative for Aircraft Maintenance
Engineer (AME) Structure, Mechanical and Avionic trades.
1.4.8 Extend the apprentice travel concession cards and the registration of
motor vehicle subsidy to cover all years of training.
1.4.9 Extend the Australian training fee voucher system to cover TAFE Training
costs in Year 3 of apprenticeships.
1.4.10 Provide assistance to students undertaking pre-vocational programs.
1.4.11 Introduce accelerated depreciation provisions for new technologies and
equipment to support skill development, or review the research and
development tax concession to enable such expenditure to qualify.
XVIII
2 AVIATION INFRASTRUCTURE
2.1 Airport planning and development
2.1.1 Recognise the change in significance of regional airports and provide a
coordinated national framework for efficient airport planning and pricing.
2.1.2 Implement mandated consultation between local councils, airports and
airport users prior to approving any on or off airport development that has
the capacity to affect the operations of an airport or residents and
businesses in proximity to an airport.
2.1.3 Establish regular forums for relevant businesses, State and local council
parties to meet and discuss on and off airport planning issues.
Government involvement in these discussions is essential.
2.1.4 Establish a compulsory and binding arbitration process to allow disputes
with respect to on and off airport planning to be expediently resolved.
2.1.5 Ensure that local councils considering planning applications which could
affect the operations of an airport are required to consider airport Master
Plans as part of their planning approval process.
2.1.6 Amend the Airports Act 1996 so that the Minister, in considering whether
to approve an airport’s Master Plan, has consideration for:
• Any similar long term planning documents of the local councils that
surround the airport in question;
• Any Master Plan or similar documents created by State planning
authorities that may effect an airport; and
• Any Master Plan for an airport that could be used as an alternative
airport to the airport in question.
2.1.7 Review Section 81 of the Airports Act 1996 to ensure that the obligation to
consider civil aviation uses is expressed as the first and highest priority in
considering the approval of a Master Plan.
2.1.8 Include mechanisms in the regulatory regime to assist in protecting airport
aeronautical users and provide a balance between non-aeronautical
development and aeronautical requirements depending on whether a dual
till or single till approach is taken.
XIX
2.1.9 Create mandatory consultation and arbitration processes in relation to the
nature and appropriateness of airport infrastructure at regional airports.
2.1.10 Develop a broad based airport planning framework that applies to both
major and regional airports (regardless of ownership) to ensure that
aeronautical requirements are not compromised. It is envisaged that this
framework would include guidelines on the following matters:
• The development of airport infrastructure;
• Consultation processes between airport operators, airlines and
communities;
• Pricing transparency and reporting; and
• Compulsory and binding dispute resolution processes.
2.1.11 Review existing artificial capacity constraints at airports in light of new
aircraft and technologies.
2.1.12 Review alternative mechanisms to curfews for those airports in Australia
that currently have curfew restrictions.
2.1.13 Do not introduce any new or additional curfews or artificial airport capacity
constraints.
2.1.14 Look to provide more flexibility in terms of access to Sydney airport.
2.1.15 Consider future strategies to increase capacity in the Sydney basin.
2.1.16 Adopt a policy that manages traffic growth at capital city and regional
airports in a fashion that minimises the use of curfews where other means
of mitigating aircraft noise are available.
2.1.17 Develop a policy framework that seeks to provide a more sustainable
balance between the commercial and operational needs and flexibilities of
civilian Regular Public Transport (RPT) operators while concurrently being
sensitive to military requirements.
2.1.18 Establish clear guidelines and criteria for the selection of airports to be
regulated under ‘Light Handed Monitoring’.
XX
2.1.19 Create a clearly defined regulatory framework for core, non-core, non-
regulated airports which includes but is not limited to:
• Applying the International Civil Aviation Organization (ICAO) pricing
principle that precludes pre-funding for capital expenditure;
• Recognising the role of airlines in bringing customers, that in turn
generate revenue and returns on what are classified as non
aeronautical assets;
• Defining ‘customer agreement’ for pricing purposes to prevent
‘agreement’ being deemed by airports to have occurred merely through
the continued use of that airport; and
• Establishing clear criteria for the airports to which this framework will
apply.
2.1.20 Provide a clear and defined response to the Productivity Commission
Recommendations including applications to pricing and reporting,
specifically in relation to:
• The ‘show cause’ mechanism and how to prove the cause;
• The ‘line in the sand’ and how to treat re-valued assets especially for
negotiation and pricing purposes; and
• Additionally include in the definition of aeronautical services at least
car parking, airline offices and lounges.
2.1.21 Regulate to ensure that Fuel Throughput Levies and other third party
charges are made transparent and revenue derived is accounted for as
‘allowable revenue’ in the building block calculation.
2.1.22 Include the Civil Aviation Safety Authority (CASA) in decision-making
relating to building height and position approvals in airport approach
areas.
2.1.23 Ensure that local planning guidelines consider “worst case” noise
scenarios for residents around airports or under flight paths through the
use of complementary measures.
2.1.24 Regulate to ensure that a pre-condition of development approval for
developments in areas surrounding airports is that any application include
plans detailing how airport Master Plans and future air space planning is
being incorporated into the development designs.
XXI
2.1.25 Regulate to ensure that mandatory information is placed on the title of
noise-impacted residences.
2.1.26 Regulate to ensure that aircraft noise be included as a consideration in the
sales process of any affected residence.
2.2 Air traffic management
2.2.1 Endorse the current Australian Strategic Air Traffic Management Group
(ASTRA) plan.
2.2.2 Formally sanction ASTRA with a Head of Power that sees it report to and
be tasked by an Aviation Policy Group (APG) type body, and encourage
representation by industry experts on both the APG and Aviation
Implementation Group (AIG).
2.2.3 Consider the introduction of Flexible Use Airspace (FUA) in airspace
controlled by the military to assist in reduced aviation emissions.
2.2.4 Monitor the Sydney Airport Community Forum (SACF) to ensure that its
focus is on the primary objective improving operating efficiencies to the
benefit of the broader community and aircraft operators.
2.2.5 Consider introducing appropriate targets and measurements for Australian
regulatory agencies to drive improving performance.
2.2.6 Consider the inclusion of industry experts in official Australian delegations
attending international forums.
2.2.7 Consider developing strategies to make air traffic control a career of
choice.
3 AVIATION SAFETY
3.1 Safety regulation and regulatory reform
3.1.1 Consider the appointment of a project manager to oversee the Civil
Aviation Safety Authority’s (CASA) regulatory reform and to focus on the
removal of impediments with the drafting of new rules.
3.1.2 Consider the secondment of industry experts to CASA to assist in
producing guidance material in a consistent format.
XXII
3.1.3 Encourage direct and ongoing industry involvement in the review of CASA
regulations post its regulatory reform program through a mechanism such
as the Standards Consultative Committee (SCC).
3.1.4 Make CASA accountable for establishing and maintaining its own Quality
Management System.
3.1.5 Review CASA governance arrangements to determine their effectiveness
and ability to deliver consistent and timely outcomes to the Minister and
industry.
3.1.6 Encourage regular meetings at CASA Chief Executive Officer level with
Australia’s major carriers.
3.1.7 Consider devolving some CASA administrative activities to industry.
3.1.8 Consider giving the Australian Transport Safety Bureau (ATSB) autonomy
from the Department of Infrastructure, Transport, Regional Development
and Local Government and other agencies.
3.1.9 Encourage CASA to change Office of Airspace Regulation (OAR)
practices to adequately consult with the industry and to be more
responsive and accountable to industry needs.
3.1.10 Encourage CASA to develop and implement mandated Safety
Management System (SMS) requirements via guidance material and
safety promotional activities.
3.1.11 Ensure that CASA has as an objective harmonisation of its legislation and
regulations and that, in support of this, it remains active in international
aviation matters via ongoing involvement with overseas regulatory
agencies.
4 CUSTOMER AND COMMUNITY PROTECTION
4.1 Aviation emissions and climate change
4.1.1 Work with the broader transport industry to invest in improved
infrastructure, transport connectivity and modal links between airports and
the communities the airports service.
4.1.2 Provide support to accelerate the introduction of Required Navigation
Performance (RNP) in Australia.
XXIII
4.1.3 Provide financial (or other) recognition for the trade-off between different
environmental priorities, ie noise vs emissions.
4.1.4 Provide incentives to all industry participants for research and
development into new fuel types.
4.1.5 Increase the deduction for research and development expenditure into
new fuel types from its current level of 125 percent and lower certain test
threshold(s).
4.1.6 Introduce an accelerated ‘green’ depreciation regime, which would include
reducing the effective life of aircraft for tax depreciation purposes from
three to five years and re-introducing the investment allowance and
balancing charge offset, or significantly modify the tax regime to
encourage research and development, including a broadening of the
eligibility for Government grants, subsidies and rebates.
4.1.7 Allocate free permits to aviation under any Australian Emissions Trading
Scheme (ETS) developed to accelerate the transition to less emissions
intensive technology.
4.1.8 Support development of an international framework to manage tax-related
issues arising from the inclusion of international emissions in ETS, which
can impact the competitiveness of airlines.
4.2 Aircraft noise
4.2.1 Ensure that state and local governments are integrated into the aircraft
noise and management process and adopt a more pro-active role in
aircraft noise education.
4.2.2 Develop a national standard for aircraft noise management.
4.3 Consumer protection
4.3.1 Maintain the current legal framework for the protection of consumers of
airline products and services.
4.4 Disability standards
4.4.1 Amend the Disability Standards for Accessible Public Transport 2002, or
develop mode specific guidelines, to provide certainty in relation to the
level of training required of assistance animals and how to determine
which organisations are recognised as providing an appropriate level of
training.
XXIV
4.4.2 Ensure industry representatives (including the Qantas Group) are
consulted on any issues, initiatives or proposed guidelines in relation to
the carriage of assistance animals on public transport, especially those
initiatives or guidelines that apply to aircraft.
4.4.3 Provide guidelines in the Disability Standards for Accessible Public
Transport 2002 in relation to the maximum weight and/or number of
disability aids that a passenger with a disability can reasonably carry free
of charge.
4.4.4 Amend the Disability Standards for Accessible Public Transport 2002, in
consultation with each carrier in respect of their particular aircraft fleet, to
include maximum weight limits on mobility aids on aircraft and a limit on
the number of mobility aids that can be carried on each aircraft.
4.4.5 Develop mode specific guidelines, in consultation with industry groups
(including the Qantas Group), under the Disability Standards for
Accessible Public Transport 2002 to address issues that set it apart from
other modes of transport.
4.5 Compensation arrangements in the event of an accident
4.5.1 Amend the Civil Aviation (Carriers Liability) Act 1959 to:
• Clearly state that the Civil Liability Acts in various states of Australia
apply to domestic aviation passenger claims;
• Exclude ‘pure nervous shock’ claims, thereby bringing it in line with
international practice; and
• Expressly state that it provides the exclusive remedies in the carriage of
passengers, baggage and cargo.
4.5.2 Amend the Damage by Aircraft Act 1999 to:
• Cap the operator’s liability; and
• Exclude or limit the operator’s liability for acts of terrorism.
XXV
5 AVIATION SECURITY
5.1 Work with industry to pro-actively develop innovative, anticipatory and
relevant approaches to future aviation security challenges.
5.2 Develop a holistic and integrated national aviation security strategy that
takes into account the increasingly complex operating environment.
5.3 Adopt a risk-based, intelligence-led and outcomes based approach to
delivering a regulatory for security that is sufficiently flexible for the needs of
the range of industry participants while ensuring compliance.
5.4 Support proper consultation between governments, airlines, airports, peak
bodies and international associations to ensure that applicable security
measures are practical, cost-effective, efficient and sustainable.
5.5 Ensure that, wherever possible, Australia’s standards and procedures are
harmonised and granted mutual recognition internationally.
5.6 Support more comprehensive and timely intelligence sharing mechanisms
between government and industry at the national level.
5.7 Review the prohibited items list with the Weapons List at Regulation 1.09 of
the Aviation Transport Security Regulations 2005 and other measures
enacted since September 11 2001, in the context of a guiding philosophy
that focuses on the protection of the aircraft and avoiding mass casualties.
5.8 Consider establishment of a single screening authority in Australia, which is
outsourced and managed by industry and government in partnership.
5.9 Consider equally apportioning aviation security costs across industry as a
fixed fee per passenger cost (network pricing) in order to encourage
sustainability and growth of air services to regional communities.
5.10 Consider establishment of a single aviation training authority in order to
deliver consistent training standards and practices backed by a rigorous
quality assurance process.
5.11 Adopt a federal approach to the licensing of aviation security, allowing
transportability of the licence, reduced costs and delays associated with
mutual recognition, facilitate operational flexibility and provide a consistent
minimum eligibility and training standard.
5.12 Maintain the current policy position which exempts non jet aircraft from
passenger security screening requirements.
XXVI
5.13 Maintain the current exemptions against certain security measures for
specific charter operations.
5.14 Conduct a review of the effective use of Closed Circuit Television (CCTV)
within the aviation environment and the framework within which networks
should be shared.
5.15 Consider introducing accelerated depreciation rates for taxation purposes
for security related equipment in the aviation sector.
5.16 Limit the number of Aviation Security identification Cards (ASIC) issuing
bodies to those with significant need and volume to minimise the risk of a
significant breach.
5.17 Consider introducing a criminal history check, in conjunction with the
AusCheck process, as a requirement for employment of all staff in the
aviation industry.
5.18 Authorise AusCheck to release the full details of the criminal history check
to the issuing body in order to remove the duplication of effort and to
provide issuing bodies with a single and effective source of information to
meet both their ASIC and employment needs.
5.19 Introduce continuous monitoring by AusCheck of all ASICs or extend the
current validity period while conducting an automatic annual review to
ensure current eligibility.
5.20 Verify the eligibility of foreigners to hold an ASIC within the aviation sector
as it is often difficult to access criminal history.
5.21 Develop mechanisms to ensure that aviation security considerations are
integrated into broader infrastructure planning and development.
5.22 Introduce a Security Management System (SeMS) requirement for the air
cargo industry, which will improve threat capability assessment and security
processes.
5.23 Consider the effectiveness of airport categorisation, airport policing and
associated national security and policing activities such as the Air Security
Officer (ASO) Program in the context of a broader examination of
Australia’s aviation security policy settings.
XXVII
1 MARKET ACCESS AND SKILLS ISSUES
1.1 INTERNATIONAL SERVICES
Australia’s high dependence on international air links for the development of
trade and tourism is brought about by its relative isolation as a large island
continent, and widely dispersed main population centres. Previous policy reviews
have acknowledged that national economic and strategic interests are well
served by the Australian-based aviation industry’s strong contribution to these
links.
Given Australia’s relatively small domestic market, the local industry’s long-term
success is contingent on maintaining the ability to compete internationally.
However, as a strong domestic market is an important platform for the
international competitiveness of Australian carriers, it should be recognised that
policy settings in one arena will impact commercial outcomes in both.
Australia’s ability to sustain a viable, fully privatised, internationally competitive
aviation industry over the longer term should not be taken for granted. If
Australia’s carriers are unable to capture a healthy share of expected
international market growth, particularly in the Asia-Pacific region, the industry
risks being marginalised over time and will find it increasingly difficult to invest,
grow jobs, operate marginal routes, serve regional destinations, and support
tourism.
1.1.1 Serving the national interest
Key features of the Qantas Group’s activities serve to underline the breadth and
importance of an Australian-based industry’s contribution to the national interest.
The Qantas Group’s flying brands offer an integrated regional, domestic and
international network serving over 140 destinations. In conjunction with their
many regional airline affiliates, they provide a network of air services that link
rural communities with major cities on the other side of the world. Qantas also
facilitates trade flows through its growing air and road freight networks.
Qantas employs a work force of approximately 36,000 people. Many, including
pilots and aircraft maintenance engineers, are in highly skilled categories and
supported by major investments in training. More than 90 percent of staff are
based in Australia. In contrast, our five major foreign competitors – who account
for a greater proportion of international market share than the Group – employ
about 1,600 staff in Australia.
1
In undertaking a broad range of aviation-based activities, the Group relies upon –
and generates demand for – a wide range of goods and services. Expenditure
with suppliers is expected to reach around $14.5 billion in 2007/08, of which $9.4
billion will be with Australian-based firms.
Qantas is the single largest private organisation marketing Australia overseas
and is singularly focused on bringing tourists to this market. Qantas has
supported Australia's largest tourism trade event – the Australian Tourism
Exchange (ATE) – for over 25 years and is again the major airline sponsor in
2008. Approximately 600 international delegates from around the world will be
attending this years ATE, the majority of which will be flown in with the
assistance of Qantas. Qantas Holidays, a Group subsidiary, is Australia’s leading
wholesaler of domestic holidays, and recently joined with Jetset Travelworld to
create a leading vertically integrated travel services business.
Qantas is a major supporter of community and charity organisations, indigenous
initiatives, sports and the arts in Australia.
Qantas has played an important role in national emergency and defence
planning for the government, for example following the Bali bombings and the
2006 tsunami.
Qantas’ incremental contribution to the economy has been assessed by Access
Economics, based on indirect multiplier effects. It found that every additional $1
million in revenue generated by the Qantas Group would result in an additional
$2.1 million in Australian output - of which $1.1 million represented flow-on
benefits to non-aviation related activity - and an additional 8.4 jobs (including
both aviation and non-aviation jobs)1.
Qantas paid over $300 million in corporate income tax in Australia in 2006/07,
collected over $700 million in employee taxes and paid over $500 million of full
franked dividends to shareholders over the same period.
1.1.2 Access to Australia’s international markets
Australia’s aviation policy has been evolving, under successive governments,
with progressive liberalisation based on pro-competition and consumer-oriented
principles. Governments have sought to ensure that Australia’s airlines grow and
operate profitably, while at the same time maximising opportunities for
international airlines to serve Australia and help grow our tourism industry.
Foreign carriers enjoy a high level of access to the Australian market. Some 44
international carriers are currently operating to Australia, while a further 17 serve
the market via code share arrangements.
1
Economic Contribution to the Qantas Group, Report by Access Economics for Qantas, 1 April 2008.
2
There are currently over 150 Boeing 747 equivalent units of weekly capacity
unused by foreign carriers under Australia’s air services agreements with top 20
origin/destination (O/D) passenger markets where capacity is limited. This
excludes countries whose airlines are able to operate unlimited services to
Australia, including Singapore, New Zealand, the UK and the US. In addition, a
range of foreign carriers have unlimited access to gateways other than Sydney,
Melbourne, Brisbane and Perth.
The composition and market share of carriers serving Australia’s international
markets has changed markedly in recent years. The withdrawal of long haul
carriers such as Lufthansa, Alitalia, Air France and Austrian Airlines has enabled
hub players to capture both market share on traditional routes, as well as non-
demand driven expansion on new routes. As a result, and despite the withdrawal
of several Northern Hemisphere long haul carriers, the Qantas Group’s market
share has declined from 40 percent at privatisation to around 32 percent today.
1.1.3 Principal elements of Australian policy
Both the design and implementation of Government policy on international air
services are major factors shaping the competitive environment.
Key features of Australia’s policy, last reviewed in February 2006, include:
• recognising ‘open skies’ as an aspirational goal to be sought on a case-by-
case basis, where it is in the national interest;
• negotiating capacity for air services ahead of demand, to allow airlines to
make decisions and provide for competition and growth;
• maintaining and expanding access to a range of aviation hubs;
• recognising the contribution an Australian-based airline industry makes to the
economy;
• encouraging major foreign carriers to commit to a long-term presence in
Australia;
• addressing Australia’s trade and economic interests;
• continuing to attract more services to the regions and smaller states by
offering unlimited access for airlines to all airports other than the four
gateways of Sydney, Melbourne, Brisbane and Perth;
• growing the air freight market by seeking unlimited access for freight aircraft
from Australian markets to and beyond the markets; and
3
• continuing reforms of the bilateral air services system by seeking to designate
airlines through their principal place of business, rather than through
ownership criteria.
More recently, prior to the 2007 federal election, the ALP indicated its intention to
ensure that air service agreements “are used to maximise the return for Australia
as a nation, and that jobs and opportunities for the Australian airline industry are
given highest priority when negotiating bilateral agreements”.
Qantas is pleased that the Government’s negotiating agenda is being framed to
take account of Australian carriers’ commercial plans and priorities. We
welcomed the conclusion of an open skies deal with the US, and are encouraged
that a mandate to open negotiations on a comprehensive aviation agreement
with Australia was recently endorsed by the European Council – something that
the Government has been seeking for a number of years.
1.1.4 Additional policy considerations
Qantas broadly supports the above objectives.
We recognise that increased competition has contributed to driving efficiencies
and strengthening the competitive ability of the Australian aviation industry more
broadly.
We note, however, that Australia’s policy contains a delicate balance of
competing interests, and relies heavily on market efficiency principles that do not
always recognise the harsh realities of international aviation, including the lack of
a level playing field, and the complexity of the bilateral system. In particular, we
believe that the Government should have regard to the following considerations
when implementing policy to achieve further liberalisation.
1.1.4.1 Australia has limited leverage
Australia’s market size and relatively remote ‘end-of-line’ location combine to limit
the leverage it can bring to bear in seeking expanded market access rights for
our airlines. Indeed, Australia has few “high value cards” left to play when trading
rights of access under the bilateral system. It is important that this leverage be
conserved and, when deployed, used to maximise commercial opportunities for
Australian carriers. This principle should guide any future consideration of access
to the trans-Pacific route.
1.1.4.2 Hub carriers have significant natural advantages
Under the bilateral system, hub carriers such as Emirates, Singapore Airlines,
Malaysia Airlines and Cathay Pacific can more readily combine third and fourth
freedom rights in both directions to exercise sixth freedoms.
4
By contrast, Australian carriers, being end-of-line operators, often lack the rights
needed from third countries to replicate many of the beyond point services
operated by hub carriers. For this reason, reciprocal exchanges of rights do not
necessarily result in equivalent improved commercial opportunities for Australian
carriers.
This characteristic of the bilateral framework underscores the importance of
careful sequencing of liberalisation. Qantas has consistently advocated
liberalisation in end-of-line markets before hubs, to maximise Australia’s leverage
and offset the hub carrier advantage inherent in the bilateral system.
1.1.4.3 Competition distorted by structural issues
Some two-thirds of the Qantas Group’s international competitors serving the
Australian market are owned or supported by their national governments. Indeed,
many represent arms of coordinated government policy, serving as flagships, or
seeking to attract traffic in the “battle of the hubs”. They enjoy cheaper access to
capital to facilitate investment and growth.
In addition to government ownership and support, airlines in many countries
benefit from bankruptcy protection, lack of competition regulation, ownership of
airports, more flexible industrial relations environments, access to labour in
developing countries, funding of security and insurance costs and more
favourable aircraft depreciation and taxation frameworks.
Middle East carriers represent the most recent – and striking – examples of
carriers in this category. They have been well treated by Australia. Emirates, has
been allowed to expand rapidly to operate 77 services a week. Further phased
increases will come on line from 2009 to 2011. Etihad, which entered the market
in March 2007, already operates 11 weekly services and phased growth
opportunities will enable it to operate up to 28 weekly frequencies by 2010.
Additionally, as capacity agreed between Australian and the United Arab
Emirates (UAE) is based on frequencies rather than seats, Emirates and Etihad
will be able to grow by a further 30 percent through the use of larger aircraft such
as the A380, which they have on order.
Maintaining Qantas’ success as a commercially run and fully privatised airline is
becoming more difficult because of increasing distortions in the competitive and
investment environment. More detail on particular aspects of these issues is set
out in the Attachment.
5
Qantas is pleased to see the Government’s recognition of the importance of
these factors:
"As an island nation with a significant tourism industry, the airline industry
is a major contributor to Australia’s economy. Our tourism industry and our
high value, time-sensitive export industries depend on these links,
supporting a whole raft of downstream industries. We need to make sure
that we are maximising the benefits that a strong Australian based aviation
sector can offer our country. This does not mean opening our skies while
other countries keep their own markets closed. This would do nothing but
allow other airlines to exploit our markets without allowing the Australian
airline industry to compete. Australia is by no means the end of the world,
but we are in many ways the end of the line in global transport linkages.
Our position as an end-point destination leaves us with few competitive
traffic rights to trade in order to gain access to valuable markets overseas.
Beyond the realm of air services agreements, broader commercial settings
in other countries, such as government subsidies and support, bankruptcy
protection and divergent tax regimes, create further market distortions.
These accentuate the competitive advantages many foreign airlines enjoy,
compounding their geographic advantages over endpoint Australian
carriers." 2
1.1.4.4 Recommended approach
Qantas advocates carefully sequenced case-by-case approaches to further air
services liberalisation, with priority given to the needs of Australian carriers, and
markets requiring additional O/D capacity. In the case of aggressive “national
agenda” carriers with small home markets - such as Emirates, Etihad and Qatar
Airways - Qantas believes that any further growth opportunities should be
conservatively measured, and phased.
The phasing of new capacity will provide greater certainty for foreign and
Australian carriers, and ensure that markets are not destabilised. The
Government should seek to offset the sixth freedom advantages of hub players
by obtaining additional fifth freedom opportunities for Australian carriers.
1.1.4.5 Multilateral agreements
Over the next decade, a gradual move towards a multilateral framework to
replace the complex system of bilateral agreements is anticipated.
A number of plurilateral and multilateral agreements are already progressing
globally, for example within ASEAN between the European Union (EU) and the
US. These have the potential to replace the patchwork of bilateral agreements –
2
The Hon Anthony Albanese MP – Statement to the House, 18 February 2008.
6
and the piecemeal liberalisation they have produced – in a number of key
aviation regions. The EU-US agreement in particular is likely to set a global
benchmark for the pace and scope of future liberalisation in other regions.
Qantas would encourage the Government to closely monitor progress of these
developments and investigate opportunities to accede to such arrangements if
they result in balanced outcomes for Australian carriers.
1.1.5 Foreign carrier use of seventh freedom rights ex Australia
The grant of seventh freedom rights for passenger services remains an
uncommon practice globally. To date, these rights have rarely been discussed in
any meaningful way in Australia’s air services negotiations, and Australia has not
exchanged them with any country.
Due to its geographic location, there are few third markets from Australia, and
even fewer with sufficient traffic volumes, to warrant third country interest. Many
of Australia’s aviation partners would recognise that Australia would expect that
the grant of seventh freedom rights would be on a reciprocal basis, and would
recognise that stand-alone routes from their third country markets would
generally offer more attractive opportunities than Australia’s would for them.
As the exercise of seventh freedoms relies upon complementary sets of rights
from two countries – as is the case where fifth freedom rights are concerned –
negotiating them is complex, particularly for countries with limited negotiating
leverage such as Australia. This is reflected by the fact that there are a number
routes on which fifth freedom opportunities for Australian carriers are still limited,
for example under the arrangements with the UK and Hong Kong. The Qantas
Group would wish to see these restrictions addressed before consideration is
given to negotiating seventh freedom rights.
The most likely routes of interest for stand-alone seventh freedom services by
foreign carriers in the future would appear to be on routes to North America,
South America and Africa. The Qantas Group would prefer to see opportunities
for growth and new entry retained for current and future Australian carriers in the
first instance. As is the case for consecutive cabotage, the exercise of seventh
freedom rights reflects the identification and exploitation of a profitable
opportunity to deploy aircraft on a route without the need to make a commitment
to the market more broadly that is inherent in the exercise of fifth freedoms. That
is, carriers based in a third country will not have the vested interest and incentive
to invest in promoting tourism and fostering domestic and regional links at either
end of the route, as their principal focus will ultimately be on carrying passengers
to and from their home markets.
7
In this regard, Singapore Airlines’ bid to gain access to the Pacific Route is
relevant in examining the issues around granting international airlines access to
operate from Australia to third markets, as – given that Singapore to the US via
Australia is not a natural geographic routing – this would have been a de facto
award of seventh freedom rights.
While it is possible that it will be beneficial to grant seventh freedom rights in the
future, this should be considered on a case by case basis. The Qantas Group
would strongly argue that this should only be encouraged when there is clear and
useable commercial value in the trade for Australian carriers. The award of
seventh freedoms to Australian carriers in exchange for additional entitlements
for foreign carriers may be a means of securing trades of value in some
agreements in the future, eg that with the UAE.
1.1.6 Cabotage
Australia has one of the most liberal aviation regimes in the world, providing
foreign airlines significant opportunities to access the domestic market.
A key feature of Australia’s aviation policy is “investment cabotage”. Australia’s
policy allows for foreign persons (including foreign airlines) to acquire up to 100
percent of the equity in an Australian domestic airline, unless this is contrary to
the national interest. Domestic airlines set up or purchased by foreign entities are
subject to the national interest test conducted by the Foreign Investment Review
Board (FIRB), as applicable to any other business.
The characteristics of Australia’s domestic market, such as long distances and
high concentrations of population at a small number of points, make the policy an
attractive option for foreign carriers. Virgin Blue was the first airline to take
advantage of this policy in 2000 as a wholly UK-owned entity. More recently,
Singaporean-owned Tiger Airways has established a domestic operator in the
Australian market.
These developments have, on balance, had a positive effect on the domestic
market. While new entrants create competition, they can do so at the expense of
the survival of local players and the stability of the market, as seen with the
collapse of Ansett in 2001. Overall, however, the policy has led to the
development of a more competitive, robust and growing domestic industry.
Airlines from Australia’s largest origin-destination market, New Zealand, enjoy a
high level of access to the domestic market, an opportunity that is reciprocally
available to Australia’s carriers in New Zealand. The Single Aviation Market
(SAM), created in 1996, allows authorised airlines to fly unrestricted between
Australia and New Zealand, with the ability to operate domestic services in both
countries. In addition to investment cabotage, this provides consecutive cabotage
opportunities for both sides. However, these rights have never been exercised,
8
with Qantas establishing domestic operations in New Zealand, and New Zealand
carriers electing to operate directly to multiple points in Australia.
As discussed further below, foreign carriers are also offered the “Regional
Package” by Australia on a unilateral basis during air services negotiations,
which provides for unlimited capacity from points in their home country to all
points in Australia other than Sydney, Melbourne, Brisbane and Perth. Extensive
own stopover rights within the Australian market have been widely granted to
foreign carriers, enabling them to serve multiple points in Australia using the
same aircraft. Cathay Pacific, Thai Airways, Air Niugini, United Airlines, China
Eastern and Air Mauritius all currently make use of these rights. Opportunities to
code share on the extensive network of domestic services operated by Australian
carriers have similarly been readily provided for under Australia’s air services
arrangements.
One of the only restrictions for foreign carriers in serving the Australian domestic
market is consecutive cabotage. If granted, these rights would be most likely
taken up by carriers with a significant scale of international operations in the
Australian market and those whose schedules have substantial local ground time
because of the particular markets they serve. This would enable them to operate
on key domestic routes between major gateways on a marginal costed basis,
alongside local carriers. The impact on local carriers would be severe, and could
be expected over the longer term to require local carriers to shrink their networks
to focus their capacity on competing on the highest yielding routes by
withdrawing aircraft from marginal or loss-making regional routes.
As part of its inquiry into International Air Services in 1998/99, the Productivity
Commission found the benefits in retaining limits on cabotage would be
“restricting access by foreign carriers to the Australian domestic market gives the
Australian carriers a solid base from which to extend into international aviation”
(Productivity Commission 1998, p111). The Commission concluded that the
benefits to the Australian aviation industry of removing cabotage would be small.
Given the competitive and growing domestic market in Australia that has
evolved, it is difficult to see how a different conclusion could be reached today.
The grant of cabotage rights in countries with a domestic market of any
significance in terms of geographic size or population remains rare on a global
basis.
Australia’s investment cabotage policy allows foreign entities access to the
domestic market, but requires them to commit to establishing a long term
presence which creates jobs and makes a contribution to the Australian
economy, as opposed to opportunistic entry afforded by consecutive cabotage. It
enables a more sustainable and stable operating environment for the local
industry, for which the domestic and international Australian markets are
inextricably linked. The policy represents an omnipresent “competitive check” on
Australia’s domestic airlines. Unfortunately, Australian carriers do not enjoy
9
reciprocal opportunities to establish themselves in other countries’ domestic
markets - something that the Qantas Group would be keen to see pursued.
1.1.7 Accessing regional Australia
As noted above, the “Regional Package”, providing unlimited access to all points
in Australia other than Sydney, Melbourne, Brisbane and Perth to foreign
carriers, is offered by Australia during air services negotiations. Although this is a
feature under 20 of Australia’s bilaterals, it has met with little success in
encouraging direct services to destinations outside of the main gateways.
These rights are largely untapped as the majority of foreign carriers have little
interest in serving these regional routes, in many cases characterised by leisure,
and often seasonal, traffic, which consequently generally offer inferior returns
than those to major ports.
Some industry stakeholders have previously argued that the Regional Package
could more actively cultivate international air services to Australia’s regions by
permitting international carriers to operate to main gateway points only if they
also connect to at least one regional Australian point on their journey.
In reality, however, carriers will generally only operate services that are
economically viable. A compulsory stop at a regional port would likely render
many services to primary gateway points commercially unsustainable. This could
therefore potentially have the reverse effect and see carriers withdrawing
capacity from the Australian market and redeploying it to other international
markets.
Not only would this run counter to the interests of the tourism industry, but more
importantly, if this requirement were imposed on foreign carriers by Australia, it
could be expected that it would be enforced reciprocally by foreign governments
– an outcome that the Qantas Group would clearly wish to avoid.
Nevertheless, as regional centres grow demographically and economically,
potential foreign carrier interest may also increase, as evidenced by increasing
international services from a mix of full-service and network carriers to Adelaide,
Darwin, and more recently Coolangatta.
Ultimately the underlying economics of a route will be the single most important
determinant of a choice by an airline to operate on a particular city-pair.
In this regard, it is worth noting that regional ports also suffer from
disproportionately higher costs associated with the provision of border control
facilities, security services and infrastructure such as air traffic control and
aviation rescue and fire fighting services. Carriers must spread these costs over
small traffic volumes, which acts as a significant economic barrier or disincentive
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for airlines wishing to consider the commencement or expansion of international
services to regional Australia in a commercially sustainable manner.
The Government could consider reviewing charging regimes in place at regional
ports, many of which have been implemented based on charging mechanisms
levied at major gateway ports without due consideration of the unique
characteristics of regional ports. For example, a fixed fee per passenger or a
network pricing regime for security charges could be introduced (refer to 5.1.3.3).
1.1.7.1 Regional gateways: role of State governments and communities
Ideally, decisions by carriers to operate to smaller international airports – and any
airport more broadly – should be based on commercial decisions, without any
subsidies, to avoid distorting market outcomes and potential competition on
routes over time.
While attractive in the short term, such mechanisms do not guarantee stability of
service beyond – or in some cases for – the period of commitment, meaning that
States and relevant regions may find themselves no better off at the end of the
period. Airlines may also be reluctant to engage in such schemes as such
commitments reduce flexibility to react to changing market circumstances.
It should also be highlighted that the Australian aviation industry has a good
network of services to link these smaller international ports with each other and
the main gateway points of Sydney, Melbourne, Brisbane and Perth. The growth
of low cost carriers such as Jetstar, Virgin Blue and Tiger Airways has had the
effect of growing this network considerably, both in terms of overall size and
routes served, as these carriers’ lower cost bases have enabled them to offer
services on hitherto unprofitable or marginal routes.
State governments could assist the development of secondary ports far more
effectively through tourism marketing initiatives. This would have the effect of
attracting greater passenger numbers to these points which in time would make it
more attractive for airlines to operate sustainable services to regional and
secondary locations.
State governments could also review the business environment within their
power in which airlines operate. For example, many State governments require
airlines to pay stamp duty on their insurance policies based on the number of
take-offs made in that State.
A recent study of the impacts of aviation stamp duty conducted by the
Sustainable Tourism Cooperative Research Centre noted that it “is effectively a
tax on air travel, which will reduce inbound and outbound tourism expenditure”.
This adds a significant impost to carriers’ operating costs, for no benefit, and acts
as a disincentive in attracting airline operations. It also risks retaliation by other
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countries whose airlines suffer as a result of the Australian states imposing these
taxes.
1.1.8 Open cargo policy
Since 2000, Australia’s approach in bilateral aviation negotiations has been to
pursue an open cargo regime for freighter services.
The success already achieved in liberalising cargo agreements with various key
partners has been instrumental in Qantas’ decision to invest in long-term aircraft
lease arrangements with US based operator Atlas Air. This currently
encompasses the exclusive use of three Boeing 747-400 freighter aircraft, which
Qantas operates on routings that largely would not have been possible a decade
ago.
The key requirements in freight arrangements from Qantas’ perspective are the
ability to operate with full fifth freedom rights between any points on the route and
to use wet-leased aircraft. Unlimited capacity is of lesser importance to Qantas at
this stage given the limited number of aircraft available for deployment. Key
freight markets with which open fifth freedom rights have been secured and on
which Qantas has capitalised include China, India, Germany, Singapore, the
UAE, Thailand, the USA and New Zealand.
Markets where fifth freedom rights are currently unavailable, but would be of
value are Indonesia, Hong Kong, South Africa, South America, in particular
Brazil, and emerging African markets such as Nigeria.
Going forward, the ability to exercise seventh freedom rights, which allows
operations on routes where a service is not required to originate/terminate in
Australia, will be increasingly important for Qantas Freight.
Cargo loads originating in Australia are typically of such low value (eg fresh
produce) that the return from their carriage is often insufficient to even cover the
aircraft’s fuel-burn, meaning that freighter operators often choose to depart
Australia empty. This is demonstrated by BITRE statistics that show that in the
year to 30 June 2007 freighter aircraft carried 29 percent of Australia’s inbound
air freight, but only 13 percent of export loads.
Australia’s current air services arrangements include freighter seventh freedoms
with Singapore, New Zealand, the USA, the UAE, India, Bahrain and Hungary.
Key target markets for seventh freedoms from Qantas’ perspective are China,
Germany and the UK.
At present some 50 dedicated freighter services operate each week to/from
Australia. Seventeen of these are Qantas services (eight long-haul, eight trans-
Tasman, one PNG), with Martinair, Fedex, UPS, DHL, Singapore Airlines,
12
Malaysia Airlines, Cathay Pacific, Korean Airlines, Air New Zealand and Heavylift
accounting for the remainder. Most of these airlines have operated freighters to
Australia for a number of years, although there has been some schedule growth
in recent years. The measured growth in air freight to/from Australia of some 17
percent over the past decade in spite of the liberalisation of air services
arrangements reflects the limited potential presented by one-way economics.
Qantas Freight’s ability to develop a more extensive international network and
build competitive frequency on key cargo routes such as Asia-Europe and Asia-
US will be closely linked to Australia’s ability to secure seventh freedom rights, by
building multi-port scheduled service routings that do not require an Australian
origin.
1.1.8.1 Time-sensitive air freight
The overwhelming majority of air freight loads in/out of Australia continue to be
carried in the belly-hold space of wide bodied international passenger aircraft. As
there is a large number of combined passenger/cargo services operating daily
between Australia and a wide selection of overseas ports in addition to the
operations of dedicated freighters, there is generally little delay in the transport of
time sensitive loads.
The only constraint that Qantas can identify is when a load is of such weight,
quantity or volume that it does not readily lend itself to belly space carriage, then
a delay in obtaining freighter space may ensue. In our experience such delays
are rare, and time sensitive loads can usually be delivered safely and in good
condition. Qantas maintains adequate cool room facilities at Australia’s main
gateways to ensure that delays do not result in loss of value of export loads such
as tuna, lobsters and other seafood through spoilage.
Other than ensuring the provision of adequate freight handling infrastructure at
Australia’s major airports, in particular Sydney, Qantas cannot identify any
strategy within the realm of government that will assist with the transport of time
sensitive air freight. The availability of freighter space to/from Australia will be
determined by the commercial viability of services by freighter operators and will
be assisted by the expected increase in overall belly-hold space through growth
in passenger services.
Qantas is confident that the needs of air freight forwarders in the domestic
market are being met, with the operation of pure freight aircraft by Qantas’ joint
venture operator Australian Air Express and the competitive domestic freighter
services offered by Toll and Heavylift.
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1.1.9 Designation
Qantas would support continued negotiation of criteria for designation based on
principal place of business and regulatory control in Australia’s bilateral
agreements. To date, this has been secured in 18 agreements.
Designation criteria based on ownership and control by a country’s nationals
limits carriers’ ability to consolidate, as has occurred in other industries without
these sorts of restrictions. This produces distortions in the operating
environment, through too many airlines operating too much capacity. The criteria
also have the effect of limiting airlines’ access to capital, in what is a highly
capital intensive industry. This has the greatest impact on those carriers based in
small capital markets, and who are not government owned or supported, that is,
carriers such as Qantas.
Over time, moving to designation criteria based on principal place of business
and regulatory control will assist in the globalisation, growth and sustainability of
the aviation industry, without compromising safety and security oversight, and
without putting at risk the use of entitlements by Australian carriers on
international routes.
1.1.10 Future industry structure
As it grows, the Australian aviation market continues to evolve structurally.
Where it was once serviced predominantly by legacy carriers, today a range of
new and established carriers operate in the market, spanning a range of product
from “no frills” to premium. For many airlines, point-to-point services are
replacing complex networks and new technology is providing efficiency
improvements and new route possibilities.
The diversity of carriers that serve the Australian market today is the product of a
range of factors. Privatisation and multiple designation of carriers has introduced
greater competition and more capacity globally. Coupled with sustained
economic growth, which has grown the passenger base, this has seen the
segmentation of air travel markets. The impact of greater competition and
external shocks, particularly in recent years, has also forced the industry to
become more efficient. In combination, these developments have seen the
emergence of airline vehicles that cater for the needs of specific segments.
The Australian aviation industry has itself been part of these structural changes.
In recent years, the Qantas Group has expanded into new routes, invested in
new technology and adapted business structures in order to remain competitive
in both the Australian domestic and international aviation markets.
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1.1.10.1 New business models
A variety of airline models operate in Australia’s aviation market including legacy
carriers such as Qantas, low cost carriers like Jetstar and Tiger, and hybrid
models, for example Virgin Blue.
While well established in other markets such as the US and Europe, low cost
carriers and hybrid models are relatively new to the aviation landscape in the
Asia Pacific region, but have proliferated quickly to number 44 (Sabre Airline
Solutions in Peanuts, May 2008 p6).
Low cost carriers reduce complexity and cost of their product through the use of
point-to-point services, single or dual aircraft types, secondary airports, direct
distribution methods and reduced service features compared with full service
carriers. This enables them to serve routes that might not be viable for full
service carriers. For example, Jetstar is now flying on some routes that Qantas
could not sustain and had been forced to withdraw from, such as Vietnam and
Japan. In this way, the low cost model allows the Group to have a greater
international footprint, which boosts our competitiveness both domestically and
internationally.
Presently there are five foreign low cost carriers operating international services
to Australia. Although low cost carriers may be less well positioned to withstand
the rising costs that are facing the industry given their more elastic demand base,
an increase in their presence in Australia going forward is likely, as Asia is
expecting strong growth in spite of the global economic slowdown.
In addition to legacy and low cost carriers, the Australian market has seen the
entry and rapid growth of a number of full-service network carriers whose
business structures and operating models are heavily influenced by the
governments in the countries in which they are established.
Airlines like Emirates, Etihad and Qatar Airways all act as flagships of trade and
economic interests for their governments. The Emirates Group estimates that it
directly generates AED22 billion (USD6 billion) and indirectly contributes AED25
billion (USD6.8 billion) to the UAE economy. In addition, in 2007/08 Emirates will
pay a dividend of AED1 billion (USD272.5 million) to its owner, the Government
of Dubai. In total, the Middle East is spending US$38 billion on airport
infrastructure3.
In contrast to Australia, the same government interests drive and coordinate the
airline, airports, tourism and competition and regulatory framework. These
national development strategies are seeing these airlines expand rapidly which is
reflected by the massive investments in fleet and aviation infrastructure taking
place in the Middle East. Emirates currently has 244 aircraft on order worth a
3
Speech by IATA Chief Executive Officer Giovanni Bisignani, 18 February 2008.
15
total value of approximately $US60 billion and is the world’s largest A380 and
A350 customer with 58 and 120 on order respectively. Qatar Airways is also
pursuing an ambitious growth strategy over the next few years, ordering over 200
aircraft worth over $US30 billion. Both carriers have aggressive expansion plans
for a total home market population of around five million.
Although the structural advantages of Middle Eastern carriers have previously
had their major impact on the legacy carriers, Emirates has recently announced
plans to launch a low cost carrier. Using single-aisle aircraft, the new carrier
would operate to destinations such as the Middle East, South Asia, Northeast
Africa, Southern Europe and Central Asia. While the standard features of a low
cost carrier will be evident, Emirates will also presumably have the opportunity to
access labour in neighbouring developing markets, enabling further cost
efficiencies. This proposed operation will compete in some markets served by the
Qantas Group, exacerbating the structural inequities outlined above.
1.1.10.2 New routes
Overall, there has been an incremental expansion of services from Australia to
new international points in recent years. As highlighted above, the low cost
carrier business model has enabled the introduction of new routes that would not
be viable for full service or established carriers. Jetstar has launched
Christchurch-Coolangatta and Sydney-Phuket services as new routes for the
Qantas Group, and will commence Ho Chi Minh City-Darwin flights in September.
Viva Macau began Sydney-Macau services in August 2007 and Malaysian-based
AirAsia X commenced Kuala Lumpur-Coolangatta services in November 2007.
The new routes operated by low cost carriers, combined with their competitive
fares, have opened up new markets to tourists and consumers. To date these
new routes have been to/from Asia, however, we can expect future growth in the
long haul markets by low cost carriers. Jetstar’s international expansion plans for
long haul services include operating to markets in Europe through a number of
Asian hubs. Air Asia X has announced plans to link European services to
Australia over Kuala Lumpur.
Growth on Australia’s international routes has by no means been limited to low
cost carriers. Qantas has launched a number of new non-stop routes since 2004,
including Brisbane-Los Angeles, Sydney-Mumbai, Hong Kong-London, Sydney-
Queenstown, Sydney-Beijing, Sydney-San Francisco and Melbourne-Shanghai.
In November 2008, Qantas will commence its first ever non-stop services to
South America, with flights from Sydney to Buenos Aires.
Qantas’ recent re-entry into emerging markets such as China, India, and South
America is an investment in the expected economic and aviation growth of these
markets over the next decade and beyond. Given the projected size of traffic
flows, there is significant potential for new routes from Australia to these markets.
16
Eastern Europe is another emerging market that would appear to offer the
possibility of new direct links with Australia over time. While the traffic between
Australia and these markets is less developed at this point, Qantas is offering
code share services in a number of these markets.
New routes are also likely to be established by both Qantas and Jetstar over the
next few years that link existing points on the Group network to multiple points in
Australia through non-stop services. In contrast to local carriers, growth in the
Australian market by established foreign carriers has in general been on existing
routes. While new routes to the Middle East have been established, eg Perth-
Dubai, Brisbane-Abu Dhabi, as highlighted above, these do not reflect O/D
market demand.
1.1.10.3 New technology
The development of new aircraft technology has already had a significant impact
on the Australian aviation market over the past few years, enabling new non-stop
routes such as Melbourne-Los Angeles and Sydney-Vancouver.
Long range aircraft are particularly important for end-of-line carriers, for whom
the ability to operate long haul services under the bilateral framework is more
complex than it is for hub-based carriers, as outlined above.
Although geographical disadvantages faced by end-of-line carriers will be
mitigated by new aircraft, these technological advances will benefit all carriers,
including those who enjoy the advantages of a hub base. They have already
assisted Middle Eastern carriers, who are now able to link destinations in major
markets over their hubs on a one-stop basis.
The development of new large aircraft such as the A380 is expected to have a
significant impact on Australian aviation going forward, with many key customers
operating to this market. For Qantas, in an operating environment where slot
constraints exist in key destinations on established routes such as London
Heathrow, as well as at our home base in Sydney, the A380 will allow growth
through capacity rather than frequency.
With fuel costs across the industry expected to be US$176 billion for 2008, a rise
of $40 billion on the previous year (at US$107 per barrel Brent), new aircraft will
be instrumental in managing this escalating cost. For this reason, the further
development and introduction of new technology will be a priority for all airlines,
whether they are low cost, point-to-point or established full service network
carriers.
The Qantas Group has committed to a total of 215 aircraft with options on a
further 72 and rights for a further 104 worth over $30 billion, including next
generation Airbus A380 and Boeing 787 fleet to meet long term demand growth.
17
The Group will also acquire up to 188 narrow body aircraft, a combination of
Boeing 737-800s and Airbus A320/A321s. As well as expanding low cost
services to South East Asia, some of the new Airbus aircraft will be used to
supply capacity to the Group’s Asian ventures, further supporting the growth of
Australia’s aviation footprint in the region.
New aircraft technology will also be important in reducing the greenhouse gas
emissions produced by Australia’s aviation industry. Adoption of the suggested
taxation regime changes outlined in the Attachment, would provide greater
incentive for Qantas to fully pursue its future aircraft acquisition program and
thereby invest in the most environmentally efficient aircraft.
1.1.10.4 Distribution channels
New technologies and an increasingly competitive operating environment have
had an impact on airlines’ product distribution methods, prompting a shift from
traditional channels such as travel agents.
Low cost carriers have been instrumental in this regard, developing online
booking engines using the internet and direct ticket sales through low cost outlets
such as convenience stores. The sophistication of today’s customer and the
technology offered has meant that many legacy carriers, such as Qantas, have
also adopted this direct form of distribution, although Global Distribution Systems
remain important in accommodating a broad range of distribution (e-ticketing and
interline solutions).
1.1.11 Future market access priorities
The Qantas Group’s strategy will see significant growth by our passenger flying
businesses – Qantas and Jetstar – over the next few years, supported by a
substantial investment in new aircraft capacity. The removal of existing and
prospective impediments in air services arrangements will be important in
enabling these airlines to support growth plans and compete with greater
effectiveness and scale in their chosen markets.
Qantas and Jetstar have plans to expand significantly in international markets
from a number of points in Australia in the medium term, including a large
number of new destinations that will offer improved trade and tourism
opportunities.
Qantas Airlines’ growth in the short to medium term will focus on new and
additional services to Africa, South America, North America, Continental Europe
and the emerging markets of China and India. This will be augmented with code
shares to new European and Asian destinations with airline partners.
18
Jetstar’s long haul expansion will include serving markets in Europe through
selected Asian hubs, to complement its flying from Australia to new and existing
destinations in Asia through point-to-point and short haul hub operations.
Australia’s ability to successfully negotiate a comprehensive aviation agreement
with Europe will be important in the Group’s ability to develop that market in the
future. As well as the removal of constraints on capacity and the use of North
Asian intermediate points in serving key markets, this would provide access to a
range of new countries in both Western and Eastern Europe, with which Australia
currently has no air services arrangements.
The Group’s strategy of participating in the growth of Asia through investment in
airlines based in that region will continue. While investments to date have been
on a minority basis in order to ensure access to international traffic rights, we
would also like to be in a position to establish wholly-owned domestic carriers in
other countries under the Jetstar banner. We would therefore like to see
reciprocity of the Australian policy with respect to inward investment for
ownership of domestic airlines sought in all Australia’s air services negotiations
with bilateral partners.
There are a number of individual markets with which the Qantas Group is
currently seeking enhanced access and has articulated these negotiating
priorities to the Department.
1.1.12 Passenger processing and facilitation issues
Increasingly, travellers arriving at Australia’s international airports are faced with
considerable delays at screening points.
While airlines have a strong commercial imperative to ensure their passengers
pass through borders as quickly as practicably and safely as possible, the drivers
for the border agencies are understandably different. Nonetheless, Qantas
considers that Australia must improve the overall processing rate of arriving
passengers in order to prevent increasing passenger frustration, provide a more
welcoming face to travellers and contribute to ensuring that Australia remains a
competitive tourist destination.
The Passenger Facilitation Task Force (of which Qantas is a member),
established in 2006 and chaired by the Australian Customs Service, is tasked
with considering how best to meet current and projected increasing passenger
arrivals without compromising border security. Qantas believes the Task Force is
making headway on these issues, as demonstrated by the trial of Express Lanes
for premium passengers, which are of substantial benefit to frequent travellers.
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1.1.12.1 Secondary screening
However, progress in addressing delays at the secondary screening point
(principally resulting from increased Australian Quarantine and Inspection
Service (AQIS) intervention) has not been as rapid as we would wish. Qantas
has made a submission to the Government’s Quarantine and Biosecurity Review
addressing our concerns, and these are briefly outlined below.
The previous Government set AQIS a passenger inspection target of 81 percent.
In addition, ad hoc requirements to inspect passengers arriving from points of
origin where incidence of avian flu and foot and mouth disease has occurred
have driven the total inspection rate to over 90 percent.
AQIS has not been funded to meet these increased demands, nor is their funding
sufficiently flexible to match the increasing numbers of arriving passengers.
Having said this, it is important to note that the provision of additional staff and
resources will not of itself solve this issue, as available space at airports is
limited, and addressing this will require significant investment to expand the
baggage areas.
In Qantas’ view it is imperative that action be taken to reduce queuing times as
soon as possible. We consider that the arbitrary inspection target should be
abandoned and inspection of passengers made on risk management principles.
This will require AQIS to completely re-engineer their inspection practices.
1.1.12.2 SmartGates
Qantas strongly supports the Australian Customs Service (ACS) plan to install
SmartGates at the major airports, but notes that while this will improve the
process at the primary line, it will achieve little unless secondary screening
practices are improved.
Australia also operates an outbound control point for departing passengers, the
aim of which is to detect overstayers and prevent the departure of persons
issued with court orders. While Qantas supports this requirement, we note that
occasionally the process is extremely slow, and are hopeful that the rapid
deployment of outbound SmartGates will go some way to relieving the strain.
1.1.12.3 Immigration
Australia was the first country to introduce Electronic Travel Authority (ETA) and
the Advanced Passenger Processing (APP) system. A number of other countries
are now seeking to emulate one or both of these systems. As Australia was the
innovator for these systems, we are well placed to influence those countries
considering implementing such schemes, which would go some way towards the
establishment of global industry standards.
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Qantas strongly supports the ETA system and encourages an expansion in its
use, or that of similar systems such as e-visa, to make the planning of travel to
Australia more palatable to potential visitors.
The APP system was introduced prior to the Sydney 2000 Olympics and has
been well accepted. It resulted in a massive decrease in the number of visitors
without visas arriving on our shores, with a consequent decrease in immigration
fines paid by airlines. While the majority of airlines are providing APP data at a
very high level (for Qantas in the order of 98 percent) we are aware that a Bill is
planned to be presented to Parliament in the near future which will impose fines
for failure of airlines to complete APP transactions on 100 percent of individual
passengers.
Qantas submits that fines should only be imposed where there are gross failures
to comply or deliberate attempts to facilitate the movement of passengers in an
illegal fashion.
Errors will continue to occur at check-in points outside Australia, as the APP
system is unique to Australia and New Zealand. Were fines are to be imposed, a
two percent non-compliance rate would result in an annual cost to Qantas of $24
million. Fines of this magnitude would threaten the viability of various marginal
routes and for foreign carriers not as diligent as Qantas, may lead to the
withdrawal of services. When the US introduced a similar scheme it accepted a
compliance rate of 97 percent and, while it has recently required 100 percent
compliance, administratively an exception to those carriers such as Qantas that
consistently achieve a high compliance rate has been provided.
1.1.12.4 Trans Tasman
The Single Aviation Market (SAM) arrangements between Australia and New
Zealand, which allow Australian, New Zealand or jointly owned airlines to operate
trans Tasman and domestic services in either country, subject to the necessary
safety approvals, have contributed to the growth of these markets. Ongoing
efforts at closer economic relations between Australia and New Zealand will
generate increased trade and investment activity which will in turn contribute to
increased travel demand.
A common border would bring a range of benefits from the aviation and tourism
perspective, including reducing journey times, lower costs of travel for
consumers, and reduced resourcing requirements for border agencies. However,
to date this concept is proving difficult to progress.
This reflects the different approaches of the customs, immigration and quarantine
agencies on each side, and in turn, broader differences in national objectives.
Australia has more restrictive immigration policies than New Zealand, there is no
21
unifying customs border, and both countries’ biosecurity requirements differ
significantly in many areas.
Nonetheless, incremental progress is possible by such means as using
technology to expedite processing and developing the concept of one process
that caters for departure from and entry into the other country.
Qantas welcomes the efforts to date of the relevant agencies in Australia and
New Zealand in streamlining the processes for trans Tasman travel. We would
like to see this engagement continue with the aim of working towards
arrangements which resemble as closely as possible to those applying to the
domestic market.
1.1.12.5 Secondary airports
Qantas considers border agencies should more strongly support airlines who
wish to operate international services to and from secondary airports. As our
major airports reach saturation point, these secondary airports will provide
opportunities to expand operations and improve tourism into the more remote
areas.
A lack of coverage by the border agencies significantly hampers such options.
Qantas believes that the extra costs associated with the provision of services to
these secondary airports would be more than offset by the additional revenue
that the increased numbers of visitors would generate.
Qantas considers that the border agencies and the airlines need to jointly explore
passenger clearance options for the future of these ports, including passenger
declarations made electronically while the passenger is still in flight.
1.1.12.6 Passenger Movement Charge
The Passenger Movement Charge (PMC) payable by passengers departing from
Australia irrespective of their nationality, is collected from passengers and
remitted to the ACS under bilateral administrative arrangements between the
ACS and airlines. While the Australian courts have defined the PMC as a tax,
any increases in the quantum are traditionally explained as necessary to meet
costs associated with border clearance of passengers. It is thus a de facto user
fee.
The Auditor General’s Audit Report No 1 1996-1997 found that the amount of
PMC collected exceeded the cost of services provided by $19 million.
Subsequent Australia National Audit Office (ANAO) audits have not revisited this
issue.
22
The Productivity Commission Inquiry on Cost Recovery by Government Agencies
(Report No 15 of 16 August 2001) identified inter alia that cost recovery
arrangements:
“Generally lack the attributes of good policy, and;
- most arrangements are ad hoc, lack transparency and have poor
accountability and review mechanisms” (emphasis added)
The Commission proposed detailed recovery guidelines for reviewing and testing
new proposals to ensure that:
“those paying would have greater confidence in the reasonableness of
specific cost recovery arrangements”
The Government accepted the proposals and a timetable was set for various cost
recoveries to be examined. We understand that the PMC was examined by the
Department of Finance during 2007, however, we are uncertain of the outcome
of that process.
In his Budget speech on 13 May 2008, the Treasurer announced an increase in
the PMC to $47. The Budget papers note that
“The increase will contribute to offsetting the cost of a range of aviation
security initiatives that until now have not been cost recovered. The
Passenger Movement Charge also recovers the costs of processing
international passengers at international airports and maritime ports, and
the cost of issuing short-term visas overseas”
Qantas has contributed many millions of dollars to increasing security as well as
meeting increased security costs arising from the provision of additional
screening by airport operators. Qantas would like to understand what aviation
security costs are designed to be recovered in whole or part by this increase. We
would also seek to have the PMC made fully transparent.
While a $9 per passenger increase may not appear excessive, when regarded in
the context of the increased visa fees announced in the May 2008 Budget, it can
be expected to have a measurable impact. In addition, as the PMC is not
differentially applied, routes which are principally composed of leisure traffic -
which has a higher elasticity of demand - will likely be most significantly
impacted, as will prospects for growth by airlines on these routes.
Qantas envisages that the border of the future will look very different to today.
Australian Government agencies currently collect a considerable amount of
information on passengers and crew before they arrive. Some of this data is
provided by the passenger, the remainder by airlines both at check-in and from
23
their own reservation and departure control systems. Armed with this data,
coupled with advances in CCTV technology and automated border clearance
options, the agencies should be able to concentrate their attention on those
passengers of interest, while allowing the vast majority that pose no threat to
pass freely and without intervention or inspection.
Qantas also believes that this evolution should reduce costs, enabling a
decrease in the PMC over time. Together, these “quality” and “price”
developments would improve the competitiveness of the Australian aviation and
tourism industries.
1.2 DOMESTIC SERVICES
1.2.1 Deregulation and the delivery of interstate services
The domestic market has experienced significant growth under deregulation,
enabling the introduction of new interstate routes. In recent years, Qantas has
added new domestic services between Sydney-Broome and Perth-Cairns, and
Jetstar has introduced a range of new routes such as Newcastle-Gold Coast and
Melbourne-Ballina/Byron.
New routes and robust competition between carriers with a variety of business
models has increased choice and access for consumers, including business
travellers, and translated into lower fares for leisure travellers, benefiting
domestic tourism.
As previously highlighted, the “investment cabotage” policy has contributed to the
dynamic domestic market that Australia has today. It is, however, important to
note that the policy provides new entrants that are wholly or substantially foreign
owned by existing airlines with a significant competitive advantage in becoming
established. Foreign carriers may enter Australia with experienced management,
trained staff and established distribution experience and trade relationships.
An established carrier will most likely not need to set up expensive infrastructure
locally to cover high cost elements of the airline business such as heavy
maintenance. The ability of these airlines to “hit the ground running”, places
locally funded airlines attempting to start completely from scratch at a
disadvantage, and indeed may act as a disincentive to local new entrants.
1.2.2 Airline ownership and access to capital
All operators in the Australian domestic market can freely source their capital
with the exception of Qantas, which is required to comply with the provisions of
the Qantas Sale Act 1992. The legislated 49 percent ceiling on total foreign
ownership means that Qantas is forced to source the majority of its capital
24
locally, and, as Australia represents only around two percent of the global capital
pool, it is not the most competitive source of equity funding. The current local and
global debt market crisis adds significant pressure on debt markets that compete
for capital.
Accordingly, the cost of supporting capital intensive investment in fleet, product
and infrastructure is generally greater for Qantas than it would otherwise be, and
certainly more expensive than for foreign owned competitors not similarly
constrained, including our major competitor in the Australian market, Virgin Blue.
It is estimated that the 49 percent foreign shareholding limit increases Qantas’
cost of equity capital by two to three percent.
While at times Qantas' total foreign ownership sits well below 49 percent, the fact
that a limit exists acts as a disincentive to investors over the long term, as they
know they may be required to disinvest should the level of foreign interest in
Qantas rise above the permitted limit.
It has been estimated that, when foreign ownership of Qantas is close to the 49
percent limit, Qantas shares trade at a discount to Australian industrial stocks
and global airline peers. Qantas also trades on one of the lowest multiples of
Asia Pacific airlines, despite having one of the better returns and dividend yields.
The 49 percent limit contributes to this discount as it constrains the depth and
breadth of foreign investors that Qantas is able to access. This is a major
disadvantage given the larger size of foreign equity markets and the greater
number of airline specialist investors relative to Australia.
The risk of Qantas undertaking a successful equity raising, should it be required,
increases without foreign investor participation. This has historically been
evidenced through a marked decline in interest for Qantas shares from foreign
investors when no foreign investment headroom exists under the 49 percent limit.
In the extreme, Qantas would be unable to continue growing the business in the
absence of domestic appetite for Qantas equity during a capital raising.
There is a range of other issues that could also have a significant bearing on
local carriers' ability to compete with foreign-owned airlines, should they choose
to take advantage of the investment cabotage policy and enter the Australian
domestic market.
These are the structural advantages, as noted above, that some foreign carriers
possess, such as government ownership and support, more favourable aircraft
tax depreciation provisions, lower corporate and employee related taxes
(including in some cases no tax at all) and bankruptcy protection. These factors
have the potential to significantly distort competition in the domestic market, and
need to be weighed carefully in assessing any proposals by carriers who benefit
from them to establish or invest in the Australian domestic market.
25
It is almost certain that Australian domestic airlines will also seek to operate
internationally in the future, as is the case currently. International markets will
over the longer term offer Australian based carriers more significant growth
opportunities than the relatively mature domestic market. The importance of a
domestic platform for international competitiveness was recognised in the
Australian government’s decision to rationalise the aviation industry in 1992 to
allow Qantas to acquire Australian Airlines and Ansett to enter international
markets. Since its entry to the domestic market in 2000, Virgin Blue has
progressively entered international markets through Pacific Blue and V Australia.
As international airlines, Australian carriers are subject to the foreign ownership
limits of either the Qantas Sale Act 1992 or for all other carriers, the Air
Navigation Act 1920. While it is theoretically possible to separate Australian
airline businesses into domestic and international arms to mitigate the impact of
the constraints on capital that these limits impose, this is an inefficient and
undesirable option from a commercial perspective.
The legislated limits on foreign investment are in place to ensure compliance with
the ownership and control requirements for the designation of international
carriers under bilateral agreements. Traditionally, these have been based on
substantial ownership and effective control by nationals of that country. There is
now a global move – encouraged by the International Civil Aviation Organization
(ICAO) – towards the use of principal place of business and regulatory control, in
recognition of the constraints on access to capital and opportunities for
consolidation that this places on airlines.
Seeking to replace traditional nationality provisions with these criteria when
negotiating bilateral agreements has been Australian Government policy since
2000, and as noted earlier, this has now been secured in 18 of Australia’s
agreements.
In May 2008, in advance of second stage negotiations between the EU and the
US on an open aviation agreement, the US advocated the pursuit of liberalisation
of ownership and control criteria along these lines, not only with the EU, but more
broadly.
In light of these developments, it is expected that over the next decade, the
requirements for foreign ownership limits on airlines to protect designation will
become far less important. In order to facilitate the improved industry outcomes
that the use of the modern designation criteria is designed to achieve, changes to
domestic legislation relating to foreign investment in airlines will be required.
This does not mean that Australia’s domestic or international airlines need to
become “less Australian”. There are a number of aspects of airlines’ operations
where an Australian government might wish to stipulate requirements in relation
26
to issues such as Board representation, operational headquarters and proportion
of locally based employees.
This would ensure that Australian carriers continue to serve the national interest,
while enabling them access to global markets to cost-effectively fund investment
for growth on Australian domestic and international routes to compete with
foreign carriers.
It would also enable cross border consolidation of the industry to more readily
occur. Similarly, specific requirements and FIRB processes would act as
safeguards to ensure that Australia maintains its own aviation industry.
Against this background, Qantas seeks removal of the 49 percent limit on total
foreign ownership under the Qantas Sale Act 1992 and Air Navigation Act 1920.
In order to secure parity with other Australian carriers, Qantas would also seek
removal of the 25 percent and 35 percent limits on foreign ownership by a single
foreign entity and by airlines in total respectively.
This would bring Australia’s aviation industry in line with other industries and their
ability to compete and globalise:
“Any bank that meets the requirements can buy a license and start
business. So HSBC can claim to be the world’s local bank with 10,000
offices in 83 countries. Nobody cares that it’s owned by investors from 100
different countries”4.
1.3 REGIONAL AND GENERAL AVIATION
1.3.1 Serving regional and remote communities
Except where air routes cross state borders, much of the regulatory policy
relating to air services to regional and remote communities remains in the hands
of individual state governments.
The vast distances between towns and the relatively small population of many of
the regional areas of Australia mean that safe, reliable and affordable air
transport services are vital to these communities. For airlines to have a single
policy upon which to base their planning of regional services would be useful.
Qantas would have no objection to an overarching Federal Government
framework being introduced, to allow airlines to work with a common approach
across all areas of Australia.
4
IATA CEO, Giovanni Bisignani speech, 2 June 2008
27
The challenge of maintaining profitable scheduled airline services to some
remote towns cannot be understated, due to small market sizes and the higher
per-passenger costs of operating smaller aircraft.
Against this background, while Qantas strongly supports competition on air
routes whenever possible, we recognise that it may be the preferred option on
selected routes to license operations to only one scheduled airline in the interests
of continuity and sustainability of services. While competitive pressures on
operators on a route might lead to a period of very low fares in the short term, it
potentially exposes communities to the risk of permanent loss of air services as
operators shift capacity away from unprofitable routes.
Qantas therefore believes that only regional intrastate routes which have reached
a volume of 50,000 passengers per year should be opened to competition.
Individual airline licences to operate routes of lesser volume, issued following an
open tender process, remain appropriate. Licence periods should run for a period
of at least three years, to enable successful operators to grow and develop
markets to realise a return on investment and to enable competition to be
introduced into markets once passenger volumes reach 50,000.
On routes to very remote communities, where there is no other prospect of air
services being operated, Qantas would have no objection to government
subsidies being paid to a single operator under a regulated licence through a
tender process. Such arrangements, which are likely to relate only to
communities requiring operations by smaller aircraft, should desirably have the
level of subsidy determined by tender responses to a minimum service level
specification (eg schedule frequency, size of aircraft etc) stipulated by
government.
1.4 ADDRESSING SKILLS NEEDS IN THE AVIATION INDUSTRY
The global aviation industry has undergone unprecedented and rapid expansion.
While the industry growth has been largely positive, the pressure placed on the
highly skilled occupational categories of pilots and engineers has seen dramatic
surges in resource requirements globally, as well as locally.
While impacted by softening economic conditions and industry responses to
increased fuel prices, this growth is expected to continue in the medium term.
International Air Transport Association (IATA) data suggests the average annual
growth rates in forecast passenger numbers from 2006 to 2010 for Australia is
approximately 4.5 percent per annum. This contrasts with one percent Airline
Transport Pilot Licence (ATPL) pilot growth expected. The growth in passengers
has meant that by 2020, 16,000 new aircraft will be needed, which requires the
28
training of 17,000 pilots each year. That is, 40,000 more pilots than current
capacity.5
The tight labour market, coupled with increased competition within the aviation
sector has provided these two highly skilled groups with employment choice in
both national and international markets. We are witnessing pro-active
approaches to skilled individuals with incentives that, if matched, would render
Qantas uncompetitive. Carriers such as Cathay Pacific, Emirates, and Etihad are
currently recruiting in high numbers. Etihad is believed to require 500 pilots –
greater than the total number of ATPL licences issued in Australia in 2007.
Previous organisational loyalty no longer constrains attrition, with ever-increasing
workforce mobility. Regional and remote communities are one of the key
stakeholder groups most affected by these dynamics within the aviation industry.
Access Economics estimates that every $1 million of revenue in the aviation
sector creates 8.4 jobs - both directly and indirectly - across Australia. In view of
this, and the skills shortages in the industry, we believe aviation should be
nominated as a “national priority” for Australian educators, similar to the current
status that applies to education and nursing careers.
1.4.1 Qantas Group investment
The Qantas Group currently invests heavily in the development of new talent and
skills for our people (over $280 million per annum in training) and this will
continue. Our large, nationally recognised engineering apprenticeship program
provides not only Qantas with the foundations for the necessary skilled labour,
but also contributes significantly to the skilling of the national workforce. We are a
trainer of pilots, cabin crew and, internally via our registered training organisation
Qantas College, all Group employees. Our commitment to maintaining world
class standards across all our job categories is evidenced by our success as one
of the world’s leading airlines.
Qantas workforce planning has identified continuing external hiring demand in
the areas of pilots, engineers, customer service and professional accounting. Our
analysis shows they will remain the focus over the next three to five years.
In order to attract and generate interest in the aviation industry and in particular
careers with the Qantas Group, we have recently launched Qantas Careers,
which is aimed at providing information more efficiently and effectively to the
employment market. It provides easy-to-use access to job application processes
and ensures interested parties have access to all available Qantas job
opportunities.
5
Speech at the Singapore Air Show Aviation Leadership Summit, Giovanni Bisignani, IATA CEO, 18
February 2008.
29
Qantas recognises that creating an environment of ongoing training and
development assists in the retention of skilled staff who regard the up-skilling as
a reason to stay.
Additionally, we have invested heavily in training via apprenticeships, cadetships,
traineeships and corporate graduate programs.
1.4.1.1 Pilots
The global pilot skills shortage has been well documented. We have seen an
overall decline in the number of currently issued flight licences in Australia
(inclusion of student GFPT, PPL, CPL and ATPL licenses) since 2005/06. This
pressure will continue to be felt at all levels of pilot employment and significantly
within training organisations where it is already evident. Qantas currently
employs over 3,000 pilots across the Group.
The substantial costs associated with becoming a pilot act as a deterrent to many
young Australians. The financial outlay associated with the accumulation of flying
hours, licensing and fees (Civil Aviation Safety Authority, medical etc) often
require a personal investment in the vicinity of $120,000.
Against this background, Qantas has created a stand alone flight training
business that, as well as servicing Qantas’ pilot training needs, is also exporting
its services with a number of overseas contracts.
QantasLink recently launched a pilot trainee program, offering unprecedented
access to airline pilot career opportunities with the provision of high quality
structured training to Qantas standards.
Qantas is also expanding the diversity of the pool of potential pilot applicants.
Targeting university students for pilot identification provides the opportunity to
recruit from all segments of the community. Evidence from universities
demonstrates that the applicant base for relevant courses includes an increasing
number of women and indigenous applicants.
1.4.1.2 Engineers
We are experiencing increased levels of attrition within the engineering skill set,
which is affecting the age distribution of our engineering workforce with the
younger, more mobile engineers leaving the organisation for fast-growing
competitors or other industries.
Qantas Engineering has a significant apprentice program as well as a graduate
program for professional engineers.
30
Since its inception, the apprentice program has trained close to 7,500
apprentices at a (current) cost of $170,000 per apprentice over a four-year
period. Some of this cost is associated with Qantas providing accommodation
and food for apprentices relocating for periods of time to meet the practical
training requirements of the Certificate IV in aeroskills training. Qantas rents six
properties in Geelong, Victoria and provides food to the value of $100 per week
per apprentice living in the accommodation throughout the year.
Qantas Engineering is also recruiting seven to 12 graduate professional
engineers in 2007/08. The graduate program will take four to six years to
complete, depending on the individual skills and experience, costing an average
of $7,260 per year for each graduate. The program aims to address the
increasing difficulties in attracting appropriately skilled and qualified professional
engineers, which is imperative to an organisation focused on operational
regulations and compliance.
1.4.2 Role of government
Government has an important role to play in assisting and augmenting the
investment in skills training made by the aviation industry.
Of primary importance are policy settings which encourage a stable and
sustainable industry, as highlighted above in 1.1 to 1.3.
Where aviation skills issues are concerned, we believe the Government could
undertake a range of activities in four key areas.
1.4.2.1 Attraction
Queensland government initiatives such as Aviation Australia and Aviation High
have been welcomed by the Qantas Group. While unable to solve labour
shortages, these initiatives go some way to ensuring students have exposure to
the industry, appropriate courseware at their disposal and the industry is given a
positive focus. Qantas would like to see these state-based initiatives extended on
a national basis.
Qantas Engineering is considering the introduction of a Summer School
Program, which would target the necessary engineering disciplines for future
requirements in line with our forecast needs. We believe that with appropriate
Government funding, further collaboration between Qantas and universities may
enable us to increase the intake. It would also promote better cooperation
between the industry and the education sector.
31
Internationally, government promotion of Australia as an aviation centre of
excellence would be helpful, particularly in Asia where the largest growth in
global aviation is expected over the next 20 years. This could be undertaken in
conjunction with industry to leverage existing relationships.
More broadly, in order to ensure that the Australian aviation industry remains
internationally competitive at attracting and retaining key skills, it is important that
Australia’s reputation for providing safe work environments and high tech skills
development continues.
The issue of accessibility to fast and efficient immigration processes (for both
short and longer term applicants) in the areas of skill demand for the aviation
industry is a priority. Many of the demand areas (pilots, engineers and
accountants) involve the requirement for highly skilled individuals to be added to
the talent pool to fill immediate shortfalls.
Where pilots are concerned, an increased pool of potential candidates could be
more rapidly addressed by adding ‘Pilots’ to the ‘Migration Occupations in
Demand’ list (MODL) for General Migration. This widens the potential pipeline of
skilled migrants entering the Australian workforce. At present, companies
sponsor qualified individuals through the Employer Nominated Scheme, which
can be costly and time consuming.
1.4.2.2 Training
One of the key challenges for government and industry with respect to some
aviation skill groups is the removal of the substantial financial barriers to entry
which currently exist.
An important aspect in this regard is for the Government to provide greater
flexibility in higher education funding models. Qantas welcomes the recent
announcement that pilots have been added to the ‘Priority Occupations’ list,
thereby providing flight training schools access to Government funding. We
believe this initiative needs to extend to providers becoming eligible for
Commonwealth supported places and therefore be able to extend HECS-Help to
qualifying students. In addition, the FEE-help cap for aviation qualifications could
be lifted, as for disciplines such as medicine, dentistry and veterinary science.
Qantas currently charges Goods and Services Tax (GST) on its technical crew
training courses. This represents an increase in costs for those that cannot claim
the GST as an input tax credit - typically private individuals. GST-free status
would reduce the cost to train Australian residents and assist to increase the pool
of pilots for the Australian aviation industry.
32
The Issues Paper asks whether proposals such as a national industry run flying
school are worth investigating (page 7). Any industry wide initiatives to expand
access to training and skill development for aviation in Australia are prima facie,
of merit. Qantas suggests the formation of a combined government and industry
taskforce to explore the concept and propose several options for consideration.
The taskforce would need to ensure areas of concern such as the supply of
instructors are considered. Lack of instructors is one of the most significant
constraints facing the industry worldwide and Australia is far from immune. This
issue extends not just to qualified and experienced instructors for the aircraft
instruction but constraints also exist in other disciplines such as ground
instructors and engineering instructors.
We believe it would be beneficial for a system of transfer pricing or bonding for
pilots to be investigated as part of this, in order to ensure that pilots can be
placed where needed, especially in regional operators.
For aviation apprentice engineers, Qantas would like to see enhancement of the
‘Tools For Your Trade’ initiative for Aircraft Maintenance Engineer (AME)
Structure, Mechanical and Avionic trades. We would also support the
Government extending the apprentice travel concession cards and the
registration of motor vehicle subsidy to cover all years of training, extending the
Australian training fee voucher system to cover TAFE Training costs in Year 3 of
apprenticeships and providing assistance to students undertaking pre-vocational
programs.
1.4.2.3 Retention
Supporting skill development is a proven mechanism for retention. In aviation,
this requires a large investment by employers as access to cutting edge
technologies and equipment is required. For instance, a new flight simulator can
cost approximately $20 million. Tax policy should be reviewed to reduce the cost
of such large investment to incentivise organisations to further invest in training
simulators used within Australia rather than offshore. This could be achieved by
accelerated depreciation provisions for this equipment or reviewing the research
and development tax concession to broaden it in such a way as to ensure that
such expenditure would qualify.
33
ATTACHMENT
Sources of Structural Disadvantage Case Study: Taxation
Overview
Qantas is currently replacing its ageing Boeing 767 and Boeing 747 fleets (with
the new Airbus A380 and Boeing 787 fleets) at a cost of $22.5 billion (current
committed aircraft acquisition program). This is a continuation of the $10 billion
investment program completed since 1999. The investment is critical to Qantas
maintaining its competitive position and provides capacity for future reinvestment
and growth opportunities.
In addition, Qantas has 72 options and 104 rights for additional aircraft
purchases worth $15.5 billion (future uncommitted aircraft acquisition program).
This fleet expansion program will bring increased employment in Australia and
more tax revenue to the Government from both Qantas and employees of
Qantas (Qantas pays tax in Australia on all its profits except its New Zealand
domestic operation) and help reduce the impact of greenhouse gas emissions.
The tax regimes enjoyed by many of Qantas’ competitors are more favourable
than the Australian tax regime applicable to Qantas. The application of tax
treaties mean that international airlines are generally taxed in their home country
and are therefore at a competitive advantage to Qantas. For example, the
corporate tax rate in Malaysia is 25 percent (from 2009), Singapore is 18 percent,
17.5 percent in Hong Kong and effectively 0 percent in UAE, as opposed to the
Australian corporate tax rate of 30 percent.
Further, the many other taxes that are paid by Qantas such as payroll tax, capital
gains tax and fringe benefits tax, are either not payable or payable at a reduced
rate by our major competitors.
In addition, the 10-year effective aircraft life for tax depreciation purposes
statutorily imposed upon Qantas is far less favourable than those which apply to
many of our major competitors, such as Singapore Airlines and Cathay Pacific.
Accompanying the following examples are proposals which are submitted as
mechanisms to improve the international competitiveness of Qantas,
underpinning its future aircraft acquisition program and thereby providing
economic and environmental benefits for Australia highlighted above.
34
A more competitive taxation regime
Tax depreciation of aircraft
Qantas is at a disadvantage to its international competitors, who enjoy more
favourable aircraft tax depreciation provisions than Qantas. A more favourable
tax regime would assist Qantas to internally fund its current ($22.5 billion) and
potential future ($15.5 billion) aircraft acquisition program.
The table in Appendix 1 shows the effective life of aircraft for tax depreciation
purposes enjoyed by our major competitors, as well as their current fleet age (as
per the latest publicly available information). It highlights that, airlines with a
lower fleet age tend to enjoy preferential tax depreciation regimes.
The table in Appendix 2 shows the cash flow benefit to Qantas under alternative
aircraft tax depreciation rate scenarios over the next 10 years (to 2019)
compared with the tax depreciation otherwise allowable under the current 10-
year capped effective life (using the current committed aircraft acquisition
expenditure of $22.5 billion).
A reduction to three years would reduce Qantas’ tax liability over the next 10
years (to 2019) by $1.36 billion in present value terms, and by $952 million in
present value terms if the effective life was reduced to five years.
Re-introduction of the investment allowance
Reintroduction of an investment allowance (including aircraft) could encourage
companies in capital intensive industries to re-invest in income producing assets
and thus increase business productivity.
In addition to the tax depreciation provisions, some major competitors, for
example Singapore Airlines and Malaysia Airlines, also enjoy investment
allowances ranging from 20 to 60 percent of the cost of the equipment. The table
in Appendix 3 shows the cash flow benefit to Qantas, of $488 million in present
value terms, if the investment allowance of 10 percent was reintroduced and
applied to our current aircraft acquisition program.
The cash flow benefit is enhanced if the changes to aircraft tax depreciation are
made in conjunction with the reintroduction of the investment allowance. That is,
$1.848 billion in present value terms with a three-year effective life, and $1.44
billion in present value terms with a five-year effective life.
Re-introduction of balancing charge
The balancing charge offset could also be reintroduced, but limited in application
to the reduction in the depreciable value of replacement assets. The removal of
35
the balancing charge offset has meant that taxpayers are less likely to update
capital equipment, resulting in the continued use of older and less efficient
equipment, which may have broader impacts on the economy and environment.
Tax treaty re-negotiations
The airline profits article in the OECD Model Tax Convention, which is adopted
by many OECD countries, provides for the exclusive taxation of profits from the
operation of aircraft in international traffic in the country of residence of the
operator. Qantas is protected under the airline profits article from tax in many
countries to which it flies.
Currently, Hong Kong and Australia do not have a double tax treaty. Qantas
supports the current negotiations of a full double tax treaty (with an airline profits
article) with Hong Kong.
The existing double tax treaty between the Philippines and Australia does not
have an airline profits article. Qantas supports the negotiation for the insertion of
an airline profits article in the existing treaty with the Philippines.
Qantas also supports the entry into double tax treaties (with the insertion of an
airline profits article) with South American countries, such as Chile.
Aircraft leasing arrangements
Currently, Australia has negotiated various double tax agreements where a
deemed permanent establishment (PE) arises as a result of “maintaining” or
“operating” substantial equipment (which includes aircraft). Australia’s
reservation to the OECD Model Tax Convention, that excludes such a provision,
is due to the perceived exploitation of Australia’s natural resources. It is
apparent, however, that the inclusion of aircraft in the definition of PE was not
intended by Treasury when entering into the various double tax treaties.
A deemed PE presence means a taxable presence in the country in which the
PE arises. This impacts Qantas’ aircraft leasing arrangements, in instances
where aircraft leased to Qantas by foreign lessors are deemed to be through an
Australian PE, as the Australian tax cost of foreign lessors is borne by Qantas,
through contractual indemnities or increased lease rentals.
We are not aware of any other jurisdiction that has deemed PE rules for using
substantial equipment.
Qantas supports a model that does not trigger the existence of a PE as a result
of a lessor “maintaining” or “operating” substantial equipment.
36
In addition, Qantas supports moving towards a US/UK treaty style exclusion of
equipment leasing from the royalty article, resulting in no royalty withholding tax
being levied. Qantas would like to see this reflected in Australia’s other double
tax treaties.
Summary
In light of the foregoing, Qantas would like to see:
• the current statutory cap on aircraft effective life of 10 years reduced to a level
more commensurate with its international competitors. A reduction to three
years (similar to Singapore Airlines) would reduce Qantas’ tax liability over
the next 10 years (to 2019) by $1.36 billion in present value terms, on its
current committed aircraft acquisition program of $22.5 billion. This would
result in reduced tax payments, providing Qantas with increased cash flow to
support both its committed and uncommitted fleet growth and re-acquisition
program.
• reintroduction of the investment allowance to increase Qantas’ cash flow and
further support the current and future fleet growth and re-investment program.
• reintroduction of the balancing charge offset, but limited in application to the
reduction in the depreciable value of replacement assets.
• revisions to the double tax treaties (as outlined above) to ensure that Qantas
is not disadvantaged relative to competitors.
37
Appendix 1
Aircraft Effective Life and Aircraft Fleet Age
Country Carrier Effective Fleet Age Comment
Life (Years) (Years)
Australia Qantas 10 9.6 20 year effective life which
has been statutory capped
to 10 years
UAE Emirates N/a 6.2 No corporate tax regime
Singapore Singapore 3 + 6.6 Accelerated tax depreciation
Airlines additional regime
aircraft
investment
allowance of
20% to 50%
Hong Kong Cathay 6.67 + initial 11.0 Accelerated tax depreciation
Pacific depreciation regime
allowance of
60%
Thailand Thai 5 10.7
Airways
Malaysia Malaysian 5 + 10.4 Accelerated tax depreciation
Airlines additional regime
aircraft
investment
allowance of
60% (over 5
years)
Korea Korean Air 10 7.4
China Air China 5 7.9
Japan JAL 8 to10 12.2 A lower effective life applies
ANA 8.5 for aircraft < 5.7 tonnes
New Air New 10 8.8
Zealand Zealand
USA American 5.2 * 14.0 *Used in US trade or
Airline business
United 12 ** 12.0 **Not used in US trade or
Airlines business
UK British 12.9 10.7
Airways
Virgin
Atlantic
38
Appendix 2
Impact of Change to Current Aircraft Effective Life
Fiscal Year 3 Year Tax Depreciation Rate 5 Year Tax Depreciation Rate
Increase in Tax Decreased Tax Increase in Tax Decreased Tax
Depreciation Liability at 30% Depreciation Liability at 30%
$M $M $M $M
2009 579 174 248 74
2010 1,324 397 634 190
2011 1,203 361 707 212
2012 1,157 347 748 224
2013 1,722 517 1,022 306
2014 1,655 496 1,076 323
2015 632 190 680 204
2016 (524) (157) 93 28
2017 (1,007) (302) (301) (90)
2018 (888) (267) (417) (125)
2019 (792) (238) (463) (139)
Present Value 1,360 952
@ 7.88%
• The total current committed aircraft acquisition expenditure (including the Boeing
747-400 roll-over) assumed in the modelling is $22.5 billion.
39
Appendix 3
Impact of Change to Current Aircraft Effective Life and Re-introduction of
Investment Allowance
Investment Allowance @ 3 Year Tax Depreciation 5 Year Tax Depreciation
Fiscal 10% Rate & Investment Rate & Investment
Year Allowance @ 10% Allowance @ 10%
Increased Decreased Increased Decreased Increased Decreased
Deduction Tax Deduction Tax Liability Deduction Tax
$M Liability at $M at 30% $M Liability at
30% $M $M 30%
$M
2009 248 74 827 248 496 149
2010 286 86 1,610 483 920 276
2011 187 56 1,390 417 894 268
2012 349 105 1,506 452 1,097 329
2013 500 150 2,222 667 1,522 457
2014 354 106 2,009 603 1,430 429
2015 164 49 796 239 844 253
2016 12 3 (512) (154) 105 31
2017 59 18 (948) (284) (242) (72)
2018 60 18 (828) (248) (357) (107)
2019 36 11 (756) (227) (427) (128)
Present 488 1,848 1,440
Value @
7.88%
• The total current committed aircraft acquisition expenditure (including the Boeing
747-400 roll-over) assumed in the modelling is $22.5 billion.
40
2 AVIATION INFRASTRUCTURE
2.1 AIRPORT PLANNING AND DEVELOPMENT
Airports are and will continue to be a major contributor to the growth of
Australia’s national economy. By virtue of its size and relative isolation Australia
will always be heavily dependent on airports and their associated infrastructure.
Historically there has been a strong focus on the major gateway airports,
however, the significance of regional and shared airports continues to grow.
The existing level of investment and the necessary new investment to support
continued growth is significant. It is essential that the planning for major
infrastructure upgrades at all airports, as well as the infrastructure that supports
them (such as road and rail) is well planned and coordinated to ensure that
maximum potential benefit is derived.
While the public sector can make decisions to invest years in advance, the
private sector is only willing to make similar investment decisions if there is a
significant risk premium on that investment. This risk premium is built into the
price that consumers pay for the product or service. In a volatile industry like
aviation, where passenger volumes fluctuate considerably, investors (whether
private airports or private airlines) are reluctant to fund infrastructure projects in
advance of a clear need. In relation to aviation infrastructure this is often too late,
and delays the efficient growth of the industry.
A $20 billion infrastructure fund was announced in the Federal Government’s
Budget by the Treasurer on 13 May 2008. Given the vital links between airports,
road and rail infrastructure, this fund should support essential investment in
aviation infrastructure.
2.1.1.1 Consultation and planning
National interest will be protected through long term growth of airports in
Australia. In order to achieve this balance between the interests of all
stakeholders there needs to be considered planning for land use on airports,
associated infrastructure and adjoining land.
The Airports Act 1996 provides for a level of planning for airport land use at the
major airports. However, the Act is limited in its ability to enforce a coordinated
approach to planning and development in areas that support and surround
airports. It is vital that there is a higher level of coordination between all levels of
government in land-use planning on and around airports. In the absence of a
coordinated planning process for all Australian airports, the potential to maximise
their value, and the value they bring to the areas surrounding them, will be
limited. In the absence of coordination there will continue to be a loss of
41
infrastructure efficiency due to conflict in the mandated planning priorities of the
three tiers of government.
2.1.1.2 Environment
The Australian domestic aviation industry is currently witnessing above average
passenger growth. Continued growth is expected at key airports. This growth is
contributing significantly to increasing congestion at most of the capital city and
major regional airports in Australia. The increased congestion leads to increased
taxiing times and delayed departures and arrivals of aircraft. Aside from the
inconvenience and flow on effect caused by such delays, compensating for
delays, by flying faster, have other impacts like increased fuel burn and
associated carbon emissions.
Federal and State Governments and private airport authorities have an important
role in making timely and cost effective investments ahead of current and future
demand. Additional runway capacity, taxiways, enhanced terminal infrastructure
including gates, departure lounges, screening points, check in facilities and
baggage make up areas can help minimise delays and further mitigate
consequential problems.
Effective land-use planning, as well as pro-active and appropriate zoning by
government, would ensure that the number of noise impacted residents living
near airports is minimised. Importantly it would also ensure that major
improvements in noise performance from new generation aircraft and new
operational procedures are not eroded over time by encroaching development
(refer also to 4.2).
2.1.1.3 Pricing
Airport infrastructure is difficult and costly to replicate due to the demand for land,
the investment required for supporting infrastructure, and competing
environmental, safety and community issues. As a result, the majority of
Australia’s major airports benefit from their natural monopoly status. The balance
of power between the airport operators and the airport users is reflected in the
pricing of aeronautical and aeronautical related assets. Clear pricing direction, or
at the very least strong guidance, should be provided by the Government to all
Australian airports to assist in the facilitation of commercial discussions between
airport operators and airlines6. Successful execution of commercial agreements
will drive and expedite essential airport infrastructure upgrades, as well as
ensuring the travelling public receives efficiently priced infrastructure.
6
Refer to Qantas’ submission to the Productivity Commission Inquiry dated 21 July 2006, section 4.4.
42
2.1.2 Land use planning and development at major airports
The Master Plan requirement under the Airports Act 1996 is principally a land-
use planning document that establishes a basis for future airport development.
Master Plans should be used as a basis to guide future development and
commercial negotiations both on and off airports. Master Plans should also be
used as the foundation for a coordinated approach to planning of airport
infrastructure, support infrastructure and property developments in the
municipalities that border airports.
Airport operators need to be held accountable to their airport Master Plans. The
Master Plans are referred to when major development plans are being submitted
to ensure compliance with the land-use planning document. However, any
deferral or cancellation of infrastructure upgrades generally flies under the radar
of the regulatory bodies, even though these deferrals may significantly impact on
airlines efficiencies.
2.1.2.1 Planning and development mechanisms under the Airports Act
The effectiveness of the existing planning and development mechanisms
provided for under the Airports Act 1996 is limited. The Act’s Master Planning
provisions:
Encompass only Commonwealth land-use requirements at major airports and do
not provide adequate (or any) mechanisms to address the lack of coordination of
priorities among levels of government; and
Do not operate at all in relation to non-Commonwealth airports, despite the
significance of those airports and the fact that they are fundamental parts of a
national network.
As a result the planning framework can be complex and can lead to delays in
planning decisions and a lack of coordination in on- and off-airport planning.
(a) Coordination between tiers of government
There is no coordinated process between the three levels of government for
land-use planning on and around airports. This increases the risk of inefficient
and/or ineffective use of the capacity of airports.
The Commonwealth government is responsible for on airport planning and has
the authority to approve the use of land for aeronautical and non-aeronautical
(commercial) purposes such as shopping centres.
43
The State government has responsibility for planning, developing and approving
support infrastructure such as roads and rail. Within the State Government itself
there are many departments that control supporting infrastructure. In addition
cross-State issues may arise where airports are located close to State
boundaries.
The Local government is responsible for land use in the municipality. Airports
may be bordered by a number of councils who do not necessarily coordinate
their land-use planning.
Without a consolidated approach to planning and development, the opportunity to
maximise the capacity of airport infrastructure is restricted. Sydney, Brisbane and
Perth airports all provide examples of where lack of insufficient consolidated
planning and rapid increases in infrastructure have resulted in significant road
and ground transport limitations.
The limitations of the support road/ground transport network to service these
airports is exacerbated by the commercial development in the vicinity of the
airport by local councils, as well as the investment in commercial facilities by
airport operators on airport land. The development of the supporting
infrastructure has lagged behind, and as a result airlines, and ultimately their
passengers, have funded a significant portion of the infrastructure upgrades.
(b) Limited application to other Australian airports
The Master Planning provisions under the Airports Act 1996 are limited in
their application to:
• Core regulated airports; or
• Airports specified in the regulations, where the site of the airport is on
Commonwealth land.
It is important to generate a degree of alignment between the planning
frameworks for the regulated airports and other airports in Australia. By not
extending the Act’s provisions to all airports, the opportunity to assess the
capacity of aviation in Australia as a whole is limited.
The ability to review and consult with all airport operators on their Master Plans
would provide an opportunity for airlines to assess their flying strategy. Non-
monitored and regional airports are increasing in significance in the aviation
sector as low cost carriers continue to look for alternatives to the monitored
airports. Further, as the monitored airports are reaching capacity, alternatives
need to be considered by all airlines.
44
2.1.2.2 State and local community consultation
The Airports Act 1996 requires core regulated airports to consult with State and
local governments as well as airlines and the community with respect to their
Master Plans and major development plans. As well as making Master Plan
documents available for public consultation, airports also arrange consultation
forums. Where the scope and objectives of consultation forums are regarded as
an opportunity to create dialogue between the parties and to work through issues
on a voluntary basis, they have been successful. Crucial to these meetings,
however, is consistent representation from the relevant Government agencies
such as Airservices Australia and the Department of Infrastructure, Transport,
Regional Development and Local Government and the Civil Aviation Safety
Authority (CASA).
Although such consultation has been of assistance in respect of certain airport
planning, reverse consultation requirements are not evident where, for example,
local councils may be considering development applications that could impact
airport operations. The use of regular quarterly planning bodies with clear terms
of reference attended by all relevant stakeholders would be of benefit in assisting
with coordinated planning decisions.
Although consultation is essential, in order to ensure that airport planning
processes are effective government regulation needs to ensure that planning and
development goes beyond this and that mechanisms are included that deliver an
ability to maximise the potential of the airport infrastructure. It is not easy or
inexpensive to replicate airport infrastructure, nor is it easy or inexpensive to
demolish a new building that happens to be in potential new approach paths, or
to deal with community issues regarding noise.
Qantas believes that the Government announcement regarding the formation of
Infrastructure Australia and the alignment of Commonwealth and State
governments may provide an opportunity for productive consultation on these
issues.
2.1.3 Non aeronautical development on airport sites
It is important that the Government continues to ensure that the leased
Commonwealth airports continue to develop primarily as airports, and that
aeronautical infrastructure and capacity developments are not subverted to non-
aeronautical revenue opportunities. The Airports Act 1996 provides that the
airport operators’ primary obligation is to operate and develop the airport as an
airport. This obligation should also be reinforced by requiring the Minister, in his
or her role of approving Master Plans (section 81(a)), to ensure ‘civil aviation
uses’ is the first and highest priority use of airport sites.
45
The Issues Paper states, “at general aviation airports close to major cities,
pressures arise where the return from non-aeronautical uses of land on the
airport site may be greater than the return from aeronautical uses” (page 11).
These same pressures are also prevalent at the major capital city ports.
The Issues Paper also states that “non-aeronautical development can be
important to diversify the revenue base of the airport operators and strengthen
the capacity to invest in improved terminal, runway or other aeronautical
facilities” (page 10). However, the current regulatory regime (and the ACCC’s
Aeronautical Pricing Principles, which embody a dual till methodology) provides
no mechanism to control the appropriate balance between aeronautical and non-
aeronautical development. There is no monitoring of reasonableness of non-
aeronautical returns, and the complementary nature of aeronautical related and
non-aeronautical revenue streams is not factored in when pricing aeronautical
services.
The regulatory regime should ensure that non-aeronautical developments
complement (rather than dominate) aeronautical activities. Non-aeronautical
development may assist in defraying costs from the aeronautical services by
allocating costs associated with what would have otherwise been aeronautical
land, but only while airport capacity is sufficiently meeting demand. Given the
growth in demand for aeronautical land, ultimately the airlines pay a higher rate
for these assets than is reasonable, as airport owners will convert these to
aeronautical assets at the commercial opportunity cost. Airport owners become
accustomed to the incremental windfall gains from non-aeronautical returns that
they seek to continue to enjoy. The timing of conversion of non-aeronautical
facilities is also a concern as non-aeronautical facilities are usually bound by
commercial contracts which include termination dates and penalty clauses.
It is also important to distinguish between non-aeronautical and aeronautical-
related investment. Rates and charges for aeronautical-related investment
should not be based on the opportunity costs of non-aeronautical assets.
Hangars, airline lounges, office space and car parks tend to fall into this
category.
Increasing non-aeronautical use of airport land increases the pressure on airport
infrastructure including inter alia roads/ground transport and energy plants. It also
increases the risks to the overall airport enterprise as it involves increasing levels
of debt and gearing in order to fund non-aeronautical projects. The
corresponding higher cost of debt caused by increased gearing is argued by
airports to be payable by aeronautical users as the aeronautical projects
compete for the same funding within the entity. Airport operators continue to
place the greatest cost burden associated with these developments on the
aeronautical users with no corresponding offsetting contribution from the revenue
streams generated by the non-aeronautical projects.
46
Qantas believes that the Government should include mechanisms in the
regulatory regime to assist in protecting airport aeronautical users and provide a
balance between non-aeronautical development and aeronautical requirements.
The specific mechanisms will depend on whether a dual till or single till approach
is taken. Suggestions for appropriate mechanisms in each case would include:
• If dual till remains
Providing direction on the conversion of non-aeronautical land use back to
aeronautical use; and
Providing clearer direction in the regulated (or recommended) pricing of
aeronautical services and to include it within the scope of an independent
airport-specific arbitration process (refer further comments in Pricing of airport
services section)
• If single till were adopted
In order for the regulatory regime to better ensure that non-aeronautical
developments do not compromise the aeronautical requirements of airlines
and airports, the assessment of the combined returns from both aeronautical
and non-aeronautical revenues could be taken into consideration such that an
airport would lack incentives to over invest in non-aeronautical assets to
leverage a higher total return; ie, a single till approach addresses the issue of
compromise between aero and non-aeronautical investment if the overall
return ends up being the same.
2.1.4 Emerging / regional airports
Emerging airports are those larger airports such as Darwin, Gold Coast,
Canberra, Hobart, and Cairns which are in transition from being (in terms of size
and infrastructure) traditional regional to major airports. This is based on their
passenger volume growth and expansions to facilitate international flights.
The objective of regional airport operations is fundamental to the issue of airport
development and operations in regional communities. This would not prevent the
development of non-aeronautical activities if these activities would assist in
supporting the aeronautical infrastructure required. It would, however, provide
greater clarity for airlines and passengers as to the purpose and need for airport
taxes.
Qantas does not support regional airport operations being used to fund other
community/commercial imperatives that are not related to aeronautical activities.
In our view, this tends to result in higher ticket taxes which have a far greater
impact on passenger demand in regional ports due to the smaller market sizes
(ie higher cost per passenger which reduces demand). Ultimately, this tends to
47
deter airline operators from regional ports if they are unable to make routes
sustainable. If governments wish to encourage sustainable and reliable services
to remote regional ports, it is imperative that the cost of operation is transparent
and reflective of the service being provided.
2.1.4.1 Appropriateness of airport infrastructure
It is also critical in regional airports to ensure that the service or infrastructure
offering provided is appropriate. Consultation and arbitration processes in
relation to the nature of airport infrastructure are imperative. It is essential that
airport operation costs are not ‘gold plated’ as ultimately the passenger pays for
the service or the airline operator pulls out of the route if it cannot be sustained.
Further consultation with airline operators is required to ensure that new
infrastructure is required and appropriate.
It is not Qantas’ intention to seek to limit the ability of airport operators to
maximise their return on non aeronautical assets, however, the aeronautical
users of the airport need to be protected from the pressures of increasing prices
driven by non aeronautical rates of return. The airport operator’s appetite to
increase revenue on the basis of re-valued assets has been the subject of long
debate and is discussed in more detail further in this submission.
2.1.5 Safeguarding Australia’s key airport infrastructure
Airports are key national infrastructure assets. While demand for aviation
continues to grow at a rapid rate, many of Australia’s airports are becoming more
constrained by land development in proximity to Commonwealth airport land. In
the absence of a co-ordinated approach by all levels of government, airport
operators, airlines, regulators and the communities, these off-airport
developments will ultimately limit the ability to extract maximum capacity from the
existing infrastructure. This will drive the need for significant investment in the
duplication of airports and supporting infrastructure at alternate locations much
sooner than might otherwise be required.
2.1.5.1 Planning and development surrounding airports
Planning is of paramount importance to ensure that development around airports
is sympathetic to the requirements of aviation operations. A range of critical
aviation operational issues can be affected by off-airport development by issues
such as transport access and building height. Similarly, the operations of the
airport can have a direct impact on off-airport development, particularly in relation
to environmental issues such as noise and safety. Failure to ensure coordinated
airport planning will ultimately incrementally decrease the usefulness, efficiency
and value of airport sites.
48
2.1.5.2 Government regulation
CASA, as the relevant Government regulator, should be included in development
approvals where building height and position could impact airport approach
areas. Currently this power has been vested in the Department. In particular,
approvals relating to the Obstacle Limitation Surface (OLS) must anticipate future
needs of industry, including curved approaches, Required Navigation
Performance (RNP), Global Positioning Landing System (GLS) and Continuous
Descent Approaches (CDA). CASA should be used, as the regulator not only for
the existing OLS area, but also for areas beyond this in order to review the
development of tall buildings that would limit the use of these technologies in the
future.
There are significant advantages in using these new technologies, for example, it
would allow approach aircraft noise to be dispersed away from existing corridors.
It is expected that it would reduce the noise impact for a number of kilometres of
affected built areas by being able to apply curved approaches at certain airports.
Allowing aircraft to operate at more optimal routings would also reduce fuel
consumption requirements and therefore environmental emissions.
2.1.5.3 Off-airport development and noise
Effective land-use planning, combined with appropriate zoning by government,
would ensure that the number of noise impacted residents living near airports is
minimised. In addition, this would assist in ensuring that major improvements in
noise performance from new generation aircraft and new operational procedures
are not eroded over time by encroaching development.
In guiding development around airports, a conservative approach and long term
perspective are critical. This can be achieved by using forecasts that are
developed using the airport’s ultimate capacity scenario including both the
runway system and movement numbers. These ultimate capacity forecasts and
guidance should then feed into local planning considerations.
Developers planning projects in areas surrounding airports should be asked to
incorporate plans as part of a development application detailing how airport
Master Plans and future airspace planning is being incorporated into their
development designs and how the development plans will comply with relevant
Australian standards. Such plans should be a pre-condition of development
approval.
The tool that is currently used for local planning guidelines is the Australian Noise
Exposure Forecast (ANEF). The main limitation of the ANEF is the perception
that its contours represent all noise-impacted areas around the airport. This
modelling is limited for two reasons, firstly as noise impacts vary on a personal
level, and secondly, because the ANEF is an annual average figure, actual daily
49
impacts may vary greatly from the average. The effectiveness of planning tools is
further discussed at 4.2.
Other mechanisms to assist in the process may include mandatory information
placed on the title of noise-impacted residences and a requirement that noise be
included as a consideration in the sales process of any noise-affected residence.
2.1.6 Future airport needs
Over the past 20 years the number of passengers using Australia’s airports grew
by an average of 5.8 percent7. It is envisaged that this growth will continue over
the medium term on the back of the introduction of new larger aircraft types, low
cost carriers, new destinations and Australia’s growing number of trade partners.
Airlines continue to invest in new aircraft and technology to address
environmental issues such as noise and emissions as well as capacity issues at
airports. Airport capacity, however, is not unlimited and we are already seeing
capacity constraints at a number of Australian airports.
Airport constraints exist in the peak hour(s) while capacity exists at the airports
outside of peak hour operations. This additional capacity is often of minimal value
as airlines, and hence airports, operate in a global environment. The ability for
airlines to operate outside of the peak is limited as a result of origin and
destination constraints.
The ability to continue to grow airports as effectively as may be required is
affected by Master Plans, major development plans and the consultation
requirements under the Airports Act 1996, as well as the extent of the investment
and land required result in long lead time for delivery of upgrades to airport
capacity. The financing of these investments through passenger charges may act
to suppress demand as the costs may have a material impact on the price of the
airline ticket.
2.1.6.1 Future planning needs
An airport needs to be able to grow in capacity and earn a fair return on its
investment. There needs to be a level of certainty that investment in capacity
upgrades will provide a return through the ongoing use of the facilities.
Likewise, airlines are investing in new aircraft as well as new technology to
improve navigational efficiency, levels of emissions and noise. Qantas, as a
locally based carrier, also continues to make significant investments in
infrastructure upgrades for terminals and engineering facilities that are leased.
Airlines need to have a level of comfort that airports will provide sustainable
7
Speech to the Tourism and Transport Forum, Melbourne, 10 April 2008. The Hon Anthony Albanese MP,
Minister for Infrastructure, Transport, Regional Development and Local Government
50
capacity growth and that supporting infrastructure is provided in an efficient way
to allow airlines to optimise fleet capacity to achieve an acceptable return on their
investments. Without this, airline capacity will be constrained with a
consequential negative impact on the economy.
At some airports, however, the ability to continue to grow is constrained by the
available land, or by the magnitude of the investment required to upgrade
facilities and supporting infrastructure (such as road and rail links). Often the
ability to gain support for increased infrastructure through all levels of
government or community is constrained. Groups with conflicting interests also
have the ability to limit airport growth. Future airport needs should be a
consideration at all levels of on- and off-airport planning with an effective
arbitration system underpinning these processes.
The Airports Act 1996 provides for airport operators to consult on the planning of
land-use between regulated airport operators and airlines, State and local
government and the community. At some regulated airports this is supported by
commercial agreements requiring a degree of consultation on capital
investments. However, airport operators go to lengths to ensure that final
decision rights rest with the airport operator even though the airlines ultimately
pay for these investment decisions through passenger charges or operating
disruption when investments are deferred.
2.1.6.2 Additional airport capacity
Given the lead time required to develop the planning for capital city airports,
Qantas believes that the Government should investigate additional airport
capacity.
It is Qantas’ view that the development of Avalon airport as an alternative
gateway to Melbourne has been a successful undertaking, both for Victoria and
the aviation industry in general. However, while this experiment has worked well
to date, the development of a secondary airport is not without its own costs
(and/or revenue penalties), and for this reason it is crucial that the low cost
operating platforms that these airports can provide are not compromised by
inefficient planning mechanisms, an inability to develop non-aeronautical assets
to defray the cost of providing aeronautical services, or disproportionate cost
burdens (ie for security and air navigation services). This is subject to the need to
ensure that aeronautical uses are given a priority status over non-aeronautical
uses as discussed above.
It should also be noted that the lack of existing capacity at major airports
increases airports’ market power in negotiations with airlines. In addition, the
current regulatory framework provides these airports with little incentive to
develop much needed incremental low cost carrier capacity because the returns
51
on a low cost carrier terminal asset base would be lower than on a terminal that
required a more significant upfront capital investment.
2.1.6.3 Additional Sydney basin capacity
Currently Sydney’s runway movement cap and curfew restrictions mean that
capacity is already being reached during peak periods. Qantas supports the
Government’s intention to use the 2009 Sydney Airport Master Plan as an
opportunity to review the options for creating additional capacity.
The guiding principle for Sydney should be to optimise the level of investment at
the existing airport. Sydney is Australia’s gateway airport and relies heavily on
transfers of international to domestic passengers and freight. It would not be in
the national interest to attempt to decant the Sydney services earlier than
required. However it must be recognised that the airport is constrained by Botany
Bay to the South, major road infrastructure to the East and South East and major
developments in the adjoining municipalities of Botany, Marrickville and
Rockdale. In addition business developments in the areas surrounding the airport
will add more pressure on the existing road network around Sydney airport.
There is limited room to grow at Sydney. While new larger aircraft and upgrades
to technology will release some pressure on the airfield system, for this to make
any significant impact the majority of current services would need to be operated
by aircraft with significantly larger capacity.
At some point in the foreseeable future there will be a requirement for additional
capacity to serve the Sydney basin. Given the lead time to develop additional
infrastructure, it is desirable for the Government to engage in an effective and
thorough consultation and planning process with airport operators, airlines, State
and local governments and community bodies immediately.
Airport operators, airlines, communities and all levels of government and relevant
regulatory bodies should also be engaged in transitional planning to determine
how the demand for existing capacity increases can be addressed until such time
as additional capacity in the Sydney basin can be delivered.
Further capacity increases at Sydney airport would be gained by reviewing the
80 movement cap and curfew restrictions, which were set under a different
aircraft regime. There may be an opportunity to review these restrictions given
new aircraft decibel levels, new aircraft technologies and allowing greater use of
over water options.
52
2.1.6.4 Military airfields/Joint user aerodromes
Qantas supports a policy position that enables Regular Public Transport (RPT)
jet aircraft to nominate the use of military airfields as alternates for the purposes
of flight planning.
The operational flexibility that a military airfield alternate provides can often
translate to higher fuel efficiency outcomes (due to the requirement to carry less
holding fuel) and an associated lower carbon emission footprint due to the
proximity of the military airfields to major airports (e.g. to Sydney RAAF
Richmond and Williamtown, to Perth RAAF Pearce and to Brisbane RAAF
Amberley).
A consistent and supportive policy framework should be developed to enable the
operations of civilian RPT jet aircraft at selected military airfields in order to
ensure that airlines have a flexible operating environment that enables growth
and development of air services in a sustainable manner to regional Australia
where many of these military airfields are located. This policy must equally
recognise and be sensitive to the operational requirements for Defence.
The existing framework can have a considerable impact on operating
efficiencies. Jetstar currently operates to RAAF Williamtown (ie Newcastle
airport) and remains very concerned with the restrictive obligations that apply to
all civilian aircraft movements. Jetstar operates over 220 services per week in
and out of Newcastle and represents over 60 percent of total air capacity
(measured in seats) to the destination. The Newcastle services are 10 percent of
the total Jetstar domestic A320 services operating nationally. Jetstar also has a
significant engineering and maintenance facility at the airport, including the main
engineering base for the airline’s A320 fleet.
Restrictive operating conditions at the airport are created by a Department of
Defence (RAAF) agreement that obliges the civilian airport owner and all tenants
to operate in a way that is now becoming a significant commercial and
operational barrier. A low cost and value based carrier like Jetstar relies on
maximising operating flexibilities and high utilisation in order to realise cost
efficiencies. New route opportunities may also require “back of the clock flying”
and other cost efficiencies which in turn benefits the travelling public through
better access and lower fares.
The RAAF has imposed what is effectively a restriction to airfield operating hours
(ie a curfew style of prohibition) for RPT aircraft between 2200 and 0600 hours
each day with a requirement to seek a dispensation if airlines are delayed
beyond 2200 hours. This is the most stringent curfew style of restriction
anywhere in Australia. The RAAF also caps the number of aircraft movements
per hour as well as restricting the ability to conduct selected engineering
maintenance such as high powered engine runs as and when required, resulting
53
in delays for the airline’s scheduled services. These restrictions effectively inhibit
Jetstar’s ability to efficiently operate and grow its services to the airport and bring
regional tourism and economic benefits.
2.1.7 Current and future infrastructure pressures
Australian domestic aviation has experienced significant growth over the past five
years. Forecast increases in passenger and aircraft movements mean that
airfields and aprons will require substantial investment in order to support this
growth and reduce congestion. Increases in aircraft gauge will alleviate some
pressures on airfields, but may transfer the problem to terminals unless airlines
and border agencies can improve processes.
• Airfield (runways, taxiways and aprons)
There is clear evidence of an increase in airfield and apron congestion in the
past three years, dramatically at some airports, with a significant spike during
peak times of the day. It has been necessary for block times to be increased
in order to facilitate the increase in taxi times caused by the rise in airfield
congestion.
• Check-in facilities
Airport operators and airlines continue to review new technology to improve
check-in capacity. However in a global environment with increasing border
security requirements including advance passenger clearance, it is difficult to
envisage how the pressure on check-in counters at existing airports will be
reduced.
• Baggage systems
Growing volumes and peaks of baggage due to larger aircraft and increases
in security requirements continue to drive an increasing need for baggage
systems. Growth in baggage systems will drive a larger terminal footprint.
• Facilitation
As highlighted in 1.1.12, increases in immigration and quarantine
requirements have put significant pressure on the facilities available.
• Roads and car parks
Roads and car parks at many major airports are often congested and at times
nearing saturation. Significant investment in road infrastructure upgrades has
been included in the Brisbane and Melbourne indicative capital plans.
54
Adelaide and Perth airports have also advised of necessary major upgrades
to the road system.
Sydney airport will require significant upgrades in the domestic precinct but
also in the major airport access roads.
Other transport modes are limited at the Australian airports. Both Sydney and
Brisbane airports have privately funded mass transit systems but their
effectiveness as a mode of airport transport is debatable.
2.1.7.1 “Artificial” capacity constraints
Some of the constraints on existing infrastructure are “artificial”, in that there is
scope currently to provide additional capacity without the need for major new
infrastructure or upgrades. In particular, airfield capacity is “artificially”
constrained by curfews and movement cap requirements. The pressure to tighten
these constraints is high on the agenda for various regulatory bodies and
sections of the community. These “artificial” capacity constraints could have the
effect of forcing earlier investment and duplication of airport infrastructure and
potentially greater environmental impact. The use of new technological
improvements as well as the review of the use of these “artificial” constraints
would help to alleviate capacity constraints.
• Runway Movement Caps
Runway movements in Sydney have now reached the maximum allowable
(80 movements per hour) during the morning and afternoon peak. There has
recently been growth in movements at Sydney by Qantas, Jetstar and Virgin
Blue domestically, while internationally there has been moderate growth that
is expected to increase following the delivery of new aircraft such as Airbus
A380s and Boeing 787s. Although it is possible to grow capacity through
employing larger aircraft to operate in Sydney during the peak, the airport will
remain at saturation point under the 80 movement cap. Future growth to new
markets or increasing frequency on existing routes will be limited.
• Curfews
Curfews are in our view a “blunt instrument” that impose a blanket prohibition
of scheduled commercial services to a port and consequently reduce
operational and commercial flexibilities to grow and develop a variety of
destinations and markets. Curfews can be potentially disadvantageous to
many airports, including regional airports that are growing rapidly, eg
Newcastle or the Gold Coast, since they curtail or inhibit opportunities for
further dispersion, growth and development of air services, tourism and other
economic benefits.
55
Potential curfew restrictions at major capital city ports such as Brisbane or
Melbourne would be of grave concern due to the loss of operational and
commercial flexibility not only at the airports concerned but equally the knock-
on impacts to other destinations domestically and internationally.
The introduction of constraints such as curfews across more airports would
reduce airline network efficiency and growth in capacity through higher
aircraft utilisation and/or could drive premature investment in duplication of
infrastructure leading to even greater pressure from communities on noise
and environment issues. For Brisbane airport, for example, this would have
significant impacts on the early morning and late evening schedule as
Queensland does not have Daylight Saving Time like other states. A curfew
for Brisbane would limit capacity growth and increase congestion.
• Slot Constraints
A presentation by Airport Co-ordination Australia in December 2007 for the
period April to October 2008, highlighted a potential frequency increase of
35.8 percent versus the same period in 2007, reflecting additional services
from domestic airlines. This indicated capacity constraints that would need to
be worked through.
Australia currently uses airport slots, which only plan for scheduled arrivals at
a specific airport. There are discussions underway (by Airservices Australia),
that Australia should adopt a more pro-active management flow system, such
as those used in Europe and the USA. The Tactical Slot Systems, as they are
known, are based on both take-off and the arrival time at the destination
airport, known as Calculated Take-off Time (CTOT).
• Ground Based Augmentation Systems (GBAS)
The current Instrument Landing System (ILS) suffers from a number of
technical limitations such as VHF interference, multi-path effect (due to new
building works at and around airports) as well as ILS channel limitations.
GBAS are expected to play a key role in maintaining existing all-weather
operations capability at CATI/II and CATIII airports. GBAS CATI is seen as a
necessary step towards the more stringent operations of CATII/III precision
approach and landing.
The benefits of implementing Ground Based Augmentation Systems are
expected to include:
• Reducing unnecessary holding delays
• Enabling displaced thresholds to be used when extended works are in
progress on a runway;
56
• Providing approach and take-off guidance services to multiple runways
through a single GBAS facility (minimising air navigation charges);
• Optimising runway use be reducing size of critical protection areas;
• Simplifying runway protection constraints; and
• Reducing costs through fuel and emissions.
2.1.8 Limiting the effects of aircraft noise
Aviation has a good track record in improving long-term environmental
performance with a 75 percent reduction in noise over the past 40 years. The
industry continues to focus on improving noise performance with noise reduction
a major design driver in new aircraft design. The A380 offers substantial
improvements in relation to the latest noise limits, producing half the noise
energy at take-off and cutting the area exposed to equivalent noise levels around
the airport runway by half. Similarly, the Boeing 787 promises to deliver a 50
percent smaller noise footprint around airports.
Qantas is committed to actively managing its noise emissions. As Australia is an
International Civil Aviation Organization (ICAO) Contracting State, Qantas must
consider noise around airports within the framework of the ICAO Balanced
Approach to Aircraft Noise Management.
This approach consists of identifying the noise problem at an airport and then
analysing the various measures available to reduce noise using four principal
elements, namely:
• reduction at source;
• land-use planning and management;
• noise abatement operational procedures; and
• aircraft operating restrictions.
The overriding objective is to address the local noise problem in the most cost-
effective manner, while not implementing operating restrictions as a first resort.
The most powerful tool in managing noise impacts around an airport is
appropriate land-use planning and management. Aircraft operators like the
Qantas Group have invested in the latest noise reduction technology and
procedures. Consistent land-use management to ensure that these gains are not
eroded by encroachment must support this investment and commitment.
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2.1.8.1 Alternative noise reduction strategies
There are several other mechanisms that should be considered in relation to
reducing aircraft noise other than the strict imposition of a curfew. These
initiatives include:
• differential landing fees - where the airfield charges could be based upon
noisier aircraft having to pay higher costs;
• limiting the number or types of operations/aircraft - this action could set limits
on the number of aircraft operations and total cumulative noise levels with the
intention of reducing overall noise at an airport;
• the imposition of a curfew on take-offs only, with no restrictions on landings;
or
• quotas limiting the number of movements during night periods.
These mechanisms, while not ideal, at least enable an airline to make
commercial and operational judgements or “trade-offs” of incremental cost,
revenue and operational decision parameters rather than having restrictions
imposed with no ability to determine the most responsible and sustainable
outcome.
Alternative mechanisms to a curfew should also be actively considered for those
regional airports in Australia that currently have curfew restrictions, ie the Gold
Coast (Coolangatta) and Adelaide. Significant opportunities to operate new
domestic services and/or long haul international services on a “back of the clock”
basis are not being realised due to these curfews. Secondary or regional
gateways should be accorded every opportunity for improved air access and
operational flexibility, as it will enable them to take advantage of incremental
growth opportunities for tourism and increased visitation.
The Government should look to provide more flexibility in terms of access to
Sydney Airport. The peak demand at Sydney drives the focus to the shoulder
curfew and creates a need to review the number of landings during this period
from current levels (a maximum of 24 per week up to five per day) in order to
increase capacity. Any incremental easing of the curfew restriction in a critical
and strategic gateway such as Sydney will have significant economic,
commercial and operational flow-on benefits in terms of the increased travel
options, visitation, tourism and economic benefits as well as a relative easing of
congestion during peak periods.
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2.1.9 Pricing of airport services
The Qantas Group supports direct commercial negotiations between the airport
operators and airport users. We recognise and support the need for airport
owners to obtain returns on capital invested that are appropriate for the class and
risk profile of the investment. Indeed, it is in Qantas’ and all airlines’ best
interests to ensure that there is a willingness by airport owners to make adequate
investments for the future capacity and requirements.
That said, the Group operates in a competitive market environment and to be
successful must provide consumer products and services that are cost effective.
The current regulatory regime gives rise to excessive profits by airport owners
which are in effect collected from consumers. This occurs because airports in
most cases have monopoly power which they use to extract abnormal rents.
Ultimately the power held by airports distorts the Government’s regulatory
intention that benefits be shared across airports, airport users and passengers.
Airports are able to enjoy more than reasonable market rate returns with little to
no incentive to keep costs down or become more efficient. Airlines are unable to
pass on all the costs increases because it is a competitive market. Passengers,
although not paying for the full cost increase, will bear a portion of the cost
increase. Under the current regime due to the lack of any significant market
power, airlines cannot retrieve for customer benefit any discount or commission
on non aeronautical revenue generation – it is the airlines that bring the
customers, and in a free market this would be recognised and shared.
Specifically, the current regulatory regime proves to be deficient in five main
areas:
1. The reasons for inclusion or exclusion from the ‘Light Handed Monitoring’ of
airports are unclear;
2. There is no regulatory framework for non-core, non-regulated airports;
3. ‘Light Handed Monitoring’ is deficient as:
• economic parameters and pricing principles are not defined clearly nor are
they enforceable; and
• there is no enforceable dispute resolution mechanism;
4. There is a lack of transparency or ability to influence indirect third party
charges; and
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5. There is a lack of clarity and application to pricing and reporting in the
Government’s response to the Productivity Commission (PC) Review of Price
Regulation of Airport Services of 27 April 2007 (PC report), particularly;
• the ‘show cause’ mechanism and how to prove the ‘cause’ for ‘show
cause’;
• the current ‘line in the sand’ for determining aeronautical asset base value
is ambiguous and flawed; and
• the definition of aeronautical assets remains incomplete as not all
essential infrastructure (necessary facilities to provide efficient airline
operations eg airline offices and car parks) are classified as aeronautical
assets. Hence they are not subject to any price monitoring, consultations
or negotiations.
These problems with the current regulatory regime lead to increased and
unreasonable airport and infrastructure charges.
2.1.9.1 Light Handed Monitoring of ‘Big 5’
Following the 2007 PC recommendations the ‘Big 5’ airports are Sydney,
Melbourne, Brisbane, Adelaide and Perth. The nature of the Government’s
response to the PC Report has meant that individual interpretations have seen
little improvement in the pricing behaviour or application of the Aeronautical
Pricing Principles by the ‘Big 5’ airports.
Although Qantas has entered into pricing agreements with the monitored
airports, it has taken a disproportionate amount of time and effort to accomplish
them.
Currently, the ability for the Government and airlines to scrutinise pricing
behaviour is largely limited to the stated rate of return on aeronautical assets.
Importantly, the values stated in the ACCC prices monitoring reports reflect the
airport operators’ interpretation of what constitutes appropriately defined and
valued assets for price monitoring purposes. This does not appear to translate to
airports using the same definitions for pricing purposes.
The Government of the time accepted the PC’s 2007 recommendation to exclude
Darwin and Canberra Airports from the Price Monitoring Regime.
It is still unclear what criteria were adopted for Canberra and Darwin to be
removed from the monitored list of airports. It is also unclear what criteria will be
used when airports are next reviewed by the Government to determine those that
should be included in the Price Monitoring Regime. In Qantas’ view clarity should
60
be provided around the criteria for inclusion or exclusion from the Price
Monitoring Regime.
2.1.9.2 Revaluation of aeronautical assets
In the time since the final PC Report in April 2007, little has come of the
Government’s recommendations except for airports to assume that revaluations
of their assets up until 30 June 2005 are justified.
Qantas welcomes the recommendation to set aeronautical asset valuation at a
fixed point in time but believes that the more appropriate and equitable date for
this purpose is the date of the grant of leases in respect of 'privatised' airports.
That is because the purchase price for the long term lease of each privatised
airport was obtained through a competitive sale process reflecting the value of
the airport's assets in their current use. Those privatisation sale values are
relatively recent and readily available, as well as capable of being “rolled forward”
to today.
The ‘line in the sand’ does not explain how to treat re-valued assets prior to the
set date (30 June 2005). Qantas disagrees with the ‘line in the sand’ approach.
Firstly, when asset value is used for a pricing purpose original book value reflects
the fairest asset base value as it generally is based on the actual cost incurred by
the airport owner and this represents their actual investment. Under the current
‘line in the sand’ approach those airports that have re-valued assets and rolled
them into pricing, now enjoy a windfall gain by achieving a return on an inflated
investment value that does not represent actual investment that they have ever
made. Secondly, it has introduced inconsistent pricing – eg between airports who
failed to re-value prior to the date of 30 June 2005 compared to those who have.
Some airports have taken the ‘line in the sand’ approach as a signal to allow
assets to be re-valued up to that date and effectively re-price from this date.
The PC’s proposal to draw a ‘line in the sand’ on asset revaluation and accept
‘booked’ revaluations as at 30 June 2005 creates the opportunity for a significant
windfall gain for the operators of Brisbane, Perth and Darwin airports. These
airports re-valued their asset bases but did not initially fully incorporate these
revaluations into their prices and charges, thereby reducing their reported rates
of return in the ACCC’s Monitoring Reports. The risk Qantas faces from this ‘line
in the sand’ is that these airports will seek significant future price increases to lift
their reported rates of return (on re-valued non-current assets) to a level they will
claim is ‘reasonable’. If this is allowed to occur, airlines – and ultimately
passengers – risk price increases for no added value. The PC and the ACCC
should clarify the ‘line in the sand’ recommendation.
Qantas suggests that an appropriate approach would be to set the aeronautical
asset value at the original book value (OBV) at the time of the airport sale for
aeronautical pricing purposes. The OBV should be adjusted with depreciation,
61
deletions and additions to ensure that the airport continues to make an adequate
return on assets/ investments.
Since the removal of prices notification, price increases in Phase I and II airports
have ranged from 30 percent to 117 percent. The ACCC’s 2003/04 Prices
Monitoring Report, released in 2005, states that Canberra, Perth and Brisbane
airports have all undertaken significant aeronautical asset revaluations. Perth
Airport increased the stated value of its aeronautical asset base by 105 percent
in 2003/04 from $86.7 million to $178 million. Canberra International Airport (CIA)
paid $66.5m for the lease over all aeronautical and non-aeronautical assets at
Canberra airport. CIA has since re-valued its aeronautical assets by some $94
million. Qantas and CIA have reached long term commercial pricing agreements
for terminal and airfield usage independent of any asset revaluations and Qantas
has no issue with CIA in this regard. By contrast, Brisbane airport has re-valued
its assets by $275 million and has sought to base pricing negotiations on this re-
valued asset amount.
Case Study
Brisbane Airport
Since 1999 Brisbane airport has re-valued their aeronautical assets by $275
million. In its pricing negotiations it has increased its charges significantly as an
implied ‘phase in’ to achieve a target return on assets. It has progressively
increased the charge by over 60 percent per arriving and departing international
passenger for the purpose of achieving a return on its re-valued assets. While a
commercial pricing path was reached, Qantas explicitly stated that we do not
agree with the fundamental revaluation to Brisbane airport’s asset base, which is
a windfall gain.
2.1.9.3 Pre-funding of capital expenditure
ICAO pricing principles preclude the pre-funding of capital expenditure. Most of
the ‘Big 5’ airports, excluding Sydney, calculate the required revenue based on
actual average capital spend, often claiming an increase in charges from the
commencement of the agreement.
The Council (ICAO) considers, notwithstanding the principles of cost-
relatedness for charges and of the protection of users from being charged
for facilities that do not exist or are not provided (currently or in the future)8
8 th
ICAO’S Policies on Charges for Airports and Air Navigation Services, 7 Edition 2004, page 9.
62
Pre-funding means that users are being charged for capital expenditure before
they receive any benefits of the new infrastructure and are often inconvenienced
by its construction. The travelling public indirectly provides the initial funding for
the airports to build assets on which the airports then charge the travelling public
an above reasonable return for an indefinite period.
Such practices are having a significant impact on prices in this period of huge
capital investment by airports. Planned capital spend over the next five years for
the ‘Big 5’ airports is in the order of $2.7 billion. While most of this investment is
necessary there are clear cases of unnecessary, early and over investment
which Qantas has attempted to resist.
Some airports are also seeking to re-open recently finalised agreements for
unplanned or significant changes to capital expenditure. In proposals the basis
for the planned/unplanned capital expenditure and the resulting aeronautical
charge is completely revised. Even though Qantas may have a pricing
agreement for a reasonable term this therefore often provides little security with
regard to charging for airlines.
2.1.9.4 Airports are not following Aeronautical Pricing Principles
Emphasising the importance of commercial negotiation has had little effect on the
way the ‘Big 5’ airports have conducted negotiations. Qantas has supported
commercial negotiation, as is evidenced by the pricing agreements that have
been reached with each of the ‘Big 5’ airports over the past two years. This is not
to say that all terms of the agreement are satisfactory. Many of the fundamentals
are not. Due to the lack of sufficient countervailing power the results are mainly in
favour of the airports.
Qantas is yet to see further articulation of pricing principles that more clearly
establish the Government’s expectations regarding effective commercial
negotiations and reasonable access outcomes. All of the ‘Big 5’ airports differ
significantly in the application of the Aeronautical Pricing Principles.
An enforceable structured framework that specifies the basis of pricing
calculations is required. This needs to detail a specific form of building block
model to calculate charges, including but not limited to specifying the asset base,
allocation and recovery of capital expenditure, asset beta, gamma, methods for
calculating CPI, debt margin, and depreciation rates.
The enforceable Aeronautical Pricing Principles that the Government proposed
need to be applied, however, clearer and more robust definitions of aeronautical
services and facilities must be delivered. At this stage, airports are only
interpreting the revised definition for the purposes of reporting and not for pricing.
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While restricted by confidentiality agreements and the sensitivity of current
negotiations from identifying specific airports the following practices are often
experienced:
• protracted and time consuming negotiations;
• non use of ACCC endorsed Building Block Model;
• WACC fundamentals not consistent with market or ACCC;
• cash flow models that are not transparent for asset value, depreciation and
capital return;
• use of IRR and not a ACCC endorsed WACC;
• pre-funding of capital expenditure where the airport seeks to recover the
capital spent prior to the benefits of the asset being delivered, and
• use of overly complicated, multi-spreadsheet models.
2.1.9.5 Implying ‘customer agreements’ by the continued use of the airport
Some airports seek to apply commercial terms on airlines along with General
Terms and Conditions based only on the mere continued use of an airport and
without any express agreement from the airline. Airports can impose
unreasonable or unacceptable terms, conditions, liabilities and prices without
explicit agreement and in the face of explicit disagreement by airlines. An
example can be seen in clause 1.1 of the Brisbane Airport Aviation Services and
Charges Agreement which provides:
“Clause 1.1 - Users of Brisbane Airport
All airlines and aircraft operators who use Brisbane Airport on or after the
Start Date are subject to these standard conditions unless we have
agreed different conditions with you. Subject to clause 1.6 and despite the
fact that you may not sign these standard conditions, if you use Brisbane
Airport on or after the Start Date you will be bound by these standard
conditions and by all of our rules and reasonable directions.”9
Even though Qantas enters into a commercial agreement on price, it is explicit
that we do not accept some of the underlying bases such as asset values, timing
of capital expenditure recovery, and weighted average cost of capital (WACC)
assumptions. Qantas is forced into this position in many cases due to the lack of
any dispute resolution mechanism and the time and cost associated with seeking
declaration of the airport under the Trade Practices Act 1974.
Airports are still able to exhibit a ‘take it or leave it’ approach which is
inconsistent with commercial negotiations undertaken in good faith between an
airport operator and its customers.
9
Ref: http://www.bne.com.au/files/pdf/AviationCharges_Agreement_300508.pdf
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2.1.9.6 Enforceability and dispute resolution
The Government believes there is a credible threat of re-regulation by proposing
to incorporate a ‘show cause’ mechanism that may lead to more detailed scrutiny
such as a pricing inquiry under Part VIIA of the Trade Practices Act 1974 or
another appropriate investigative mechanism.
There still remains no binding independent dispute resolution in the event that
agreement cannot be reached as a real deterrent to abuse by an airport of its
monopoly power.
Notwithstanding the Government’s response to the PC Report, it is unclear what
would trigger the Government to ask an airport to ‘show cause’ why it should not
be subject to more detailed scrutiny.
In the most recent 2006/07 ACCC Airport Monitoring Report for price monitored
airports:
• the rates of return for average tangible non current aeronautical assets
exceed a reasonable rate of return, with Melbourne at 14 percent and Darwin
at 15 percent; and
• increased margins and increased expenses per passenger are not evidence
of an airport improving efficiencies or needing to.
Despite these findings the Government has not asked these airports to ‘show
cause’.
Aeronautical Pricing Principles (as defined in part 7 of the Airports Regulations
1997) say that negotiations should be conducted with open and transparent
information exchange. Qantas has to repeatedly ask for transparency and we are
often provided overly complex financial models, insufficient transparency of
costs, scant detail of capital expenditure, re-valued assets and little justification of
their book value.
Pricing agreements should involve sharing of risks and returns, yet airports
continually model low passenger forecasts and high asset beta’s and have no
plans to reassess as actual data emerges. They may wear the cost of capital
expenditure over-runs for a year or two but then will completely recover the cost
when those costs are rolled into the asset base in the next pricing round. During
that time they have been over recovering from increased passenger growth
(higher than forecast) and WACC fundamentals that exceeded the business
needs.
Airlines do not have the countervailing power to enforce the Aeronautical Pricing
Principles.
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2.1.9.7 Definition of aeronautical assets
The definition of aeronautical assets in the Act should include all those services
for which airports have significant market power. The Government recommended
that the definition include ‘space and facilities (whether terminal or airside)
essential to efficient airline operations’10.
Current limited monitoring only looks at aeronautical assets and returns – many
airports make even higher returns on activities classified as non-aeronautical. If
there was a commercial and competitive environment (choice of airports to use)
then airlines would be able to obtain a share or commission (practically a
discount) on passenger handling charges recognising that it is the airline that
brings the customers to the retail and other non-aeronautical asset revenue
generators. Qantas has always maintained that a transparent whole of airport
approach is the only viable way to effectively manage the total revenues, costs
and returns to achieve a cost effective outcome for the travelling public.
Many Australian airports have restricted the roadways around airports to force
people to use their car parks and charge significantly for stays of less than 10
minutes for drop off and pick up purposes. This is not in line with car parks in the
inner city to which the ACCC compared them. In the 2007 financial year $206
million in car parking revenue was generated by the ‘Big 5’. This exploits the
travelling public, their families and misrepresents the aeronautical revenue being
generated by the airport.
It is also evident that it airports, due to their location and the lack of alternative
car parking, are able to charge high fees for the privilege of parking.
Approximate Car Parking Rates ($A) - 2006/07
Sydney Melbourne Brisbane Perth Adelaide
Airport Airport Airport Airport Airport
Short-term Stay 13.00 10.00 8.00 5.20 4.00
42.00 public
car park
Domestic car
Long- 24.00 at
park 25.00 (40.00
term long term
covered)
22.00 17.00 15.00
Stay car park
International 40.00
car park
Note: Short-term rates and long-term rates refer only to the first hour and the first day
respectively.
10
Recommendation contained in the Government's 30 April 2007 response to the Productivity
Commission's inquiry report entitled Review of Price Regulation of Airport Services.
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Airports also have significant market power for the provision of airline offices and
essential facilities such as staff car parks. It is a universal requirement for airlines
to set up offices in the airport terminals to enable staff to be present at terminals
to deal with the expedient resolution of passenger and operational issues. Staff
and offices are also required in sterile international areas as the security
requirements preclude the constant movement of staff across the sterile
boundary. As such, these areas ought to be properly included in the definition of
aeronautical assets.
This aeronautical asset definition should also be required to be used not only for
the purposes of monitoring, but for consultation and negotiations with airlines
over pricing and service level agreements.
2.1.9.8 Emerging / regional airports
Most emerging and/or regional airports are not considered core regulated
airports under the Act and as such a regulatory framework does not exist for
airport service pricing. A regulatory framework is urgently required to enable
airlines to obtain cost transparency and reach mutually acceptable commercial
outcomes. It has been Qantas’ experience that an overwhelming number of
emerging/regional airports have taken advantage of their market power, as no
guidelines or incentives exist to prevent them from doing so. Airports have had
no incentive to reach a negotiated commercial arrangement as the outcome
achieved by arbitrarily imposing high charges is far more advantageous.
As the ACCC pricing guidelines are not recognised by regional airports the only
applicable pricing framework airlines can have recourse to in some instances are
local government laws which unequivocally favour the airport owners they
represent.
There are numerous examples of regional airports that exploit their market
position by imposing arbitrary prices, refusing to justify pricing increases and
rejecting negotiating commercial agreements. As a result there is no incentive for
airports to gain cost efficiencies. The uninhibited use of market power also
comprises substantial pricing risk for both leisure and labour passengers. This is
particularly concerning as remote regional airports in Western Australia and
Queensland are the only practical means for supplying labour to many of
Australia’s economically essential resources-industry locations.
Another frustration experienced by Qantas is that regional airports often carry out
capital projects without consultation and then impose pricing increases to recover
these costs during the projects completion. While airport infrastructure
investment may be necessary, Qantas has no visibility of capital plans and can
not ensure that projects will meet future service requirements in a cost effective
manner. As regional airports do not engage in pricing negotiations nor seek
commercial agreements, a few weeks notice of a newly imposed price is often all
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that is provided to Qantas. As pricing increases are imposed during the project
construction period Qantas is unable to recover the balance of pricing
adjustments from passengers who have paid prior to this notification.
Case Studies
The following are some of the examples of uncommercial or unreasonable airport
behaviour in the period 2007 to 2008:
Case Study Airport Operator No. 1 – Imposition of charge and refusal to consult:
• Qantas requested consultation and information regarding a pricing increase.
Airport Operator No. 1 responded ‘[w]hile we acknowledge that airlines have
the right to seek clarification in relation to our pricing, it should be noted that
they also have the option to reduce or modify their services should they
consider the imposition of this charge to be commercially unsustainable.
While I would like to meet with you, I see little value in your effort to travel
here if it is to discuss our aeronautical charges.’
Case Study Airport Operator No. 2 – Airport cannot confirm what expenditures
are funded by new charges:
• Airport Operator No. 2 has advised ‘Qantas requested detailed data to
undertake a “full commercial assessment” of the Town’s pricing proposal. As
previously indicated, the Town is unable to provide all the data that was
requested’. While the costs are unknown the Town proceeded to demand
pricing increases to fund these costs. ‘Council will be invoicing Qantas
landing fees and passenger service charges in accordance with the adopted
fees and charges within its 2007/08 budget and expects payment in full’.
Case Study Airport Operator No. 3 – Suggestion that Qantas withdraw service if
pricing increase is not accepted:
• Airport Operator No. 3 has advised ‘ Council wishes to re-iterate that the
correspondence to QantasLink in March 2007 advising of a rate change was
not a proposal. It was purely an advice to QantasLink that should it continue
to operate services to/from the airport from 01 July 2007, the rate will be
$X/passenger’.
Case Study Airport Operator No. 4 – Result of having no guidelines to provide
cost transparency:
• When Qantas requested cost transparency to support a pricing increase,
Airport Operator No. 4 advised ‘we will not be disclosing the information you
have sought as there is no statutory requirement for us to do so.’
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Case Study Airport Operator No. 5 – Imposing charges without any willingness to
reaching a commercial agreement:
• Qantas requested cost transparency and agreement regarding a new pricing
increase, Airport Operator No. 5 advised ‘Council is not reliant on an
agreement with users of the airport, including QantasLink, in setting its fees
and charges for the use of the Airport.’ Airport Operator No. 5 then stated
‘[t]he fees and charges as previously advised to you will apply from the 1st of
July 2008 as previously advised regardless of your assertion to the contrary.’
Case Study Airport Operator No. 6 – Local Law supports unilateral airport pricing
and acknowledges prices fund non-aeronautical activities:
• Section ‘X’ allows the Airport Board to ‘make, demand, levy and recover such
charges and fees as may be prescribed or where no charge or fee is
prescribed such charges and fees as may be fixed by the Board’. This law
clearly enables [Airport Operator] to leverage its monopoly power without
restriction. The Board then stated that airport charges also fund non-
aeronautical activities. The ‘Levy was not specific to airport operations and
that it covered a range of services that directly benefit all visitors to the Island.
These include the provision and maintenance of walking tracks …, removal of
recyclables and other waste from the Island’.
2.1.9.9 Third party charges
Third party charges are often aeronautical related charges imposed upon airlines
where the airline has been excluded from direct negotiation or does not receive
any service in return.
In the case of a fuel throughput levy (FTL) these charges are negotiated with a
third party fuel supplier. Fuel suppliers are a “comfortable oligopoly” and directly
pass the costs onto the airlines. Airlines are excluded from the negotiation
process but fully exposed to the implications. These levies are imposed without
any service in return.
With the removal of direct price controls and the introduction of a dual till
approach to prices, the economic reasons that airports have put forward in the
past no longer apply. Third party charges such as fuel throughput levies should
be made transparent and revenue derived should be accounted for as ‘allowable
69
revenue’11 as part of the building block calculation. All costs associated with the
provision of aeronautical services and facilities are directly recovered through
aeronautical charges levied on the airline, examples include:
• fuel throughput fees/charges levied by certain airports;
• certain airports seeking to impose charges for being nominated as an
alternate airport for emergency landings without the slot being used; or
• charging a standby fee to be an alternate airport.
Regional airports are no different from larger airports that also have monopoly
power, and as such the Government has an obligation to monitor and report to
the public on the profits they derive from the exploitation of their monopoly
power.
This is required urgently as a number of emerging/regional airports currently levy
charges without any apparent restraint. As these airports do not recognise the
ACCC’s pricing guidelines for major airports, the Qantas Group and the travelling
public are exposed to every airport’s pricing discretion, which includes charging
for non-aeronautical projects and the prejudices of local laws and ordinances.
Airlines are at additional risk as regional operations are threatened by inelastic jet
fuel costs and inelastic airport costs. Unfortunately, passenger travel is elastic
and if these inelastic costs are passed on to the passenger, traffic will decline
substantially as passengers will choose less expensive alternatives. Eventually
airline travel may no longer be affordable for passengers travelling to leisure
destinations and remote mining locations.
It is critical that the pricing framework and disclosure requirements which are
applied to major airports are equally applied to emerging/regional airports. This
will ensure that the ACCC, airlines, the travelling public and the tourism industry
in general can see if and how airports are taking advantage of their natural
monopolies. As smaller airports have limited resources compared to major
airports, Qantas suggests that the regulatory guidelines endorsed by the
Government are be equally as rigid but that the compliance requirements be
made less complex.
11
The basic formula for calculating Allowable Revenues (AR) in any one year is:-
AR= O + M + D + [(AVs-AD)}* r]
O= operating costs
M= Maintenance
D= depreciation
AVs= Starting value of asset
AD= accumulated depreciation
r= rate of return
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Again, the Qantas Group is willing to pay its fair share for the investment made in
these facilities, however, the price paid must be transparent and reasonable.
2.1.9.10 Nature of airport infrastructure
Many airports in Australia have been slow to react to and embrace the low cost
carrier (LCC) phenomenon. Whilst LCCs have delivered a disproportionately
large share of the recent growth in domestic passenger volumes, many airports
remain reluctant to invest in LCC infrastructure and provide differentiated service
levels. Many airports continue to offer only one level of infrastructure and
services that may be above the operational and commercial needs of LCCs. The
LCC business model is predicated on cost containment, and airport costs are the
second largest category of most LCCs behind fuel. As such, it is critical that
airports are able to ‘unbundle’ the services that they provide to airlines (in much
the same way that Jetstar has done for its passengers in order to offer low fares)
in order to ensure that LCCs only pay for the services and facilities that they
need for an efficient operation, and a customer experience commensurate with
the airline’s market positioning.
For example, for an efficient domestic to international connecting proposition,
Jetstar may only need an efficient swing gate capability (allowing joint domestic
and international operations) with no aerobridge and with the ability to dual door
board its aircraft. This infrastructure may result in the most efficient operation and
also be cheaper to deliver than a full service alternative.
The Qantas Group would like to see the Government support a balancing of the
service levels provided at all airports including regional ports. There are many
examples of “over servicing” at airports and of expensive infrastructure that is
unnecessary from operational or compliance perspectives.
2.1.9.11 CBS / LAGs
Policy must strike a balance between tourism interests and the commercial
sustainability of services by airlines that have a long-term commitment to
Australia. This will ensure that emerging / regional airports continue to be
adequately served and enjoy growth in visitation, while enabling the carriers of
Australia to remain competitive in international, domestic and regional markets.
It is imperative for a robust consultative approach between Government and
industry to ensure appropriate changes to aviation security meet current issues.
These changes need to consider the impacts to airports, airlines and the flying
public, from both a facilitation and a cost perspective.
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Since the Government mandated the Checked Bag Screening (CBS) and
Liquids, Aerosols and Gels (LAGs) requirements, the airports have had to invest
in the required capital and human resources to comply with the regulations.
Airports recoup this cost from the airlines who in turn seek to recoup the cost
from the passengers.
When these regulations are applied in a regional gateway such as Darwin, it has
a significant regressive impact since the airlines can only recoup the costs from a
relatively small volume of passengers. The policy of mandating minimum
acceptable security infrastructure such as CBS and LAGs at regional or
secondary gateways can potentially have the unintended consequence of
providing an incremental incentive to concentrate air services and passenger
volumes at the major gateways to avoid airports with high charges.
Jetstar’s acquisition of up to 108 narrow body jets over the next decade has
provided the airline with a strategic opportunity to roll out a northern Australian
hub from which a multitude of short haul international services to various Asian
destinations can be realised. The consequential dispersion benefits that can be
delivered to regional Australia as a result of this initiative will be significant in
terms of tourism, employment and associated economic development.
However, a significant commercial barrier or disincentive to the realisation of this
outcome is the Government’s regulations, which impose higher security costs at
many of the regional airports to which Jetstar currently operates. These costs
include, amongst others, CBS and LAGs as highlighted in the table below.
Port Departing charge per pax as at 30 June 2008
Darwin $18.04
Perth $5.73
Sydney $5.00
Cairns $4.55
Melbourne $4.55
Coolangatta $3.90
Brisbane $3.71
Adelaide $3.35
The Qantas Group’s strategy for serving the Northern Territory is to optimise a
commercially sustainable network of services, which meets the needs of the
various market segments. This currently involves a mix of Qantas mainline and
Jetstar services. Going forward, this balance will be subject to the ongoing
economic viability of each of the Group’s routes into and within the Northern
Territory. Although the Northern Territory is an important tourism destination for
overseas and domestic visitors, it is a relatively small and highly seasonal
market. Having regard to these factors, the impact arising from CBS and LAGs
costs generates significant commercial barriers.
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In addition the Federal Government’s mandated increased security measures at
Alice Springs airport, arising from the airport’s proximity to military installations
and Pine Gap, have the potential to discourage travel to Central Australia.
As the only airline until recently that serviced Alice Springs, the cost of installing
security infrastructure to comply with the new measures – approximately $7
million – was being passed on to Qantas in full. This includes the 11 percent
return on the capital cost of the installation targeted by Alice Springs airport,
which is owned by Northern Territory Airports. As a result, passenger service
charges at Alice Springs have almost doubled since these measures were put in
place (refer also to 5.1.4.2).
2.1.9.12 Transparency in airport service charges
The current ACCC prices monitoring reports fall short in their intention to capture
information in determining whether returns are excessive or constitute abuse of
monopoly power.
The current broad disclosure in prices monitoring reports is insufficient to provide
the transparency that is required to be able to form an opinion as to the realism
of the allocation processes used between aeronautical, aeronautical related and
non-aeronautical components. The allocation processes used by the airports are
not covered by any audit process other than the ability to reconcile the aggregate
allocated figures to the financial accounts in total. The signing of the Regulatory
Accounts by two airport Directors does not constitute an effective audit for this
purpose.
The only way that the ACCC and the airlines can gain some ability to get comfort
from the figures is to see a more detailed breakdown that makes the
reasonableness of the allocations more obvious. Transparency could be obtained
by increasing the number of airport profit centres and cost categories disclosed in
the Regulatory Accounts. Suggested profit centres for public disclosure would be:
• Aeronautical Services;
• Landing Fees;
• Terminal Charges;
• Aeronautical Related Services;
• Refuelling Services;
• Aircraft Maintenance Sites and Buildings;
• Freight Equipment and Storage Sites;
• Cargo Facility Sites and Buildings;
• Check-in Counters and Related Facilities;
• Service Desks;
• Public Car Parking;
• Staff Car Parking;
• Retail;
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• Other Property; and
• Other.
No changes are suggested to the existing cost categories except that Borrowing
Costs and Amortisation should be allocated across the profit centres to give a
fully costed result for each profit centre. Such costs must be allocated as the
business is capital intensive and their exclusion would make it impossible to
observe the returns made by each business segment.
Borrowing costs can be allocated using the asset values in each profit centre as
the allocation driver. Amortisation clearly relates to a specific asset and, as with
depreciation, it should be possible to create a reasonable allocation method to
spread it across the proposed profit centres.
Existing cost categories in the regulatory accounts are:
• Salaries and Wages;
• Depreciation;
• Services and Utilities;
• Property Maintenance;
• Government Mandated Security Costs;
• Passenger Screening;
• Checked Baggage screening;
• Other Costs;
• Borrowing Costs; and
• Amortisation.
With the transfer of airports into a deregulated regime it is essential that
disclosure requirements be increased from present levels. This will ensure that
the ACCC, airlines, the travelling public and the tourism industry in general can
see if and how airports are taking advantage of their natural monopolies.
2.2 AIR TRAFFIC MANAGEMENT
2.2.1 Enhancing air traffic management
To achieve appropriate enhancements to air traffic management (ATM) safety,
capacity and efficiency, the four elements of the system, namely communication,
navigation, surveillance and air traffic management, need to be continuously
improved in line with technical advances.
The ATM system must be capable of providing benefits to those equipped with
advanced technology systems, and not be inhibited by a need to cater for the
lowest common denominator, by giving older poorly equipped aircraft an equal
footing in air traffic management terms. Qantas strongly believes that the needs
74
of Regular Public Transport (RPT) operators, which are responsible for the
carriage of the overwhelming majority of air travellers, should be paramount in
the development of airspace policy. For instance, separation standards based on
the continued use of terrestrial navigation aids, where Global Navigation Satellite
System (GNSS) avionics are in general use, is no longer appropriate.
Australia is ideally suited to take advantage of the developments in satellite
technology for air traffic management. While we recognise that some
stakeholders, such as the military, may not be in a position to fully participate in
the short to medium term, this should not hold back positive developments for
major airlines, which, being suitably equipped at considerable expense, are
eager to move forward.
Australia’s success in taking advantage of these developments will be in part
dependent on an inclusive approach, with the input of the commercial aviation
industry duly taken into account by the Government in formulating policy.
At the prompting of industry, the Australian Strategic Air Traffic Management
Group, known as ASTRA, was set up in 2003, consisting of representatives of
both industry and government aviation regulatory bodies. This has become an
important vehicle for consolidating long term strategic plans, and the European
Strategic Plan, SESAR, has emulated this model.
ASTRA has already been instrumental in delivering industry-enhancing
outcomes, including the use of Global Positioning System (GPS) to conduct
GNSS instrument approaches, introduction of RNP approaches at various major
ports and the progressive introduction of what will be 28 Automatic Dependent
Surveillance Broadcast (ADS-B) ground stations under the Upper Airspace
Program (UAP).
The introduction of ADS-B, which is strongly supported by Qantas, will offer new
airspace management possibilities which will impact on the current classifications
and improve safety levels for scheduled passenger transport operations.
Notwithstanding these successes, Qantas is disappointed that many aspects of
the regulatory framework have significantly lagged behind technological
advancements over the past 20 years, and many regulations have not been
updated for the past 50 years. This has meant that the application of new
technology and systems has not been fully exploited and consequently resulted
in less than optimal safety and operational performance outcomes.
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2.2.1.1 ASTRA
The ASTRA plan provides, in Qantas’ view, an appropriate vision for the future of
ATM in Australia. The current ASTRA plan has now been signed off by all
industry and regulatory stakeholders, with the exception of the Department of
Infrastructure, Transport, Regional Development and Local Government.
In doing so, these stakeholders have made a commitment to implement the new
system. However, the plan remains ineffective until its status is properly
formalised by full acceptance by all participants. Qantas advocates that this be
progressed with some urgency.
To be successful, ASTRA must continue as an independent technical group
suitably empowered to make policy recommendations, which are given due
weight, assisting in timely implementation by government regulators.
To achieve this, we see a need for formal links to be established between
ASTRA and the government’s peak aviation groups, the Aviation Policy Group
(APG) and the Aviation Implementation Group (AIG). Desirably, ASTRA should
be formally sanctioned with a Head of Power, and report to and be tasked by an
APG type body – provided that body is also formally set up and endorsed by the
relevant Ministers. Qantas believes that actual representation by industry experts
on both the APG and AIG would assist considerably the outcomes that ASTRA is
able to achieve.
2.2.1.2 ATM and broader policy considerations
Airspace is a national resource and should be treated as such. Industry is
currently inhibited by the vast areas of airspace controlled by the military in
proximity to major capital city gateways. For instance, commercial aviation
operations to/from Sydney are currently constrained by the need to avoid
airspace controlled by military bases at Williamtown, Richmond and Nowra.
In the UK and Europe, ATM developments now see both military and civilian
aircraft having common access to previously restricted airspace. Qantas sees no
reason why similar arrangements, designated as flexible use airspace (FUA),
permitting unrestricted access to both current military and civil airspace by all
users should not be put in place in Australia.
Introduction of FUA would permit operations closer to optimum tracks (User
Preferred Routes), with positive environmental outcomes due to a resultant
reduction in fuel burn and emissions.
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2.2.1.3 Airspace around Sydney airport
Qantas is concerned that effective dialogue on prospective changes to airspace
management around Sydney (Kingsford Smith) Airport, which would provide
definite and tangible improvements in both noise and aircraft emissions
reduction, has been constrained by operational restrictions imposed as a
consequence of local community positions which are not always fully informed.
Airlines serving Sydney have long liaised on local airspace issues with
representatives of community and government at the local, state and federal
level, through the Sydney Airport Community Forum (SACF).
To fly efficient low noise and emissions profiles, airlines need predictability of
flight path. The Federal Government has legislated noise sharing at Sydney and
Airservices Australia achieves this by inefficient radar vectoring of aircraft in the
airspace. This radar vectoring means that flight path predictability is lost.
Some elements of the Sydney airport community take a strongly conservative
position which does not recognise the links between emerging technology and
aircraft operational performance optimisation and potential environmental
benefits. This segment has historically exerted a disproportionate influence in the
consideration of change improvements to Sydney airspace. In the past ten years,
and since the introduction of the Long Term Operating Plan, aircraft have
become operationally much more efficient, demonstrating significantly reduced
noise and emissions footprints.
Qantas believes that the required technology to simultaneously achieve the twin
goals of predicability and noise sharing has now arrived on some fleets. It is
imperative that airlines be allowed to use this new technology for the mutual
benefit of the wider community and the airlines.
Qantas is hopeful that the SACF recently reconstituted by the Minister will make
more progress towards the primary objective of improving operating efficiencies
to the benefit of the broader community and aircraft operators.
2.2.1.4 Effectiveness of Australian regulatory agencies
The Civil Aviation Safety Authority (CASA) and Airservices Australia have both
been active in the progressive development of a risk-based safety system in
recent years. Qantas supports this system, which we believe will identify all
potential risk factors, and we are pleased to see the progress which has been
made in this area. To drive ongoing improvement, Qantas would like to see
appropriate targets and measurements put in place for Airservices. The Group
would be prepared to work with Airservices as appropriate to develop and
contribute to the assessment of these performance targets.
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Currently, representation at international meetings and forums is shared between
the Department, CASA and Airservices. In Qantas’ view, this does not
necessarily produce optimum results, as it is not possible for these delegates to
always possess the level of specialist expertise required.
For Australia’s representation in these forums to be most effective, it should
include the most suitably qualified experts. In many areas this expertise reside in
industry as well as in government agencies. Accordingly, Qantas would like to
see more flexibility to permit industry experts to be part of Australian delegations.
2.2.1.5 Air traffic control
Australia must continue to actively participate in global and regional forums to
ensure that international standardisation and harmonisation of air traffic control
systems is progressed.
Australia is currently experiencing a shortage of air traffic controllers, which is
having an impact on the operations of commercial airlines.
Qantas believes that historically there have been limited opportunities for career
progression by air traffic controllers in Airservices, due to the organisation’s flat
structure and streaming philosophy. This has been recognised by Airservices,
and we understand that alternative approaches are being considered which will
allow lateral and vertical mobility.
Government and industry need to cooperatively develop strategies to again make
air traffic control a career of choice within the aviation world. More pro-active
education at secondary and tertiary levels through the means highlighted in 1.4.2
is recommended.
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3 SAFETY
3.1 SAFETY REGULATION AND REGULATORY REFORM
3.1.1 Regulatory reform process
Qantas believes completion of CASA’s regulatory reform program, which has
been underway for over a decade, is long overdue. We note that Directive
01/2007, produced by the Chief Executive Officer (CEO), which clearly laid out
regulatory reform priorities, has had a positive effect on the change process over
the past 18 months.
The extended timeframe of the reform program means that elements of it are
already outdated prior to its full implementation. This is of concern to Qantas.
There is a need for continual improvement and revision of the earlier Civil
Aviation Safety Regulations (CASR) in parallel with the implementation of the
other aspects. At present there are at least three different underlying
philosophies behind the existing "new" CASRs.
These should be revised to provide uniformity of style, ie European Aviation
Safety Agency (EASA) style rules, to enhance both ease of use by industry as
well as oversight and application by CASA. This in turn should provide greater
consistency of application by CASA of regulatory requirements – an area in
which industry has long been critical of CASA and its predecessors.
It is important that a whole-of-government approach be taken to the introduction
of the new regulatory regime.
To this end, Qantas would recommend the appointment (or confirmation) of an
appropriately credentialled project manager, who has overarching authority and
responsibility to drive the regulatory reform project to completion, and in
particular, to overcome problems associated with the drafting of the new rules.
For example, it is understood that there have been significant delays in drafting
by the Office of Legislative Drafting and Publishing (OLDP) within the Attorney-
General’s Department, due to changing and conflicting government policy and
restructuring into the Australian regulatory context (and the criminal code).
In the drafting of the new outcomes-based legislation, it is important that the
OLDP embraces the philosophy and advantages provided by the new EASA-
style CASRs and adopts internationally recognised ICAO terminology. Wherever
possible, the legislation should deliver consistent outcomes as provided by EASA
and other National Aviation Authorities (NAAs) regulations.
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CASR Part 21 is a good example of where an easy comparison (and adaption)
can be made with the US Federal Aviation Regulations (FARs). The CAO100.66
as currently written also provides direct comparability with EASA. Standards
should not be written in prescriptive legislative terms, but be prescribed in such a
manner that they are able to be reviewed by the regulator under strict guidelines
to reflect the relevant supporting (safety) standard.
CASA must also issue appropriate advisory and guidance material in a
consistent format. At present there are Civil Aviation Advisory Publications
(CAAPs) and Advisory Circulars (ACs), and Acceptable Means of Compliance
(AMC) and Guidance Materials (GMs) will soon be introduced, as per the EASA
template.
To assist in this process the Qantas Group would advocate secondment of
industry experts to contribute to the finalisation of the new legislation, particularly
the guidance material, as this requires the input of current practitioners who are
familiar with world’s best practice in their respective fields. Importantly,
harmonisation with other regulators should be adopted, unless there is a
compelling “Australian” reason for difference.
CASA must ensure that sufficient, dedicated and appropriately qualified staff are
allocated to the ongoing task of maintaining and continuously improving the new
regulations once they have been implemented. Finally, and most importantly,
there needs to be a robust mechanism to allow CASA to continuously monitor
and assess effectiveness, and where necessary, amend the regulations. From a
quality assurance perspective, this mechanism must necessarily include active
input from respective industry experts.
CASA should also be accountable for establishing and maintaining its own
Quality Management System, which should assist in continual enhancement of
the legislative regime.
In Qantas’ view there are other areas of opportunity that should be addressed in
the regulatory reform program, which are relevant to the aviation and
infrastructure framework more broadly. These include:
• greater conformity, wherever possible, with other NAAs such as EASA, the
New Zealand CAA, and the FAA, for example in respect to mutual recognition
of technical service activities such as design, modification and repairs;
• greater levels of mutual acceptance/recognition between Australian
governmental agencies associated with aviation activity (eg for defence
services operating civilian type certificated aircraft) in respect of engineering,
design, maintenance and audit processes;
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• Australia providing a greater support and assistance role within the
Asia/Pacific region to regional safety and regulatory initiatives, eg the Pacific
Aviation Safety Office, and in providing regional NAAs and carriers (eg Papua
New Guinea, Indonesia, Vanuatu, Nauru, Fiji, the Solomon Islands) for
engineering, maintenance and also regulatory, technical and operational
support.
3.1.2 Governance arrangements for CASA
Qantas believes that a restructure of the current governance arrangements and a
review of the role of the CASA Chief Executive Officer (CEO) should be early
priorities. While in general the high level CASA ‘vision’ is supported, quite often
the translation of these initiatives to workable realities is lost at the level at which
CASA interacts with the industry. From time to time strained relationships and
tensions between field office management and staff and strategic management
activities of CASA result in variance and inconsistency in approach to industry.
This is also reflected in the application of regulations and policy at the field office
level.
A review of the current governance structure should be undertaken to determine
its effectiveness and its ability to deliver outcomes to both the Minister and
industry. This would facilitate a comparison with the previous governance
structure that included a Board. Options might include devolution of the Minister’s
broader portfolio governance to a Board of suitable experts, and/or appointment
of a junior Minister or Parliamentary Secretary to assist in this area of portfolio
responsibility.
It should be noted that prior to 1997, CASA field office management, ie Regional
Directors, reported directly to the CEO (then Director Aviation Safety) who was
comparatively better positioned to identify issues at the coalface, thus providing
more effective interaction and outcomes between the regulator and industry.
Today there are three additional layers of management between field office
managers and the CEO, resulting in greater potential for inconsistency in the
application of CASA policy and legislation, which has, in our experience, been
borne out in practice. This is exacerbated by the requirement for the CEO to
additionally undertake executive corporate governance and Ministerial
responsibilities.
Qantas strongly recommends simplification of current delegation processes, as
under present requirements it sometimes takes months for delegations to be
‘signed off’ where the delegate is the CASA CEO.
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3.1.3 Relations with industry
The Standards Consultative Committee (SCC) has provided a very positive
consultative process over the past few years from Qantas’ perspective. We
support continuation of the SCC, with its role and activity reviewed to ensure
optimal outcomes can be delivered to the aviation industry. Qantas believes our
SCC participation, in view of the size, complexity and diversity of the Group’s
operations and activities, should not be limited to one representative.
The SCC may also be the appropriate forum by which ongoing industry feedback
into a CASA Quality Management System could be provided.
Since the Air Transport Operations Group moved to Brisbane, there has been a
perception in industry that senior CASA executives have undertaken little direct
consultation. Qantas believes the CEO and senior CASA executives should be
more visible to industry.
Previous “heavy industry” meetings were seen as successful, but in our view
require the presence of the CASA CEO. Meaningful and regular forums to allow
dialogue between CASA and the major passenger carrying operators (ie the six
largest airlines, which account for some 93 percent of all domestic passengers)
should be regularly scheduled.
Qantas also believes it would be appropriate to devolve more administrative
activities to industry, such as re-validation of licences, thereby freeing up CASA
personnel to more effectively undertake policy setting and surveillance functions.
3.1.4 Inter-agency relations
The main area for improvement in working relationships between agencies in our
view is between CASA and the Australian Transport Safety Bureau (ATSB). The
Qantas Group provided a detailed response to the Miller Review, in which we
provided a comprehensive perspective on the legitimate and proper role and
responsibilities between CASA, ATSB and the Department.
In that response we noted:
“Qantas is opposed to the suggested changes to ATSB governance. The
changes go to the heart of the independence of the ATSB. There is little
supporting evidence in the Review to call for broad ranging governance
changes. In general terms, the aviation industry in Australia is supportive
of the current ATSB model in its handling of industry issues. The reporting
culture in the local environment is sound. Any changes to the governance
process that gives the perception of a loss of independence by the Bureau
will have the potential to adversely affect the industry’s reporting culture.
Pilot associations and the broader aviation community have developed
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high levels of trust and respect of the ATSB and reciprocate with
commensurate levels of cooperation. Accordingly, implementation of
Recommendation 6 may result in a withdrawal of this cooperation. Pilots
and other aviation personnel may become reluctant to fully disclose
information under such an arrangement and thereby denigrate the level of
safety.
Qantas would support a governance change that would make the ATSB
totally separate from the department and other agencies. The statutory
authority model similar to the New Zealand, Dutch, Canadian and US
models would be acceptable.”
In our view CASA must not conduct or participate in safety investigations, which
must remain the sole province of the ATSB. Independent and parallel review of
incidents and accidents from a regulatory safety compliance perspective remains
an important function of CASA.
We believe tensions between the two organisations could be lessened if the
heads of both CASA and the ATSB were on the same Senior Executive Service
classification, as a positive relationship between them must be driven from the
top down.
The only other comment we would offer in relation to government agencies is in
respect of the Office of Airspace Regulation (OAR) within CASA. It is Qantas’
belief that the OAR needs to be more responsive and accountable to industry
needs, particularly in relation to requested airspace changes from both industry
and Airservices Australia. This includes changes in respect to terminal areas and
controlled airspace steps. The internal OAR processes must be not only capable
of reacting to industry requests in a timely manner, but must include adequate
consultation with industry via direct contact, RAPAC (Regional Airspace Users
Advisory Committee) forums and the SCC. The recent review of Avalon Airport in
terms of airspace management requirements is an example of where this type of
process should have occurred.
3.1.5 Maintenance of industry standards
One of the key factors in the success of air carriers is their safety record. This
provides a real focus and impetus for internal safety consciousness and
improvement, rather than it being totally externally driven by regulators. The
move toward a safety outcomes-based regulatory regime provides industry with
far greater scope and opportunities to futher enhance their safety systems, and
therefore safety standards, through the development, implementation and
maintenance of an adequate Safety Management System (SMS).
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Qantas would like to see greater commitment by CASA to effectively develop,
finalise and implement mandated SMS requirements. This should involve greater
leadership by CASA and industry assistance for operators to develop and
implement their SMS, including practical and ongoing (regularly updated)
guidance material and safety promotional activities. More effective project
management by CASA of SMS initiatives in terms of providing and adhering to
timetables to industry would greatly assist this cause.
A greater focus on SMS, however, should by no means diminish CASA’s ongoing
responsibility of oversighting the operator to ensure that they are complying with
their “approved” means of compliance.
Changes in current regulatory environments which involve any handover to ‘self-
administration’ should be the subject of rigorous risk assessments prior to
implementation.
As there are potential risks to both the industry and community that are likely to
result from greater self-administration, it is imperative that there is at least some
form of regulation of all aircraft which have the ability to enter airspace served by
commercial aviation.
At present this is not the case. Some forms of aircraft, such as powered
parachutes, are not subject to any regulation or self-administration, but still may
pose a definite hazard to all aviation, including high capacity Regular Public
Transport. This is illustrated by an incident with a Qantas aircraft in July 2007.
3.1.6 Harmonisation
In Qantas’ view, the objective of achieving the highest degree of international
harmonisation possible should, after safety, be CASA’s major priority.
CASA must support the goal of ‘shared responsibilities’ not only within Australia,
but also with other NAAs, such as the FAA and EASA, as well as via bilateral,
mutual agreements and cross audits for other NAAs. For this to work
successfully, CASA legislation must “look and feel” like the equivalent legislation
of other NAAs.
Another area that would benefit from development of common aviation safety
rules is civilian type aircraft certificated with the state such as DGTA-ADF, DQA
and civilian aircraft operated by the military. A common approach would provide
significant safety and cost benefits across all aviation sectors. At present where
dual standards apply, there are added costs and inconsistencies.
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The recent Miller Review indicated a propensity and factional support for
deviation from international best practice, such as governance models for air
safety investigation authorities, and unwarranted, unjustifiable and
counterproductive deviation from international (ICAO Annex 13) standards.
Australia must retain and actively support its ICAO representatives, and also
remain active in the international aviation arena by ongoing close involvement
with both overseas regulatory agencies (NAAs and regional agencies such as
EASA) and industry bodies such as IATA.
By way of example, Australia should pro-actively support the IATA Training and
Qualification Initiative which aims at “mobilising and changing the world”, in
relation to the high demand for skilled personnel, mainly pilots and engineers.
This initiative looks at the safety risks associated with introducing an increasing
number of young and inexperienced professionals (refer to 1.4).
3.1.7 Future focus
A 21st century aviation regulator must be able to properly develop, implement
and support internationally accepted practices in a timely manner.
The establishment and maintainance of a world’s best practice, outcomes-based
regulatory regime which provides for the safety of passenger-carrying air
services should be the regulator’s first priority.
Government must ensure that regulators are adequately experienced, resourced
and motivated to perform their allocated tasks which relate to the particular
industry segment for which they have oversight responsibilities. If suitably
experienced experts cannot be recruited to the regulator, then industry
specialists should either be seconded to it or given an appropriate delegation by
the regulator.
As demonstrated by the progress of the regulatory reform program, CASA has
had difficulty with the timely implementation of already accepted international
practice. As noted above, closer relations between field office staff and strategic
management will enhance the application of existing regulations. Possible
greater exchange of staff between the regulator and industry may provide
enhanced relations and relevance by allowing each to better understand the
other and thereby promote the mutual respect of professionals who have
identical goals - that of providing the highest levels of air safety.
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In establishing and maintaining such a regime, the aim of the regulator should be
to clearly tell industry what it has to do, but not prescribe how to do it. This will
provide important business flexibility and adaptability for larger and more mature
operators. Where necessary, the regulator should also provide guidance material
on how compliance can be achieved for those operators who do not necessarily
wish, or have the resources, to develop their own specific practices.
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4 CUSTOMER AND COMMUNITY PROTECTION
4.1 AVIATION EMISSIONS AND CLIMATE CHANGE
As demand for air travel continues to grow, the aviation industry, as a producer of
greenhouse gases, must play its part in improving the carbon efficiency of its
operations. Globally, aviation accounts for two percent of emissions, and this
could grow to three percent by 2050. In Australia, civil aviation contributes one
percent of the domestic emissions footprint.
Along with safety and security, environmental responsibility is at the top of the
aviation industry’s agenda and we are already on a path to a lower emissions
future. The industry has a track record of continuous improvement in
environmental performance, with a 75 percent reduction in noise and 70 percent
improvement in carbon emissions per passenger kilometre over the past 40
years.
All parts of our industry – airlines, airports, air traffic managers, and
manufacturers – are contributing to the effort. Through our industry body, the
International Air Transport Association (IATA), Qantas is participating in the
Aviation Industry Commitment to Action on Climate Change, agreed to by
aviation industry leaders in Geneva on 22 April 2008. The declaration further
demonstrates aviation’s co-ordinated efforts in tackling environmental challenges
and confirms our intention to grow and contribute to economies in a sustainable
way. The declaration highlights a number of key principles including:
• building on a strong track record of technological progress and innovation that
has made our industry the safest and most efficient transport mode;
• accelerating action to mitigate our environmental impact, especially in respect
of climate change, while preserving our role in sustainable development of
our global society;
• committing to a pathway of carbon neutral growth and aspiring to a carbon
free future;
• urging all governments to participate in these efforts by:
- supporting and co-financing appropriate research and development in the
pursuit of greener technological breakthroughs;
- taking urgent measures to improve airspace design including civil/military
allocation, air traffic management infrastructure and procedures for
approving needed airport development; and
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- developing and implementing a global, equitable and stable emissions
management framework for aviation through the International Civil
Aviation Organization (ICAO), in line with the United Nations roadmap
agreed in Bali in December 2007.
4.1.1 Qantas Group climate change policy
The Qantas Group is committed to growing its operations in an environmentally
sustainable manner. Our response to climate change is built on ‘four pillars’:
• Measurement, target setting and transparency;
• Mitigation;
• Adapting for the future; and
• Offsetting.
Qantas has undertaken a detailed life cycle assessment of our operations to
establish our carbon emissions footprint. On that basis, the Group has set
challenging performance improvement targets for achievement by 2011,
including a two million tonne saving of greenhouse gases or a 7.5 percent
improvement in fuel efficiency per revenue tonne kilometre.
The Qantas Group is committed to transparent reporting of our environmental
performance that allows many different stakeholders to judge our exposure to
risks from climate change and our strategies to manage them. This includes
reporting on sustainability performance, with data published for the first time in
the 2006/07 Annual Report and participating in the Carbon Disclosure Project, an
independent not-for-profit organisation that collects greenhouse gas emissions
data from 3,000 of the world’s largest companies.
Over 95 percent of the Qantas Group’s emissions come from aircraft fuel
consumed as part of normal operations. Over the past five financial years, fuel
has on average constituted 18 percent of Qantas’ costs, providing us with a
strong natural financial incentive to improve fuel efficiency. In the current
environment of high and increasing oil prices, where fuel represents around 35
percent of our total expenditure, there is an even more significant emphasis on
improving fuel efficiency.
The Group has a well-established fuel efficiency program which has delivered
significant improvements in the performance of our existing fleet. Last financial
year, Qantas saved 130,000 tonnes of carbon dioxide (CO2) through fuel
conservation alone, equating to the removal of 30,000 cars from Australian
roads.
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We have been working towards best practice in fuel efficiency for a number of
years. Many initiatives involve improvements to operational procedures and can
be as simple as a decision to change the way aircraft are washed or switching to
ground power when an aircraft is at the terminal.
Qantas is also at the forefront in the development and application of
technological innovation to improve fuel efficiency. Key initiatives over recent
years have included:
• the use of Required Navigation Performance procedures that utilise Global
Positioning System (GPS) technology to optimise flight approach and
departure tracks. This reduces fuel consumption and emissions and improves
safety;
• the development of User Preferred Routes across the Pacific. We have been
able to efficiently plan aircraft operations along flexible routes that adjust each
day to make best use of cruise-elevation wind patterns. These enhanced
flight paths have reduced flight times and associated fuel consumption; and
• the introduction of Variable Cost Index Flight Planning to ensure that aircraft
are operated at optimal speed, based on daily variations in wind, temperature
and weight, to maximise efficiency and reduce fuel burn and emissions.
Advanced aviation technologies are critical to a greener aviation future. Under
our multi-billion dollar fleet investment program, Qantas is taking advantage of
the latest airframe and engine designs. The Airbus A380 and Boeing 787 are set
to deliver improved fuel efficiency and reduced emissions per passenger
kilometre.
Although Qantas has been working towards more efficient and sustainable
operations for many years, more can be done to mitigate our impact and a
Group-wide employee environmental improvement program, ‘begreen’ was
recently launched. Environmental targets have been issued to all business units,
with staff required to take ownership of the environment in their workplace. The
‘begreen’ program is designed to increase employee awareness of
environmental issues, especially climate change, and provide them with the tools
and strategies needed to reduce their environmental impact.
The Qantas Group is working with many stakeholders in the tourism industry to
develop an industry-wide response to climate change. As part of this strategy,
Qantas is also seeking to foster climate change awareness and improved
performance in the broader tourism community and has launched a national
award and education campaign to reward and recognise businesses that
implement environmentally sustainable business practices.
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The Group is also seeking to provide research and development support for “at
risk” destinations, such as the Great Barrier Reef to adapt to the potential impact
of climate change through the newly established Qantas Foundation
Environmental Sustainability Fund.
Carbon offsetting is another element of our response to climate change. In
September 2007, the Qantas Group launched a Carbon Offset Program that
allows Qantas and Jetstar passengers to calculate and offset their share of flight
emissions when making a booking. In support of the program, the Group has
also committed to offset the emissions for all staff travelling for business
purposes as well as those generated by the Group’s ground transport vehicles.
All offset contributions go towards Australian-based Greenhouse FriendlyTM
approved abatement programs that have been independently verified and
subsequently authenticated by the Commonwealth Government’s Department of
Climate Change (previously the Australian Greenhouse Office) and either
remove greenhouse gases from the atmosphere or avoid their release in the first
place.
4.1.2 Government policies and environmental sustainability
This review of aviation policy provides the Government with an opportunity to
develop a package of measures that enhance the global competitiveness and
sustainability of the Australian aviation industry. The Government should work
with industry to invest in world class infrastructure and provide financial
incentives to support investment in less emissions-intensive technology.
4.1.2.1 Infrastructure – reducing emissions on the ground
The Australian domestic aviation industry is currently experiencing high growth in
passengers, which is expected to continue. This growth is contributing
significantly to increasing congestion at most of the capital city and major
regional airports in Australia. This leads to increased taxiing times and delayed
departure and arrival times for aircraft which combine to increase fuel burn and
associated carbon emissions.
Federal and State Governments and private airport authorities have an important
role in making timely and cost effective investments ahead of current and future
demand. Additional runway capacity, taxiways, enhanced terminal infrastructure
including gates, departure lounges, screening points, check-in facilities and
baggage make-up areas can help minimise delays and further mitigate
consequential emissions.
More broadly, it is important that the Government works with the broader
transport industry to improve the quality of the total journey and reduce the total
travel footprint by investing in improved infrastructure and transport connectivity
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and modal links between airports and the communities the airports service (refer
also to 2.1).
4.1.2.2 Air traffic management – reducing emissions in the air
Improvements in air traffic management have the potential to deliver significant
operational benefits to air transport. Qantas is working with air traffic managers in
Australia and around the world to establish new navigational routes, approach
paths and airborne holding procedures that will reduce flight times. These
improvements promise to improve fuel efficiency and reduce related emissions.
Qantas and Airservices Australia have worked together to deliver improvements
through the introduction of Required Navigation Performance (RNP) procedures
that utilise Global Positioning Systems (GPS). This technology optimises flight
approach and departure tracks and facilitates the application of ‘User Preferred
Routes’ across the Pacific. Increased support from the Government could
significantly accelerate the introduction of RNP in Australia. Introduction of
flexible use airspace (FUA) would also provide enhanced environmental
outcomes, as discussed in 2.2.1.2.
4.1.2.3 Recognition for trade-offs between different environmental priorities
Actions to mitigate one environmental impact may have an adverse effect on
other environmental factors (for example noise). The most fuel efficient flight path
will decrease CO2 emissions, but may increase the number of people exposed to
aircraft noise. In many cases, Qantas is required to operate a noise-compliant
but less fuel efficient flight path in response to local community concerns.
Government policy should provide financial (or other) recognition for this trade-off
if airlines are required to fund these emissions.
4.1.2.4 Tax incentives to support research and development into new fuel types
It is essential that technology is developed to provide alternative fuels that are
both commercially viable for air transport and environmentally sustainable. The
Government could assist in this regard by providing incentives for research and
development to all participants, including fuel supply organisations, so that lead
times to bring new refining capacity on-line can be reduced.
While a commercially viable alternative to jet fuel is still considered to be at least
a decade away, Qantas is working with airframe and engine manufacturers to
produce more efficient and environmentally friendly aircraft over the long term
and to encourage the fuel supply industry to support research and development.
Significant issues exist for aviation with both synthetic and bio fuels.
Manufacturing processes for current synthetic fuels emit large quantities of
carbon dioxide and the fuel itself can have less than optimal lubricating
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properties when compared to standard jet fuel. This can adversely impact fuel
lines and seals. The industry’s continuous focus on safety also means that the
lead times for fuel or additive development are long (~10 years). Bio fuels have
less than optimal thermal stability (they can freeze at around zero degrees
centigrade) and have lower energy output. They also require large amounts of
arable land and water for their production and therefore have the potential to
impact on the price of standard food crops. Future bio-fuel opportunities using
non-food crops (algae) may be more efficient, and require less land and water.
However, costs of production are high and they have high ‘into wing’
transportation costs.
Local alternative fuel solutions common in ground transportation fuels are only
applicable to General Aviation. Hydrogen-based fuel would need completely new
aircraft and infrastructure, and given the extremely poor energy output per
volume, it is not likely to be viable for commercial aviation.
Many industry participants are pessimistic about the potential of alternative fuels.
The long useful life and high capital cost of aircraft means that kerosene is likely
to be the preferred jet fuel for the next 30 years.
In the long-term, alternative fuels promise to deliver the greatest environmental
benefits over the supply chain for aviation, but significant technology
breakthroughs are required. Industry participants will need to work together with
governments at all stages in the research and development process to
commercialise new fuel types sooner and more effectively. The Government
could assist by increasing the deduction for research and development
expenditure from its current level of 125 percent and lowering certain test
threshold(s).
Alternatively, thought could be given to significant modifications to the regime to
encourage research and development, including a broadening of the eligibility for
Government grants, subsidies and rebates. Currently, a tax incentive may not
encourage research and development activities where the relevant decision-
maker is not measured on a profit-after-tax basis.
4.1.2.5 Tax incentives to deploy the cleanest technology aircraft
The ambitious target of zero carbon emissions within 50 years set by the aviation
industry means that significant advances in aircraft and engine technologies are
required to dramatically reduce emissions. These types of advancements will
require massive capital investment by the aviation industry.
Qantas is currently replacing its Boeing 767 and Boeing 747 fleets with Boeing
787 and Airbus A380 aircraft. The Boeing 787 is approximately 20 percent more
fuel efficient than a Boeing 767, and the Airbus 380 is approximately 10 percent
more fuel efficient than a Boeing 747 on a per passenger basis. The Boeing 787
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Dreamliner is expected to use about as much fuel per passenger as a hybrid car.
Improvements in noise and non-CO2 emissions are also significant.
Government can play an important leadership role, introducing an expanded
accelerated ‘green’ depreciation regime, reducing the effective life of an aircraft
and encouraging rapid deployment of emerging and breakthrough technologies
as soon as they become available.
An aircraft tax depreciation effective life of three to five years (as well as the re-
introduction of the investment allowance and balancing charge offset) would
achieve this, and would be in line with those applicable to Qantas’ major
competitors Singapore Airlines and Cathay Pacific (refer to Attachment to
Chapter 1 for further detail).
4.1.3 Emissions trading
Global and regional Emissions Trading Schemes (ETS) also have a role to play
in reducing global greenhouse gas emissions. The Qantas Group supports fair
and balanced market-based measures that do not increase competitive distortion
among airlines and between industries and regions. Schemes should allow the
market to find the most efficient and cost effective way to reduce emissions
without undermining international competitiveness or creating additional trade
barriers.
As international aviation is currently excluded from Kyoto Protocol targets, any
ETS applied to aviation should preserve ICAO’s global leadership. ICAO is
currently developing guidelines on open emissions trading for international
aviation.
We believe that Australia should work towards an international framework to
address climate change where national actions should be seen as building
blocks and designed for future harmonisation. Domestic and regional ETS should
have the broadest possible coverage over a long time horizon. While
harmonisation is important, schemes should be designed to recognise
differences in national carbon footprint and local characteristics including
geographic location, population size and spread.
The Australian ETS under development should permit international sourcing of
carbon permits to avoid volume and price volatility. Businesses should be
permitted to utilise the least cost instruments including Clean Development
Mechanisms (CDMs) and Certified Emission Reduction (CERs) provided they are
auditable, reliable and represent ‘real’ reductions in greenhouse emissions.
As an industry, aviation has made continuous efficiency improvements over a
long period. However, the next major technological breakthroughs in aviation are
some years away and our industry will need time to adjust when an Australian
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ETS is introduced. In an industry which has no immediate and commercially
viable alternative to traditional fuels, severe cuts in Australia’s aviation emissions
through an ETS would have a small impact on the country’s domestic footprint,
but a major impact on Australia’s economy.
Qantas believes that, as a trade-exposed, emissions-intensive industry, with few
immediate emission reduction options, the Government should allocate free
permits to aviation in conjunction with the range of other incentives outlined
above to accelerate the transition to less emissions-intensive technology.
It is also worth noting that, should an Australian or any other ETS include
international emissions, a number of tax-related issues arise, including
compliance complexity of ‘taxing rights’ and the potential for the tax burden to be
borne in more than one jurisdiction for the same emissions. In this case, thought
would need to be given to development of an internationally harmonised
framework that provides for airline home country compliance similar to the Airline
Profits Article within the International Tax Agreements into which Australia has
entered.
4.2 AIRCRAFT NOISE
4.2.1 ANEF system
The basis of the Australian Noise Exposure Forecast (ANEF) system goes some
way to providing an effective tool for planning purposes (refer to 2.1.5.3), yet is a
long way from clearly articulating the impacts of aircraft noise around an airport.
As a result, when used for these purposes it must be supplemented with
information that provides a more realistic representation of the aircraft noise
effects. This would require the use of scenario examination tools like the
Transparent Noise Information Pack (TNIP) provided by the Department of
Infrastructure. Other tools such as N70 indicators or single event contours would
be useful. These tools provide the ability to analyse actual expected noise impact
rather than just an average representation which is likely to mask any “worst
case” scenarios for residents.
Providing information to explain aircraft noise information must not be done in
isolation. This data should be combined into a broader environmental analysis
that includes emissions related information. This would encourage a balanced
approach to the potential trade-offs between noise and emissions, as well as
greater visibility around the impacts of certain noise mitigation measures.
State and local governments must be integrated into the aircraft noise
management process. If these organisations are to remain responsible for local
planning arrangements, they are critical to any effective measures. In Qantas’
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view, it would be appropriate for local and state governments to play a more pro-
active role in aircraft noise education. These measures must be overseen from a
federal level to ensure that compliance is maintained and the interests of
preventing short-sighted planning arrangements.
4.2.1.1 Airport/community partnership approaches
A national standard provides an important framework and approach to aircraft
noise management. Airport by airport analysis and measures in consultation with
the local community must then be used to ensure that the response is applicable
to the measured problem.
Airport/community partnerships have a similarly important role to play.
Information on aircraft noise for the community, including property purchasers,
could be shared in both mandatory and voluntary ways.
Information could be placed on the title of noise-impacted residences with a
requirement to make this information available at the time of sale.
Airport Environment Education Centres staffed by local community
representatives could provide an ongoing opportunity for the community to
understand more about the airport and associated environment impacts.
4.2.1.2 Noise enquiry and complaint services
Noise enquiry and noise complaint services must provide easy to understand
information that goes beyond what is already accessible to the inquirer. A
process for lodging concerns regarding operations is also necessary.
More transparent information (recognising security requirements) such as
displays of real time actual aircraft flight paths may provide people with greater
opportunities to understand the way airports and aircraft operate, reducing the
workload requirements of the existing telephone service and raising the level of
community knowledge around these issues.
4.3 CONSUMER PROTECTION
Qantas is one of the world’s leading long distance airlines globally and one of the
strongest brands in Australia. Qantas has achieved this position by providing
safe operations, world class product standards and outstanding service to
customers. This commitment to excellence extends beyond the operational
aspects of the Qantas Group, to a commitment to compliance with laws and a
best practice approach to consumer protection.
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The Qantas Group recognises that Australian consumers have a choice of
airlines, both internationally and for domestic/regional operations. Therefore, the
Group takes great care to:
• promote our services and range of products in an open and transparent
manner to allow the consumer to make a fully informed decision about the
product they purchase; and
• provide those services in a manner that strikes an appropriate balance
between individuals’ needs, service and the operational reality of running an
airline.
Qantas and Jetstar believe that Australian consumers continue to benefit from
high levels of service and low fares. This is particularly noticeable when
standards for both full service and low cost carriers are compared to domestic
US or intra EU passenger services.
Where passengers value added comforts or benefits to their travel experiences
(eg lounge access, complimentary beverages, extra leg room, ticket change
flexibility or connectivity) Australian consumers can already access fares with
these attributes.
It would hurt consumers in the form of higher fares if these optional extras were
mandated to be included in all tickets.
4.3.1 Existing standards and procedures
Qantas leads the way in applying best practice consumer protection standards in
the Australian aviation industry and we believe that existing consumer
protections and procedures for dealing with passengers are more than adequate.
Some examples of practices and procedures adopted by the Qantas Group
which underline our commitment to consumer protection are set out below.
4.3.1.1 Internal compliance policy
Qantas recognises the importance of consumer protection laws in promoting
competitive markets and protecting consumers.
Our comprehensive Competition Law Compliance Program was launched in
1997 and was revamped and re-launched in December 2007 as part of Qantas’
commitment to continuous improvement in this area.
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As part of this Program:
• the Qantas Code of Conduct and Ethics requires that all directors,
employees and every person representing the Qantas Group must,
regardless of position or location, comply with Australian and any local
competition laws (including consumer protection laws);
• all staff are responsible for understanding how their obligations under
competition laws affect their dealings with customers, competitors and
suppliers. Staff must not, for instance, engage in any unfair practices or
make any representations which are incorrect, false or misleading; and
• all public statements and advertising must be reviewed and approved by
Qantas Legal prior to publication.
4.3.1.2 Communications to consumers
Some of the ways Qantas communicates with consumers are via:
• advertising;
• booking engines (on qantas.com or Jetstar.com);
• hard copy communications (such as mailings to Qantas Frequent Flyer
Members); and
• detailed information available online, over the phone or on request
regarding travel (including applicable terms and conditions which explain
passenger’s rights and responsibilities).
4.3.1.3 Advertising
Qantas has led the way in relation to improvements in travel advertising – both in
relation to print media, websites and online booking systems – and, in many
cases, applies standards that are higher than its competitors and go beyond the
requirements of the law.
For example, Qantas was one of the first airlines to move to all-inclusive price
advertising in April 2005 – following the Government’s announcement that it
intended to introduce amendments to the Trade Practices Act 1974 to require all-
inclusive price advertising in Australia. Qantas supported this move and publicly
committed to implement all-inclusive price advertising in advance of the change
to the law.
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Qantas continues to advertise prices on an all-inclusive basis notwithstanding the
fact that the Act has yet to be amended and the continued practice of split price
advertising in other high profile industries (such as car sales).
4.3.1.4 Booking engines and payment methods
Qantas and Jetstar have invested significant resources in developing and
enhancing their on-line booking engines www.qantas.com and www.jetstar.com
to ensure that they are informative and easy to navigate.
Customers can now view the wide range of fares available for sale on domestic
and international routes, the conditions that attach to those fare types and book
using a debit or credit card function. As a result, customers today are provided
with more information than ever before.
Qantas and Jetstar have also led the travel industry by being the first company in
Australia to develop an online direct payment facility that gives consumers the
option of paying for their travel via direct debit, rather than by credit card, thereby
avoiding any credit card service fee. Consumers are made aware of the different
payment options available to them prior to completing their purchase.
4.3.1.5 Terms and conditions
Qantas and Jetstar have also taken active steps to ensure that consumers are
aware of the specific restrictions and fare conditions that attach to certain fare
types and can access information that compares the different conditions
attaching to a fare types.
To assist consumers, Qantas has prepared the following table as a simple guide
which allows consumers to compare the key terms of the various fare types.
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The key fare conditions are also set out in the booking process so that a
consumer is able to read them prior to booking their flight. An example of how
Qantas ensures that consumers are aware of this information is provided at
Appendix 4.
Consumers are also required to certify that they have read and accepted the
Fare Conditions and Terms and Conditions of Carriage before they can proceed
with a booking. Qantas specifically identifies a number of key terms and
conditions and allows consumers to click through to view the entire terms and
conditions.
4.3.2 Reasonableness of existing terms and conditions
Qantas believes that it takes all steps reasonably available to it to ensure that
passengers are appropriately informed about restrictions that apply to the fares
booked.
Qantas and Jetstar’s terms and conditions of carriage are reasonable and strike
a fair balance between protecting business interests and providing customer
flexibility.
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This is demonstrated in the following terms:
• bookings changes;
• mandatory check-in requirements; and
• overbooking policies.
4.3.2.1 Changes to bookings
If passengers require the flexibility to change the time or date of their journey,
they have the option of purchasing fare types which allow full flexibility at no
subsequent charge. Alternatively, passengers can purchase cheaper fares and
pay applicable change fees if flexibility is later required.
Both Qantas and Jetstar offer promotional fare types which do not allow changes
to be made on the day of travel. This is reasonable, as airlines would not be able
to resell the seat at such a late stage. If passengers want the flexibility to change
their booking on the day of departure or obtain a full refund for any cancellation,
they have the option of purchasing a fare type that is fully refundable.
There has been some criticism that airlines unreasonably restrict passengers
changing the name on their bookings. Qantas and Jetstar restrict name changes
to avoid the situation where tickets can be transferred between individuals.
Non-transferability is important, otherwise there is the risk that unlicensed
'agents' could establish a business without complying with licensing requirements
and bulk-buy cheap tickets to sell at a profit by simply changing the name. This
would be not only risky for consumers because the transactions will not be
supported by the Travel Compensation Fund, but also as it is more likely that
people would not be able to buy tickets from licensed outlets at peak travel times.
4.3.2.2 Overbooking practices
Overbooking describes a carefully managed practice implemented by airlines to
accept more bookings for a specific flight where past experience indicates that
there are likely to be ‘no-shows’ and cancellations.
Qantas and Jetstar have invested a significant amount in systems which are
designed to forecast the number of ‘no-shows’ per flight as accurately as
possible. This investment has a dual benefit:
• it enables the airlines to minimise the number of passengers disputed due
to overbooking; while
• maximising the revenue earned by the airline.
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For example, Qantas may receive up to 1,800 ‘no-shows’ (excluding late
cancellations) on the day of travel. Qantas is very conservative about
overbooking on the last domestic flights of the day in order to avoid the possibility
of customers having to be accommodated in a hotel overnight. The instances of
overnighting due to overbooking are extremely rare, and when it occurs, all
reasonable costs and expenses are covered by Qantas and an additional amount
is provided.
The instances of denied booking of economy class passengers on domestic
flights are approximately one in every 5,000 customers. When this occurs, every
effort is made to get the customer away as quickly as possible on a later Qantas
flight or on another carrier. In the majority of cases this would be within two hours
of the original departure time. Overbooking is generally not applied to business
class.
In relation to international flights, the number of customers who are denied
boarding is less than 3 in every 10,000. Depending on where the customer is
denied boarding, they will be handled in accordance with local regulations or in
accordance with the Qantas international denied boarding compensation
practice.
Qantas estimates that if overbooking were to cease, there would not only be an
increased cost to Qantas of over $200 million per year, but it would invariably
result in a material increases in fares or changes to the current flexibility in air
travel provided to millions of customers annually.
4.3.2.3 Minimum check-in times
Qantas and Jetstar both impose minimum check-in times for departing
passengers. These minimum check-in times are brought to passengers’ attention
on electronic ticket receipts. Information is also available through qantas.com
and jetstar.com.
These conditions protect the interests of passengers as well as the airline. They
reduce the likelihood that late-arriving passengers will delay the departure of an
aircraft and disrupt other passengers who have arrived at the airport within
recommended time limits. Minimum check-in times also allow Jetstar and Qantas
to protect the integrity of their flight schedules and avoid flow-on disruptions to
their broader network.
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4.4 DISABILITY STANDARDS
4.4.1 Qantas initiatives
Qantas is committed to its role in the Australian community and the international
arena. In line with that commitment, Qantas takes its responsibility to customers
with a disability very seriously and has been a proud major sponsor of the
International Day of People with a Disability in December 2006 and December
2007.
Qantas’ commitment to customers with disabilities is also reflected in the
development of our own Mission and Vision Statements in relation to the carriage
of people with disabilities. These can be found on Qantas’ web site, and provide
as follows:
Mission: Qantas is committed to the carriage of people with specific needs in
a safe, non-discriminatory manner with dignity, whilst ensuring the
health and safety of Qantas staff.
Vision: Qantas is the airline of choice for customers with specific needs,
providing a travel experience that is comfortable and hassle free,
while ensuring the safety of Qantas staff and achieving the
company’s commercial objectives.
The Qantas Group has taken active steps to achieve the outcomes sought by the
introduction of the Disability Standards for Accessible Public Transport 2002
(Transport Standards) which are set out below.
4.4.1.1 Mobility aid policy
Qantas revised its Mobility Aid Policy in late 2005. The changes include:
• the ability for passengers to surrender and collect their mobility aids at the
departure gate, where possible; and
• on narrow-bodied aircraft operated by Qantas:
- electric wheelchairs must fit within the Qantas specified size dimensions
(that is, within a certain height, width and length depending on the aircraft
type) and must be carried in the upright position;
- manual wheelchairs must also fit within the same Qantas specified size
dimensions (that is, within a certain height, width and length depending on
the aircraft type). However, if the wheelchair cannot be loaded in the
upright position and it weighs under 32kg, it may be carried on its side if
the manufacturer has confirmed that it can safely travel on its side.
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These requirements were introduced to comply with manufacturer
recommendations, to reduce the risk of damage to mobility aids and Qantas
aircraft, and to reduce the risk of serious injury to our staff.
In cases where the restrictions on the mobility aid dimensions introduce any
challenge for a customer’s travel plans, Qantas does its best to accommodate
the customer via a range of options including:
• moving the customer to an earlier or later flight that is operated by a wide-
bodied aircraft;
• re-routing the customer on a wide-bodied aircraft to their intended destination;
• discussing with the customer alternative mobility aids that they may have the
opportunity to travel with;
• speaking to wheelchair manufacturers on behalf of the customer about
possible ways to collapse or modify the wheelchair to fit within the requisite
dimensions; and/or
• providing full refunds.
4.4.1.2 Eagle lifter
Qantas initiated the development and design of an Eagle Lifter to assist in the
safe transfer of passengers to and from their mobility aids into and out of Qantas
wheelchairs and/or aisle wheelchairs and aircraft seats, both in wide and narrow-
bodied aircraft, without significant manual handling risks. The Eagle Lifter is a
mechanical solution modelled on similar machinery used in hospitals and is
aimed at providing safer lifting techniques for both the passenger and the staff
assisting in the transfer. Qantas was awarded the Aviation Safety Foundation
Australasia Professionalism Award for the Eagle Lifter in July 2006. Qantas sees
this initiative as an important break-through in addressing the manual handling
issues faced by airline staff in assisting passengers with disabilities.
Airport staff have received specialised and on-going training in the use of the
Eagle Lifter and in assisting customers who have mobility limitations.
4.4.1.3 Working Group and Customer Forum
Qantas has established initiatives to inquire into and solve systemic and policy
issues.
An internal Working Group has been established to address the ongoing needs
of passengers who have disabilities. The Working Group meets regularly to
discuss and resolve issues raised in relation to the carriage of passengers with
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disabilities, as well as to review Qantas’ related policies and procedures from
time to time.
The Working Group also liaises on an ongoing basis with various national
disability organisations12 at Customer Forums. Qantas initiated its first Customer
Forum in 2005 and the Forum members have met formally approximately every
six months since that time. Qantas hosted its fifth Forum for Customers with
Specific Needs at Sydney Domestic Airport in March 2008. The Forum provides
an opportunity for Qantas and our regional airline subsidiary QantasLink to
receive regular feedback from members regarding both current and future
proposals for improvements to customer service for passengers with disabilities
and for Qantas and QantasLink to provide an update on initiatives to improve
products and services for customers with disabilities. Forum members provide
valuable feedback, offer suggestions and raise concerns.
The Forums allow for relationships to be developed and provides members with
an opportunity to meet Qantas and QantasLink representatives who they can
contact as a touch point for any issues or questions they have or that may arise
for people with disabilities.
Qantas also resolves issues as they arise by meeting with individual passengers
to discuss customer issues and potential solutions to the challenges faced. For
example, Qantas recently resolved an issue surrounding the carriage of disability
aids in the aircraft cabin that potentially raised security concerns due to the
sharp-ended nature of the particular disability aid.
The Human Rights and Equal Opportunity Commission (HREOC) is invited to
attend the Customer Forums and regularly attends as part of its function and role
in providing advice, guidance and support to the community of people with a
disability and to assist and effect change at the operator level.
4.4.1.4 Staff training and education
Qantas is continuously training its staff in relation to anti-discrimination issues via
training courses, on-line training and through staff updates and internal company
publications.
12
Attendees of Qantas’ Customer Forum held on 4 March 2008 included representatives from:
- Australian Federation of Disability Organisations (‘AFDO’)
- Physical Disability Council of Australia
- Paraplegic and Quadriplegic Association of NSW
- Human Rights and Equal Opportunity Commission
- Wheelchair Sports Australia
- The National Disability and Carer Ministerial Advisory Council
- Australian Employers Network on Disability
→ Blind Citizens Australia
→ Australian Association of the Deaf
→ Deafness Forum of Australia.
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In line with Qantas’ vision of being the “airline of choice for customers with
specific needs”, Qantas has invested in new staff training initiatives and
produced information specific to travellers with mobility aids.
As part of these initiatives, a new internal training video titled “Travelling with a
Disability”, which follows the travel experience of a customer in a wheelchair,
from making a reservation through to arriving at their destination has been
produced. The video offers advice to staff about questions they should ask
customers when making a booking, about the proposed procedures for transfers
(both manual and when using the Eagle Lifter), while also addressing general
customer service issues. The over-riding message in the booklet and the internal
training video is that Qantas really values customers with a disability and that it is
imperative that Qantas treats all its customers with dignity and respect.
As part of Qantas’ sponsorship of the New South Wales 'Don’t Dis My Ability'
Campaign and Qantas’ continuous training program, events were held at various
locations on Qantas’ Australian network to mark the International Day of People
with a Disability in December 2006 and 2007, respectively, and Qantas’
sponsorship of each day.
Qantas has introduced further ongoing awareness training for cabin crew and
airport staff through monthly articles in its internal company publications to
continue to increase the awareness of frontline staff of the issues faced by
people with disabilities.
4.4.1.5 Other measures
Qantas introduced the ‘Passenger Assistance Brochure’ and a ‘Customer
Checklist for People Travelling with Mobility Aids’ to assist passengers travelling
with a mobility aid with a view to improving the end-to-end travel experience that
Qantas is seeking to provide to customers with disabilities.
Commissionaires are employed to assist people with specific needs in major
Australian ports, such as Sydney, Melbourne and Brisbane. Over time, Qantas
has reviewed its commissionaire staffing levels and their overall role at these
airports and improvements were introduced to assist them to focus on their
primary role of assisting customers with specific needs, particularly passengers
with disabilities.
Qantas has explored the development and purchase of additional wheelchairs at
Australian airports with improved comfort and safety. As a result, Qantas
introduced a manual wheelchair with a new design into all of its Australian ports
in 2007.
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Qantas has redesigned its ‘Fitness for Travel’ section on its web site,
qantas.com, enhancing the navigation and content available for customers who
use mobility aids and is continuing to update and improve its web site content
and accessibility for customers with specific needs.
For Qantas domestic travel within Australia and New Zealand, customers who
travel with a carer are eligible, where they have an approved carer concession
card such as the Qantas Carer Concession Card, to purchase reduced fares for
both themselves and their carer.
Qantas carries service dogs in the aircraft cabin on all domestic and most
international flights. Changes to UK government regulatory requirements have
enabled Qantas to accept service dogs for carriage to the United Kingdom (via
Singapore or Hong Kong only) since 1 March 2006.
Qantas is currently reviewing its policies for people who are deaf or hearing
impaired, along with its policies for people who are blind or vision impaired, and
hopes to be able to announce new improvements to these services shortly.
It is important to note that all this has been achieved in an environment where the
real cost of airfares has fallen substantially, and over a timeframe in which
airlines have had to address the additional costs caused by global and regional
terrorism and pandemics and record fuel prices.
4.4.1.6 Jetstar – the position of the low cost carrier
Low cost airlines face their own difficulties particular to the level of services that
can be provided at low fares. Jetstar provides point to point air travel at a very
low cost because it is based on an operational system based around short
'turnaround times' between flights, facilitated by a range of supporting operational
requirements including domestic flights opening 120 minutes before scheduled
departure, domestic flights closing 30 minutes before scheduled departure,
domestic boarding closing 15 minutes before scheduled departure, limited crew
numbers and no through checking of domestic baggage for passengers travelling
on connecting flights. Similar requirements apply to international travel offered by
Jetstar.
As a consequence, Jetstar provides limited special assistance services to
accommodate customers with disabilities and is not able to provide the level of
special services provided by other higher cost or full service airlines.
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Nonetheless, Jetstar offers services for people with disabilities, including:
• carriage of two passengers who use wheelchairs per domestic or international
flight;
• moving to the carriage of two passengers who travel with a Service Dog in the
aircraft cabin per domestic or international flight;
• assistance to passengers who are blind or vision impaired, deaf or hearing
impaired or who otherwise require assistance to and from the departure and
arrival gates, respectively (such as elderly passengers); and
• on-board aisle wheelchairs on all Jetstar aircraft.
4.4.2 Interaction of Transport Standards and the Disability Discrimination
Act with other legislation
Airlines face significant challenges in balancing passenger rights between
conflicting legislative requirements.
In this context, airlines face competing issues around compliance with disability
discrimination laws, protecting and ensuring the health and safety of airline staff,
maintaining and enforcing civil aviation safety and compliance, while also
guaranteeing aviation transport security.
In November 2006 Qantas responded to a request from the then Department of
Transport and Regional Services (the Department) to provide information about
the conflicts airlines and airports encounter between the requirements of
Australian anti-discrimination legislation (in particular, the Disability
Discrimination Act 1992 and the Transport Standards), and other competing
legislation, such as the civil aviation safety requirements and occupational health
and safety legislation. The outline provided was not intended to cover every
conflict that has arisen, or may arise, between Australian anti-discrimination
legislation and the varying legislative requirements applicable to the aviation
industry. Rather, it was intended to address some of the issues which had
already been encountered by the Qantas Group at the time it was written.
The Qantas response is attached in full for reference at Appendix 5. There are a
number of issues we wish to highlight:
• the impact of civil aviation safety legislation and regulations on the ability of
airlines to comply with Clause 28.4 of Part 28 (Booked Services) of the
Transport Standards given the restrictions placed on exit row seating;
• the impact of civil aviation safety legislation on the carriage of assistance
animals;
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• the impact of occupational health and safety legislation in relation to the ability
of airlines to carry all mobility aids safely (in particular on certain narrow
bodied aircraft) and on transferring passengers between mobility aids and
aircraft seats; and
• the impact of the Aviation Transport Security Regulations 2005 on the ability
of airlines to allow passengers to carry scissors and hypodermic needles on
board in relation to the delays associated with new requirements regarding
the screening of mobility aids.
The information set out in the letter to the Department serves to underscore the
Qantas Group's contention that the Transport Standards ought to contain a clear
exemption in relation to compliance with civil aviation safety, occupational health
and safety and aviation transport security legislation respectively.
In response to complaints that Qantas is failing to comply with the Transport
Standards, the Group considers that it can rely on the unjustifiable hardship
defence where it is required to comply with competing legislation, in
circumstances where it is not possible to comply with both pieces of legislation
simultaneously. However, we consider that it is appropriate, reasonable and
resource efficient that this issue be clearly addressed in the Transport Standards,
ideally via aviation specific requirements, so as to clarify the position for airlines
and people with disabilities alike. This would result in the complaint process
being avoided by all parties where the airline is merely complying with its
obligations under conflicting legislation as best it can. This is particularly the case
in relation to the civil aviation safety and aviation transport security legislation
respectively, where the Government is able to resolve the conflicting issues
through amending its own legislation, regulations and standards.
Some of the major issues faced by airlines in complying with the requirements of
the Disability Discrimination Act 1992 and the Transport Standards are
highlighted below.
4.4.2.1 Training of assistance animals
The Transport Standards and the Disability Discrimination Act 1992 deal with the
carriage of assistance animals, including assistance dogs. Section 9 of the
Disability Discrimination Act 1992 makes unlawful less favourable treatment
because a person possesses or is accompanied by a guide dog, a hearing or
“any other animal trained to assist the aggrieved person to alleviate the effect of
the disability”.
The Qantas Group provided a submission to HREOC dated 26 September 2003
in response to its Discussion Paper “Assistance Animals under the Disability
Discrimination Act 1992” (refer to Appendix 6).
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As is evident from both this submission and the letter to the Department, the
principal and interrelated issues in relation to the carriage of assistance animals
are:
• interaction with civil aviation safety legislation; and
• lack of clarity about the appropriate level of training required for assistance
animals.
Since these two submissions were provided, there have been a number of
developments in relation to this issue.
In relation to the issue of training, as noted in the letter to the Department, the
Qantas Group has taken the approach that the animal must be trained:
• to show a high standard of appropriate behaviour;
• in real life situations to travel and function appropriately on public transport;
• not to bark or make any similar animal noise;
• to toilet on demand and only under instructions from the person that they are
accompanying;
• to remain calm when in confined spaces; and
• not to react to noises, crowds or stressful environments.
The Qantas Group considers that it is essential that the assistance dog has at
least the above level of training before the animal can be safely carried in the
aircraft cabin.
A recent judgment of the Federal Court of Australia (see Forest v Queensland
Health [2007] FCA 936 (22 June 2007)) held that there is nothing in the Disability
Discrimination Act 1992, in particular section 9, which justifies an interpretation of
the word “trained” beyond its ordinary meaning – that is, there is no requirement
under the Disability Discrimination Act 1992 (either explicitly or by implication)
that an animal:
• be trained by a particular type of trainer or organisation;
• undertake a particular amount of training; or
• be accredited by or registered with a particular agency or organisation.
This decision has been overturned on appeal as recently as 6 June 2008. While
this is welcome news, we would emphasise that it would impose an unjustifiable
hardship on the Group if it were required to carry an animal in the cabin of an
aircraft that did not meet the training requirements set out above. This position is
not unreasonable in the circumstances of air travel. Air travel, unlike any other
form of ‘public transport’, involves carriage in a confined space, often for
extended periods of time, where there are no simple solutions to an adverse
reaction from an assistance animal, or an allergic passenger, in-flight. Qantas
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believes that there are also safety considerations for airlines in relation to how
the assistance dog will react in the event of an emergency and whether it will
impede the egress of passengers in an evacuation.
In addition, the Qantas Group is faced with complaints from a variety of
passengers with ‘home trained’ assistance dogs or assistance dogs trained by
organisations with limited credentials and/or credentials that cannot be verified by
any recognised training association. The Group is then placed in the difficult
position of having to assess the appropriateness of the training received by those
animals, often with limited written information provided by the owner or trainer of
the assistance dog. As airlines’ core business is air transport, they do not have
the necessary expertise to determine whether an assistance dog has been
appropriately trained to travel in the aircraft cabin.
Until recently, this assessment has also been made with the guidance of the Civil
Aviation Safety Authority (CASA) in the context of the civil aviation regulations
which regulate the carriage of animals in the aircraft cabin.
As noted in the submission to HREOC and to the Department, the Qantas Group
is subject to civil aviation safety regulations in relation to the carriage of
assistance animals in the cabin of an aircraft. The carriage of any animal,
including an assistance animal, in the cabin of an aircraft is regulated by the Civil
Aviation Regulations 1988 (see CAR 256A). CAR 256A provides that the carrier
may not carry any animal in the aircraft cabin, other than a dog accompanying a
visually impaired or hearing impaired person as a guide or assistant, without
written approval from CASA.
In addition to the exemption for dogs accompanying a visually impaired or
hearing impaired person as a guide or assistant, CASA Instrument 253/06
outlines a permission to carry assistance dogs trained by organisations listed in
Schedule 1 in the cabin of the aircraft subject to the following conditions:
• an assistance dog must accompany its owner, being a person who suffers
from a disability other than sight or hearing; and
• the owner of an assistance animal must produce to the operator a proof of
identity card, issued by an organisation listed in Schedule 1.
Schedule 1 lists the following organisations:
• Animal Assisted Therapy Australia, Inc;13
• Assistance Dogs Australia;
• Association of Australian Service Dogs (NQ), Inc; and
• Australian Support Dogs.
13
Assisted Therapy Australia, Inc has changed its name to Canine Helpers for the Disabled, Inc.
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The assessment of the appropriateness of the training by these organisations
has been undertaken by CASA. The Qantas Group understands from CASA that
its acceptance of these assistance dog associations is based on these
organisations having full membership of Assistance Dogs International.14 CASA
also reviews requests for permissions for individual assistance dogs.
The Qantas Group considers that it would be more appropriate for the Transport
Standards to provide that the rights contained in the Disability Discrimination Act
1992 and the Transport Standards in relation to assistance dogs only apply if
they have:
• been trained by a recognised trainer or organisation; or
• been accredited by or registered with a particular agency or organisation; or
• undergone particular training which can be verified by a recognised trainer or
organisation – where the training required in relation to such assistance
animals includes:
- training the animal to alleviate the relevant disability;
- training the animal to behave properly and safely in public; and
- training the owner/handler in appropriate animal management.
The Qantas Group submits that the Transport Standards should be amended, or
mode specific guidelines developed, to provide certainty in relation to the level of
training required and how to determine which organisations are recognised as
providing an appropriate level of training. This would provide a more structured
arrangement in relation to the carriage of assistance animals on aircraft and
provide certainty for both passengers and airlines.
The Qantas Group suggests that accreditation of assistance animals be required
to a high standard and level of training appropriate to the carriage of the
assistance animal on public transport. In this context, the Group believes it is
reasonable to consider different levels of accreditation being mandatory for
different modes of transport. Qantas would support the highest level and
standards of training being required for an assistance animal to travel in the
aircraft cabin, taking into consideration the unique issues that such travel raises
for each of the operator, the passenger and the assistance animal.
Finally, it is imperative that industry representatives (including the Qantas Group)
be consulted on any issues, initiatives or proposed guidelines in relation to the
carriage of assistance animals on public transport, especially as those initiatives
or guidelines apply to aircraft.
14
Assistance Dogs International is a coalition of not-for-profit organisations that train and place assistance
dogs – see www.adionline.org.
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4.4.2.2 Disability aids
The Qantas Group recognises that the ability to access transport is crucial to the
ability of people with disabilities, and their families and carers, to participate fully
in community life.
The Transport Standards impose a number of obligations on airlines in relation to
(amongst other things) disability aids. These obligations include, but are not
limited to:
• an obligation that disability aids are to be in addition to normal baggage
allowances (see Part 30.1); and
• an obligation that disability aids are treated in the same way as cabin or
accompanied baggage (see Part 30.1).
For the purposes of the Transport Standards, disability aids are considered to
include equipment and apparatus including mobility, technical and medical aids.
The Qantas Group considers that the Transport Standards, as currently drafted,
do not take sufficient account of the special circumstances of airlines that, for
obvious reasons, have constraints imposed in relation to the amount of baggage
which can be carried including:
• the technical limitations of an aircraft – including significant restrictions on the
weight an aircraft can carry – together with safety, design and construction
limits; and
• the costs involved in providing the additional allowance, particularly in light of
escalating fuel prices.
While the Qantas Group can rely on the ‘unjustifiable hardship’ defence in
relation to non-compliance with the Transport Standards, we consider that a
more appropriate approach would be to provide:
• a maximum weight, and/or number of disability aids (eg: in the European
Union, new regulations introduced from July 2007 require that up to two
pieces of mobility equipment must be carried free of charge per passenger
with a disability or passenger with reduced mobility, including electric
wheelchairs, subject to some conditions)15; and
15
See Regulation (EC) No 1107/2006 of the European Parliament and of the Council of 5 July 2006
concerning the rights of disabled persons and persons with reduced mobility when travelling by air. Annex 2,
Assistance by air carriers, provides inter alia “In addition to medical equipment, transport of up to two pieces
of mobility equipment per disabled person or person with reduced mobility, including electric wheelchairs
(subject to advance warning of 48 hours and to possible limitations of space on board the aircraft, and
subject to the application of relevant legislation concerning dangerous goods).”
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• a proviso that the disability aid must be necessary for the flight or intended
travel or unable to be reasonably purchased or provided at the passenger's
destination.
The Group's current approach is that, for the safety and comfort of passengers,
and to ensure compliance with civil aviation safety legislation, it is necessary for
the Qantas Group to limit the weight, and number, of each passenger's baggage.
In relation to disability aids:
• where a passenger is travelling with a mobility aid, being a mobility aid such
as a manual or electric wheelchair or electric scooter, the weight of that
mobility aid is not included in the calculation of the total baggage weight,
provided it is for the passenger's own use. Where a passenger has two or
more mobility aids, the passenger will generally be charged excess baggage
for these additional mobility aids if the general luggage allowance is
exceeded16;
• walking canes, crutches and collapsible walking frames may be carried in the
aircraft cabin and are treated as cabin baggage in addition to the usual cabin
baggage limits; and
• Qantas Group check-in staff also have discretion to waive up to 5-6kgs
excess baggage for other disability aids.
The difficulty faced by the Group is that it has, to date, had to deal with
passengers who attempt to travel with extensive ‘disability aids’ including
incontinence pads, some of which could be purchased at the destination.
Examples of the range of disability aids that passengers may seek to travel with
include:
• electric wheelchair or manual wheelchair or both;
• electric scooter;
• a commode;
• bladder testing equipment;
• incontinence products;
• sheepskin bedding;
• cushions;
• a sleep machine;
• Canadian crutches; and
• various forms of medication.
16
There is an exception for all Qantas Group flights into and out of the European Union in accordance with
the requirements set out in footnote 4 above.
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Some passengers may wish to travel with a range of the above items each time
they fly and request that all items be carried in addition to the maximum weight
allowances applicable to all passengers.
Other passengers with food allergies or intolerances may seek to carry food
products for an entire vacation period on the basis that the same food products
are not available at the destination. Passengers with food allergies or
intolerances seek the carriage of these food products free of charge in addition to
the maximum weight allowances applicable to all passengers.
The lack of any qualification in the Transport Standards, being either a weight
limit or the number of items per flight that a passenger with a disability can
reasonably carry free of charge causes inconvenience and discontent for
passengers and airline staff, which is usually first addressed at the airport. When
passengers are charged excess baggage fees, in circumstances where they are
carrying numerous disability aids or disability related equipment, they make
complaints of disability discrimination which the Qantas Group is then required to
spend significant time and resources to resolve. This time and the resources
could be better directed at continuing to review and improve Group services and
products for people with disabilities.
The Group considers that the operation of the Transport Standards and the
Disability Discrimination Act 1992 would be assisted by an acknowledgment of
the special circumstances of air travel in relation to the carriage of disability aids.
This acknowledgment may be achieved by amendment to the Transport
Standards or by development of mode specific guidelines. Either way, the
applicable Transport Standards should make it clear that in the context of air
travel, the right to carry disability aids without charge is not unlimited but subject
to a maximum weight limit and/or number of items per flight that a passenger with
a disability may carry in addition to the maximum weight allowances. Not only
would it be easier for the Qantas Group to communicate these requirements to
passengers, it would also provide airlines and passengers alike with the clarity
and certainty required for the smooth operation of air travel.
4.4.2.3 Mobility aids
Qantas’ letter to the Department addresses in detail some of the challenges of
the carriage of mobility aids. The recommendations made in the Review of the
Disability Standards for Accessible Public Transport Draft Report dated January
2008 produced by The Allen Consulting Group (Draft Report) have raised further
issues and again illustrate the need for mode specific guidelines or Transport
Standards that take into account and address the aviation context.
The Group agrees with the recommendation made in the Draft Report (see Part
30: ‘Belongings’ referred to on page 251) that the Transport Standards be
amended to include maximum weight limits for mobility aids on aircraft and a limit
on the number of mobility aids that can be carried on each aircraft.
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It must be appreciated, however, that dimension limits cannot be imposed upon
carriers, per se. Any dimension limitations must be determined in consultation
with, and ultimately with the agreement of, each carrier in relation to its particular
aircraft fleet. This is a vital consultation and approval process due to the range of
important issues that must be addressed before any guidelines could be
practically applied to the aviation industry regarding this issue. Some of the
practicalities that require consideration include the individual nature and
complexity of each aircraft type and the individual configuration of each aircraft
within each type. The occupational health and safety risks posed to Qantas
Group employees and contractors are aligned with the determination of
appropriate dimension restrictions. The applicable dimension restrictions also
affect the likelihood of damage being occasioned to the aircraft (rendering the
aircraft immediately unserviceable) during the process of loading the mobility aid.
Weight and dimension limits must also be practical and compliant with
occupational health and safety requirements.
The Group can see the merit in the recommendation in the Draft Report (see
paragraph 3 on page 163 and Option 3A on page 163 and 164) that all mobility
aids should be labelled with a sticker that indicates that a particular model meets
any agreed specifications under the Transport Standards (for weight, dimensions
and turning capabilities). This would enable a person who uses a mobility aid to
make an informed choice about which mobility aid would best accommodate their
needs and allow them greater access to air travel. However, as a practical
matter, Qantas is concerned as to how this would be effectively achieved given
that aircraft types operating in the Australian market will continue to change from
time to time. This is true of the current aircraft fleets operating within the
Australian domestic market and is especially so in relation to those operating in
the international market today. Nonetheless, despite this reservation, the Group
supports the industry investigating the viability of such an initiative.
4.4.3 General comments
4.4.3.1 Service Failures
Much of the public criticism currently directed at airlines in relation to these
issues relies on information provided in the submissions from the Public Interest
Advocacy Centre Ltd of New South Wales (PIAC) entitled “Flight Closed – Report
on the Experiences of People with Disabilities in Domestic Airline Travel in
Australia” dated December 2007 (PIAC Report). Qantas believes that many of
the examples provided by PIAC are a result of service failures rather than
systemic problems or policy issues.
The Qantas Group works hard to provide excellent service for all its customers,
including passengers with disabilities. Sometimes there are issues with that
service, for all customers. Due to the significant additional interaction required for
passengers with disabilities, particularly those requiring direct assistance, the
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opportunity for issues to arise is greater. Qantas would like to be able to
guarantee that no issues will arise at any time, but as a practical matter, is
unable to do so.
The Qantas Group and airlines generally, have been criticised by individual
complainants in the PIAC Report in circumstances where the airline has not
generally been identified nor provided with the dates or times of the alleged
event. As a result, airlines generally have been placed in a position where they
are unable to respond to the PIAC Report in any meaningful way.
The introduction of the PIAC Report concludes that – “since 2002, it has become
more difficult for people with disabilities to travel by air” page 1). The Group
disputes that this is the case, particularly in light of the numerous initiatives we
have introduced within that same timeframe, as noted earlier.
The Qantas Group would also point out that while service failures do occur, the
airport environment is generally not conducive to travel running smoothly for any
passenger all of the time. In comparison to other modes of transport, travel by air
involves a lengthy and complicated process of travel whereby the passenger
must book and purchase a ticket, arrive at the airport allowing sufficient time to
check-in, pass through the security screening point, board the aircraft via the
departure gate, disembark on arrival and retrieve baggage from the baggage
carousel. Accordingly, there are numerous opportunities throughout this process
for human error and service failures to occur, especially when compared to other
modes of transport, where the level of interaction with the customer can be very
low or even non-existent (eg, ferries, buses or trains).
4.4.4 Mode specific guidelines
The Qantas Group supports the development of mode specific guidelines under
the Transport Standards (as described in Option 2A of the Draft Report at page
161). The proposal is that more appropriate requirements be developed
according to the applicable mode of transport and that the guidelines should
address uncertainly where the Transport Standards are silent or unclear on
issues that are important or particular to the mode of transport.
The aviation industry faces unique and difficult challenges as a provider of ‘public
transport’. The issues that set it apart from other modes of transport need to be
directly addressed in any Transport Standards, or mode specific guidelines,
applicable to air carriers. This is to ensure that the requirements are manageable
for aircraft operators (within all the restrictions placed on airlines by time, cost
and infrastructure constraints) so as to enable air carriers to achieve the aims of
the Disability Discrimination Act 1992 and Transport Standards to provide
consistent, reliable, efficient and effective services for the benefit of people with
disabilities and the airline staff who assist them.
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The mode specific guidelines must be developed in consultation with industry
groups, including the Qantas Group, at all stages of the process. The Qantas
Group would also support the ability to make submissions on an informal and/or
oral basis so that operators can be spared the expense and inconvenience of
preparing written material.
4.5 COMPENSATION ARRANGEMENTS IN THE EVENT OF AN ACCIDENT
4.5.1 Passenger liability
The Qantas Group believes the current domestic regime under the Civil Aviation
(Carriers Liability) Act 1959 (the Commonwealth Act) is an effective and
appropriate mechanism for handling passenger liability claims and that the
current maximum compensation limit of A$500,000 per passenger is an
appropriate level.
The existing arrangements provide for strict liability on the part of the aircraft
operator and remove the burden of proof on the part of the passenger, or the
passenger’s estate, to prove that the operator was negligent.
The current regime does not put this burden on the passenger, avoiding the time
consuming and costly legal expenses involved in litigation and court proceedings.
It also provides for mandatory liability insurance on the part of the operator for
passenger claims, giving passengers certainty of cover.
The cap on the maximum compensation payable allows the operator to purchase
appropriate insurance to protect its liabilities and ensure continued operations.
The cap is an appropriate trade-off for strict liability and the removal of the
burden on the passenger to prove the operator’s negligence. The monetary cap
appears reasonable when compared with liability limits and caps on other modes
of transport in Australia, and is generally in line with liability awards for
compensation claims in Australia.
Our view is that, on balance, the current domestic regime is preferable in a
domestic carriage context to the application of the Montreal Convention to such
carriage.
The experience of Qantas as a domestic and international carrier is that domestic
passenger claims are settled much more efficiently and with significantly lower
legal costs than those under the Conventions for international carriage. The
current regime provides greater certainty to both the passenger and to the
operator, who – particularly in the case of small carriers – may be disadvantaged
by the application of the Montreal Convention.
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The adoption of the Montreal Convention for domestic carriage would expose
operators to unlimited liability, and many smaller operators may be unable to
obtain insurance or unable to afford insurance at limits adequate to meet their
potential exposure under the Convention.
It would also place domestic passenger claims at odds with other transport
claims and lead to inconsistent settlements across the various modes of
transport. Higher liability settlements may disadvantage airline operators against
operators of other modes of transport.
While we regard the current regime as an appropriate model for compensating
passengers, we believe there is room for improvement and there would be
significant benefit in clarifying the existing legislation.
The existing legislation could be improved by amending the Commonwealth Act
to clearly state that the Civil Liability Acts in various states apply to domestic
aviation passenger claims.
There is currently confusion as to whether the Civil Liability Acts apply to
domestic carriage, which has led to delays in passenger settlements and
protracted litigation. The New South Wales Court of Appeal is currently
considering this issue in Arefin v Thai Airways. We believe it would be beneficial
for the Commonwealth Act to be amended, confirming that the Civil Liability Acts
in each state apply to domestic passenger claims.
The Commonwealth Act allows passengers and third parties to recover damages
for ‘pure nervous shock’ or psychological injury where there is no accompanying
bodily injury. Presently a passenger may claim such injury where there is an
incident eg. engine failure or ‘go around’ of an aircraft, or a third party may allege
injury just by witnessing an aircraft accident; even where the claimant has
suffered no bodily injury. This is not permitted under the Montreal Convention
and has given rise to a number of frivolous and vexatious claims.
We believe that the Commonwealth Act (providing strict liability and no defence
for such claims) should be amended so that the domestic regime is brought into
line with international practice to exclude ‘pure nervous shock’ claims.
The Commonwealth Act is clearly intended to provide the exclusive remedies for
the issues it covers. However, unlike the international conventions which provide:
"In the carriage of passengers, baggage and cargo, any action for
damages, however founded, whether under this Convention or in contract
or in tort or otherwise, can only be brought subject to the conditions and
such limits of liability as are set out in this Convention...",
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the Commonwealth Act does not expressly state a similar intention. Qantas
submits that this should be corrected in the Commonwealth Act, and that it
should be expressly stated that it provides the exclusive remedies in the carriage
of passengers, baggage and cargo.
4.5.2 Baggage/ cargo liability
The Qantas Group believes that the current regimes for baggage and cargo
liability work very effectively and that there is no need for change.
Passengers can purchase a wide range of comprehensive travel insurance
products and cargo shippers have access to broad and affordable transit
insurance to cover their interests.
The current minimum insurance standards for passengers appear appropriate
and we support their continuance. The standards are generally in line with those
in other modes of transport.
Qantas would have no issue with minimum required insurance standards being
extended to third party surface damage. Our current insurance cover includes
liability for third party surface damage and minimum standards would be unlikely
to result in any additional cost to Qantas. However, this may not be the situation
for other operators, on whom it may impose a significant burden, in particular
small operators.
The European Union (EU) has introduced legislation (known as EC785/2004)
which requires operators within and to the EU, to carry minimum levels of third
party liability insurance (with levels dependent on aircraft maximum take-off
weight).
EC785 increased insurance costs for many operators, and many recreational
operators and exhibition airshows had great difficulty obtaining the required
insurance. Anecdotally, Qantas understands that some entities could not obtain
insurance, resulting in airshows and exhibitions being delayed or even cancelled.
One area of third party damage claims that we believe requires attention is the
Damage by Aircraft Act 1999.
The Act currently imposes strict and unlimited liability on the aircraft operator with
no defence (either for contributory negligence or a right of contribution).
The Act goes significantly beyond the liability position in the Rome Convention.
Prior to Australia denouncing the Rome Convention in 1999, this Convention
applied to surface damage claims and had a maximum cap on liability.
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It is not possible to purchase insurance for an unlimited amount, and this
exposes operators to the risk of a claim for surface damage exceeding the levels
of insurance available. This situation certainly arose following the terrorist attacks
on September 11, 2001. The lack of any defence to such claims further exposes
the operator to uninsurable liabilities.
In Qantas’ view the Damage by Aircraft Act 1999 should be amended to:
1. Cap the operator’s liability. Various caps could be considered based on:
i. the level of insurance purchased by the operator; or
ii. minimum levels of liability based on the size of the operator, or the size
and type of aircraft operated ; or
iii. strict liability to apply up to a cap of say $100 million, and beyond that
the operator should be entitled to defend its liability position.
2. Exclude or limit the operator’s liability for acts of terrorism.
Operators should not be liable for damage caused by the actions of terrorists or
any unlawful interference or seizure of the control of an aircraft.
4.5.3 Family Assistance Code
Qantas fully supports the Voluntary Family Assistance Code and in the event of
an aviation accident we would intend to comply with the Code.
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Appendix 4
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Appendix 5
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Appendix 6
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5 AVIATION SECURITY
5.1.1 The evolving threat environment
5.1.1.1 The role of Qantas
As the Qantas Group carries more than 65 percent of passengers in the
domestic aviation market, we play an important role in working with the
Australian Government to deliver effective, consistent and sustainable aviation
security outcomes. To facilitate this, the Qantas Group has one of the largest
centralised corporate security divisions of any airline in the world. We employ
more than 55 staff and utilise approximately 3,000 contractors dedicated to the
provision of security services for Qantas.
As the largest screening authority in Australia, Qantas deploys our contracted
security staff to provide passenger and checked baggage screening duties at 23
airports across the country. In addition, Qantas undertakes security duties at our
Engineering, Freight and Catering facilities, as well as delivering alarm
monitoring and response, tarmac patrols, traffic management and general
security monitoring. Qantas also maintains an active threat tracking capability to
assist the Group anticipate and adapt to a wide range of new and emerging asset
and people risks.
These capabilities underpin the ability of Qantas to maintain our best practice
position in the aviation security environment, but they require an active and
genuine connection to industry and government partners to ensure their
relevance in a changing threat environment.
5.1.1.2 A broader threat context
Given its continued growth and industry development, commercial aviation
remains an enduring ‘high pay-off’ strategic target for local and transnational
terrorism. Furthermore, with the dynamic nature of transnational terrorism, it is
likely that its targeting calculus has considered the progressive target hardening
of mass transit infrastructure, and the growing complexity and interdependency
of urban, commercial, and transport infrastructure. Consequently, it is likely that
next generation and emerging threats will increase in sophistication in order to
counter existing protective security strategies. Therefore future aviation security
approaches focussed on understanding and predicting the nature, scope and
potential scale of these threats well before they can manifest are essential.
Historically, however, aviation security strategies have been reactive rather than
pre-emptive, with aviation security measures reflecting an ad hoc and sometimes
inconsistent overlay of responses to threats once they have already occurred.
The global implementation of strategies designed to combat the threat posed by
liquids, aerosols and gels (LAGs) based improvised explosive devices is an
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example of a response rather than risk-based preventative measures. Equally, it
is unclear whether the response measures that have been developed are well
placed to continue to mitigate risk over time or if adversaries will seek to adjust
their approach to better target the aviation sector.
As such, Qantas supports the underlying contention in the Issues Paper that the
aviation security system of the future must be less reactive in nature to better
guide both government and industry in developing innovative, anticipatory and
relevant approaches to future aviation security challenges.
5.1.1.3 Integrated aviation security strategy
The Qantas Group maintains that there is a need to question and subsequently
refine the current definition of the purpose of aviation security. In particular, it is
Qantas’ view that aviation security must consider the protection of people and
aircraft in the air and on the ground as part of a holistic and integrated aviation
security strategy. A different “people” focus offers the opportunity to consider
where people interact with aviation at the terminal, retail spaces and at the
kerbside. A broader view considers the need to protect commercial aviation as a
total system, with security solutions designed to facilitate flexibility and
coordination, rather than being sequential or ad hoc as is often currently the
case.
In particular, such a strategy takes into account an increasingly complex
operating environment characterised by:
• an emerging threat environment that is increasingly difficult to forecast;
• competing pressures between risk based and affordable security planning;
• evolving complexities and interdependencies between intermodal transport,
and urban planning systems;
• the need for a ‘whole of precinct’ approach to operational security command,
control, and coordination;
• new patterns of interaction between the aviation industry and government,
with competitive neutrality at its core;
• a requirement for an integrated and synchronised approach to the planning
and implementation of security policy and response measures beyond 2015;
• a recognition of the need for a ‘community of interest’ approach to security
planning and coordination, rather than a piecemeal and adversarial
governance model; and
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• a recognition that government is increasingly less able to shape the aviation
industry due to, increasing competitiveness and deregulation.
In addition to this host of domestic challenges, Qantas also notes three critical
overseas operational issues that illustrate the increasingly integrated nature of
the challenges and solutions within international aviation security, namely:
• the poor standard of aviation security training in developing markets served
by international carriers as they seek to expand;
• security systems that operate to meet international regulations rather than
provide security outcomes;
• the likelihood that screening authorities in these markets will not be able to
afford emerging generation screening equipment for many years; and
• reliance on air carriers acting unilaterally in an attempt to address these
situations or by imposing mandates upon air carriers at Last Ports of Call
(LPOC) as a de facto method of reducing the risk to the domestic
environment.
Faced with this array of increasingly convergent issues, Qantas endorses a
recent Aviation Security Advisory Forum Discussion Paper that identified the key
change drivers impacting the aviation industry, and questioned the fundamental
purpose of aviation security in Australia. It is noted that currently, there is no
national strategy for aviation security, and significantly, this requirement has not
been identified in the Issues Paper.
5.1.2 Advancing the Australian regulatory framework
5.1.2.1 Broadening the patterns of industry-government interaction
Qantas recognises the requirement for the Australian Government to shape the
security framework on behalf of industry participants operating in the Australian
aviation context. However, we contend that a balanced or tailored approach to
industry-government engagement that incorporates risk, exposure and
operational need rather than a uniform ‘one-size-fits-all’ solution will deliver a
more practical risk-based and integrated product than is currently the case. In
particular, to effectively and transparently deliver such a product, Qantas
proposes that new patterns of interaction could incorporate the requirement for:
• a separate framework of regulatory and industry support;
• a simplified regulatory framework focused on those measures that safeguard
against persons taking control of an aircraft in flight or causing mass
casualties;
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• a collaborative system of risk management (Qantas sees the value in
government recognising the inherent strengths and diversity of aviation
operation risk management capabilities) within a ‘community of interests’ style
approach;
• more inclusive whole-of-government, inter-agency, and private-public
partnerships; and
• a less adversarial approach to risk management and compliance.
Qantas believes it is vitally important that the Government takes a risk-based,
intelligence-led and outcome-driven approach to delivering the Australian
regulatory framework, particularly for those industry participants with capability
and maturity in their operations. However, Qantas is also supportive of a
differentiated approach with more restrictive and/or prescriptive provisions for
new entrant participants, participants with limited capability, or for those who
consistently breach or fail to meet regulatory standards and expectations.
Accordingly, the regulatory framework must be flexible and provide aviation
industry participants (carriers and airport/terminal operators) variations,
exemptions or alternative procedures based on their relative capacity to deliver
security outcomes. This process needs to be simple, transparent and
expeditious.
An example of the inflexibility in the current regulatory framework is the continued
requirement to off-load appropriately screened checked baggage when
unforeseen circumstances or practical operational decisions require its
separation from the passenger; a situation that occurs frequently. In a risk-based,
balanced and practical framework, it would be recognised that there are no
additional risks attached to separating the passenger from their baggage in these
instances. Accordingly, given the substantial costs and operational delays
associated with the locating and removal of this baggage, Qantas would
encourage the pursuit of a regulatory model that not only acknowledges these
realities, but remains flexible enough to keep pace with operational and technical
changes in the aviation environment.
5.1.2.2 Harmonisation and mutual recognition
The travelling public has demonstrated remarkable resilience, patience and
goodwill in the face of increasingly complex and onerous aviation security
standards and procedures. Proper consultation between governments, airlines,
airports, peak bodies and international associations is required to ensure that
applicable security measures are practical, cost-effective, efficient and
sustainable.
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Consistent with the concept of an integrated aviation security strategy, a powerful
mechanism for change is partnerships between governments to mitigate any risk
at source. In particular, the regulatory emphasis must move away from
addressing security deficiencies at LPOC by imposing mandates upon air
carriers towards a preference for government-to-government dialogue, in part
based on advice that has been actively solicited from the air carrier community.
This practice is highlighted by the recent imposition on carriers to introduce
security measures, including secondary screening, at LPOC to detect LAGs on
some inbound flights to Australia. These security measures have not been
introduced in a way that provides transparency with regard to the associated
risks and local regulatory structures and subsequently leads to inconsistencies in
LAGs mitigation, increased costs and confusion to passengers. A pragmatic,
risk-based regulatory model would seek to generate mutually agreed and
supportive arrangements across the LPOCs to ensure a consistent and
streamlined application of the appropriate security measures at an international
level.
The accepted link between aviation industry participants and regulators is the
Transport Security Program (TSP). In Australia, however, the methodology and
utility of the product does not align with corresponding overseas approaches,
thus causing inefficiencies, confusion and duplication of effort and resources. In
effect, all administrative and other non-aviation security aspects of TSP
construction could be removed to improve the function and utility of the TSP.
Similarly, the security of international air travel relies on the close collaboration of
governments and a commitment to ensuring that, wherever possible, standards
and procedures are harmonised and granted mutual recognition. Such a
framework would be characterised by a philosophy of:
• greater regional participation to protect Australian interests in an environment
of ever-increasing extra territorial foreign regulation;
• ‘one stop security’ established by mutually recognised security standards and
procedures; and
• a focus on simplifying the passenger travel experience.
It is Qantas’ view that these principles should underpin the Australian
Government’s strategic approach to continuously improving and dynamically
contributing to the highest levels of international aviation security.
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5.1.2.3 Intelligence and information exchange
Given the dynamic nature of the threat environment, the exchange of information
and intelligence between government and industry needs to be open and
constant. While recognising that local relationships and mechanisms such as the
Airport Security Committees foster the flow of information and intelligence,
Qantas strongly supports the enhancement of information and intelligence
sharing mechanisms at a national level. While limitations in terms of the sharing
of some information and intelligence are accepted, there nevertheless needs to
be greater and more timely exchanges on current and emerging trends and
future indicators.
Qantas would like to see the Government develop a comprehensive framework
for a collaborative approach to industry-government interaction that encourages
information sharing without fear of competitive loss or prejudice.
5.1.3 Aviation screening
As outlined above, Qantas supports a risk-based approach to mitigate acts of
unlawful interference against aircraft and people, and this is no different in the
aviation screening context. Qantas believes the primary focus of security
screening should be to prevent acts of unlawful interference that could ultimately
destroy or take control of an aircraft in flight or cause mass casualties in flight or
on the ground in sterile areas (ie those areas on the ground post screening).
However, while passenger screening is invariably the primary defence against
acts of unlawful interference, it is important that it remains focussed on delivering
outcomes that are optimised to deliver genuine protective benefits to industry and
the community. The screening of items that do not pose a practical threat to
aviation security such as plastic cutlery knives, nail files and nail clippers, have
the potential to distract screening activity from its genuine purpose. As such,
Qantas maintains that the prohibited items list needs to be reviewed and refined
to include only those items that could ultimately be used to destroy or take
control of an aircraft in flight or cause mass casualties in flight or on the ground.
5.1.3.1 Prohibited items list
While Qantas supports the current review of aviation security screening, and
specifically a comprehensive re-evaluation of the current prohibited items list, the
prohibited items list should be reviewed with the Weapons List at Regulation 1.09
of the Aviation Transport Security Regulations 2005.
Current security screening procedures require screeners to concentrate on a
broad range of items that have the potential to cause harm to people and
passengers, potentially distracting them from identifying items that could cause
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acts of unlawful interference and/or result in mass casualties. Unfortunately this
is reinforced by the audits conducted by Screening Authorities that generally use
benign test pieces.
Any review of the prohibited items list must take into account other measures
enacted since September 11 2001 such as enhanced crew training, the
installation of enhanced flight deck doors and the improvement in the capability
of the screening equipment deployed. In addition, in reality there are many items
permitted in the cabin of aircraft that could be potentially used as weapons. In
particular, Qantas believes that better public education and deterrence activities
can be developed and maintained with a more concise list of prohibited items
leading to enhanced security outcomes overall.
Subsequent to the introduction of enhanced flight deck doors, the United
Kingdom, United States and New Zealand governments have all reviewed their
prohibited items lists, resulting in low risk items being removed from the list. It is
understood that these governments have all taken a policy position of protecting
the aircraft and therefore passengers rather than generically protecting
individuals against harm.
Qantas believes that a reduction in the prohibited items list to those items that
could ultimately be used to take control of an aircraft in flight or cause mass
casualties will result in:
• an overall increase and focus on the security outcome;
• improved compliance rates across industry;
• improved passenger facilitation; and
• an increased confidence in the system by industry, passengers, government
and the community.
5.1.3.2 Number of screening authorities
Qantas considers that there are currently too many screening authorities in
Australia. This problem is increasing, as more airports are now required to
perform security screening services, especially in smaller regional towns. This
leads to a number of operational challenges and risks including:
• a lack of resource availability;
• restricted opportunities for economies of scale with respect to fixed costs,
instead duplicating these costs for an increasing number of screening
authorities;
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• a lack of aviation security expertise within local councils and smaller airports;
• a lack of suitable experience in security and supplier/contract management
that can lead to security processes being determined by contractors and staff
at a local level. This potentially compromises security outcomes and will
inevitably lead to inconsistent application;
• security contractors being subject to variability of application of regulations by
the various screening authorities which results in inconsistent customer
experiences that significantly undermines community confidence in the
aviation security system; and
• screening authorities operating in isolation, which does not enhance
vocational development, network performance management, consistency of
security outcomes and/or service and in some cases, security screening is
seen simply as another revenue opportunity.
In Qantas’ view, the majority of performance, management, resource and morale
issues faced by the industry could be addressed by the establishment of a single
screening authority in Australia. Given that aviation security is part of Australia’s
national security infrastructure, this is regarded as appropriate. As the
requirements to screen passengers, baggage and cargo continue to expand, and
airside inspection regimes are formalised, failure to do this will see the number of
industry participants with responsibilities for screening activities continue to
increase and the current deficiencies will be amplified across the Australian civil
aviation network.
From the viewpoint of effectiveness, consistency and efficiency, the delivery of
screening services in Australia is sub-optimal in numerous ways:
• the number of screening authorities;
• financial consideration;
• regulation;
• training;
• licensing regime;
• contractor staffing issues; and
• security technology.
All of these deficiencies are, in our view, best addressed by a centralised
screening authority that is independent of the regulator. Specifically, a centralised
management model would:
• facilitate rapid, co-ordinated roll-out (and roll-back) of new screening
requirements if warranted by the security environment;
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• determine screening priorities for national interest reasons and implement
these in a consistent manner;
• deliver a coordinated approach in relation to the deployment of screening
technologies;
• minimise inconsistencies in screening processes and practice through the use
of common processes and equipment across all airports;
• enable the collection, analysis and dissemination of data on an immediate,
national basis to support continuous improvement of screening and facilitation
outcomes;
• maximise the potential contributions which could be made to aviation security
via the more efficient deployment of resources from other government
agencies eg via the deployment of police at screening points;
• provide economies of scale with respect to fixed costs, instead of duplicating
these costs for an increasing number of screening authorities; and
• ensure management by aviation security experts with a dedicated portfolio
focus.
Further, a centralised management of screening model provides a stronger and
more flexible foundation for meeting future aviation challenges, which include:
• the need to understand and respond to new threats and apply that
understanding to research; and
• the incorporation of behavioural analysis into aviation security measures –
effective implementation of which will require real-time analysis and exchange
of data between multiple public and private sector players. The industry is
unlikely to develop such programs, and solve the related privacy issues,
without close involvement of and support from the Government.
Of the models for management of screening, Qantas favours an outsourced
model which is managed by the industry and government in partnership. In
particular, the Canadian Air Transport Security Agency (CATSA) approach is one
that is recognised as an effective means of managing screening and a
comprehensive assessment of the CATSA model may identify features that could
work effectively in the Australian context.
Qantas believes that a centralised model offers benefits in a number if important
areas, as set out below.
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5.1.3.3 Network pricing
Currently each airport is required to fund its own security requirements. Given the
increasing number of airports requiring security screening, invariably with smaller
throughput, the cost per passenger is disproportionate to that of capital city
counterparts. Qantas suggests that aviation security costs should be equally
apportioned across industry as a fixed fee per passenger cost (network pricing)
in order to preserve and encourage growth in vital air services to regional
communities. A centralised managed screening model would be best placed to
facilitate this desired outcome.
5.1.3.4 Labour
In a tight labour market, aviation security is becoming increasingly unattractive as
a career of choice given the major impediments to entry, such as costly and time
consuming State licensing and training requirements. This is compounded by a
relative lack of career progression, a lack of investment in the individual (eg
training), a confrontational workplace, and a general lack of respect from both the
public and industry which leads to dissatisfaction and increased turnover. While
pay rates are an issue requiring attention, they are not the sole contributing
factor.
Qantas sees the centralised model as being a means to more readily facilitate
attraction and retention of personnel to this industry sector, as well as provide the
opportunity for an increased emphasis on staff, including programs for improved
recruitment, training and retention. A national screening management agency
would have the capacity to take a national approach to its workforce and facilitate
operational and employment flexibility.
5.1.3.5 A single national aviation training authority
The quality of the training framework and its consistent delivery is a critical
element in achieving desired security outcomes. The current regulatory training
framework lacks specificity, resulting in variable training outcomes and
inconsistent application by screening personnel of security and facilitation
processes. More concretely, the current security framework does not provide a
robust foundation for aviation security for the following reasons:
• Secretary approval is required, but has not been sought, nor given to any
training provider;
• there is currently no requirement, beyond the Certificate II, for training to be
undertaken by a registered training organisation;
• removal of the requirement to complete the elective modules of the Certificate
II which previously contained special application to aviation;
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• competency is subjectively assessed by a supervisor without the requirement
for a Certificate IV qualification; and
• there are multiple training providers leading to variability in training outcomes.
Qantas recommends the establishment of a single aviation training authority in
order to deliver consistent training standards and practices backed by a rigorous
quality assurance process. This initiative would be best attained in conjunction
with a single screening authority. We would also like to see the requirement to
complete the elective modules of the Certificate II which contain special
application to aviation reinstated.
5.1.3.6 A single national licensing authority
The current security licensing regime is based on general guarding requirements
and utilises a State-based framework with variability across the training,
background checking and identity requirements.
Qantas contends that this unnecessarily complicates entry of personnel to the
industry, and in fact acts as a deterrent. Qantas considers that licensing of
aviation security should be managed by the Federal Government rather than the
States. Furthermore, the licensing focus placed on traditional security guarding
activities needs to be broken in order to attract a new and more highly qualified
Aviation Protection Officer.
A national approach will allow transportability of the licence, reduce costs and
delays associated with mutual recognition, facilitate operational flexibility and
provide a consistent minimum eligibility and training standard. Similarly, the
creation of Aviation Protection Officers (screening officers) covered by national
licensing requirements rather than the current state based security guard
licensing system would also substantially increase flexibility of resources to
operate across State boundaries, enhance career development opportunities and
the attraction of aviation security for those considering employment in the private
security industry.
5.1.4 Progressing regional AVSEC regulation
5.1.4.1 Sustainability of regional aviation
Regional communities are often vast distances from capital cities and require an
efficient and cost effective aviation network. Recent developments in aviation
security in Australia have thrust an inequitable and disproportionate burden upon
communities that are already at an economic and social disadvantage.
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Regional airports are increasingly expected to mirror the capital city airport
security measures, yet have only a fraction of the passenger throughput over
which to spread the cost burden. In fact, many of the measures are more
expensive to implement due to the remoteness of the location and a lack of
support of infrastructure and resources. Some of the key issues impacting
regional areas include:
• Equipment maintenance
Much of the equipment required in an aviation security environment is highly
technical and requires regular maintenance. Also due to its criticality,
breakdowns need to be remedied quickly. The distances and consequent
time constraints severely impact the effective delivery of security services as
technicians must often travel from capital city locations. Service costs are also
high as a result.
• Labour force recruitment and management
Regional aviation has a number of labour-related issues that challenge the
effective delivery of security outcomes. Recruitment and retention of
personnel is problematic in regional areas for a number of reasons including:
- high salaries in remote mining areas, particularly Western Australia;
- a lack of reasonable rental accommodation, including the likes of regional
mining towns (often company owned) and some tourist destinations such
as Hamilton Island;
- a lack of full-time roles, with some locations having only one or two
services per day and requiring minimum four-hour shifts;
- a lack of quality management, especially council managed in-house
services;
- a lack of training support; and
- a lack of career progression.
• Screening authority expertise
Qantas recognises the need to ensure appropriate security and safety
measures are in place for regional airports. However, given the importance of
maintaining commercially viable and sustainable scheduled airline services to
remote ports, it is imperative that a risk-based approach becomes the guiding
principle to adopting security and safety measures. As such, Qantas suggests
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a framework and support base is provided to regional airports to guide them
through the implementation of new security and safety polices.
This framework should outline the risk-based approach so that outcomes are
achieved which both mitigate risk and contain costs. Not all regional airport
operators have had due regard for a balanced ‘risk-based’ approach to
compliance as recent requirements for checked baggage screening (CBS)
illustrate. Some airports over-engineer their core solutions and also their
contingency solutions, resulting in substantial and unnecessary extra costs,
which ultimately become a cost to the passenger. In some cases, the cost may
threaten the viability of particular destinations. Airlines have limited capacity to
influence these airports as in almost all cases there is no competitor airport.
Qantas believes that the introduction of a centralised screening authority and the
establishment of a network pricing model (as noted above) are both features of
an integrated aviation security strategy that would better deliver on both the
economic and protection outcomes necessary to maintain a sustainable regional
aviation capability in Australia.
5.1.4.2 Limitations on growth of regional airports and new international hubs
Policy settings must strike a balance between tourism interests and the
commercial sustainability of services by airlines that have a long-term
commitment to Australia. This will ensure that emerging and regional airports
continue to be adequately served and enjoy growth in visitation, while enabling
the Australian carriers to remain competitive in international, domestic and
regional markets.
It is imperative for a robust consultative approach between government and
industry to ensure appropriate changes to aviation security, which meets both
current and future challenges. These changes need to consider the impacts to
airports, airlines and the flying public, from both a facilitation and cost
perspective.
Since the Australian Government mandated the CBS and LAGs requirements,
airports have had no option but to invest in the required capital and human
resources to comply with the regulations. Airports recoup this cost from the
airline, who in turn seeks to recover some of these costs from passengers. When
this policy is applied to a regional gateway such as Darwin, it has a significant
regressive impact since the airlines can only recover the costs from a relatively
small volume of passengers. The policy of mandating minimum acceptable
security infrastructure such as CBS and LAGs at regional or secondary gateways
can have the unintended consequence of providing an incremental incentive to
concentrate air services and passenger volumes at major gateways to avoid
airports with high charges (refer also to 1.1.7).
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Similarly, the Australian Government’s mandated increased security measures at
Alice Springs Airport, arising from the airport’s proximity to military installations
and Pine Gap, have the potential to discourage travel to Central Australia. As the
only airline until recently that services Alice Springs, the cost of installing security
infrastructure to comply with the new measures – approximately $7 million – was
being passed on to Qantas in full. This includes the 11 percent return on the
capital cost of the installation targeted by Alice Springs Airport, which is owned
by Northern Territory Airports. As a result, passenger service charges at Alice
Springs almost doubled since these measures were put in place.
As highlighted in 2.1.9.11, Jetstar’s acquisition of up to 108 narrow body jets over
the next decade has provided the airline with a strategic opportunity to roll out a
northern Australian hub from which a range of short haul international services to
various Asian destinations can be served. The consequential dispersion benefits
the Qantas Group can deliver to regional Australia as a result of this initiative can
be significant in terms of tourism, employment and associated economic
development. However, a significant commercial barrier or disincentive to the
realisation of this outcome is Australian government regulations that impose
higher security costs that apply at the airports to which Jetstar currently operates.
These costs include, amongst others, CBS and LAGs and generate a wide
variation in charges per passenger (from $18.04 to $3.35) depending upon the
port.
While the Northern Territory is a useful example for illustrating the range of
challenges and burdens being experienced in regional Australia, it is important to
emphasise that these issues are only exacerbated at smaller and more isolated
airports across the country.
5.1.4.3 Screening of non jet aircraft
As part of a balanced, risk based aviation security strategy, Qantas is not aware
of any material change in risk that would necessitate a change in policy position
to extend passenger security screening requirements to non jet aircraft. In
particular, jets are statistically far more attractive to would-be terrorists or
hijackers, as they have a much longer range than Australia’s fleet of turbo-prop
aircraft. For example, although jets such as the Embraer 170 and propeller-
driven aircraft such as the Bombardier Q400 may have similar seating capacity,
the aircraft are substantially different, with the Emb170 carrying 77 percent more
fuel, having a 46 percent longer range and a maximum cruising speed 26 percent
faster than the Q400.
As such, in the context of establishing a transparent and outcomes-focussed
regulatory framework, Qantas questions the risk mitigation value of significantly
increasing operational costs to potentially screen only a small proportion of the
remaining four percent of unscreened passengers.
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5.1.4.4 Screening of charter aircraft
• An integrated, risk based regulatory framework acknowledges that a ‘one size
fits all ‘approach to the screening of aircraft is not possible due to the
operational uncertainties and dynamic nature of the aviation business. As
such, flexibility is required to facilitate unscheduled, but common operations
which do not add substantial risk challenges, but which are severely
hampered by static and uncompromising security measures. Examples of
such operations include:
• the unplanned diversion of an aircraft to an airport without screening facilities
and the subsequent treatment of the flight after landing;
• the ad hoc substitution of aircraft captured by the regulatory framework due to
unserviceable aircraft or scheduled maintenance;
• to facilitate the ad hoc movement of itinerant aircraft visiting Australia; and
• in the case of emergency or other humanitarian operations.
While some other essential operations are event or seasonally based, providing
these services under uniformly restrictive policy measures for relatively short and
fixed periods would be cost prohibitive. Flexibility is always required if regional
communities are to receive adequate civil aviation services. These situations
include for example:
• an increase in capacity to accommodate a specific event - such as the 10-day
Tamworth music festival; or
• non-scheduled closed charter operations (scheduled mining in/out operations
would not qualify for exception); or
• seasonal requirements such as school holidays.
For these reasons, Qantas supports the maintenance of the current exemptions
against certain security measures for specific charter operations.
5.1.5 Harmonising security technology
5.1.5.1 Variation in security technology across the network
Due to the number of screening authorities, there is currently considerable
variation in security technologies deployed. While this equipment has broadly
similar outcomes, there is nevertheless a degree of variability in detection
capability. Further, passengers have inconsistent experiences which lead to a
lack of confidence in aviation security.
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5.1.5.2 Impediments to implementation of emerging technology
Security technology continues to develop and Qantas anticipates significant new
equipment becoming available in the coming years. The limited financial
capability of some screening authorities, especially in regional areas, may restrict
the deployment of new technologies.
Security technology has a useful life generally of seven to 10 years. However,
new technology advancements will mean current equipment, while still being
effective for the purpose designed, will have been superseded by equipment
capable of delivering greater security outcomes. With large prior capital
expenditure still being depreciated over longer periods, there will be reduced
appetite to implement new technology unless regulated to do so.
Qantas believes that a centralised model that owns and operates all equipment
would be best placed to ensure deployment of this technology in a consistent,
considered and timely manner. However, Australia’s large land mass adds
extraordinary challenges for those organisations addressing the issue of timely
maintenance of sophisticated technical equipment, particularly if that equipment
is not supported nationally.
5.1.5.3 Biometrics and identity management
In recent years there have been significant advancements in the use of
biometrics to ensure the identity of people and to control access and egress as a
security solution. In the context of an aviation security environment, Qantas
considers that biometrics has limited application, as the overarching security
priority is that no individual carries into the sterile area or onto the aircraft any
item that can be used to unlawfully interfere with the operation of that aircraft,
rather than the identity of that individual in the screening environment.
However there are potential benefits from the use of biometrics in the area of
airside inspections of staff, contractors and others to validate their identity on
each occasion they wish to access critical facilities.
5.1.5.4 Sharing of CCTV networks
Airports currently have significant deployment of Closed Circuit Television
(CCTV) throughout their facilities. CCTV is a useful tool for both operational
effectiveness and security outcomes. There is also further potential for more
effective policing functions through the use of CCTV, as in many cases CCTV
capability is not currently shared. Qantas would like to see a review be
conducted on the effective use of CCTV within the aviation environment and the
framework within which networks should be shared.
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5.1.5.5 Taxation implications and incentives
Security technology solutions are a considerable cost impost in the aviation
environment. The technology required includes passenger, baggage and cargo
screening equipment, CCTV, access control, alarm and duress monitoring
equipment. In Qantas’ view the Government should consider accelerated
depreciation rates for taxation purposes for security related equipment in the
aviation sector. Qantas encourages this consideration for the following reasons:
• the investment is largely necessary to comply with Government regulation;
• it will encourage purchase and deployment of new and emerging technology,
thereby improving security outcomes; and
• it will overcome some inequities that currently exist. Presently the
Government fully funds some equipment requirements for its initiatives by
providing the funds for airports and airlines to acquire the equipment.
Currently the funds are taxed in the year of receipt, yet the associated capital
expenditure is deductible over the life of the asset, some 10 years. The
consequence is that the recipient airline or airport must fund a substantial
taxation liability in the current year. Full deductibility in the year of purchase
would overcome this inequity.
5.1.6 Access control and background checks
5.1.6.1 Number of ASIC issuing bodies
At present there are some 130 issuing bodies across Australia, with a significant
proportion of these issuing and responsible for less than 1,000 Aviation Security
Identification Cards (ASICs). Given the importance of the ASIC in the overall
aviation security framework, the large number of issuing bodies currently lends
itself to fragmentation, a lack of oversight and the risk of a significant breach.
Qantas considers that the only issuing bodies should be those with significant
need and volume. We suggest the following participants would be appropriate:
• major airlines;
• major capital city airports;
• the Australian Customs Service;
• the Civil Aviation Safety Authority (CASA); and
• a centrally managed and diverse body such as Australia Post, who could
manage of ASICs similar to the process for issuing of Australian passports.
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5.1.6.2 Criminal history details
Qantas currently requires all employees to conduct a criminal history check, in
addition to any requirement to undertake the AusCheck process to obtain an
ASIC. Qantas requires this additional measure to understand the nature of
offences and to ensure the honesty and integrity of all its personnel. This
additional requirement of a criminal history check is costly and also extends the
lead time for effective employment of staff. However, Qantas believes that this
principle should be explored as an option to at least require all staff working in
the industry who do not require ASICs to undergo similar background checks.
Qantas already funds the cost of AusCheck, which carries out the criminal history
check, yet AusCheck will not release results of the criminal history check to the
employing agency or issuing body. Qantas requests that the Government
consider authorising AusCheck to release the full details of the criminal history
check to the issuing body in order to remove the duplication of effort and to
provide issuing bodies with a single and effective source of information to meet
both their ASIC and employment needs.
5.1.6.3 Background checks – live monitoring/enduring consent
Currently ASICs are issued for a period of two years. Prior to the expiry of this
period, a further application is required. Qantas considers that all ASICs should
be subject to continuing monitoring by AusCheck so that there is confidence that
all current ASIC holders are at all times fit, proper and eligible to hold an ASIC. A
two-year review carries the risk that some individuals may continue to hold an
ASIC yet not be currently eligible. This position is supported by the number of
personnel that are refused an ASIC on renewal.
In the absence of an ability to deliver continuous monitoring, Qantas contends
that AusCheck should consider extending the current validity period of ASICs to
avoid unnecessary renewal paperwork, but at the same time implement an
automatic annual review of each ASIC holder to ensure current eligibility.
5.1.6.4 Overseas recruiting
Many current and potential employees come from other countries. From a
security threat perspective, this is often problematic for ASIC-issuing bodies to
establish suitability, as the availability of reliable and accurate criminal history is
variable and in some cases non-existent. In some cases foreign jurisdictions will
not make available any criminal history, including to the candidate. In other
cases, documents are difficult to verify and potentially false.
Qantas suggests that the Australian Government would be in a better position to
verify the eligibility of foreign nationals to hold an ASIC within the aviation sector.
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5.1.7 An integrated approach to infrastructure security
5.1.7.1 Integrating infrastructure development and security
Qantas endorses the need for a broader strategic view of aviation security and
infrastructure development and planning. Airports have become intermodal
urban and commercial hubs. Any future aviation system will need to embed the
growing complexity, diversity, and inter-dependencies of airport and urban
infrastructure within a ‘beyond the airport’ context.
A broader and more integrated approach to infrastructure planning would enable
the following key aviation security challenges to be synchronised with airport and
urban infrastructure development:
• the impact of intermodal transport and urban systems on airport infrastructure
development and security;
• the concept of a ‘whole of precinct’ approach to aviation security policy and
implementation;
• the integration of front-of-house protective security systems with precinct-wide
and cross-jurisdictional considerations;
• the calibration of infrastructure design and renovation with next generation
aviation security threats and policy; and
• the coordination of queue security with airport and traffic design systems.
5.1.7.2 Integrating front of house
While the impact of mass casualties at any one of the aforementioned locations
would have far-reaching implications across a populace, airports remain critical
pieces of infrastructure with direct connections to local and global commercial
activities. In particular, airports are unique as they already have substantial
layers of security in place with the ratio of security staff to population superior to
the average public environment.
Qantas considers that airports have specific needs compared with other places
of mass gathering and as such, there is a need to harmonise a range of activities
occurring there, including the proposed front-of-house strategy, the Australian
Security Intelligence Organisation (ASIO) T4 Vulnerability Assessment program,
broadening the scope to a ‘whole of airport precinct’ approach and bringing these
in contact with the aviation security screening review.
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5.1.8 Air cargo security
In countries other than Australia, variances in cargo security regulations still
exist, which give rise to confusion and duplication of effort. However, over the
past 12 months, it has become apparent that a number of key states have moved
towards a supply chain security model. Qantas supports all freight security
governance models (in principle) that can successfully minimise the amount of
screening that must take place at the airport. In addition, models that empower
freight forwarders and shippers to ‘screen’ freight avoid the duplication of
expensive screening equipment in the airport environment.
Qantas supports the introduction of a Security Management System (SeMS)
requirement for the air cargo industry. SeMS will result in a more structured and
standardised approach to the implementation of security processes and will
provide improved and more uniform standards throughout the aviation industry.
Implementing a Cargo SeMS requirement on the entire supply chain, as well as
an effective and focused air cargo threat assessment capability, will contribute to
making air cargo security processes pro-active and agile.
5.1.9 Categorisation of airports
Qantas recommends the inclusion of a review of the categorisation of airports,
and the methodology to determine such categorisation, as part of the Aviation
White Paper process. This issue is a key component of any overarching
integrated aviation security strategy to drive the protective security framework
and effective utilisation of policing at airports.
Risk and threat assessments of airports and associated infrastructure are
essential and must be the driving force behind any system of categorisation and
the necessary resourcing decisions that flow from it. At present, ASIO T4 is in the
process of conducting a number of physical security assessments. These
assessments are being conducted with very little visibility to the Airport Security
Committee membership, with individual industry participants conducting their
own assessments, often at the same time as ASIO T4.
This is a clearly inefficient practice and inconsistent with the fundamental
philosophy underpinning formation of the Airport Security Committees, which is
to identify and assess risks to aviation security in that environment and then
make decisions to apply appropriate measures and resources commensurate
with the risk. In particular, in relation to the assumptions underlying any approach
to categorisation of airports, the broader context needs to be considered,
including the purpose of categorisation and the outcomes being sought –
especially with respect to what is determined to be the identified target (airport,
aircraft, local facilities, people, etc.)
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Qantas believes that there should be a set of defined criteria driving
categorisation which are responsive to changes over time. Equally, there needs
to be a process which can trigger a response to ‘turn on’ an airport becoming a
‘categorised’ port with a corresponding trigger to ‘turn off’ or reduce any
enhanced measures that may have been applied at that particular port.
Designation or categorisation outcomes should be founded on agreed local multi-
agency risk assessments and the development of the local airport security plans.
Consideration should be given to upgrading this to a policy level/setting.
The threshold issue is that there needs to be sophisticated assessment criteria
for determining whether Counter Terrorism First Response (CTFR) levels should
be applied at a particular airport. Satisfaction of any one of these criteria should
not, in isolation of consideration of other factors lead automatically to CTFR
status being applied. Criteria which could be considered include, but are not
limited to:
• size of airport;
• types of aircraft operating into/out of that airport;
• amount of traffic;
• passenger throughput;
• perceived vulnerabilities;
• location;
• presence of nearby ‘targets’ – proximity to critical infrastructure;
• landside and airside infrastructure – eg airport towers;
• presence of hazardous materials – fuel etc;
• presence of international RPT services; and
• the relative ‘attractiveness’ of domestic and regional airports – because they
are perceived as softer targets.
5.1.10 Airport policing
5.1.10.1 The unified policing model
Designation or categorisation outcomes should be a threshold factor with respect
to policing strategies and resourcing levels at airports. Qantas regards the
current approach to airport policing as flawed, on the basis that there appears to
be little or no emphasis on the nexus between a particular port and its assessed
level or ‘category’ of risk, resourcing levels, equipment, strategies and ‘patrol’
doctrine.
For example, Qantas has consistently requested that an Australian Federal
Police (AFP) officer be located at screening points at designated airports. Qantas
believes that the presence of such officers would considerably enhance the
deterrence factor, provide rapid assistance if needed and introduce the possibility
of targeted screening of high-risk passengers or those acting suspiciously
utilising behaviour analysis techniques.
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Qantas submits that there should be a review of the current model of policing at
airports which should take into account collective (and collaborative) risk
assessments – which should be transparent and not undertaken in isolation – in
the context of the ‘designation’ or ‘categorisation’ of airports.
Furthermore, in Qantas’ view the current command and control structure of the
unified policing model does not provide optimal benefits. On one hand, there is a
command structure in relation to the ‘uniformed’/general duties component of the
structure, yet on the other a separate and siloed command structure in relation to
the CTFR component. It is arguable that the former is better qualified to conduct
CTFR functions than the latter who, in the main, are former Australian Protective
Service officers who do not possess the full range of constabulary powers, skills,
competencies and experience.
5.1.10.2 The ASO program
While not a component part of the airport policing model, the Air Security Officer
(ASO) Program is nonetheless an inherent part of the AFP aviation portfolio. In
existence since December 2001, the ASO Program has not been involved in any
interventions with respect to threats to the security of the flight deck.
Qantas fully supports Australia’s ability to maintain an ASO capability. It is
arguable, however, that the time is right for a review of the fundamental
deployment philosophies underpinning the Program. The effectiveness and
sustainability of a program which deploys resources on only a small number of
domestic flights and even fewer international flights might be questioned.
Qantas notes the AFP’s intent to implement a risk-based model of deployment of
ASOs onto commercial flights. While reaffirming our support to the fundamental
concept of maintaining an ASO capability, we have concerns about the potential
impact of such a risk-based approach without full and frank exchange of
information relating to the perceived risk as assessed by the AFP with respect to
any Qantas operation.
Qantas suggests that it would be inherently useful for any review of aviation
security to take a holistic approach to considering the effectiveness of airport
categorisation, airport policing and associated national security and policing
activities such as the ASO Program in the context of a broader examination of
Australia’s aviation security policy settings.
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