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Wednesday, 31 August 1994
Page: 715


Senator PARER (5.24 p.m.) —We are debating here today the International Air Services Commission Amendment Bill, which proposes a series of essentially routine amendments to the act. The amendments would streamline the commission's processes, and have been welcomed by the industry.

  Before 1992, Qantas was designated by the government as Australia's sole international carrier. In the One Nation statement, the government announced that it would permit other Australian airlines to fly international routes. It also announced that it would renegotiate Australia's air service agreements to enable more than one carrier to fly on each route—a policy known as multiple designation. The government has so far renegotiated 29 of Australia's 45 air service agreements to provide for multiple designation.

  The International Air Services Commission was established in that year to allocate capacity rights to Australian carriers. That was its independent role. The amendments in the bill can be divided into four principal areas. Australia does not have a formal bilateral air services agreement with Taiwan. The IASC is consequently unable, under the current act, to make determinations concerning capacity rights on the Australia-Taiwan route. The bill empowers the commission to make determinations concerning Taiwan by, amongst other amendments, redefining `another country' to include any region that is part of a foreign country. The bill streamlines the commission's procedures for approving and evaluating applications under the act.

  The commission is also required to make capacity allocation determinations according to criteria set out by the Minister for Transport in policy statements. The bill proposes to empower the minister to issue abbreviated criteria that would apply in situations where there was no need for the commission to undertake the full assessment process. This would include situations where: firstly, capacity was unlimited under a particular bilateral agreement, for example, on the Australia-New Zealand route; secondly, no submissions were received opposing the allocation of capacity; thirdly, only one application for capacity was made; or, fourthly, an application for capacity was opposed but not under all of the criteria.

  Clause 9 of the bill would allow the commission to permit carriers to transfer their capacity rights to their wholly owned subsidiaries. The proposed amendment would rectify an anomaly in the current act which recently forced Ansett to create a new company, Ansett International, to run its international operations.

  The act currently requires the IASC to invite public submissions whenever a carrier applies for a determination to vary its capacity. The commission would, as a result, be required to call public submissions if a carrier wished to hand back a portion of its entitlements. Clause 12 of the bill would remove the consultation requirement for reviews in which the only effect of the varied determination would be to reduce the capacity allocated to the carrier.

  Under the Air Navigation Regulations, a wide range of operational decisions such as timetabling must be made by airlines flying to and from Australia and must first be approved by the Department of Transport. Section 9(1) of the International Air Services Commission Act prohibits the department from issuing an approval that is inconsistent with a commission determination. As a result, Australian airlines must apply to the commission before they can make minor operational changes, such as running supplementary flights during peak periods.

  The bill would permit the department to approve minor and temporary operational decisions without reference to the IASC. The scope of the department's authority would be delineated by regulation. The bill finally includes a number of miscellaneous provisions intended to streamline the day-to-day operations of the commission.

  The establishment of the IASC was one element of the government's 1992 reform of the aviation industry, which was announced in One Nation and in Australian aviation: toward the 21st century. The IASC has been relatively successful during its first two years in operation. To date, the commission has issued about 30 final determinations. The only successful applicants for capacity have been Qantas, the existing international carrier, Ansett, and a freight carrier, National Airlines, which has been awarded unlimited rights to carry freight between Australia and New Zealand. The IASC awarded capacity rights on the Australia-China route to a start-up carrier, Australia Air, but its right to fly that route is in the process of being withdrawn—not, I might say, without vitriol, with the owners of Australia Air claiming that their financial consultants, Messrs Turnbull and Wran, have been in breach of fiduciary responsibility.

  A number of other start up carriers applied for capacity allocations but failed to obtain them. One company, Australia World, applied for capacity on the Australia-Holland and Australia-Greece route. Indian Ocean Airlines applied to fly to Singapore, and a start up company called Tropic Isle Air proposed to fly four B767s a week from Osaka to the Whitsundays. One consistent comment that the commission made about the companies' applications was that it was of the view that the financial projections were over optimistic.

  The commission's view reflects the low operating profits recorded by international airlines worldwide. According to the International Civil Aviation Organisation, the world's international airlines, taken as a whole, recorded net operating losses of almost $US1 billion in 1992. It is said that the two years, 1990 and 1991, wiped out all the profits achieved by US airlines since the commencement of air travel—an incredible figure.

  It seems to me that the commission is right to take a cautious approach to carriers' business plans. It is essential, however, that it is not too cautious. Small companies must be given the opportunity to develop innovative new airline services, but those opportunities must be balanced against the need to preserve the reputation and standing of Australia's tourism industry overseas, an industry which is so vital to the future economic development of this country. The coalition supports the bill.