CHAIR —Welcome. I invite you to make an opening statement and then we will endeavour to ask you some deep and meaningful questions.

Mr O’Callaghan —I apologise that the other government relations adviser for Virgin Blue, Stephen Carney, is not here today. He knows you well and sends his regards. We would like to make an opening statement in two parts. I will start and then defer to my colleague to provide a bit more information. For the benefit of new senators on the committee, I thought that we might give a quick snapshot of Virgin Blue—who we are and how we have grown.

Virgin Blue has fifty 737 aircraft, either 700 or 800 series. It has grown to operate 300 flights per day within Australia. It operates to 23 destinations within Australia and also operates into the Pacific and across the Tasman to New Zealand. It employs nearly 4,000 people directly as well as additional subcontractors—and I am one. It has been operating for nearly five years. By comparison with the quality airline that Ansett was at the time, when Ansett was operating it was the best business airline in the world. It operated 55 jet aircraft, as I understand it, and employed around 13,500 personnel or staff.

Virgin Blue is a low-cost airline, which principally means that you pay as you go and we keep costs low. When you operate a brand-new fleet of aircraft you have the benefit of being able to run the aircraft reasonably hard, which means in effect that your maintenance costs would be lower than for a traditional type of airline. For those who have had the benefit of flying on Virgin Blue, you would know that if you wish to purchase a cup of coffee, for example, you need to pay for it. So in that sense it is pay as you go. That model seems to work pretty well.

Virgin Blue operates 21 flights per day between Sydney and Brisbane and Sydney and Melbourne. It is generally thought of as being a leisure airline but, in fact, the profile of travellers on Virgin Blue is as follows: around 40 per cent of people who travel on Virgin Blue are travelling for business—obviously the profile of those travelling into Far North Queensland would be slightly different—about 40 per cent are leisure travellers or tourists and around 20 per cent of people are travelling for family reunion. Since Virgin Blue commenced nearly five years ago the average cost of air fares has been reduced by between 40 and 50 per cent.

CHAIR —Great work.

Mr O’Callaghan —Ten years ago, 29 million people were travelling domestically in Australia per annum. There are now 38 million people travelling per annum. In the last 12 months, Virgin Blue has carried 12 million passengers—about one million passengers per month. Many of those people had never travelled on an aircraft before. We held our inaugural flight from Sydney to Hervey Bay recently. If you bear with me I will tell you a bit about that because it is an important issue for us. We were asked by the local community in Hervey Bay to give consideration to flying into Hervey Bay. At the time—this was about 18 months ago—the Hervey Bay airport was not capable of taking a 737 aircraft. We became involved in extensive negotiations with the local council, the local business community, the tourism association and the Queensland government to extend the runway to allow 737 operations. In fact, on the day on which we had our first flight Jetstar also had its first flight from Sydney to Hervey Bay.

Senator O’BRIEN —Funny about that.

Mr O’Callaghan —That is right. The point I wanted to make in the context of this activity is that Virgin Blue is responding to a demand by regional Australia to improve the scheduling and affordability of services. If you fly from Armadale to Sydney now you pay about $500 return. Since Virgin Blue commenced operations into Coffs Harbour nearly three years ago the average cost of a return air fare between Sydney and Coffs Harbour is about half of what you would pay to travel from Armadale to Sydney. It is quite a significant saving. If you have the benefit of having access to the web site, you can surf the web any day of the week and find some terrific fares. It does not matter whether you are travelling for business or for pleasure, by comparison with five years ago, the cost of air travel is now much lower. I would like to think that Virgin Blue has played a significant part in providing this opportunity.

Without further ado, I will invite Mr Bartlett to make some comments with regard to the bill before the Senate. I should say that we are pleased to be able to present today and we are happy to take any questions from you. In fact, if you or any of your colleagues wish at any time to observe or be part of the Virgin Blue activity we would be more than happy to brief you in our Brisbane office and show you our facilities at Brisbane airport, for example.

Mr Bartlett —Good morning. I too am new to this forum and would like to take just a moment to give the committee a couple of ideas as to my background. After nearly 30 years flying I hold both Australian and New Zealand heavy metal licences and I have spent 20 of those years in operational management, including technical management of flight attendant affairs, both with the Air New Zealand and Ansett groups, and in-flight standards. I retired from flying in 2000 and joined the New Zealand Civil Aviation Authority as their general manager of airlines. I was there for three years before joining the Virgin group, reporting directly to the board as their general manager of safety systems. I hope that is helpful.

This is the opening statement that adds to our submission at the last inquiry. Virgin Blue has carefully considered the record of proceedings of the 2004 inquiry and now welcomes the opportunity to further assist the committee in its examination of the civil aviation amendment bill, with particular regard to the mutual recognition of aviation related safety certification with New Zealand. We reiterate that we are not opposed in principle to the bill, again noting that it will enable a number of efficiency improvements in the industry. We have also signalled that there are some differences that, if harmonised, might improve the prospect of realising those efficiencies. We recognise that this bill seeks to avoid the complexity of full harmonisation and we are comfortable with that, providing those differences that present potentially unfair advantage to operators certified in either jurisdiction are recognised and, if possible, dealt with.

We have noted the comment from other submitters that traverses the notion that New Zealand regulatory system represents a lower standard than that presented by the Australian regime. We do not agree. Virgin Blue’s wholly owned subsidiary Pacific Blue is certified by the New Zealand authorities to standards that we are proud of. Pacific Blue, along with every other international airline operating to and from Australia, holds an Australian foreign airline operating certificate issued by CASA. That recognises acceptance of those airline safety standards and, more importantly, recognises that the state of certification—in this case New Zealand—has an effective and acceptable regulatory aviation safety oversight capability. In this regard, the acceptability of equivalence of safety outcomes between Australia and New Zealand is already established and in operation. This bill simply recognises that and furthers the development of the desired single aviation market by removing duplication, complexity and financial burden on operators engaging in air commerce. It is important, however, that the bill also avoids unintended distortions in the competitive environment that it seeks to enable.

The various submissions seeking to challenge the longstanding acceptance of equivalence in respect of individual rules or regulations are simply not sustainable. Individual rules in either jurisdiction do not stand alone; they are parts of a wider regulatory framework that must be seen in totality. There has been a good example of this principle, and it is to be found in the discussion on cabin crew ratios that this committee has now dealt with in both of its inquiries. A number of submissions have advanced the proposition that the greater number of flight attendants present on flights the greater the prospect of ensuring the safety of passengers. This is a simplistic assertion at best that fails to recognise that safety is an outcome of the processes and behaviours employed to achieve that end, and not just compliance with an arbitrary standard. The safety of passengers in any phase of flight is a product or, if you like, an outcome of several factors, including: aircraft design, which has been canvassed today; aircraft certification; approved airline procedures, with the emphasis on ‘approved’; training; and, most importantly, the consistent application of those standard operating procedures. I will deal briefly with the aircraft design and certification aspects.

The design of air transport aircraft in respect of passenger safety has seen many advances in recent years that have markedly improved survivability in the event of an incident or accident. Examples include the development of advanced structures, fire resistance, passenger restraint systems, floor level lighting and automatically deployed rapid exit systems, just to name a few. These design standards are considered during the initial certification of the aircraft type, during which the minimum crew requirement in evacuation situations is determined. That test requires a demonstration that the aircraft capacity can be evacuated using one half of the available exits in less than 90 seconds. The ratio of cabin crew numbers to passengers is not considered in isolation. Virgin Blue was required to conduct and has conducted evacuation exercises to satisfy CASA that its approved procedures meet this standard. I am pleased to say that they do.

Let us talk for a moment about the airline’s approved procedures. The management of cabin safety is underpinned by standard operating procedures approved by CASA. Virgin Blue’s approved procedures dealing with in-flight emergencies and evacuations are predicated on the availability of four flight attendants on all of its aircraft. The presence of extra flight attendants carried to meet the required ratio of one to 36 is not considered from a safety perspective.

I will briefly talk about training and, in particular, the consistent application of the procedures that are to be taught. Cabin crew procedures are the subject of exhaustive training and retraining, as has been mentioned already today. These procedures also interact with the standard operating procedures of the flight deck and ground operations, and with the management of risk in flight and on the ground.

Let us talk for a moment about the management of risk. I have talked about safety being an outcome. Safety is in fact an abstract notion; it is what you get if you do not have things—accidents and incidents. You cannot manage what you do not have, so you have to find something you can manage, and that is risk. Visibility of risk comes from reporting—also mentioned today—experience, best practice, all of those things. These procedures are designed to mitigate the risks to ensure a safe outcome. You simply cannot manage safety; it is not a thing. It is what you get, if you do things well. It is proactive. It is the culmination of the processes, standards and behaviours that will determine whether or not, consistently, you get safe outcomes. If we had to rely on the tactical intervention of any one individual within the safety system then I would not go flying on an aeroplane, because everybody has a bad day. We are talking here from a management perspective about ensuring that everybody, including our flight attendants, is armed with the procedures, the documentation, the training and the skill sets to ensure that safe outcomes are predicated. We cannot just see whether it happens. It is the consistent application of these procedures that ensures safe outcomes for our passengers, and not the prescription of any one in particular—for example, the ratio of cabin crew to passengers.

These considerations firmly and empirically, we believe, establish the standards to be met in establishing a regime that ensures safe outcomes for passengers. In New Zealand—and it happens to be the internationally accepted standard—the standard of one to 50 clearly meets the criteria. Australia holds with a ratio of one to 36. Whatever the genesis of this ratio is, there is clearly no safety case to be made to support the proposition. That said, the existence of different ratios in Australia and New Zealand does result, potentially, in a less than level playing field in both countries, with operators certified in Australia exposed to a significant cost penalty over those certified in New Zealand. As indicated in our original submission, Virgin Blue does not support a mutual recognition regime that might give a potential competitor an unfair advantage. We would like to reiterate that in general we support the principle of the bill. We thank the committee for receiving this further submission and confirm our availability to give further evidence.

CHAIR —What is the difference between one to 36 passengers and one to 50 seats, in real terms not in theory? What generally does that mean? Could it be a plane with one less crew on it?

Mr Bartlett —It could be many things. We have heard some comments today about the New Zealand system dealing only with capacity. It is not quite true. There are two rules in New Zealand. The pre-eminent one, if you like, is that an operator cannot operate at less than one to 50 in terms of its design capacity, regardless of the number of passengers on board. There is, however, a further rule in part 121 that ensures that the ratio does not fall below certain requirements. I cannot recall the detail of that, but there is a duopoly there. So there is a recognition in both systems that numbers of passengers matter.

CHAIR —Could you make that detail available?

Mr Bartlett —Yes, we will gladly do so.

Senator O’BRIEN —So could a 737 operate with three crew?

Mr Bartlett —Depending on its design seating capacity, that is true.

Senator O’BRIEN —With 144, say?

Mr Bartlett —Yes, it could. It is unlikely to do so.

Senator O’BRIEN —I use that example because you have 50 of them.

Mr O’Callaghan —Just to clarify, we have 737-700s at 144 and 737-800s—

Senator O’BRIEN —What is the capacity of those?

Mr Bartlett —180.

CHAIR —You say—and this may well be a good point—that you do not necessarily have to man every exit because you have umpteen capacity to get the people out in a few seconds.

Mr Bartlett —The design standards and the certification criteria for a new aeroplane, both in the state of manufacture and in Australia, are that you need to be able to demonstrate that you can get the capacity of the aeroplane out of the aeroplane in 90 seconds using one-half of the available exits.

CHAIR —Would that assume that in a real situation perhaps some of the doors won’t open, anyhow?

Mr Bartlett —And it is more likely to be the case—

CHAIR —Obviously there might be a fire at one door and something going wrong at another.

Mr Bartlett —Indeed.

CHAIR —So how do you figure that out in the event? If you do not have enough crew and—I do not know how many exits there are—if you have eight exits and six crew, on the way down, as you are getting ready to crash, do you say, ‘We won’t open that door but we’ll open that one; we’ve only got six’? How do you do it? Or when you have actually crashed do you say, ‘Oh’?

Mr Bartlett —There is a bit of both. Let me draw on my experience as a commander of jet aeroplanes. Typically, the first line of an evacuation is that it is commanded from the flight deck. What might happen is that you have landed, you have blown a tyre, the wheel is set alight and that side is not really good; it is a bit hot. Typically, the pilot would attempt to swing the aeroplane into a wind position that minimised the effect of that. I am not familiar with Qantas’s or even Virgin Blue’s specific requirements in this regard, but when he commanded the evacuation he would say, ‘Evacuate, evacuate; do not use’ or ‘only use’—some use the negative imperative; some use the positive—‘those exits.’ It is only if there is no command from the flight deck, typically, that an uncommanded evacuation would occur from the cabin. The judgment then about which exits to open and not open—and we are generally now dealing with a catastrophic situation because the crew are disabled—is made by observation. If it is burning outside, the exit on that side would not be opened.

CHAIR —This is my last question before handing over to Senator O’Brien: who do you barrack for at the footy—New Zealand or Australia? You don’t have to answer that!

Mr Bartlett —It’s not a good week to ask me that question, Mr Chairman!

Senator O’BRIEN —It depends on the game you are talking about—and New Zealand does not play the game that the majority of Australian states play, so it is probably not germane. There is soccer, of course.

Mr Bartlett —I defer to your knowledge on the matter.

Senator O’BRIEN —Basically you have two types of 737—one has about 144 seats and one has about 180?

Mr Bartlett —Yes, one has 144, with four floor-level exits and two over-wing exits. The Boeing 737-800, with a seating capacity of 180, has the same number of floor-level exits—two at the front, two at the back—but it has four over-wing exits which are typically briefed for and manned by passengers, anyway.

Senator O’BRIEN —Under the New Zealand regulation, what would the required cabin crew manning be, assuming a full aircraft?

Mr Bartlett —For a 737-800, it would be four; here in Australia it is five. For a 737-700, it could be three, theoretically—I don’t know anybody that operates with three.

Senator O’BRIEN —I am just asking what the regulation provides for, not practice. Practice can change. Practice is at the discretion of the operator of the system.

Mr Bartlett —I agree.

Senator O’BRIEN —I think what you are saying to us is that, although the regulation might allow for three for the 737-700, in fact the practice is for four in New Zealand. Is that what you are saying?

Mr Bartlett —Yes.

Senator O’BRIEN —And although the regulation would allow four for the 737-800 the practice would be five or more. Is that what you are saying?

Mr Bartlett —No. Perhaps I could give you a real-life example. Both Pacific Blue, our New Zealand wholly owned subsidiary, which is certified in New Zealand, and Virgin Blue operate 737-800s. Across the Tasman, on the longer sectors, Pacific Blue operates with four, which exceeds the New Zealand ratio. Virgin Blue operates with five, and they use exactly the same flight attendant procedures—identical.

Senator O’BRIEN —So Pacific Blue, operating out of New Zealand now, uses four, and Virgin Blue, operating out of Australia now, uses five for the same aircraft.

Mr Bartlett —It uses five. But, for example, a 737-800 with 180 passengers is required to be used with four flight attendants, we have to off-load because it is at passenger ratio here in Australia. The certification of the aeroplane does not change. The exits are still the same. We have to off-load the extra passengers to operate with the lower ratio.

Senator O’BRIEN —Or put an extra crew member on.

Mr Bartlett —Yes.

Senator O’BRIEN —What do you do in practice?

Mr Bartlett —It depends where you are. If you are at a base where you can find an extra crew member, you put the crew member on; if you are at a base where you cannot—for example, if a flight attendant has become injured or something—you have to off-load.

Senator O’BRIEN —If this bill comes into force in its current form, do you see significant operational changes for Virgin Blue? For example, would there be an increased incentive to operate aircraft under a New Zealand AOC?

Mr Bartlett —I would need to take advice before answering that with any detail. I think it is fair that, if most of what you do is in one state, that would become the state of certification.

Senator O’BRIEN —That is the interesting thing. Virgin has an operation here and an operation in New Zealand at the moment, and we hear Qantas is in a similar situation. The question has increased significance because you are already operating under both regimes. If there is a financial advantage—and the commercial pressures are certainly strong on Virgin at the moment—wouldn’t it be fair to assume that there would be thought about whether there was a significant advantage in operating aircraft under New Zealand AOCs as against Australian AOCs?

Mr Bartlett —I imagine a determination in that regard would be made simply on cost if, in fact, the playing field was relatively level—I am not saying harmonised. There would be no impetus to do that.

Senator O’BRIEN —So whatever was the cheapest would be opted for?

Mr Bartlett —I think whatever is established is probably optimal, bearing in mind that 45 of those aeroplanes operate domestically in Australia, as John said, which is some 350 sectors a day. To shift the weight of the management and control required under the bill to an offshore jurisdiction would be a fair task.

Mr O’Callaghan —It is probably also useful to keep it all in perspective. For example, 12 months ago we started operations through Pacific Blue to Vanuatu. We stimulated the tourism market there by nearly 30 per cent in 12 months. Operating Pacific Blue aircraft with the crew that applies to that aircraft operation is principally carrying Australians out of Australia. I have travelled that route a number of times now, and I do not see the service that applies with that crew number and the assurance about the safety of operation being any different to the operations that we would normally handle with an 800 series here, frankly.

Senator O’BRIEN —The Pacific Blue operation is the New Zealand based operation, isn’t it?

Mr O’Callaghan —That is correct.

Senator O’BRIEN —So, principally, it is now carrying Australians overseas operating with one fewer cabin crew staff member than Virgin Blue would with the same or similarly configured aircraft.

Mr Bartlett —They are identical. I hasten to say that Virgin Blue has not contemplated changing anything that it does. Just the availability of that ratio would not necessarily translate—

Senator O’BRIEN —With respect, one hears every time there is a takeover that the new management is not contemplating a change, yet it almost certainly happens within the next three months.

Mr Bartlett —That is true.

Senator O’BRIEN —Do you have any difference with the evidence given on the role and function of cabin crew as presented by the Flight Attendants Association witnesses earlier?

Mr Bartlett —No, I just think our perspective is slightly different. I agree with everything that was said this morning—that the professional application of well-trained procedures in the cabin is in fact a very important part of an integrated safety management approach. It is not, however, the be-all and end-all. It comes from procedures that were designed outside of that process.

Senator O’BRIEN —You have got to keep the aircraft in the sky as much as possible; that is fundamental!

Mr Bartlett —Yes.

Senator O’BRIEN —I think you have to accept the evidence in the context that it was about the behaviour of passengers in the cabin and dealing with not just incidents in the cabin but also the evacuation process in the very occasional instances that it is warranted. Do you have any query with the evidence about the higher standard of survivability of crashes, due to what were described I think as 9g seats and other measures designed to improve cabin safety?

Mr Bartlett —Yes, I mentioned four or five things that have been improvements in both aircraft design and certification, and certainly they have contributed to the survivability of accidents, thankfully.

Senator O’BRIEN —Do you have any comment to make about the evidence with regard to the Air France crash and the role of cabin attendants in the evacuation?

Mr Bartlett —I am not familiar with just how many people were on that aeroplane or even how the aeroplane finally came to grief. It would be very difficult to generalise. I think certainly the fact that it was—

Senator O’BRIEN —We all saw pictures of this—

Mr Bartlett —Everybody survived.

Senator O’BRIEN —burnt cabin; the wings apparently survived. The cabin was extensively damaged by fire—

Mr Bartlett —After everybody left, thankfully.

Senator O’BRIEN —after everybody had left. We saw the statistics in the paper. I think it said there were 13 crew and 290-something passengers, so it seemed remarkable to me, given the state of the aircraft when the photos were taken, that there were no fatalities or indeed serious injuries.

Mr Bartlett —I did read some comment in the professional press that said that was as much due to the design standard, improved management processes and just the general improvements in the way aviation safety is managed. Certainly, that demonstrated a remarkable result.

Senator O’BRIEN —No-one was expecting the calamity—there were no fire crew standing ready to put the flames out—so what happened was down to the survivability of that incident in the fuselage.

Mr Bartlett —Yes. It sounds like everybody did a great job.

Senator O’BRIEN —Yes. In your company’s submission last year, we were provided with some suggestions that mutual recognition did not go far enough. Note was made of some differences in safety standards between Australia and New Zealand, notably in the areas of low-oxygen warnings, which is pretty timely, I would have thought, after the Helios experience; low-visibility operations and ETOPS approvals; and flight and duty times. It seemed to be Virgin Blue’s view that Australia should amend its standards in these areas to match New Zealand’s. What is the company’s current thinking on those matters?

Mr Bartlett —I think the current thinking of the company is that they are just examples of differences. One could take a semantic view that either you are for mutual recognition with the differences or you are for harmonisation, but we do think there is middle ground. I do not think we would want to press detail beyond giving examples of things that might be looked at. Those particular examples were pre my involvement and I would not be in a position to answer specifically on the technical matters, but we are happy to take that on notice and go and do some work on it.

Senator O’BRIEN —I took your submission earlier as saying you were adding to the previous submission, which is the reason I raised matters that were raised in the previous submission. So you are not in a position to deal with those now?

Mr Bartlett —I think this submission perhaps ameliorates our concerns. For example, one of the concerns we raised was that we did not have a clear view of the application of related legislation as to security. We are now satisfied that that is dealt with adequately in the bill, for example, so that part of our submission no longer causes us concern. I think the differences, other than those, might potentially cause a distortion in the competitive environment that this bill seeks to enable. This is, after all, about the enabling of air commerce, not the restriction of it, and I re-emphasise that we generally support that principle.

Senator O’BRIEN —Since the last hearings has Virgin Blue had any discussions with the department or CASA in relation to addressing what was described by Virgin as a level playing field between the two jurisdictions before the bill should be passed? Mr O’Callaghan probably knows more about this.

Mr O’Callaghan —In the context of specifics, no. Partly that has been due to the fact that the previous bill expired at the time that the parliament was prorogued, or dissolved. In effect, we were waiting to see the government’s intention with regard to the reintroduction of the bill. But it would be fair to say that, in the context of our day-to-day discussions with the department of transport and CASA, we deal with a whole raft of issues but not specifically those issues which were canvassed in that bill in the period since the committee reported previously. That is correct.

Senator O’BRIEN —So you have not raised it with the department or CASA and they have not raised the matter with you?

Mr O’Callaghan —Not specifically in that context since the previous report of the committee, to the best of my knowledge, but I will take that on notice to the extent that I will double-check with my colleagues in Brisbane and come back to the committee on that.

Senator O’BRIEN —Is there any ongoing consultative mechanism in relation to operational and regulatory policy in the aviation sector when those matters are raised as a matter of course?

Mr O’Callaghan —Generally, the process that we follow from a Virgin Blue perspective is in terms of directly meeting with key department of transport and CASA officials. We do that on a regular basis. In fact, the working relationship, I would say, is good. It is a lot better now than it was four or five years ago. So it is principally a work in progress and is very much part of the day-to-day discussions that we have with officials at all levels.

Senator O’BRIEN —So there is no formal mechanism; it is just an informal approach by—

Mr O’Callaghan —There are a number of committees which are chaired by the department of transport and in which Virgin Blue participates. They mainly apply in the area of aviation security, I would have to say, including, for example, the high-level group on aviation security policy, which was an initiative of the department of transport about two years ago. That is an entity which is chaired by a deputy secretary of the department of transport, with representatives of the airports, the airlines and others. That is in fact a good template for the sorts of entities that could perhaps be even duplicated in other areas. Perhaps this is one area where that could occur. If I could re-emphasise it, I think that in the context, for example, of the development of bills like this, there has been a fair degree of discussion over a period of time between Virgin Blue people, the department of transport and CASA personnel, and we think that is principally about right.

Senator O’BRIEN —Is passenger misbehaviour on the increase, or has it been relatively static over recent times?

Mr O’Callaghan —I do not have to hand the data in terms of the number of instances, for example. It would be fair to say that, in the context of the increased concern by the general population about potential terrorist activity, the number of reports of potential incidents—or the number of reports of concerns that people have—has gone up exponentially.

With regard to issues of behaviour or misbehaviour, I think it would be fair to say that on each of the occasions that I have flown into some of the leisure centres in Queensland in recent times, the level of misbehaviour has probably been higher on some of those flights than on some of others. You certainly do not see it on the extensive network of activity between, say, Sydney and Melbourne and between Sydney and Brisbane. I do not want to give a generalist response here. I would like to take that question on notice and come back with a considered response.

Senator O’BRIEN —If this bill came into force in its current form, would Virgin see significant operational changes for Virgin Blue? For example, would there be an increased incentive to operate under a New Zealand AOC and potentially move jobs offshore to New Zealand? If so, from what areas of the organisation’s operation would those jobs come from? Maintenance, flight attendants, catering?

Mr Bartlett —We have made no determinations in that area.

Mr O’Callaghan —As a general point of disposition, the first thing I would say is that Virgin Blue is a majority owned Australian company. Patrick Holdings own 62 per cent of its share base. The Virgin Group owns 25 per cent. We are in fact a majority Australian owned entity with a desire to support Australians and Australians having Australian jobs.

Senator O’BRIEN —But there is a lot of speculation about what the structure might be with the current takeover. Far be it from me to speculate, but some people suggest that it might ultimately become majority British owned again. I am not sure; we are all speculating on what the future is in that regard. I do not think we can make judgments or what the future will be, based on the shareholding.

Mr O’Callaghan —Let me just add to that. I acknowledge that as well. Of course, you will appreciate that we are not really in a position to be providing a running commentary on what may or may not happen, and nor will we be. But, having said that, the position is principally this: we have got a strong Australian work force which is customer focused and young and energetic. We would, frankly, like to keep it that way.

ACTING CHAIR (Senator McGauran) —I would just ask the committee to be mindful of the time. We are 15 minutes over at the moment and Senator Sterle is looking to ask some questions too.

Senator O’BRIEN —I will just ask other question, if I may. How is the trans Tasman route going for Virgin Blue at the moment?

Mr O’Callaghan —It is probably worth making the point that the trans Tasman route is in fact the most competitive route in the whole of the world. That is principally because a number of international carriers in recent times have entered that route. Those Australians, New Zealanders and others fortunate enough to travel on that route now get the enormous benefit of a massive reduction in the cost of airfares. I would have to say that that is not a fine example of good public policy outcome because principally it is not sustainable. Not just Virgin Blue and Pacific Blue but all carriers on that route are looking very carefully at it at this point in time because it is a very tough route. Having said that, Australians are travelling by the bushel to New Zealand and New Zealanders are travelling by the bushel to Australia—and not just to watch rugby.

Senator O’BRIEN —There would only be a few flights a year, if that were the case.

Mr O’Callaghan —In fact, quite a few people travel just for rugby, to pick up on a point that was raised by the chair earlier. They are not all Brumbies supporters though; some are even Canterbury Crusaders supporters, like Mr Bartlett.

CHAIR —There will be a bit of that going on!

Mr O’Callaghan —Perhaps just briefly I will add three other points that I would like to make in the context of our presentation today. The first one follows the point that was raised by Senator O’Brien—that is, that the aviation market at the moment is a very tough market. Fuel charges have risen by more than 70 per cent in the last 12 months and there is no sign that they are going down. A rough order of measure is that the cost of fuel is around 20 per cent of the operating costs of the airline. So that is a tough call. That is putting enormous pressure not just on our airline but on others as well.

Secondly, airport charges have gone up by 40 per cent in the last 12 months. We find that not only disappointing but incredibly frustrating. We would call upon the public policy makers to have a careful look at this. We think, for example, that the ACCC ought to have a stronger role in keeping a careful eye on particularly the behaviour of some of the major airports. Those unfortunate enough to travel through Sydney airport, for example, on any day of the week are paying a premium for their plastic cup of coffee, their visit to the car parking station et cetera. We think that there is strong requirement to do more there.

Finally, Chair, we would like to call upon you and your colleagues to do a little better on the subject of government travel. Two years ago Virgin Blue went to the Premier of Queensland and asked him, ‘Do you realise that only five per cent of your public servants travel on Virgin Blue, despite the fact that we have an extensive network within Queensland and despite the fact that you expended a considerable amount of effort to encourage Virgin Blue to base its operations in Brisbane?’ He was somewhat alarmed about this, and directed his ministers and the heads of his departments to seek ‘best fare of the day’ for their travel requirements. Today, Virgin Blue has nearly 60 per cent of the Queensland government market, which is worth $20-odd million per year. In the last two years, the savings to the Queensland budget have been 30 per cent or thereabouts.

CHAIR —Is this a paid ad, by the way? It is certainly not in the terms of reference.

Mr O’Callaghan —I was seeking a bit of license, just to finalise.

CHAIR —You’ve got it.

Mr O’Callaghan —By comparison, the federal government and its agencies spend nearly $300 million per year on travel, of which the Department of Defence spends nearly $150 million. Virgin Blue has been operating for nearly five years and offering very competitive rates which are attractive to business of Australia. Forty per cent of people who travel on Virgin Blue, particularly on the eastern seaboard, are business travellers. They are particularly small and medium sized enterprise business travellers from regional Australia. Virgin Blue has five per cent of the Commonwealth government’s travel market. We think that is far too low. We would like you to encourage your colleagues to do a little better. To use the Queensland model as an example: if they can save 30 per cent in two years on their budget, and federal government outlays on travel are around $300 million a year, a rough order of measure would be a saving of about $100 million a year, for starters. I encourage you to have a look at that. I appreciate that it is not strictly within the terms of this bill, but we would very much appreciate that.

CHAIR —That is what you call an advertorial.

Senator McGAURAN —Is the $100 million saving if 60 per cent of the government took up—

Mr O’Callaghan —No. The bottom line is that if all the public servants in Canberra, Melbourne, Brisbane, Sydney, Perth and Adelaide sought the ‘best fare of the day’ to meet their business requirements, the sort of saving I am suggesting that the Commonwealth would make per annum would be in the order of $100 million. You would see around 50 per cent of travel by public servants on Virgin Blue, Jetstar or Qantas. There would be roughly 50 per cent on Virgin Blue and 50 per cent on Qantas. When Ansett collapsed, the travel management companies that were responsible for booking travel by public servants, in particular, were entities owned either by Ansett or by Qantas. When Ansett collapsed, Qantas Business Travel—to its credit—acquired most of the travel management contracts of each of the departments and agencies including, for example, the Department of Defence. What that meant, in effect, is that—

CHAIR —We are going to have to end this here, because we have some questions that actually relate to the terms of reference we are here for today. So do you mind, Senator McGauran, if you have this conversation a bit later?

Senator STERLE —I am a public servant. I would rather see everyone buy Holdens and support the 1,400 unemployed workers in Adelaide.

CHAIR —There’s another advertorial.

Senator STERLE —Okay, it is one all. I am getting a bit confused when we talk about safety. Mr Bartlett, your presentation is all about when the plane is heading to earth at a greater rate of knots than what we want it to be. I also see security as safety. I think we are not getting the full story in terms of numbers on what can happen with in-flight security and incidents that happen on the aircraft. I will ask you a question and if you want to, you can take it on notice. We spoke to the FAAA earlier about in-flight incidents. Does your company keep a record of in-flight incidents?

Mr Bartlett —Yes, it does. We have an extensive reporting system and culture. We operate what is called a ‘just culture’ reporting system, which basically says to anybody, ‘You tell us and we will not hang you for it even if you have been the perpetrator.’ As a result, we gather many hundreds of reports a week, which are trended and analysed. They go through our aviation quality database and we are able to report to management online the state of what is actually going on out there as far as we can tell from the reporting. Security is no different. We track all of those and they are categorised from 1 to 4. Categories 3 and 4 are looked at from a desktop perspective. Category 2s, which are real incidents—somebody has whacked someone or something—are the subject of a full investigation and we look at them systemically, not just at what happened on the day but at what allowed it to happen. In that regard, security is no different to safety, OHS&E or any other environmental consideration. The manner of behaviour of staff and the application of process and procedure is generally designed to stop this stuff happening. There are always exceptions. The best X-ray machine cannot detect somebody who is mentally deranged. When those things happen, in general, it is left to the crew to deal with it and often with the assistance of passengers as they see fit. It is rare, however—very rare. In general, the security environment is managed in exactly the same way as the safety environment—by the application of good process, policy, procedures and safety systems.

Senator STERLE —Do you take into account pastoral care, such as people fainting? Does that get reported as well?

Mr Bartlett —Absolutely.

Senator STERLE —Would it be possible for this committee to have access to those figures?

Mr Bartlett —Yes, I believe it is.

CHAIR —Thank you very much.

[11.12 am]