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Thursday, 23 May 1996
Page: 1309


Mr SHARP (Minister for Transport and Regional Development)(5.06 p.m.) —I move:

That the bill be now read a second time.

The sale of long-term leases over airports currently operated by the Federal Airports Corporation, FAC, forms an important part of this government's privatisation program. The government is confident that the leasing process for the federal airports offers a number of long-term benefits to the Australian people.

The decision to sell long-term leases offers benefits to airport users and the community as a whole. The leasing process should lead to further improvements in the operating efficiency and quality of service of the airports by exposing them to private sector disciplines. It will also provide an opportunity for the funds of Australians to be productively employed in the provision of national infrastructure through the involvement of superannuation and investment managers.

The provision of airport infrastructure has traditionally been considered the responsibility of government due to the large amount of capital required. However, today, Australia's capital markets have reached a level of maturity and sophistication capable of supporting the evolving infrastructure requirements of airports. The Commonwealth's involvement in the provision of such infrastructure will no longer be necessary given the protection to public interest considerations afforded by the proposed regulatory regime of the Airports Bill 1996.

The primary purpose of this bill is to put into place a framework to facilitate leasing of all federal airports effectively as ongoing businesses under a two-stage sales process. It is proposed that Melbourne, Brisbane and Perth airports will be included in the first phase leasehold sales. Adelaide will also be added to the first tranche consistent with our election commitment, subject to decisions to be taken in the budget. The leasing of Sydney and Sydney West airports will be deferred pending resolution of noise issues at Sydney airport and an environmental impact study being conducted on Sydney West airport. In the meantime, consideration will be given to how best to position Sydney and Sydney West airports for future sale.

The bill provides for the transfer of airport land and other assets from the FAC to the Commonwealth; the granting of leases over the airports and transfer of associated assets to individual airport companies; and the orderly treatment of the FAC's debts during the sales process. Provision has also been made in the bill for the transfer of airport staff employed by the FAC to the airport companies.

The companion bill, the Airports Bill 1996, will establish the regulatory regime for air ports post leasing. This regulatory regime is designed to improve the efficiency of airport operations while ensuring the protection of airport user and community interests.  Leasing the airports permits the government to retain some control over the land on which the airports are located. The long term of the lease will ensure that sales proceeds are similar to sale under freehold title.

The sale of long-term leases is expected to produce a significant net offset to outlays in the forthcoming financial years. Provision has been made in the bill to allow for the orderly disposal of the FAC's assets and facilitate and account for the leasing process. The transactions associated with these provisions are expected to be budget neutral. As honourable members would appreciate, it would not be appropriate for the government to disclose details of expected proceeds from the leasing of the airports, as it is likely this would influence the outcome of the sale process, possibly reducing proceeds.

As I have indicated, a number of measures designed to facilitate the leasing of the federal airports are contained in the bill now before the House. These measures provide for the land and associated assets of the FAC to be transferred to the Commonwealth, as well as provide for the Commonwealth to grant a lease over land at a particular airport to a company referred to as an airport lessee company. Following this, the bill provides the government with a flexible disposal strategy to grant an airport lease to a company either established by the Commonwealth or the purchaser. In both instances when the lease is granted, the FAC's contractual rights, obligations and liabilities are transferred to the airport lessee company.

The bill also provides for airport staff to transfer to the airport lessee companies at the time a lease is granted over the relevant airport. The bill also contains provisions to enable transfer of accrued benefits and leave entitlements post-sale. These provisions are designed to ensure fair and consistent treatment of staff.

To ensure that state and territory governments receive duties to which they are entitled on sale transactions which take place in their state or territory, the sale of shares in airport lessee companies or the sale of leases over the airports will be subject to state and territory taxes and stamp duties. The bill does, however, provide for the transfer of the lease or assets that take place while the airport lessee company is owned by the Commonwealth to be exempt from stamp duty. This exemption does not cover the sale by the Commonwealth of its shares in the company, nor the transfer of the lease or assets to a company where that transfer takes place after sale time.

A number of taxation provisions have been provided for in the bill to ensure that both the purchasers and existing lessees of the FAC are not disadvantaged from a taxation perspective. The government has adopted these provisions in respect of transactions between the FAC, the Commonwealth and the airport lessee company to ensure that the tax effect of the transactions would be the same as if it were a sale by the FAC in the private marketplace.

Provisions have also been made in the bill to deal with the FAC's debt, which comprises both Commonwealth and non-Commonwealth debt. These provisions, along with the existing provisions in the FAC's statute, provide the government flexibility to deal with the FAC's debts in the most appropriate manner. In managing the FAC's debt during the sale process, the government can assure honourable members that the FAC bondholders' interests will be taken into account. The bill also provides for the treatment of the debt during the sale process to be properly recorded in the Commonwealth's accounts.

Following the leasing of the major federal airports, the FAC head office will continue to have a role in overseeing the management of the remaining federal airports prior to their leasing in the second phase of the sale process. These second phase airports present specific regional and administrative issues which will need to be addressed prior to their lease. Among these are the joint user airports at Canberra, Darwin and Townsville, which are jointly operated by the FAC and the Department of Defence. The development of new operating arrangements with Defence will be required before the civil facilities at these airports can be leased.

It is expected that a number of the second phase airports which have been unprofitable in the past should prove commercially viable under private ownership through cost reductions and improved revenues. The government will examine options to secure the future of the remaining few airports that may prove to be commercially non-viable by taking into account the specific financial characteristics of each airport as well as regional interests and concerns.

This bill is intended to provide a framework for the sale of leases over the airports currently operated by the Federal Airports Corporation. This bill and the companion Airports Bill 1996 are designed to promote the most efficient operation and maintenance of Australia's airport infrastructure, while ensuring that the benefits of increased efficiency are passed on to airport users and the community as a whole. The government is confident that these arrangements will ensure a fair return from the airports while allowing it to divest itself of a function in which its involvement is no longer essential. I present the explanatory memorandum.

Debate (on motion by Ms Macklin) adjourned.