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International aviation - maximising the benefits



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PARLIAMENTARY LIBRARY MICAH

STATEMENT BY THE HON RALPH WILLIS MP

MINISTER FOR TRANSPORT AND COMMUNICATIONS

TO THE HOUSE OF REPRESENTATIVES

INTERNATIONAL AVIATION - MAXIMISING THE BENEFITS

15 JUNE 1989

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MADAM SPEAKER, I SEEK LEAVE TO MAKE A STATEMENT OF AUSTRALIA'S NEW APPROACH TO INTERNATIONAL AVIATION ISSUES.

IN OCTOBER 1987 THE GOVERNMENT UNVEILED ITS POLICY TO BRING TO AN END 35 YEARS OF DETAILED ECONOMIC REGULATION OF DOMESTIC AVIATION. AT THE SAME TIME WE ANNOUNCED SIGNIFICANT CHANGES TO INTERNATIONAL PASSENGER AND AIR FREIGHT CHARTER POLICIES. IT REMAINED TO COMPLETE A REVIEW OF THE AVIATION AREA BY REASSESSING OUR APPROACH

TO SCHEDULED INTERNATIONAL SERVICES.

INTERNATIONAL AIR SERVICES THROUGHOUT THE WORLD ARE ESTABLISHED AND OPERATED WITHIN A COMPLEX NETWORK OF

BILATERAL INTERGOVERNMENTAL AGREEMENTS. TYPICALLY, THESE AGREEMENTS COVER THE AIRLINES THAT MAY FLY ON PARTICULAR ROUTES, THE AIRCRAFT TYPES AND NUMBER OF SERVICES TO BE OPERATED, AND THE FARES AND RATES TO BE CHARGED ON THESE

SERVICES.

AUSTRALIA IS PART OF THIS WORLDWIDE NETWORK OF BILATERAL

AIR SERVICE AGREEMENTS. WE HAVE 27 SUCH AGREEMENTS WITH OTHER COUNTRIES WITH ONE NEW AGREEMENT PENDING.

WORLDWIDE, THERE ARE OVER 2000 AIR AGREEMENTS IN PLACE BETWEEN INDIVIDUAL COUNTRIES. AIR SERVICES BETWEEN PAIRS

OF COUNTRIES ARE EXPANDED WHEN THEIR GOVERNMENTS TRADE AVIATION RIGHTS, LEADING TO ADDITIONAL COMMERCIAL TRAFFIC POINTS AND INCREASED NUMBERS OF SERVICES.

IN THE AUSTRALIAN CONTEXT, IN THE TIME OF THIS GOVERNMENT THE EXPANSION IN AVIATION RIGHTS HAS BEEN ENORMOUS. FOURTEEN NEW INTERNATIONAL AIRLINES HAVE COMMENCED SERVICES TO AUSTRALIA, AND AN ADDITIONAL 4.9 MILLION

AIRLINE SEATS HAVE BEEN INTRODUCED BY QANTAS AND OTHER AIRLINES INTO AND OUT OF AUSTRALIA.

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IT WAS NOT THE GOVERNMENT'S INTENTION IN REVIEWING INTERNATIONAL AVIATION POLICY TO CHANGE AUSTRALIA'S PARTICIPATION IN THE WORLDWIDE BILATERAL NETWORK.

BIG CHANGES ARE OCCURRING IN INTERNATIONAL AVIATION HOWEVER AND THE COMPETITION IS GETTING CONSIDERABLY TOUGHER. THE SO-CALLED "MEGA-CARRIERS" ARE BECOMING MORE PREDOMINANT, INTEGRATED MARKETING AGREEMENTS BETWEEN GLOBAL CARRIERS ARE EMERGING AND THE DEVELOPMENT OF

POWERFUL COMPUTER RESERVATION SYSTEMS CAN GIVE AIRLINES DOMINANT MARKET POWER. THE SYSTEM OF BILATERAL TRADING IN THESE CIRCUMSTANCES ENSURES QANTAS' PARTICIPATION IN WORLD AVIATION MARKETS AND THUS GUARANTEES OUR SHARE OF

WORLD AVIATION REVENUE.

THE GOVERNMENT CHOSE TO EXAMINE AUSTRALIA'S APPROACH TO NEGOTIATING AIR SERVICE AGREEMENTS TO ENSURE THAT WE ARE GETTING THE BEST POSSIBLE DEAL.

IT REJECTED THE SIMPLE NOTION OF AUSTRALIA’S ADOPTION OF AN "OPEN SKIES" POLICY UNDER WHICH ANY FOREIGN AIRLINE

COULD FLY TO AUSTRALIA EVEN IF THEIR GOVERNMENT DENIED THE AUSTRALIAN CARRIER A FAIR CHANCE TO COMPETE ON AN

EQUAL BASIS. NO COUNTRY OF ANY AVIATION STANDING, OR ANY OF OUR BILATERAL AVIATION PARTNERS, HAVE ADOPTED SUCH AN APPROACH BY UNILATERALLY DEREGULATING LANDING RIGHTS FOR FOREIGN CARRIERS.

THE GOVERNMENT'S REVIEW WAS PARTICULARLY PROMPTED BY A SURGE IN INBOUND TOURISM LAST FINANCIAL YEAR. BECAUSE SEATS WERE SCARCE, NOT EVERYONE WHO WANTED TO TRAVEL TO AUSTRALIA WAS ABLE TO. THE GOVERNMENT WAS DETERMINED TO

ENSURE THAT AUSTRALIA'S APPROACH TO NEGOTIATING AVIATION RIGHTS WAS ABLE TO MEET THE GROWING DEMAND FOR TRAVEL.

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HISTORICALLY, THE INTERESTS OF QANTAS WERE THE

PRE-DOMINANT FACTOR WHEN THE GOVERNMENT WAS CONSIDERING ENTERING INTO NEW AIR SERVICE AGREEMENTS WITH FOREIGN

GOVERNMENTS OR.AMENDING EXISTING ONES. THE REASON WAS CLEAR - IN THE PAST THE BULK OF AUSTRALIA'S INTERNATIONAL AVIATION MARKET WAS DERIVED FROM CARRYING AUSTRALIANS INTO AND OUT OF THE COUNTRY. IF AUSTRALIA HAD ALLOWED THESE SERVICES TO BE SWAMPED BY FOREIGN AIRLINES

THERE WOULD HAVE BEEN LITTLE INCENTIVE FOR THOSE AIRLINES TO DEVELOP TOURISM TO AUSTRALIA, AND WE WOULD HAVE LOST

SIGNIFICANT OVERSEAS EARNINGS FOR OUR ECONOMY.

GOOD REASON THOUGH THERE MAY HAVE BEEN FOR THE APPROACHES OF THE PAST, THE FACT WAS THAT THE EMPHASIS WAS ON

TRADING "LIKE FOR LIKE" BENEFITS. ACCESS TO AUSTRALIAN CITIES FOR FOREIGN CARRIERS OFTEN DEPENDED ON QANTAS . . . BEING GRANTED ACCESS TO SIMILAR-SIZED CITIES OVERSEAS. INDEED ACCESS HAS SOMETIMES BEEN REFUSED TO A FOREIGN CARRIER WHERE OUR OWN DID NOT HAVE AN INTEREST IN FLYING TO ITS COUNTRY.

BUT THIS APPROACH NO LONGER MAXIMIZES OUR NATIONAL INTEREST. AUSTRALIA IS NOW A MAJOR TOURIST AND BUSINESS DESTINATION IN ITS OWN RIGHT. IN SOME CASES THE APPROACHES WHICH SERVED THE COUNTRY WELL WHEN OUR MARKETS WERE SMALLER AND DIFFERENT ARE SIMPLY NO LONGER APPROPRIATE.

WE NOW HAVE A VARIETY OF MARKETS - SOME WITH VERY HIGH

GROWTH RATES SUCH AS JAPAN WHERE THE NUMBER OF TOURISTS INCREASED BY 64% IN 1988 OVER THE PREVIOUS YEAR. OUR SHARE OF INTERNATIONAL TRAFFIC GENERALLY IS GROWING AT A MUCH FASTER RATE THAN THAT OF THE REST OF THE WORLD.

BETWEEN 1987 AND 1988 THE NUMBER OF TOURISTS ARRIVING IN AUSTRALIA INCREASED BY 26% COMPARED WITH A WORLD GROWTH RATE OF 9%.

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THE BUREAU OF TOURISM RESEARCH HAS ESTIMATED THAT OVERSEAS TOURISTS ACCOUNTED FOR 1.4% OF GDP IN 1987/88, AND, DIRECTLY OR INDIRECTLY, SOME 103,000 JOBS. IT ALSO ESTIMATES THAT REVENUE FROM OVERSEAS VISITORS CONTRIBUTED

$4.8 BILLION IN THE SAME YEAR TO THE AUSTRALIAN ECONOMY. WHILE UNDOUBTEDLY THERE ARE COSTS INVOLVED IN EARNING THE TOURIST DOLLAR, FOREIGN SPENDING IN AUSTRALIA IS EXPANDING THE SERVICES PROVIDED BY THE HOTEL, RESTAURANT,

ENTERTAINMENT AND TRANSPORT SECTORS. THE EFFECTS OF THIS EXPANSION IN OUTPUT AND EMPLOYMENT ARE IN TURN TRANSMITTED THROUGHOUT THE ECONOMY AS THE INDUSTRIES DIRECTLY AFFECTED BY THE INCREASED TOURIST SPENDING IN TURN PURCHASE SERVICES FROM OTHER AUSTRALIAN INDUSTRIES.

AN IMPORTANT OBJECTIVE IN OUR NEGOTIATING STRATEGY THEREFORE MUST BE TO INCREASE NET EARNINGS FROM INBOUND TOURISM, ALONG WITH FLOW-ON BENEFITS TO INDUSTRIES SERVICING THE TOURISM SECTOR. ON THE OTHER HAND, THE VIEWS OF QANTAS REMAIN IMPORTANT. QANTAS’ OWN CONTRIBUTION TO AUSTRALIA'S ECONOMY AND BALANCE OF PAYMENTS, THROUGH ITS ENORMOUS OVERSEAS EARNINGS, IS

SIGNIFICANT - SOME $1.9 BILLION IN 1987/88. IT IS ALSO A MAJOR PROMOTER OF AUSTRALIA AS A DESTINATION.

WHAT HAS TO BE STRUCK IS A BALANCE. THE REVIEW SUGGESTED A NUMBER OF WAYS IN WHICH OUR APPROACH COULD BE BROADENED SO THAT IN NEGOTIATING AIR SERVICES AGREEMENTS WITH OTHER NATIONS WE SECURE THE BEST BALANCE OF OVERALL BENEFITS

FOR AUSTRALIA, INCLUDING A BIGGER SLICE OF THE WORLD'S TOURISM AND TRADE, AS WELL AS ADVANCING QANTAS' ABILITY TO COMPETE IN THE EXPANDING INTERNATIONAL MARKET.

THE GOVERNMENT ACCORDINGLY DECIDED THAT, WHILE SEEKING TO WIN RIGHTS FOR QANTAS TO SERVE A WIDER RANGE OF DESTINATIONS AND BUILD A MORE SOPHISTICATED NETWORK OF

SERVICES, IT WILL ALSO .

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. INCLUDE A WIDER RANGE OF VIEWS IN DETERMINING OUR NEGOTIATING STRATEGIES, PARTICULARLY TOURISM AND TRADE VIEWS AS WELL AS THOSE OF QANTAS

. DEMONSTRATE A READINESS TO ENCOURAGE NEW SERVICES BY FOREIGN CARRIERS WHERE THESE WILL LEAD TO IMPROVED TOURISM AND TRADE OPPORTUNITIES FOR AUSTRALIA GENERALLY

. PROMOTE GROWTH AND COMPETITION BY DEVELOPING ARRANGEMENTS WITH OTHER COUNTRIES GIVING AIRLINES GREATER COMMERCIAL FREEDOM TO INTRODUCE NEW SERVICES AND RESPOND MORE QUICKLY TO MARKET DEMAND

. EXAMINE THE BENEFITS THAT COULD FLOW FROM A SEPARATE AUSTRALIAN INTERNATIONAL AIRLINE OPERATING SCHEDULED CARGO SERVICES

. HIGHLIGHT TO FOREIGN CARRIERS THE OPPORTUNITIES FOR SERVING THE FULL RANGE OF AUSTRALIAN GATEWAYS, WHILST RECOGNISING THAT SYDNEY WILL REMAIN AN ATTRACTIVE DESTINATION.

IN ADDITION THE GOVERNMENT WILL CONTINUE TO:

. MAINTAIN A FLEXIBLE APPROACH TO INTERNATIONAL PASSENGER CHARTERS IN THE INTERESTS OF PROMOTING INBOUND TOURISM.

. APPROVE SUPPLEMENTARY SERVICES PROMPTLY TO ENABLE

AIRLINES TO CATER FOR SURGES IN DEMAND

. EXERCISE MINIMAL CONTROL OVER AIRFARES.

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MORE LIBERAL APPROACH

TAKEN TOGETHER THESE MEASURES REPRESENT A SIGNIFICANT CHANGE OF APPROACH. THIS COULD BE DESCRIBED AS A MORE HARD-HEADED ECONOMIC APPROACH TO AIR SERVICES, AND FULLER ANALYSIS OF WHERE TO CAPTURE THE ECONOMIC AND OTHER BENEFITS FOR AUSTRALIA.

A STRICTLY RECIPROCAL EXCHANGE OF ENTITLEMENTS WILL NO LONGER APPLY. INSTEAD WE MIGHT WELL GIVE NEW SERVICES TO A FOREIGN CARRIER WHERE AUSTRALIA CAN WIN REALISABLE LONGER TERM BENEFITS OF INCREASED TOURISM, OR FLIGHTS FOR

THE FOREIGN CARRIER MIGHT BE TRADED FOR ACCESS TO NEW DESTINATIONS FOR THE AUSTRALIAN CARRIER, EVEN WHERE QANTAS MAY NOT PLAN TO USE THOSE RIGHTS FOR SOME TIME. THIS IS LIKELY TO MEAN GREATER RECEPTIVENESS TO REQUESTS BY FOREIGN CARRIERS TO FLY TO AUSTRALIA.

OVERSEAS AIRLINES SHOULD NOT EXPECT THAT AUSTRALIA WILL GIVE THEM A FREE RIDE. WE ARE PROPOSING A MORE LIBERAL APPROACH TO THE TRADING OF AVIATION RIGHTS, CERTAINLY; BUT WHAT IS IN IT FOR AUSTRALIA AS A WHOLE WILL BE THE

DOMINANT CONSIDERATION.

MORE FLEXIBLE ARRANGEMENTS

TO PROMOTE GROWTH AND COMPETITION, THE GOVERNMENT WILL

PUSH FOR MORE FLEXIBLE ARRANGEMENTS.WITH OTHER COUNTRIES TO GIVE AIRLINES GREATER COMMERCIAL FREEDOM TO INTRODUCE NEW SERVICES AND TO RESPOND MORE QUICKLY TO MARKET DEMAND. .

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WHEREVER POSSIBLE AUSTRALIA IS RENEGOTIATING AIR SERVICES AGREEMENTS AND ARRANGEMENTS IN A FORWARD LOOKING MANNER. FOR INSTANCE, WE ARE NOW AGREEING INCREASED FLIGHTS ONE TO TWO YEARS AHEAD OF CURRENT REQUIREMENTS. THIS MEANS MORE CERTAINTY FOR THE AIRLINES TO MEET DEMAND QUICKLY - AND IT MEANS LESS INTERVENTION BY GOVERNMENTS IN THIS

PROCESS.

THIS APPROACH IS PARTICULARLY APPROPRIATE IN GROWING MARKETS - FOR EXAMPLE, THAILAND, SINGAPORE AND JAPAN. CONSEQUENTLY ON THE AUSTRALIA/THAILAND ROUTE FIVE ADDITIONAL B747 SERVICES CAN NOW BE BROUGHT ON BY THE AIRLINES AT ANY TIME. ON THE JAPAN ROUTE UP TO AN ADDITIONAL EIGHT B747 SERVICES CAN BE OPERATED FROM

OCTOBER THIS YEAR AND THROUGH 1990. SIMILARLY ON THE SINGAPORE ROUTE THERE IS PROVISION FOR ANOTHER EIGHT B747 SERVICES TO COMMENCE FROM OCTOBER THROUGH NEXT YEAR.

MOREOVER, AS RECENTLY AS LAST WEEK, WE REACHED AGREEMENT WITH THE FEDERAL REPUBLIC OF GERMANY TO PERMIT AN ADDITIONAL FOUR B747 SERVICES PER WEEK TO OPERATE FROM APRIL OF NEXT YEAR. FROM APRIL 1991 A FURTHER TWO

SERVICES A WEEK WILL BE PERMITTED, THUS ALLOWING QANTAS AND LUFTHANSA TO OFFER A COMBINED TOTAL OF 14 FLIGHTS A WEEK BETWEEN AUSTRALIA AND WEST GERMANY FROM THAT TIME.

THE ADVANTAGES OF A MORE FLEXIBLE APPROACH TO AIRLINE SERVICES IS ALREADY PROVING SUCCESSFUL IN OVERCOMING SEAT SHORTAGES CREATED BY SEASONAL PEAKS. AIRLINES NEED TO KNOW THAT THEY WILL BE ABLE TO OPERATE MORE SERVICES DURING PEAK PERIODS SUCH AS THE NORTHERN SUMMER, CHRISTMAS AND SCHOOL HOLIDAYS TO MEET THE ADDITIONAL DEMAND FOR SEATS.

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THE GOVERNMENT WILL CONTINUE ITS POLICY OF GIVING PROMPT APPROVAL TO AIRLINES APPLYING FOR SUPPLEMENTARY SERVICES IN PEAK PERIODS. THIS WILL ALLOW CARRIERS TO PLAN ADDITIONAL SERVICES WITH CONFIDENCE, AND IT GIVES TRAVELLERS CERTAINTY IN OBTAINING SEATS WHEN THEY WISH TO

TRAVEL. '

DURING THE 1988-89 PEAK PERIOD THE GOVERNMENT APPROVED SOME 500 ADDITIONAL AIR SERVICES REPRESENTING A 31% INCREASE IN FLIGHTS OVER THE 87/88 PEAK. THIS WAS IN ADDITION TO THE SERVICES WHICH CARRIERS WERE ALREADY

OPERATING. THESE SUPPLEMENTARY SERVICES EASED THE DIFFICULTIES FACED BY AIR TRAVELLERS IN MAKING FORWARD BOOKINGS AT THIS TIME. THEY ALSO PROVIDED A LARGE BOOST TO THE ECONOMY BY ENSURING THAT AIRLINES WERE ABLE TO CARRY AS MANY PASSENGERS AS POSSIBLE INTO AUSTRALIA.

FREIGHT

AIR FREIGHT HAS GROWING IMPORTANCE FOR THE ECONOMY AND FOR AUSTRALIAN EXPORTERS, AND SINCE 1983 WE HAVE PROGRESSIVELY LIBERALISED FREIGHT SERVICES.

OVER 90% OF AIR FREIGHT CAPACITY OPERATED TO AND FROM

AUSTRALIA IS ON SCHEDULED PASSENGER AIRCRAFT. IN THE LAST COUPLE OF YEARS THIS CAPACITY HAS INCREASED BY A STAGGERING 260% TO AN ANNUAL TOTAL OF APPROXIMATELY 735,000 TONNES. SCHEDULED PURE FREIGHTER CAPACITY HAS ALSO RECORDED SUBSTANTIAL GROWTH IN THE ORDER OF 60%

SINCE 1987.

SIX SCHEDULED CARRIERS NOW OPERATE DEDICATED INTERNATIONAL AIR FREIGHT SERVICES INTO AND/OR OUT OF AUSTRALIA FROM WEST GERMANY, JAPAN, SINGAPORE, HONG KONG AND THE USA, BUT AUSTRALIA DOES NOT HAVE A DEDICATED PURE

FREIGHT OPERATION IN ITS OWN RIGHT. IN SOME MARKETS, QANTAS BUYS SPACE ON THE FREIGHT AIRCRAFT OF OTHER AIRLINES, AND IN OTHER CASES IT LEASES FREIGHT AIRCRAFT.

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IN ANNOUNCING THE DEREGULATION OF DOMESTIC AVIATION IN OCTOBER 1987, THE GOVERNMENT INDICATED THAT ITS POLICY OF MAINTAINING QANTAS AS AUSTRALIA'S SOLE INTERNATIONAL SCHEDULED CARRIER WOULD CONTINUE FOR THE FORESEEABLE FUTURE. HOWEVER, THE GOVERNMENT IS NOW CONSIDERING WHETHER DIFFERENT ARRANGEMENTS COULD APPLY TO FREIGHT, AS

DISTINCT FROM PASSENGER SERVICES.

ANOTHER IMPORTANT STEP WAS TAKEN IN 1987 WHEN THIS GOVERNMENT REMOVED RESTRICTIONS ON THE OPERATION OF FREIGHT CHARTER FLIGHTS AND ALLOWED THE CARRIAGE OF ANY TYPE OF CARGO IN ANY MIX INTO AND OUT OF AUSTRALIA.

AS A RESULT WE BELIEVE AUSTRALIA NOW HAS ONE OF THE MOST LIBERAL AIR FREIGHT CHARTER POLICIES IN THE WORLD. IN 1988, THE FIRST FULL YEAR AFTER THIS INITIATIVE, THE . . . . NUMBER OF FREIGHT CHARTERS APPROVED INCREASED 50% OVER THE NUMBER OPERATED IN THE PREVIOUS YEAR. A FULL REVIEW WILL BE UNDERTAKEN LATER THIS YEAR TO ASSESS OVERALL RESULTS AND THE SCOPE FOR FURTHER OPPORTUNITIES.

PRELIMINARY RESULTS INDICATE AUSTRALIAN EXPORTERS HAVE

BENEFITTED FROM THE LIBERALISATION OF FREIGHT CHARTER POLICY AND FROM THE SUBSTANTIAL INCREASE IN FREIGHT SPACE AVAILABLE ON SCHEDULED PASSENGER SERVICES.

NEVERTHELESS, SOME EXPORTERS OF PRIMARY PRODUCE, PARTICULARLY IN VICTORIA AND WESTERN AUSTRALIA, CONTINUE TO EXPERIENCE DIFFICULTIES WITH EXISTING SCHEDULED SERVICES.

IN THE INTERESTS OF SEEING WHETHER FURTHER GAINS IN THE FREIGHT AREA MIGHT BE MADE, THE GOVERNMENT HAS DECIDED TO

EXAMINE THE COSTS AND BENEFITS OF ALLOWING A SEPARATE AUSTRALIAN INTERNATIONAL AIRLINE TO OPERATE SCHEDULED CARGO SERVICES.' THIS STUDY WILL BE COMPLETED BY OCTOBER 1989 CONCURRENTLY WITH THE GOVERNMENT'S REVIEW OF THE

OPERATION OF ITS AIR FREIGHT CHARTER POLICY.

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TO ASSIST IN EXAMINING THIS CONCEPT, THE GOVERNMENT WILL SHORTLY ADVERTISE FOR EXPRESSIONS OF INTEREST FROM AUSTRALIAN CARRIERS WISHING TO OPERATE SCHEDULED AIR FREIGHT SERVICES TO AND FROM AUSTRALIA.

IN WEIGHING UP THE COSTS AND BENEFITS, PARTICULAR ATTENTION WILL BE GIVEN TO THE VOLUME OF DEMAND, FREQUENCY OF SERVICES AND THE DESTINATIONS LIKELY TO BE REQUIRED BY EXPORT INDUSTRIES, AS IDENTIFIED BY THE

EXPRESSIONS OF INTEREST.

ALSO RELEVANT IS THE POSSIBLE COST TO AUSTRALIA OF SECURING AGREEMENT FROM OTHER GOVERNMENTS FOR A SEPARATE AUSTRALIAN CARRIER TO OPERATE OVER SUCH ROUTES. ON THE PLUS SIDE, THE BENEFITS COULD PROVIDE A BETTER SERVICE

FOR AUSTRALIAN EXPORTERS BY PROVIDING A GREATER CHOICE OF. FREIGHT CARRIERS AND SERVICES OFFERED.

SMALLER GATEWAYS

IN SPREADING THE BENEFITS OF AIR SERVICES AS BROADLY AS POSSIBLE, THE GOVERNMENT ACKNOWLEDGES THAT IT HAS A ROLE IN ENCOURAGING BOTH SCHEDULED AND CHARTER AIR SERVICES TO ALL OF AUSTRALIA'S INTERNATIONAL GATEWAYS.

THE GOVERNMENT HAS ALREADY INTRODUCED MEASURES TO ASSIST SMALLER GATEWAYS IN ATTRACTING INTERNATIONAL AIR SERVICES - SPECIFICALLY, THE REFORM OF ITS INTERNATIONAL PASSENGER CHARTER POLICY AND THE REMOVAL OF RESTRICTIONS PREVENTING

QANTAS FROM CARRYING INTERNATIONAL PASSENGERS OF OTHER OVERSEAS AIRLINES ON ITS SERVICES BETWEEN CITIES IN AUSTRALIA.

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IN ITS REVIEW OF INTERNATIONAL PASSENGER CHARTER POLICY IN 1987, THE GOVERNMENT SIGNIFICANTLY BROADENED THE CATEGORIES OF CHARTER TRAFFIC ABLE TO FLY TO AUSTRALIA. THESE CHANGES WERE AIMED AT INCREASING INBOUND TOURISM AND ENCOURAGING THE DEVELOPMENT OF AIR SERVICES AT SMALLER GATEWAYS. OVER 150 MAJOR INBOUND TOURIST CHARTER FLIGHTS HAVE BEEN APPROVED SINCE OCTOBER 1987. THIS REPRESENTS AN INCREASE OF 21% OVER THE SIMILAR PERIOD BEFORE OCTOBER 1987,

SMALLER GATEWAYS HAVE BENEFITTED FROM THESE SERVICES.

THE UK AIRLINE BRITANNIA AIRWAYS OPERATED CHARTER SERVICES TO CAIRNS AND PERTH OVER THE 1988-89 AUSTRALIAN SUMMER PERIOD. AFTER A SUCCESSFUL SEASON BRITANNIA HAS RECEIVED APPROVAL FOR AN EXPANDED CHARTER PROGRAM FOR

1989-90. AFTER OPERATING CHARTER SERVICES TO SYDNEY AND, MELBOURNE IN 1988, THE POLISH AIRLINE LOT INCREASED ITS CHARTERS TO AUSTRALIA IN 1989 TO INCLUDE SERVICES TO BRISBANE AND PERTH.

WHILE THE GOVERNMENT ENCOURAGES AIRLINES TO OPERATE TO SMALLER GATEWAYS, LOCAL COMMUNITIES ALSO MUST PLAY A ROLE. THE MOST EFFECTIVE MEANS OF ATTRACTING CARRIERS TO SMALLER GATEWAYS IS THROUGH LOCAL PROMOTION. NO-ONE CAN FORCE FOREIGN CARRIERS, WHETHER THEY ARE SCHEDULED OR CHARTER OPERATORS, TO FLY TO A PARTICULAR DESTINATION, AND ULTIMATELY IT IS UP TO STATE AND LOCAL AUTHORITIES AND THE TOURIST INDUSTRY TO CONVINCE FOREIGN CARRIERS OF THE COMMERCIAL ATTRACTIVENESS OF THEIR INDIVIDUAL GATEWAY.

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ACTIVE PROMOTION BY NORTH QUEENSLAND OF ITS REGION HAS LED TO A RAPID INCREASE IN INTERNATIONAL SERVICES. AS A RESULT, CAIRNS IS NOW RECOGNIZED INTERNATIONALLY AS A HIGHLY DESIRABLE TOURIST DESTINATION, AND ATTRACTS

INTEREST IN ITS OWN RIGHT BY FOREIGN CARRIERS. TWENTY

THREE INTERNATIONAL FLIGHTS NOW OPERATE EACH WEEK THROUGH CAIRNS AND THE NUMBER OF INTERNATIONAL PASSENGERS USING THE AIRPORT INCREASED BY 88% IN 1988 OVER THE PREVIOUS YEAR.

A CHANGING WORLD

HAVING ACHIEVED STRONG GROWTH LEVELS ON ALL ITS MAJOR ROUTES, AUSTRALIA MUST MAINTAIN AND BUILD ON THEM. THIS HAS TO BE DONE IN A RAPIDLY CHANGING INTERNATIONAL ENVIRONMENT.

DEVELOPMENTS IN EUROPE TOWARDS A SINGLE MARKET IN 1992 WILL MAKE EEC CARRIERS MUCH MORE COMPETITIVE AGAINST FOREIGN AIRLINES. QANTAS THEREFORE NEEDS THE FLEXIBILITY TO RESPOND TO THIS CHANGING REGIME IN ORDER TO CONTINUE

TO COMPETE.

IN OUR OWN ASIA-PACIFIC REGION, OUR NATIONAL CARRIER FACES GREAT CHALLENGES AND EVEN GREATER OPPORTUNITIES.

IN THIS REGION DEMAND FOR INTERNATIONAL AIR TRAVEL IS GROWING FASTER THAN ANYWHERE ELSE IN THE WORLD.

ACCORDING TO THE WORLD TOURISM ORGANISATION, GROWTH IN THE PACIFIC BASIN REGION WAS 18% IN 1988 COMPARED WITH A

WORLD GROWTH RATE OF ALMOST 9%.

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QANTAS HAS ACCESS TO MOST OF THE MAJOR MARKETS IN ASIA

AND THE PACIFIC, AND HOPES TO OPEN NEW SERVICES TO THE REPUBLIC OF KOREA SHORTLY. THE AUSTRALIAN CARRIER NEEDS IMPROVED RIGHTS TO ENABLE IT TO BUILD A MORE COMPREHENSIVE NETWORK OF SERVICES IN THESE MARKETS.

THE RECENT PURCHASE OF AIR NEW ZEALAND BY QANTAS AND A GROUP OF PACIFIC BASIN CARRIERS SHOWS THE POTENTIAL FOR THE DEVELOPMENT OF A MARKET ALLIANCE IN OUR REGION.

MANY CARRIERS ARE RATIONALISING THEIR OPERATIONS BY CONCENTRATING THEIR SERVICES ON A CENTRAL "HUB" FROM WHERE FEEDER SERVICES FERRY PASSENGERS TO AND FROM OTHER DESTINATIONS. FURTHER AFIELD, QANTAS FUTURE OPERATING

STRATEGY IN EUROPE IS LIKELY TO BE DEPENDENT UPON ITS USE OF "HUBS" AT LONDON AND FRANKFURT USING ITS OWN RIGHTS IN COMBINATION WITH THOSE OF OTHER AIRLINES TO SERVE AND DEVELOP MARKETS BEYOND THESE CITIES.

THESE ARE JUST SOME OF THE RESPONSES THAT MUST BE MADE BY AUSTRALIA TO KEEP PACE WITH CHANGES WORLDWIDE. THE GOVERNMENT CONSIDERS IT VITAL TO ENSURE THAT AUSTRALIA KEEPS ABREAST OF EMERGING CHANGES IN THE INTERNATIONAL AVIATION ENVIRONMENT, AND CAN RESPOND EFFECTIVELY.

MINIMAL PRICE CONTROL

AUSTRALIA HAS ONE OF THE MOST LIBERAL PRICING REGIMES IN

THE WORLD, AND THE GOVERNMENT APPROACH SINCE THE EARLY 1980S HAS BEEN TO STAY OUT OF PRICING MATTERS, LEAVING CARRIERS AS FREE AS POSSIBLE TO SET FARES IN RESPONSE TO MARKET CONDITIONS.

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AS A RESULT, A GREAT VARIETY OF INTERNATIONAL FARE TYPES ARE AVAILABLE IN AUSTRALIA, AND FARES ON MOST ROUTES HAVE DROPPED IN REAL TERMS OVER MANY YEARS. THE BENEFITS TO THE AUSTRALIAN CONSUMER ARE OBVIOUS, AND THE GOVERNMENT WILL FURTHER REDUCE INVOLVEMENT IN PRICE-CONTROL BY

SIMPLIFYING THE AIR NAVIGATION REGULATION THAT DEALS WITH INTERNATIONAL AIRFARES TO THE MINIMUM NECESSARY, AND BY DOING AWAY WITH OUTDATED ENFORCEMENT PROVISIONS BEFORE THE END OF THIS YEAR.

CONCLUSION

AUSTRALIA WILL BROADEN ITS APPROACH TO INDIVIDUAL AVIATION NEGOTIATIONS, BY PLACING WEIGHT ON THE NATIONAL BENEFITS THAT CAN ARISE FROM ENHANCED TOURISM AND TRADE OPPORTUNITIES, AS WELL AS THE BENEFITS THAT CAN ARISE FOR QANTAS.

WE WANT TO ENCOURAGE FOREIGN AIRLINES WHO ARE WILLING AND ABLE TO CONCENTRATE THEIR MARKETING EFFORTS ON PROMOTING INBOUND TOURISM TO AUSTRALIA, AND WE WILL GIVE FAVOURABLE CONSIDERATION TO PROPOSALS FROM AIRLINES WHICH ARE

DIRECTED TOWARDS BOOSTING INBOUND TOURISM.

IN ADDITION TO THE THRIVING INBOUND TRAFFIC FLOWS FROM JAPAN, THE USA AND NEW ZEALAND, AUSTRALIA HOPES TO BUILD BIGGER FLOWS FROM EUROPE AND SOUTHEAST ASIA AS WELL. MINIMISING BARRIERS TO FOREIGN CARRIERS WILL ASSIST IN MAINTAINING THE GROWTH OF TOURISM AND MAXIMISING THE

BENEFITS TO AUSTRALIA OVERALL.

AT THE SAME TIME, SECURING REALISTIC BENEFITS IN RETURN FOR THE AUSTRALIAN CARRIER OVERSEAS WILL MEAN INCREASED

OPPORTUNITIES FOR PARTICIPATION BY QANTAS IN FOREIGN

MARKETS, AND WILL GUARANTEE AUSTRALIA'S ROLE AS A SIGNIFICANT FORCE IN WORLD AVIATION AS WE ENTER THE 1990'S.