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Thursday, 15 October 1964

Senator KENNELLY (Victoria) - We have listened to the Minister for Civil Aviation (Senator Henty) try to answer the case submitted by the Leader of the Opposition (Senator McKenna). I wonder just what parts of the case he answered. He quoted passages from the remarks of certain judges. He told us what happened in 1937, when so much money was spent However, despite the mass of words and figures that he used, he did not, in my view, tell us why the Commonwealth did not enter this field at any time between 1937 and 1961. Until 1961 there was no worry by the Government about whether there were two airlines in New South Wales or about whether they were both subsidised. At no time prior to 1961 did the former Minister see any great virtue in the rationalisation of intrastate services in New South Wales, but he did sit up and take notice when Ansett failed in his take-over bid for East-West Airlines Ltd. That is when all this trouble started. Everything seemed to be going along smoothly until then.

At no time had the New South Wales Government said that the Commonwealth should not have complete control over such matters as the licensing and air-worthiness of aircraft, the licensing and competence of pilots and air crew, the rules to be observed by aircraft in the air and on the ground and when taking off and landing, and over all the other technical matters presently contained in the Commonwealth's air navigation regulations. At no time had the New South Wales Government said that the Commonwealth should not exercise control both within and outside controlled air space. The New South Wales Government believed that, subject to the Commonwealth requirements that I have mentioned, it should have the right to say who should operate commercial aircraft on purely intrastate routes. This has gone on for a number of years. If it is wrong, did it become wrong only after 1961 when Ansett failed in his take-over bid? Has all this trouble arisen because of that? Is that the only thing that made it wrong? That is what I want to know.

Let us trace the history of this matter. It is extremely interesting. The matter originated when Ansett-A.N.A. made a takeover bid for East-West Airlines in April 1960. That bid was rejected by the shareholders of that company. In fact, the company's articles were changed so that no take-over could be made without the approval of the existing board. The next that the people knew of the dispute was when allegations were made by three officers of East-West Airlines) - Messrs. Shand, Pringle and Smith - and were published in the Press in October 1961. They were to the effect that the then Minister for Civil Aviation was attempting to pressurise East-West Airlines into accepting the Ansett take-over bid. I am not saying whether those allegations were true or false, but they were the allegations that were made. In reply to a question about this matter which was asked by Senator McKellar on 24th October 1961, Senator Paltridge denied that the allegations made by the three gentlemen I have mentioned were true. On that evening, rather remarkably, Mr. Drummond, who was then the honorable member for New England in another place, said -

I can say definitely that the Minister said to the representatives of the company that they would have to get together with Ansett.

On 25th October the former Minister for Civil Aviation confirmed that he could well have said that, but he said that the substance of what he actually did say was that now that East-West Airlines had declined Ansett5 s offer and the two airlines would be operating side by side in New South Wales, the Commonwealth Government would expect and would look for a degree of sensible cooperation and self assistance between the two. He elaborated this statement on the evening of 25th October, when he said that he had told the companies that they should do their utmost to reduce costs by collaborating on common operational, technical and traffic problems.

Let us consider why Ansett was so anxious to take over East-West Airlines. Seemingly this has caused all this trouble. Surely this matter has not just blown up overnight. The situation existed prior to 1961. It has existed since Airlines of New South Wales and East-West Airlines have been in competition in the State. Why did Airlines of New South Wales want to take over EastWest Airlines? It wanted to get the oncarriage. At the time - no doubt this has continued to the present time- on-carriage from East-West Airlines went to TransAustralia Airlines.

As honorable senators well know, oncarriage is most important and immensely profitable. It enables airlines to earn extra revenue without incurring very great expense or expense that is in proportion to the extra passengers that it carries for the remainder of their trip. It is true that T.A.A. arranged to do the bookings or provide some of the booking facilities and that it made maintenance arrangements at a very small charge, in return for the benefit of East-West Airlines' on-carriage. From a business point of view, one cannot have any quarrel with this. It seems clear that the only intelligent meaning that can be given to Senator Paltridge's admission that East-West Airlines should come to some arrangement with Airlines of New South Wales - it being an Ansett subsidiary, the logical thing would be to make some arrangement with Ansett Transport Industries Ltd. - is that the EastWest Airlines' on-carriage that had been going to T.A.A. would be diverted to Ansett-A.N.A. No doubt, both the Government airline and Ansett-A.N.A. knew the value of such on-traffic.

What happened? To prevent the monopolisation - I use the word that the Minister has used - of intrastate routes in New South Wales, the State Government in its wisdom decided that it should undertake a reallocation of the routes so that the traffic would be fairly distributed between the two airlines. Is that any different from what the Commonwealth Government has done in relation to interstate operations? There is no difference at all. The Commonwealth has rationalised the industry to such an extent that even today there is extremely little variation between the percentages of passengers carried by the two interstate operators. When this Government found out what was in the mind of the New South Wales Government, it immediately gave notice that it would suspend payment of subsidy to East-West Airlines. It persisted in this attitude until the matter became the subject of litigation, when an agreement was made between the two bodies concerned that the subsidy would continue.

As is known, it was about the time of the original take-over proposals that East-West Airlines sought help from the New South Wales Government in relation to intrastate routes, and it was at that time that the Government decided to attempt to allocate business on the basis of 51 per cent, to Airlines of New South Wales and 49 per cent, to East-West Airlines. When this decision was arrived at, it was challenged in the courts by the Ansett interests. The High Court of Australia, and later the Privy Council, rejected Ansett's claim. It is as hard for me to understand as it was for the Leader of the Opposition to understand why the Commonwealth Government did not ask for costs. Thank God, I do not know much about the law or the very good people who are judges and lawyers. I have always believed that the wisest thing is to keep away from them, because by so doing one will have a lot more money. But the facts are that in practically any case one reads about, when a petitioner fails to win his case costs are awarded against him. For some reason no doubt best known to the Commonwealth Government, its counsel did not see fit even to ask for costs. I should be grateful if whoever follows me will give some reason for this most unusual procedure as far as the law is concerned.

Following the court's decision, the New South Wales Government announced that the first re-allocation of routes would take place on 10th October. As the Leader of the Opposition said, there was then an exhibition of indecent haste on the part of this Government to acquire Commonwealthwide power over air navigation in order to frustrate the New South Wales Government's proposals. Everyone knows that the growth of civil aviation in this country has been tremendous between 1937 and 1964, but it has not been so great since October 1961 as to warrant this rushing in by the Commonwealth. As the Leader of the Opposition has said, we are not against Commonwealth powers over civil aviation, but there is a very fundamental point to be observed. Justice must not only be done; it must be perfectly clear that justice is being done. To be quite candid, I believe this action was taken for one reason alone and I shall prove my contention as I go along. This is just another of the Government's almost fanatical actions to help a private airline company to take revenue away from the Government's own airline One marvels at the Government's attitude. I do not think I am casting any wrong aspersions when I say that. I have never done so and no honorable senator should indicate that I have done so unless he is prepared to prove it line by line and word by word. The people outside just cannot understand the loving care that the Government has shown for many years for a private company that is in opposition to the Government's own airline. I do not think anybody in this chamber can understand the Government's attitude either.

As I have said, the Government has shown indecent haste. The Prime Minister (Sir Robert Menzies) wrote a letter to the six State Premiers, not asking for their opinions but simply telling them that certain things would be done. It is true, as the Minister for Civil Aviation has said, that the right honorable gentleman has stated that he would consult with the State Premiers on air transport co-ordination. But what does that mean when it is all boiled down? The Prime Minister will confer with the Premiers, but when there are strong men on both sides they will be fortunate if there is any agreement at all. Whatever the Commonwealth lays down will be adopted. There have been four replies from State Premiers in writing, apart from Press reports. Each of the Premiers who have replied have objected to the Government's intentions. It is true that the Governments of Tasmania and Queensland, by Acts of Parliament years ago, agreed to hand powers in relation to civil aviation over to the Commonwealth Government, but they put a tag to the agreement. The tag was that they could withdraw the power any time they wished.

So the Government has virtually told the States it is not worried about Tasmania and Queensland and the other States but is going to act irrespective of what the States may say. The only gleam of hope in the Prime Minister's letter - if one can put it that way - is that the Commonwealth will consult with the States on certain matters. I do not like consultation on that basis when the other party has the big stick. If there is disagreement I believe that in the end what the Commonwealth Government lays down will prevail. Everyone knows that the undue haste with which the Commonwealth has acted has spread a nasty aroma around. Surely there was no need for this haste. One airline which, as the Minister has rightly said, is being subsidised by the Government so that it can remain in existence, could not be bought by the big private airline company operating in Australia. It could not take over this smaller airline and now we have all this rumpus.

Let us consider the solicitude that the Government has shown for the private airline which operates against the Government's own airline. It is remarkable and I cannot understand it. The Government has often said that it believes in a two airlines policy and if that is its belief, I will go along with it. But at least the Government should be fair about this. I marvelled at what the Government has done in this connection when I was gathering information from past debates. As far back as 1952, there was a civil aviation agreement between Australian National Airways Pty. Ltd. and T.A.A. The Government allowed Ansett Airways Pty. Ltd. to import two Metropolitan Convair aircraft in 1954. Ansett Airways Pty. Ltd. entered into the profitable Sydney, Melbourne and Brisbane routes and cut prices. Under an agreement that T.A.A. had then with Australian National Airways Pty. Ltd., neither could reduce fares unless both agreed. The fact is that A.N.A. Pty. Ltd. was not in a sound position at that time and its financial resources would not allow it to reduce charges. It was at that time that Australian National Airways collapsed and the Ansett organisation bought it. I suppose the Ansett organisation was quite entitled to do so but I have .given the fundamental reason. I cannot recall whether the Government then had a two airlines policy but at least it would not then have given an import licence to Ansett Transport Industries. Some might have said that would have been drastic but it was no more drastic than what the Government did to Butler Air Transport Ltd.

In 1957 when Ansett Airways Pty. Ltd. bought Australian National Airways Pty. Ltd., the 1952 benefits were transferred to Ansett and the Government provided additional benefits by way of guaranteed loans and a strengthening of the rationalisation provisions. The main benefits that Ansett-A.N.A. got from the purchase of Australian National Airways were half the mails, a fair share of Government business, an agreement on fares, schedules and air navigation charges. When in 1957 T.A.A. refused to agree to a fare increase which was sought by Ansett, what did the Government do to come to Ansett's aid? It put a tax on aviation kerosene, knowing full well that to all intents and purposes T.A.A. was the only user of aviation kerosene. That cost T.A.A. £300,000 a year. That was not a bad way for the Government to help Ansett to obtain, in effect, a fare increase. I have attempted to take the history of this matter in chronological order. That history is fantastic. Why the people of this nation do not rise in protest I do not know. I suppose they are so worried about eking out their own existence that the only time they care about the airlines is when they travel with them.

I ask: Why has there been this solicitude for Ansett Transport Industries Ltd. The Government's attitude has been amazing. I remind the Senate of what happened when the equipment of both airlines with jet aircraft was under discussion. TransAustralia Airlines wanted to buy Caravelles but Ansett wanted to purchase Electra aircraft. Senator Paltridge the then Minister for Civil Aviation - now the Leader of the Government in this place - told both airlines that they had to buy Viscount aircraft. This man Ansett, who must have some remarkable power, saw the Prime Minister, with the result that the decision of the then

Minister for Civil Aviation was overruled. Ansett got his Electras. Of course, he had his order in first. Because of the loss of traffic due to the delay in getting similar aircraft, that decision cost T.A.A. an estimated sum of £400,000.

In 1958 the Government introduced the Airlines Equipment Bill, which guaranteed Ansett a sum of up to £15 million. I could understand the Government taking that step if the private airline was in the industry on its own and was battling to make ends meet.

Senator Hannaford - So it was.

Senator KENNELLY - It was not.

Senator Hannaford - I mean as far as the airline was concerned. You are looking at the position of Ansett Transport Industries Ltd.

Senator KENNELLY - Well, Ansett puts all his companies together to save tax.

Senator Hannaford - Would you not do the same?

Senator KENNELLY - I am not saying what I would do. L am saying what he does.

Senator Paltridge - lt is quite legal.

Senator KENNELLY - I have enough faith in the Taxation Branch to know that it would have to be legal. Senator Hannaford said that Ansett was making huge profits on everything except his airline.

Senator Hannaford - I did not say anything of the kind.

Senator KENNELLY - That is what you implied. The solicitude of this Administration for the Ansett organisation is beyond my comprehension. Would the hard headed businessmen on the other side of the Senate be prepared to do likewise? I give great credit to businessmen who are hard headed. Would honorable senators opposite be prepared to bolster up their competitors in anything like the way in which this Administration has bolstered up Ansett? When I go through the history of this thing I am stunned.

Let us go a little further. We all remember the famous cross-charter deal. As far as the Government was concerned, it was quite all right for T.A.A. to have to exchange three Viscounts for two DC6B aircraft. Everybody who took an interest in civil aviation knew that T.A.A. was doing better on the east-west run with its Viscount aircraft, but it was forced into the cross- charter arrangement. The daddy of all the acts of this Government which believes in free, fair competition occurred when Sir Warren McDonald, as the Chairman of the National Airlines Commission, asked the present Leader of the Government in the Senate to allow T.A.A. to operate intrastate. The Minister would not agree to that proposal. The Government speaks about fairness. If anybody on this side of the Senate did one-tenth as much as the Leader of the Government has done to bolster up the private airline against its competitor, he would be removed from public life. The Minister is fortunate, because he is on the side of the private airline. He has been much more courageous than I would be. It is just past comprehension.

The next thing to occur was a dispute between the two airlines about operating to Darwin. Trans-Australia Airlines was operating on this route, but the co-ordinator of air services said that both airlines had to operate on that route. Members of the National Airlines Commission unanimously decided to appeal against that decision. The then Minister for Civil Aviation met the Chairman of the Commission in Perth. No appeal was lodged. That is what the Minister has told us here. I can point out in " Hansard " what he said. I repeat that no appeal was lodged even though a unanimous decision to appeal had been made. These men are not boys. They do not make a decision one day, then take a flight to Perth, and change their minds for no reason at all.

Senator Paltridge - I do not want to interrupt you, but I want to be clear on this matter. Are you saying that no appeal was lodged against this decision because I influenced Sir Giles Chippindall?

Senator KENNELLY - All I am saying-

Senator Paltridge - Are you saying that?

Senator KENNELLY - Just wait a minute. I shall answer in my own way and in my own time.

Senator Paltridge - You will answer it, won't you?

Senator KENNELLY - It might be quite all right for you to do things in the interests of a private airline as against the nation's airline. I would not be able to do it. I do not think I would be able to stay in politics for one day if I did so. You are lucky. The people - or their bosses - want you and therefore they leave you where you are.

Senator Hannaford - What air route are you referring to now?

Senator KENNELLY - I was referring to Darwin.

Senator Hannaford - Adelaide to Darwin?

Senator KENNELLY - Yes. T.A.A. had it and Ansett applied for it. They could not agree and the Co-ordinator decided that Ansett ought to fly to Darwin. He made the decision and 1 am not arguing with it. According to what I have read, T.A.A. decided to appeal. I am certain that I could find where that was reported. However, after a talk between the Minister and the Chairman of T.A.A. the decision was reversed and, to my recollection, there was no appeal.

Senator Paltridge - But that does not answer my question.

Senator KENNELLY - It answers it in the way I want to answer it just as you answer questions as you want to answer them. When you do not want to answer a question you just say a few kind words, with a nice grin. That is why some of us do not ask questions. We got a bit tired of it.

Here is a beauty. Prior to the general election in 1961 Parliament passed the Airlines Agreement Act which incorporated matters requested by Ansett in an open letter. Here is the open letter. He is the cheekiest fellow I know. He tells the Government what to do. I have here a photostat copy of the letter. The most remarkable thing is that it appeared in the Press on 14th July 1961. The legislation was submitted to the Senate on 28th September 1961. I shall deal with the matters it contained. The 1961 legislation, which was requested and obtained by Ansett Transport Industries Ltd., contained provisions for guarantees for re-equipment, a guarantee against a sudden increase in air route charges and aviation fuel taxes, continuation of the Rationalisation Committee, a profit target for T.A.A., and the restriction that T.A.A. could not use its insurance account. It is astounding.

Ansett placed his letter in the Press as an advertisement on 14th July and the Government then acquiesced in what he wanted. The Minister should know the the answer to this question: Is there any request in the letter that was not granted to Ansett? One wonders. Justice must not only be done, as in the case of New South Wales, but it has to be made manifest that it is done and that it is in the interests of the people; not in the interests of one man. If ever I go into industry I hope the Government will be as good a supporter of mine as it is of Ansett Transport Industries Ltd. I shall then be able to say: " I have no fears or worries about standing up successfully for any length of time ".

While we believe in Commonwealth control of civil aviation, as Senator McKenna has said, we believe that it should be obtained openly by asking the people for it. But you do not ask them at a time when it will benefit one person. You ask for it openly in the belief, which we hold, that it would be in the interests of Australia to broaden the Constitution not only in regard to civil aviation but also in regard to a lot of other things. It is unjust to bring in regulations at this time and expect the people outside and inside Parliament to believe that you do it, as the Minister for Civil Aviation said, for the most honorable purpose of benefiting the finances of the nation. I believe that the Minister will attempt to do that, but there should be no strings to it. If it is done openly, no-one inside or outside Parliament will ask: " Why is this always done with one person getting the rake-off? "

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