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Joint Standing Committee on Treaties
Treaties tabled on 12 March and 14 May 2013

CLARK, Mr Brenton, Assistant Director, Air Services Negotiations Section, Aviation Industry Policy Branch, Aviation and Airports Division, Department of Infrastructure and Transport

LUCAS, Mr Samuel, Acting General Manager, Aviation Industry Policy Branch, Aviation and Airports Division, Department of Infrastructure and Transport

POKALIOUKHINE, Mr Edouard, Policy Adviser, Air Services Negotiations Section, Aviation Industry Policy Branch, Aviation and Airports Division, Department of Infrastructure and Transport

SMITH, Mr Gilon, Acting Director, Air Services Negotiations Section, Aviation Industry Policy Branch, Aviation and Airports Division, Department of Infrastructure and Transport

CHAIR: I welcome the witnesses from the Department of Infrastructure and Transport. Before I get on to reading you your rights, can I just thank you. I think you had attended a previous meeting which we asked be deferred and you have come back again today. We apologise for that profusely and thank you for putting yourselves out to see us at this time today. Without going into the full spiel, there is an obligation on you to tell the truth; the way we put it before is that you get into trouble if you do not. I might leave it at that. I invite one of you want to lead off with an opening statement, then we might ask questions.

Mr Smith : Thank you. Air services agreements are negotiated to permit and facilitate the operation and development of international air services between countries. Under the framework of the Chicago convention of 1944, which provides an over-arching civil aviation framework, international airlines cannot service a market between two countries without the framework of an air services agreement. The negotiation of these agreements is consistent with the international aviation policy settings set out in the national aviation white paper released in December 2009. The agreements will facilitate improved opportunities for Australian carriers to access international markets as well as increase consumer choice and improve trade and tourism opportunities for Australian industry. The legally binding treaty component provides the benefit of legal certainty to Australian airlines operating overseas.

As with all their services agreements, these agreements oblige the Australian government and the relevant foreign government to allow the designated airlines of each country to operate services between the two countries in accordance with the entitlements settled between the aeronautical authorities and subject to compliance with applicable laws, including safety, aviation security, trade practices and border security, including customs and quarantine. The treaty-level air services agreements are supplemented by arrangements of less-than-treaty status between the aeronautical authorities, settling more detailed commercial entitlements that determine the scope of airlines operations under the air services agreements. These documents, such as memoranda of understanding and records of discussion, are by custom confidential between aeronautical authorities and are not distributed publicly. We have provided copies of these MOUs to the committee to aid the committee's consideration of the agreements.

These four agreements are typical of the department's ongoing air services negotiation program to facilitate the growth of Australia's international markets. Negotiations of the new ASA, or air services agreement, with Belgium have opened up the Belgium market to Virgin Australia and QANTAS, both of whom are now using the rights negotiated. New frameworks with the Solomon Islands, the Philippines and Indonesia increase the commercial opportunities available to Australian and overseas airlines and deliver legal certainty to the framework governing those airline operations. The agreements set out the framework under which airlines may operate airline services; they do not necessarily require airlines to operate airline services. Further detailed comments on each treaty action being considered here today are set out in the relevant national interest analysis documents that are before the committee. I do not propose to go into each of the proposed agreements but am happy to take questions.

CHAIR: Thank you. Do you have any sense of the potential value of these agreements in a monetary sense?

Mr Smith : The agreements set out a framework under which airlines can decide whether to provide air services to and from Australia. They do not set out the specific services the airlines will operate. We have not done specific analysis with each of the agreements as to the specific economic benefit. There are broad studies about the benefits of opening up international aviation markets and the increase in services, improved competition and consumer choice and those sorts of benefits that they bring.

CHAIR: Presumably the agreements that you negotiate are based upon your awareness of various commercial arrangements which will be established in light of the agreements being made. Is that how it works?

Mr Smith : Often that is the case. Airlines and other interested stakeholders put forward to the department their views as to which commercial markets are of interest to them and that forms the department's negotiating strategy or schedule for the coming year. Stakeholder views are taken into consideration before the negotiation of each agreement, and a mandate is sought from government.

CHAIR: It is not just countries to which there are direct flights from Australia. In the case of Belgium, there must be a stop between here and there.

Mr Smith : Correct. If an Australian or a Belgian carrier wishes to conduct services to Australia, it needs to be operated under one of these arrangements. That extends even to a code share service. An Australian carrier may operate to an intermediate point and code share on another carrier for that final point in Belgium.

Mr FORREST: My understanding of these agreements is that they have effectively been in operation by a memorandum of understanding for years and we are just formally forming them into actual treaties. Does that apply to every one of the agreements being considered here or only to the Solomon Islands?

Mr Lucas : Yes. Each of these agreements has been given interim effect since it was negotiated and is now coming through and completing the treaty process to be brought into legally binding force. This is the standard procedure that is followed internationally with air services agreements so that the rights they create for the industry become available as soon as possible. The nature of the treaty process, in our own Australian processes and in the equivalent processes in other countries, means that it takes some time for the treaty text to be finalised, as it is reviewed and confirmed that there are no simply things like typographical mistakes in the text. It then goes through executive council processes on our side to permit signature, a signature occasion is lined up with the other side, the documents are prepared and tabled and then they are brought through here for the committee's consideration. Because of that time, there is often a lag of up to a couple of years between the negotiation of the agreement and when it comes to this committee.

Mr FORREST: For the Solomon Islands it is more like 14 years than a couple of years.

Mr Lucas : The Solomon Islands agreement was negotiated in 2011.

Mr FORREST: If the arrangements have been operating like a memorandum of understanding, obviously that has provided opportunity to iron out any bugs or difficulties that are in the agreements. I assume that that is a process that has happened and that we are now ready to formalise as a treaty.

Mr Lucas : Yes. The time since negotiation has given an opportunity for each side to be comfortable with the text. Most of the time between the initial negotiation and us being here today is driven not by each side sitting back and reviewing the operation of the agreement but by the time it takes to step through all of the legal processes that have to be followed.

CHAIR: Are you referring to the fact that there was an MOU in place in 1998 and the basis on which air services were operating under that agreement?

Mr Lucas : Yes. With the Solomon Islands, in 1998 an MOU was negotiated which included a draft air services agreement. That ASA continued to be in interim effect, and that was the basis on which airline services were operated until 2011. In 2011 we negotiated a new MOU and draft air services agreement. That is what services have operated on since 2011. That draft services agreement negotiated in 1998 was never formally brought into force, largely because the Solomon Islands had gone through a period of internal turmoil and was not in a position to be worrying about international legal processes. Therefore the draft arrangements continued to be the basis on which flights operated in that period.

Senator SMITH: If an international airline were to request the ability to transport domestic passengers between ports internally in Australia, would that be done through agreements such as this?

Mr Smith : What you are referring to is cabotage or the rights for international carriers to conduct services within Australia. The government set out its policy on cabotage in that 2009 white paper, and the policy was that it would not ordinarily be negotiated in those air services agreements. Technically, if it were to be introduced, the air services agreements would be the forum to do it. Presently only airlines of New Zealand have the opportunity to conduct services within Australia, and there are no plans for other carriers to be provided with that right.

Senator SMITH: Have international airlines made approaches to government requesting the ability to transport passengers between ports domestically?

Mr Smith : Not that I am aware of.

Senator SMITH: Can you take that on notice?

Mr Smith : Sure.

Senator SMITH: Perhaps you can tell me whether, over the last five years, any international airlines have requested that.

Mr Lucas : I will just add to Mr Smith's comments and perhaps clarify what we will take on notice. The government's approach is not to permit foreign airlines to carry domestic traffic within the Australian market. There are exceptions to that. On occasion, there are cabotage dispensations issued to permit the carriage of outsize equipment or particular bulk loads, or something like that, on a one-off or a short-term basis. So the government does receive, a number of times a year, requests from industry to carry that sort of cargo. Often it is to carry some horses or to carry large mining equipment or things like that, and the government considers those requests in an operational sense by looking at whether or not any Australian operator is able to carry that load. If no Australian operator is able to carry that load, then the government will grant a cabotage dispensation that will permit the economic needs for the transport of that cargo or traffic to be met. But those dispensations are given on an operational basis rather than in a policy sense. Is your interest more in what countries have approached us seeking to exchange cabotage rights?

Senator SMITH: Yes, and specifically around passengers rather than cargo.

Mr Lucas : Certainly. We will come back to the committee with an answer on that.

Senator SMITH: Thank you.

CHAIR: How many countries would we have an airline services agreement with?

Mr Smith : We have air services agreements with around 80 countries at the moment.

Mr FORREST: It is probably a bit beyond the terms of reference of the inquiry, but I was concerned last week at a Sydney Morning Herald report to do with Chinese-made aeroplanes and some questions about their qualification to meet certain standards. Would this be an issue in relation to the agreement we are considering here with Indonesia? Indonesia has just completely deregulated its aviation sector, and I do not know whether they have got sufficient rigour in their system to cope with the kind of situation I read about in The Sydney Morning Herald last week—I think it was about 12 June. Does CASA have concerns about this, or is it just a beat-up?

Mr Lucas : The way that these agreements operate is that they provide market access subject to compliance with, amongst other things, safety frameworks. Therefore any airline operating to or from Australia, or wishing to operate to or from Australia, must obtain the approval of the Civil Aviation Safety Authority here in Australia, and CASA will assess that application on the merits of that application. The agreement obliges us, Australia, in accordance with the international system under the Chicago framework, to recognise certificates of airworthiness and licences and the like that have been issued. But that does not preclude CASA making its judgements about whether or not an airline that may apply to CASA to operate to Australia meets what CASA regards as appropriate standards of safety.

CHAIR: And obviously that is based on the aircraft they are flying?

Mr Lucas : Yes. So, if an airline was seeking to operate a new aircraft that had not previously been certified for operation in Australia, that would obviously entail a greater degree of scrutiny by CASA.

CHAIR: Thank you very much for appearing today. We very much appreciate the time that you have given us.

Resolved (on motion by Mr Forrest, seconded by Senator Singh):

That this committee authorises publication of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 10:21