HAYES, Councillor Daniel, Wagga Wagga City Council [by video link]

KENDALL, Councillor Rod, Wagga Wagga City Council [by video link]

THOMSON, Mr Peter, General Manager, Wagga Wagga City Council [by video link]

WOODS, Mr Darryl, Manager, Council Business, Wagga Wagga City Council [by video link]

[14:00]

ACTING CHAIR: I now welcome representatives from Wagga Wagga City Council via video conference. I invite you to make a brief opening statement before the committee asks questions.

Councillor Hayes : The three areas we were hoping to raise today, particularly about the Wagga Airport, were to do with the lease arrangement. Currently, we lease it from the Department of Defence, which has implications around the rent, what we can do out there and the financial future of the council's role at Wagga Wagga Airport. That lease arrangement flows onto the second part, which is about the challenges that creates in both attracting grants from state and federal governments and attracting businesses to set up at the airport. The third area is around the security requirements set by the federal government and the challenges we have in meeting those, including having two different airlines with two different requirements for screening, and managing that in a regional area. Those are the three key parts.

Councillor Kendall : I did send you some notes in addition to that that were largely personnel orientated. I don't think we need to concentrate on that this afternoon because I'm sure many other witnesses have touched on it, except to say that the one aspect during COVID that has been sorely missing from the federal government's response is the support for the financial wellbeing of regional airports generally, and particularly those owned or operated by local government. We've seen a lot of money spent on [inaudible] we need functional, well maintained operational airports to continue that standard of transport that we've experienced in the past.

Senator O'NEILL: Thanks so much for coming and for giving us evidence about that great hub of activity in the south-west of New South Wales. Wagga is one of the key cities out west in terms of connection for trade, movement and tourism in the area, so I'm very appreciative of your opening remarks. I'll start with Mr Kendall's comment regarding regional airports and their status. You made a claim, which I think has been well borne out by correspondence to my office from regional New South Wales entities, that the financial wellbeing of airports has been essentially overlooked by the federal government in the course of the pandemic. What is the impact of that neglect and what is the scale of recovery that's required?

Councillor Kendall : I'll throw to the general manager for that, because he'll have those costs more significantly worked out. But from my point of view, the operational aspects of an airport have to continue whether or not air traffic is passing through that airport, and of course the income from that, particularly regular passenger transport, hasn't eventuated, largely, through COVID, and significant losses to those airports have occurred because of it. But Peter Thomson, I think, is better placed to answer it.

Senator O'NEILL: Mr Thomson?

Mr Thomson : I can give you actual figures for last financial year and can confirm that our regional airport had a net loss of $1,083,000 last year and our other general fund is propping that up with a loan, and no doubt in the year we're going into there'll be a similar result. That's the here and now.

In relation to the neglect of regional airports comment and the financial impact generally, the airport, for our regional centre, as well as all regional centres, is one of our key communication hubs. For us to be appealing, to establish businesses and invest money, we need to be connected to other centres and other capitals. In the case of Wagga airport, because it's owned by the federal government and it's unusual for that reason, it sees itself neither supported by the federal government with grant funding nor supported by the New South Wales government with grant funding, and every year we are slipping further and further behind with that particular gateway and selling our city for that investment. Did you want me to go any further?

Senator O'NEILL: That's very helpful, because there are two issues: there's the particular, of Wagga, and the unusual position you find yourselves in by comparison to some other regional airports, and then there's the general neglect that is across the entire sector. So I think we've got both of those on the record.

Mr Thomson, can I just go into a bit more detail about the general fund that you indicated is propping up the $1.083 million loss from the airport last year. How are you balancing that? Do you see a path forward? Have you made approaches to either the state or the federal government for a response to that reality? And, if you don't get a resolution, what does it mean for the people of Wagga Wagga and the region that is served by the airport?

Mr Thomson : In our particular case, as I said before, we don't own the airport. Our lease with the federal government ends in 2025, so we've only a few years left. We are currently in discussions with the federal government in relation to whether we continue as a tenant of that airport or we withdraw our current involvement and leave it to someone else to run the regional airport, because, financially, it's not sustainable for us to keep propping up the regional airport in the absence of funding from either the state or the Commonwealth government which other regional airports enjoy. I should say: we would like to continue running the airport. We see our tier of government, particularly in regional New South Wales, as the best entity to run that airport. But it may surprise some of the committee members that, if you enjoy an aircraft trip to Wagga and collect your baggage, we still take that off a small tractor in an area outside the terminal, so it's very much a modest and cheap airport offering at the moment, notwithstanding that we're the largest regional capital in inland New South Wales.

Senator O'NEILL: There are a lot of issues there, and I suppose the complication of it is exacerbated somewhat by the intersection with the Australian Defence Force as well. Now can I go to Councillor Hayes. You've indicated—and we've had a number of conversations over the years about—the nature of the lease arrangements regarding Wagga Wagga airport, and there has certainly been plenty of correspondence to the federal government about a satisfactory resolution of this matter. For the record, could you just bring the committee up to date with the nature of the lease arrangement, how the council administers it and the correspondence and communication to date through Mr McCormack to the federal government?

Councillor Hayes : The arrangement, as just mentioned previously, is that the airport is owned by the Department of Defence and we're the tenant. Every year, we have a formula that depends on how much traffic goes through. We then pay our lease, which is probably around $200,000 a year, give or take, based on that formula. And that has been different with COVID and some of the arrangements there.

One of the challenges with that is, obviously, the rent itself. But any upgrades or improvements to the airport that we make increase the value of that lease. That has a perverse outcome where we pay for the increases in infrastructure or improvements, which then come at a greater cost to us through increased rent. The Department of Defence, acting as the landlord in this case, isn't necessarily meeting the obligations that we would like to see, to help improve that infrastructure and maintain the assets as well. So we've got this situation where, as mentioned just before, attracting grants is then very difficult because often the grants aren't allowed to be put forward to what is a government asset. It's also difficult attracting businesses, because if they were to build infrastructure on the airport there would be questions around who owns that if the lease expires and it's not renewed. So businesses are unlikely to set up.

Our local member, Michael McCormack, has been pretty adamant that he does not want to see the airport ownership given to anyone, let alone Wagga council. He wants it to remain in the Department of Defence's hands. The reason he's stated for that publicly is concerns around the RAAF base while the Department of Defence are potentially moving. There's significant investment in upgrading the RAAF base at the moment, so I'm not entirely sold on that, but I understand. No-one here wants to see Defence go. They're a valuable part of the Wagga community. So any approaches that we've made to look at taking ownership of that airport have been met with resistance from our local member.

Senator O'NEILL: It's a very particular reality in a very particular place, but it does highlight the importance of consideration by this committee of regional airports, in addition to the major flows of business and people movement, and the insecurity of employment that's now part of the entire sector. It's in particular that we're finding some of the critical failure points, and that's a failure to resolve this issue that's been going on between the council and the federal government, particularly the Department of Defence. Over how many years has this now been a thorn in your side that you've been speaking to? I see, Councillor Kendall, that you want to make a comment there.

Councillor Kendall : Yes, if I can. I've been a councillor now for 16 years. The current lease was a 30-year lease. When we got to 15 years, those discussions with Defence were instigated at that stage, because we knew that to keep a viable entity going we couldn't allow that uncertainty to continue right to the end of the lease period. There have been a couple of instances where there's basically been an agreement in place—I think the general manager might want to speak to that at this stage as well—but then a change of government has basically made the process start again, because the new minister, in a new government with new administration, would always want to review where they were up to prior to doing it. Those negotiations are now about 11 years in the run, from my experience.

Senator O'NEILL: That's an extraordinary period of time. Having been out to Wagga on so many occasions as Labor's duty senator, I look around the community, and it's a robust and resilient community, but I think that $200,000 per year over that period of time could have been very well invested in local community infrastructure. I still find it extraordinary that the Australian Department of Defence continues to leave Wagga hanging with this degree of uncertainty, which has real commercial and practical impacts. Mr Thomson, do you want to speak to what Councillor Kendall was just referring to there?

Mr Thomson : I would like to acknowledge that in recent times the representatives from the Department of Defence have been very accessible and we've had a good dialogue with them in relation to that lease. I certainly recognise that and am grateful for that outcome. For the benefit of the senators who may not be familiar, in the early nineties 230 regional airports were transferred from the Commonwealth to local government authorities. There were four airports that were not transferred. In New South Wales Williamtown was one of those and we were the other.

In recent times, in that discussion we are having with the Department of Defence we accept that they won't transfer ownership because they still see the Wagga airport as a strategic asset for the Commonwealth to own, and we would accept that. The discussions are looking to a longer term lease, which is also an advantage in terms of how we then make an offering for commercial development.

The key issue for us in relation to COVID, and emerging from COVID, is having the Commonwealth bear the cost of actually maintaining that airport. Because the base is not a base that uses the runway for training purposes the council is left to pay all of the costs of maintaining the actual airport part of the facility—because the RAAF don't use it for training. If we compare ourselves to Williamtown airport, which was the other New South Wales airport that was not transferred when all the other councils received their airports in the early nineties, that's still a very active RAAF base for flight training. I believe the Commonwealth government has just contributed to the costs of the actual airport facility there to the tune of $60 million. We certainly don't want $60 million—although I'd gladly accept it if it were offered—however, if we look at the government's contribution to us, the total of funding we have received since 2005 is $2.5 million, yet we are charged in the order of $200,000 every year for the privilege of maintaining the Commonwealth's asset.

For us to provide an offering to that business community during COVID and emerging from COVID—councils aren't based as income earners to actually find that money in a way other than grant funding. We would love to focus the Commonwealth's attention on what it's trying to achieve with regional centres; what those regional centres need to thrive, particularly in a post-COVID environment, and support those initiatives. Communication through transport is clearly one of them. If you look at settlement patterns in England or America cities of more than a million people are unusual. I think England has two cities that are more than a million people in population. Australia's gone down a radically different path of having population concentrated in particular metropolitan centres. Those airports between the capitals work very cheaply and are a very, very reliable source of communication between centres. That's not true for regional New South Wales. We would urge the committee and the Commonwealth government to rethink what improving the airport connectivity to regional centres might achieve in decentralising the population, because post-COVID it has never been better to live regionally as opposed to the metropolitan areas—notwithstanding, we sit here with masks and no haircuts just like everybody else!

Senator O'NEILL: That's why I am so glad you are actually able to be here, because if there is a structural response to better enabling regional areas to access the services and the quality of support for infrastructure that is necessary going forward in a post-COVID period—mindful of the health implications that are going to change as a consequence of this, as well as the situation with jobs, the situation with re-establishing trade connections and also the post-COVID period where people do start moving around again to connect with one another. You've got a very particular situation there that might not fit a general scheme of response to regional airports, because of the particular nature of your relationship with the federal government. I think that it's very important that you have come on today and that the evidence needs to show the particular nature of Wagga's needs. Whatever happens structurally, this will need a particular and careful fix because of your historic intersection with the federal government.

One of the key things of this inquiry and its terms of reference relates to the medium- and long-term impacts of the COVID-19 pandemic response on all sectors that rely on aviation. It highlights tourism, but I know there is a huge amount of trade movement through your airport as well. Can you speak to what's happened to trade and how the movement of goods and services has been affected in this period, and what it is the Wagga region, through the airport, needs going forward?

Mr Woods : Wagga airport is a very important hub-and-spoke airport. We see that not only through the amount of hire cars that move out of here and of people who move throughout the regions but also with respect to the charter aircraft that are flying out of Wagga into different remote and regional locations throughout New South Wales, and even further afoot on occasions. So it is a very key aspect of Wagga airport, along with the training facilities that are operated by the Australian Airline Pilot Academy, which, without being able to access international pilots, has really dropped off in recent times.

Senator O'NEILL: Is that business going to be sustained? I know that is a critical training hub there.

Mr Woods : I certainly hope it will be sustained. That academy was operating well before the lack-of-pilots crisis was borne out by Qantas and others in Australia. They had been sitting there since 2010, training many pilots which moved through Rex and into other international and other domestic carriers. So they were a very important source of pilots not only in Australia but, in some circumstances, internationally.

Councillor Kendall : Can I make a small comment about the interconnection that major regional airports like Wagga provide into the regional areas. I think banks today still need to have all their documents transferred overnight, and that, in the southern area and south-western area of this state, goes through Wagga airport. Wagga airport is also a major hub for charter services. If we need to fly to another regional centre within New South Wales on scheduled flights, it takes, say, somewhere between half a day and three-quarters of a day to get to Tamworth from Wagga. But with a direct charter out of the airport you could be in Tamworth two hours later or an hour and a half later via a normal charter.

That's a fairly critical function that, pre COVID, was increasing on a year-on-year basis. That interregional charter flight business, as regional centres grow, is becoming a pretty good business model that is serving a need within the regional community. Where we go after COVID will be interesting, now that we've got better used to using these types of connection services. From what we saw between the first COVID phase and this second phase of COVID, most of that travel returned very quickly once the community opened up. It's a critical need for regional areas to continue to function, to have air travel services, both through regular public transport and charter services.

Senator O'NEILL: Thank you.

ACTING CHAIR ( Senator McCarthy ): Thank you, Mr Kendall. I'll go to Senator Sheldon for the five minutes we have left in the inquiry.

Senator SHELDON: First, I just want to say I've flown into Wagga Wagga Airport on a number of occasions and have certainly driven down to Wagga. It's a beautiful area. You're in a great part of the country. One of the things that struck me about the airport is that, to keep that vital part of community infrastructure going, there need to be some federal government actions. Can you just outline the actions that the federal government needs to take? I know you've raised some monetary questions, but might you step us through them?

Mr Thomson : The pressing issue for us is that we have a very small terminal, and I won't repeat what's been said before in relation to that; however, the federal government, through its regulations, is imposing new screening requirements on all regional airports. For us to meet those screening requirements, we actually have to increase the size of our terminal, because one carrier is subject to screening but the second carrier is not subject to screening, and the footprint of the existing building is too small to house the new screening equipment. The federal government are not funding the new building or the new area required to house that screening equipment. So what the federal government are essentially saying to us at the moment is: 'We will lease you an airport and a terminal. We will impose on you the costs of maintaining all of the assets at that facility. We will impose on you a rental fee in the order of $200,000. We will then change the regulations so that you have to change your screening requirement for half of the passengers that leave; the second carrier is not subject to those screening requirements. And we will pay for the new equipment, but we won't pay for you to build us a new building to house that equipment in, because, of course, we own the building, because it's our land and you're only a tenant.' To us, that's untenable.

Our immediate need is for the government to take a more reasonable approach to our airport in relation to meeting the costs of that new screening equipment, noting that when 230 airports were transferred in the nineties we were one of four that weren't, and we'd just like it to be recognised that we are in a slightly different situation to all the other large regionals that are putting in screening equipment but enjoying funding from the state government, which is not coming to us because it's a Commonwealth asset.

Senator SHELDON: Thanks very much for that. I noted the evidence you gave before that there's been only $2.5 million in grants to upgrade the airports since, if I understood correctly, 2005, yet there's an annual cost of $200,000. So, if I calculate correctly, it's $3.2 million that you've actually paid the government, but you've only received $2.5 million. You've given us evidence about the importance of the airport to the Riverina as an economic hub, and now you're telling us that the new facility building that you're going to be required to build is going to be owned lock, stock and barrel by those that own your land, the lessor. This seems a quite incredible position for the government to have put you in. It seems inconsistent with making sure that we have an economically viable aviation industry down there. I note the costs you've outlined. What will be the impacts if the government doesn't provide additional funding both for these new facilities and also, arguably, for the capacity to further expand the airport where necessary?

Councillor Kendall : I'm happy to give part of the answer to that. Frankly, we can't afford to do that airport terminal extension and install the legislatively required security arrangements for the federal government. I'm not sure that we can continue to offer the services that require that. I'm certain we can't continue to offer that airline service, because it's an absolute requirement of the federal government.

Keeping in mind that there are three years to run on this lease—and that hasn't yet been resolved—and in addition to what Mr Thomson outlined, I would say that one of the most critical current needs is the finalisation of a new lease for the airport. It needs to be—and I think there's some agreement on this in principle—a long-term lease with a long-term option so that the relevant investment can be made from an operational point of view. For example, we've even had issues in the last 12 months that we've had to resolve from a depreciation point of view. With only three years to run on the airport, if we invested, say, $5 million into taxiways then potentially they would have to be depreciated over the remaining life of the airport lease rather than on the remaining life of those taxiways in that investment. So the lease is a critical part which needs to be resolved very quickly.

Senator O'NEILL: Chair, could I put another question on notice?

ACTING CHAIR: Sorry, I'll just go to Senator Sheldon first then I'll go to you.

Senator SHELDON: I was just going to say to Mr Kendall that it does seem incredible and disturbing that such an important facility as the airport at Wagga—with the critical nature of it for the Riverina; I know how important it is as I've been there often enough to see it firsthand—has this degree of uncertainty. The whole community has to pay the price, both for the uncertainty and also when there is certainty! There needs to be some sharing of that load across the community. Back to you, Chair.

ACTING CHAIR: Senator O'Neill?

Senator O'NEILL: I'm just mindful of the time, so I'll put a question on notice. I'm very concerned about the evidence we've received this afternoon, about the general fund propping up the loan to the tune of over $1 million. I wonder if you could provide us with some more detail about that and what financial path of resolution you're pursuing? Also, with regard to point 'f' of the terms of reference:

… what policy and practical measures would be required to assist the industry to recover in the medium term; …

In terms of the medium-term recovery, particularly for Wagga, given the unique situation that you're in, would you be able to write to this committee and perhaps write to me separately as well—I'm the Labor duty senator—and tell us what the measures are, along the lines of what Senator Sheldon was just saying, that are required to assist the development and maintenance of the aviation industry and all the services that it provides in the Wagga Wagga region? To be very specific: what exactly do you need in the medium term to make this work?

ACTING CHAIR: Thank you, Senator O'Neill. I just alert the witnesses from Wagga city council that we need answers to questions on notice by 20 September. Are you comfortable to take those questions on notice from Senator O'Neill?

Mr Thomson : Yes, we'll be able to respond within that time.

ACTING CHAIR: Okay. I'd like to thank each of you for appearing before us this afternoon, and also all those witnesses who have given evidence to us today. The committee will hold its next hearing as part of this inquiry on Wednesday at 9.30, Australian eastern standard time, but for now the committee stands adjourned.

Mr Thomson : Thank you for the opportunity; it is appreciated.

Committee adjourned at 14 : 33