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Thursday, 14 June 1984
Page: 2999

Senator MacGIBBON(11.43) —This morning in the Senate we are speaking on two Bills, the Australian National Airlines Amendment Bill 1984 and the Australian National Airlines Commission Retention Bill 1984. The second reading speech of the Minister for Veterans' Affairs (Senator Gietzelt) has been dealt with most effectively in this place by Senator Peter Rae and the second reading speech of the Minister for Aviation (Mr Beazley) has been dealt with equally as effectively in the House of Representatives by the honourable member for North Sydney, Mr Spender, who answered many of the fabrications in the argument put forward by the Government, particularly in respect of the repeal of the legislation on the conversion of Trans Australia Airlines to a public company. The speech we have just heard from Senator Jack Evans of the Australian Democrats lacked depth of knowledge of the commercial world and it failed to understand the historical perspective of airline operations in Australia since the Airlines Agreements Act came into force. The claim that there is an uncertainty about the future of TAA and that this has led to a fall in morale is not true. Uncertainty happens to be part of commercial life. Companies are bought, sold and taken over every day of the week. Companies rise and go to the top of the tree; companies go bankrupt and disappear from the commercial scene. There is nothing static about commercial life in any way at all. Because of that one must run a management system that provides incentives for people to perform and win the prize and one has to have an inbuilt censure scheme which the market -place provides, for failure. One of the great fallacies in the Democrats' argument of preaching parity between a government instrumentality, which is guaranteed against going broke, while competing in the market-place, and a public company is the lack of censure of the government instrumentality. The public company cannot take on a statutory authority which is guaranteed by the resources of the country against going broke. That is the fundamental point that is avoided in the argument by the Democrats.

The details in the Bill and the second reading speech by the Minister were very adequately handled by Senator Rae, particularly the point about superannuation. That is a mess that the Labor Party got us into with Trans Australia Airlines during the Whitlam years. It is an enormous albatross around the Australian taxpayers' neck and something we will be working off for the next 20 or 30 years .

I will deal with generalities since this is the second reading debate on this Bill. I pose the question: What is the place of the Government in the airline industry? I would argue very strongly that the Government has only two interests in the regulation of airlines in this country. The first is the maintenance of safety and the second is the preservation of the public interest in ensuring that the best deal is available for the travelling public, both with respect to the range of services offered and the fares paid. Australia is a very much overlegislated country. We have an obsession to legislate on and regulate everything we can. This is no more clearly demonstrated than in the regulation of the airline industry.

There is no case at all for abandoning all government interests and involvement in the airline industry. If we go to absolutely unbridled competition, operators will run at a loss in the short term to drive their competitors out of business and the great fears that have been expressed by the Labor Party that we would end up with a monopoly situation will come about. On the road to that monopoly situation we would go through a period of unprofitability. I have been involved in aviation for the whole of my life and there is one thing I hold above all else, that is, that a profitable airline is a safe airline. The converse is hardly ever true. An unprofitable airline is not often a safe airline. The first thing an airline does when the profits go down is to cut its maintenance and operational costs. The relationship between the profitability of an airline and safety is absolute and linked inexorably. Therefore, the Government has a responsibility to see that no unbridled eighteenth century capitalism operates in the market place with respect to airlines; so some degree of regulation is required.

I now move to another point-the promotion of the public interest. Probably, the very worst way of promoting the public interest is to design a monopoly situation in the market-place. That is what we have in Australia. We might have two airlines-Tweedledum and Tweedledee. We might call it a duopoly but essentially we have a monopoly in the airline system in Australia.

There is an element to this monopoly that is not often appreciated and that element is unfair to TAA. Nearly every commuter airline, third level airline and other operator in the country is a sub-company of Ansett Airlines of Australia. Air New South Wales, Airlines of Western Australia and the other commuters around Australia are nearly all sub-companies of Ansett or beholden to Ansett financially in some way. The only two companies I can think of that are not part of the Ansett net are Sunstate Airlines in Queensland, the small south-east Queensland operator, and Air Queensland, although Air Queensland has a marketing arrangement with Ansett and it feeds into the Ansett net. This gives a very great advantage to Ansett over TAA. Although we have essentially a duopoly on the trunk routes, beneath the surface one partner has an unfair advantage. I would certainly like to see the Australian airline scene opened up so that at all levels there is competition in the market-place.

There has been very little discussion in this place on deregulation of the Australian airlines. I believe that the place of deregulation is limited in Australia. It has worked very well in the United States of America because it has led to a shake-out on a rational economic basis. Small towns had big airliners going into them because of historical reasons or government directives that that should be the route served if the airliner wanted a licence to operate . All that has gone. The needs of the market dictate the type of aircraft and the frequency of service. It is an uncomfortable period for some operators. Certainly, quite a few airlines in the United States are in difficulties. Some have gone broke. But the net result, two or three years down the track, and certainly 10 years down the track, will be an efficient airline service in the United States at a fair market cost. It will serve the needs of the community at a cost that the community can pay.

We are different in Australia insofar as our population is about one-tenth of that of the United States and we could not go to complete deregulation. But consistent with what I said earlier about this being a much over-regulated country, particularly with respect to aviation, there is a lot of regulation that we could look at and remove from the operations of the airlines. I would like to see, as much as possible, market forces enter into the airline structure of Australia.

We always have a problem with remote areas. The classic case is western Queensland. The correct approach is not to allow a major airline to cross- subsidise within the major route structure the cost of running non-economic services. The correct approach is to subsidise directly, as we have in Queensland, the airline to provide that service. That way we know what it is costing the community. We can monitor the situation and there is no unfair transfer of an uneconomic route to the travelling public.

The Opposition will not support the Bill which seeks to repeal the public company status of Trans Australia Airlines. The Government's view on this is very muddled. It is saying on the one hand that it wants TAA to be efficient, yet on the other hand it is making it a statutory authority, a body which simply cannot operate in the hard commercial airline world. I am at a loss to understand why it does not see what is going on in Qantas. The Minister for Veterans' Affairs (Senator Gietzelt) talked proudly of the achievement of Qantas and its profit margin in the last financial year. That is a very great achievement but Qantas is a public company; it is not a statutory authority. By structuring TAA as a public company the management practices and the whole operation of the airline would be able to compete better with Ansett if that is the purpose that the Government seeks to attain. The problems with operating as a statutory authority are simply that there are no censures and rewards for its management. The manager of TAA gets a salary that the Remuneration Tribunal determines. It does not have the ability to go into the market place, find out what Ansett , or any other airline, is paying for its managers, and compete by buying the best people in the business to run the airline. It is tied up with Public Service rules. My experience, having talked to many pilots, hostesses and ground employees of TAA is that they would much rather be in some sort of company structure which allowed them to compete with Ansett. They do not want to be public servants. I have yet to meet an employee of TAA who wants to see the company run as a statutory authority. This is the point that the Democrats fail to understand-this business of censure and reward and of being able to operate in the market-place.

The problem we have at the present time with the structure of airlines in Australia is cost. The airlines are not using the equipment they have, the aircraft they own. They are parked against fences or leased out to other airlines around the world simply because there are not enough people flying in Australia today because of the high cost of travel. That cost of travel in turn is so high because of a lack of direct competition between the airlines. The Airlines Agreement Act 1981, as it operates in Australia, provides that the fare structures will be set at the level that the less efficient of the two airlines needs to make a profit. That was why in 1981 I led the fight in the Senate against the Airlines Agreement Bill, because it did not provide for competition between TAA and Ansett. One can get competition only if there is parity between the airlines. One airline is a statutory authority and the other is a public company and both have to be placed on an equal footing. Either we have to have two statutory authorities-which means nationalising Ansett, which is absolutely impossible under the Australian Constitution-or we have to take the only alternative, which is to put TAA on a basis of parity with the public company. That means that TAA must become a public company and preferably it should be sold, and sold to its employees. But we cannot have a public company competing with a statutory authority which is guaranteed solvency, no matter how irresponsibly and how recklessly it is operated. That is the crux of the whole point. The Opposition will not agree to that. When I opposed that Bill in 1981 I foresaw that without competition costs would get out of hand. The government airline in this country must be put on a basis of parity with Ansett, or whichever is the private operator, and the need for a two-airline Act avoided. More than that, we have to have the opportunity and the ability for new airlines to come in to challenge them if the need arises. Until we do that we will be stuck with high air fares in Australia for as far as we can see into the future.

We are a big country; we have big distances to cover. An efficient transport system, whether it is in the air or on the ground, is absolutely vital to us, from both a business point of view and a social point of view. In going back to creating TAA as a statutory authority we are getting the worst of all possible worlds. We are doing a very great disservice to the Australian community because we are guaranteeing that high costs are going to be an inherent part of the system. Like Senator Peter Rae, I have a very great admiration and respect for the way TAA operates, but if we look at the constitution of the TAA board we see it does not have the level of commercially successful people that the other airlines have. This is vitally important. It is very hard to promote public servants to the board of a statutory authority and then demand that they have the commercial judgment that takes a lifetime to acquire and which has to be exercised every day, because judgment is something that cannot be held in abeyance and used once every five or 10 years when major equipment comes along.

An example is the problem which TAA has at present in relation to the Airbus. The Airbus is not a bad aircraft but blind Freddie knew at the time of its acquisition that the Boeing 767 was coming along and that it would be a far more economic aircraft to operate and therefore a far more profitable one. TAA bought the Airbus and it has two which it cannot use. The profitability of TAA's Airbus just does not bear comparison with the profitability of Ansett's 767, but TAA bought the Airbus in good faith. I believe it did that because in that field of expertise of commercial judgment the members of its board did not have the experience that the opposition board had. That is quite a distinct and different thing from the business of running the aircraft with respect to safe operating practices and running a good airline from the passenger's point of view. In summary, I reaffirm that the Opposition will support the first of these Bills but we will oppose the second Bill, for the repeal of the Australian National Airlines Act.