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Wednesday, 31 May 1972
Page: 2394

Senator COTTON (New South WalesMinister for Civil Aviation) - in reply - (8.50) - 1 think the course you have outlined. Mr President, is quite appropriate. I thank you for your help. As in the House of Representatives, so in the Senate the Government does not agree that the amendment is necessary. Accordingly, we do not propose to accept it. Nonetheless, I am grateful for the opportunity to say something about this matter. I, personally, am interested very much in the observations made by Senator Wriedt. He has been a student of the 2-airline policy, its ramifications and its problems for some time and is a member of the Senate committee which looked into the airline industry recently. I will have to take a little longer in making my remarks than normally would be the case because I think it is proper that I should make some of these observations amongst my colleagues.

Firstly, let me deal with the amendment. As I mentioned, it was put forward in the House of Representatives and not agreed to. It has been put forward in the Senate and is not supported by the Government. The motion does not need any amendment because no difficulty whatever is anticipated in having Ansett Transport Industries Ltd make the necessary adjustments to its accounts to achieve the desired results. This has been observed on behalf of the Government by the Minister for National Development (Mr Swartz) who represents me in the House of Representatives. It was observed at an earlier stage by me. What is sought in the amendment is part of the process that is now taking place. In due course the requirements could be made a condition of the renewal of the 2-airline policy. A little later, I will have something to say about that because I believe it is a matter that could be aired a little in the Senate. As I see it, that would put the situation properly into context.

Let us bear in mind that we have an argument only in relation to the Airline Equipment (Loan Guarantee) Bill 1972 which applies to Ansett Transport Industries Ltd. We ought to understand that the Bill makes provision for a guarantee that the loan that company negotiates will be able to be repaid. The Government does not give the company any money. It just guarantees that the company will be able to repay the money it borrows. Senator Wriedt observes that it is important to have the 2 airlines on an equal footing. He says that Ansett Transport Industries Ltd should be on an equal footing with the Australian National Airlines Commission which has access to Government borrowing support. That is what this Bill really provides for. 1 could make a number of observations about the 2-airline policy. I will do so as I pass along, and ask honourable senators to bear with me if I am a little longer than normally I would want to be. The 2-airline policy in Australia is really best described as a duopoly. There is no doubt about that situation.

Senator Keeffe - It appears, judging from the timetables, that the Ansett company is going broke. It is going to change them again.

Senator COTTON - Senator Keeffe is offering some observations which I will offer a little later, but perhaps more correctly. The situation is a duopoly. That means that it is really a monopoly position conferred upon 2 major operators. On one side we have the government arm, the Australian National Airlines Commission, and on the other side the market economy arm, Ansett Transport Industries Ltd. I do not want to go into a historical review of all this. But those who are interested can find plenty of reading material. It might be said that operating in this fashion is the equivalent of what might be callel a Scandinavian model. From my point of view, there is a great deal to be said philosophically for a utility - this is a utility - of this fashion to be operated in this form. We have 2 contenders - one the market economy arm and the other the government arm - as far as possible, working in equality, seeking to serve the public and competing with each other to make sure that the service is both adequate and competent.

But the operation of running a domestic airline is increasingly one that is very heavily capital intensive. As I read the report of the Senate committee which went through this exercise, it held the view that the earning rate on the total invested capital was not of a particularly high order. It is of a satisfactory order, but it is not of a particularly high order. The capital intensive nature of the industry and the fairly modest earning rate make it a venture that is not remarkably attractive to a great number of people. At the present time, we in the Department of Civil Aviation have a concluded view that the size of the market and the business envisaged over a period of years make it possible to have 2, but not 3, viable operators. Our minds are by no means closed to the idea that one day there might be a situation in which the size of the market and the potential market will make it possible to have . more than 2 operators. But at the present time that is our concluded view on. all the evidence we have. It is equally true to say that the 2- airline policy of this country, which was referred to by Senator Wriedt in quite a complimentary fashion, is very much admired by other countries. Many people regard this as a good policy to operate in this country. As in all matters, people can advance their views and can see how to do things better. That is always, possible. One should be always seeking to have improvement and should be looking for it.

It is my view - 1 have expressed this view to the 2 operators- that, because the 2-airline policy has worked well, because it is a good policy and because it is very much admired, that is not to say that it is not capable of being improved' or bettered. Accordingly, I think that all honourable senators will agree that on any occasion when they have suggested to me things that I thought were beneficial I have seen to it, as best I could, that something has been done about the position. The Australian people have what Senator Wriedt has asked for, namely, the best possible service, except perhaps in one or two areas in which there is room for improvement. 1 will talk about them later. The Australian people receive an efficient, safe, modern and up to date service. Senator Wriedt said that the Australian Labor Party believes that Trans-Australia Airlines is not treated quite as well as Ansett Transport Industries Ltd is. I find it very difficult to sustain that view. I know that TAA sometimes claims this to be the case. I read very carefully its submission to the Senate committee. To the extent that the representatives of TAA made observations that they thought that it was unfairly treated, this is being taken up by the Department. But I do not think that TAA can fairly say that it has not had a pretty fair go.

We are awaiting the results of a very detailed and long term study of the 2- airline policy, the 2-airline agreement and the 2-airline equipment legislation, which has been conducted within the Department of Civil Aviation for some time. The agreement expires in 1977, which is 5 years away. Much of the time of the agreement is behind us. A little of the time is still ahead of us, in which to make some fairly clear determinations in regard to what ought to be the situation after 1977. This has been, is being and will be looked at extremely carefully. The areas to which we have been devoting ourselves are the ones that I have mentioned in the Senate before. One was to try to improve the parallel scheduling position. Any fair minded person will admit that we have succeeded in making quite useful changes in that position. We seek to make further changes. We have been seeking for some time to stimulate concession flying in Australia by the domestic carriers in certain areas, at certain places and at certain times. We are beginning to see some success in that.

Like Senator Wriedt, I, from the very beginning of my occupation of this portfolio, have been interested in and concerned about what I regard as the slow rate of growth in the air freight business in Australia. When 1 talk to the 2 airline operators about this they have some fairly substantial and valid reasons why their growth rate in this field is slow. There are many of them and we would be talking in terms of a total transport examination in a seminar form to canvass them all fully. Some of them are connected with the fairly low rates for road haulage between capital cities. Others are concerned with the actual cost of doing the job, compared with alternative means of transport. I think that some of them are the product of the operators not taking the initiative in air cargo that one might have liked to have seen them take. I understand from talks held recently with both operators that they are pushing their air cargo business quite substantially. So we will be looking for those results from them, as honourable senators opposite will be.

Senator Milliner - Have they had any degree of success?

Senator COTTON - Yes, I would say so. I would say that there is a degree of success, yet to be measured by actual figures as apart from prediction. It takes a while to achieve results. We do not see much result in these matters within a 12-month period. One of the other matters that have concerned the Department and me has been the necessity from time to time for the airline operators to fly during curfew periods, particularly at Brisbane airport, sometimes at Adelaide and quite often at Sydney. This has been a matter of concern and we need to watch always that the actual flights are fully justified. From time to time the Department engages in some fairly harsh exchanges with the airline operators because it believes that the flights are not justified and so refuses their requests and the airlines believe that they are justified and continue to press their case. This is a problem which I meet in the administration of the Department.

I have also been eager to stimulate country air service business, and to that end the Government has decided to spend about $10m on upgrading country airports. I was interested very much in Senator Wriedt's observations, which I shall mention a little later on. Senator Wriedt made quite a lot of play on the fact that under the loan guarantee arrangements the Government had a responsibility to look at the accounts of Ansett Transport Industries Ltd, He ought to know that this is what the Department of Civil Aviation does. Quite regularly and specifically the accounts of Ansett Transport Industries are scrutinised. The figures relating to the company's airline operations are isolated. The accounts are examined very carefully. They are inspected, and when I am given them to look at I find that the airline operations of Ansett Transport Industries and Trans-Australia Airlines bear a remarkable resemblance to each other in their comparability, operation results and investment pattern. As I said earlier, the Department has held the view for quite some time that there would be nothing wrong with Ansett in due course presenting its airline operation accounts in a separate form so that the public as well as the Department can see what the results are. But honourable senators need be in no doubt that the Department sees the company's accounts and looks at them very carefully.

Senator Wriedtreferred to an article in the 'Age' of October 1971. I cannot depend upon the veracity of that article or the observations in it of Mr Galbally. I can depend upon the officers of the Department, who get the accounts, scrutinise them and send a communication to the Minister that bears upon the Department's examination of the accounts. The Senate committee expressed the view that there was wisdom in these accounts in due course being published iri that form, and with that we agree in general principle. We do not support the amendment. We do not think it is necessary. It will hold up the Bill and hold up the purchase of the equipment by the airlines.

An observation was made that Commonwealth public servants tended to travel more by TAA than they do by Ansett. That is by individual decision and not by Government decision. That is quite clear. I have even had figures taken out for each Commonwealth department and analysed across the board. One of the departments whose officers travel mostly with the private airline is the Department of Civil Aviation. In some departments a higher percentage of officers travel with TAA than is the case in other departments. It is purely a decision of the officer concerned and not an instruction by the department that produces this result.

I would like some help from Senator. Wriedt, not tonight but later, about his observation that last year the airlines were offered 3 times as much air freight as they could carry. That sort of evidence would be useful to me and I would be grateful if he could subsequently let me have it. I would be quite interested in those figures. He referred to Tasmania. I agree with him that Tasmania does not have the sort of internal air service that, if I were a Tasmanian, I would want to see. TAA had the service and dropped out of it. Senator Wriedt's observations about the necessity for this service to be revived and what the Tasmanian Government may do about it are of interest and some concern to me. But I note the point that he makes.

I think Senator Wriedt made an observation on the decision by the airlines on what equipment they should have. At one point of time TAA thought that a particular type of aircraft would be better than the one it now has. Senator Wriedt talked about the airbus. Probably he was referring specifically then and later to the 10/11 and the DC10 aircraft. What is now known as the airbus is the A300B, which is a product of the British-French consortium and which will not be available until about 1975. That wide bodied jet is quite attractive "in many ways to the domestic airlines but it does not look as good to them as does the stretched Boeing 727 200 series. One gets no view from either of them that they are not entirely happy with the decision they have made for the equipment referred to in these 2 measures. It could be that both Senator Wriedt and I might find ourselves interested in this later on. The next stage in equipment may be the wide bodied jet that' the senator is talking about- the DC 10, the 10/11 or the A300B, It appears to me, though, from my knowledge that those aircraft would be more properly considered at the next equipment stage rather than at the present stage.

I think I have referred to most of the points I wished to cover.' I did not think I ought to have much to say about a former accountant of ATI and what he might have done when he was employed by that company. 1 assure the Senate that the Department of Civil Aviation looks at the accounts of Ansett extremely carefully. We need to do so. In effect we are responsible for ensuring that it will fulfil its loan obligations under the guarantee. We watch its applications for increases in fares very carefully. We make a pretty close scrutiny of what goes on, because, in: the end I think one cannot depart from the view that I expressed earlier, that domestic air transport in this country is fundamentally a public utility. It is operated on what I call a Scandinavian model. That is one under which a public utility is operated in a kind of duopoly sense, with -a market economy operator and a- . government operator. That has proved, to ,be the successful and competent way. .to-' do the job in this country in the past, and: it offers promise for a little while ahead yet.

But please be assured ' that the Department has an open mind. The Department's view is that it ought to do pretty well what Senator Wriedt exhorts it to do. It does that. Its Minister seeks to do the same. It tries to operate fairly and equitably in the public interest. It tries to balance the scales in the public interest and to; be' fair to both operators, giving one neither ' any advantage nor any disadvantage over the other.

Although they declaim vociferously from time to time against each other and the Government a genuine endeavour is made by the Department, its officers and the Minister to deal fairly with both. But the fundamental test is the Australian public interest.

Observations were made about what Mr Gordon Barton might have done in Ipec Australia Ltd if he had had a chance to do these things. The period in question was before my time. I cannot express any strong view on that. I do not want to canvass the past. Senator Wriedt referred to the air cargo situation. It is a fundamental truth that a great part of the air cargo is carried in the holds of passenger aircraft. It is claimed by the operators that this is the most efficient way of doing it, that it produces a rate that is competitive. It is my understanding that in the new aircraft coming up in the new series the cargo capacity has been increased quite a bit to try to stimulate air cargo business. The Department does, as senators probably know, license various operators who carry air cargo separately. I have not had much of a problem with any of these people. They seem to have been able to capture a part of the market, but the great expansion programmes they have talked about have rarely come to anything.

The conclusion one has reached is that the air cargo business in this country has not yet developed as it might do or could do. But there are still inherent factors in the kind of country Australia is. The population is concentrated in capital cities on the Australian seaboard, and alternative methods of transport are more expensive than they are in countries of the size and magnitude of America. In fact I conclude by saying that it looks a little as if the air cargo business is one that takes a while to reach what I call a take-off point. I would be anxious to stimulate air cargo business in this country, as the Department would be. I think it is not yet at the stage where it has achieved the self-multiplication that it will have later on when the country gets a bigger population and becomes more sophisticated.

I am sorry to have taken as long as I have. Senator Wriedt and I perhaps could have had a talk about this over a couple of cups of tea. Nonetheless I am grateful to him for his observations. I believe the airline policy has served this country extremely well. 1 believe that it was very well conceived. I have no personal feelings other than the greatest respect for the 2 main operators as well as for all the others, for the people who carry out their operations and for the people who take charge of their affairs. I think they do a. good job ' for the Australian people. If from time to time they claim they are being unfairly treated by the Department of Civil Aviation or the Minister, perhaps we might ascribe it to a little natural selfinterest.

The PRESIDENT - Earlier 1 addressed myself to honourable senators on the question of the Bills to which Senator Wriedt's amendment applies. I understand, Senator Wriedt, that you would . like to make a statement on this. If so, would you seek the leave of the Senate?

Senator Wriedt - I seek leave briefly to clarify the position.

The PRESIDENT - Is leave granted? There being no objection, leave is granted.

Senator WRIEDT(Tasmania) - I explain that the amendment I have moved is in respect of the Airline Equipment (Loan Guarantee) Bill, which is Order of the Day No. 11.

The PRESIDENT - Honourable senators will recollect that I mentioned, quite correctly according to the amendment in my possession, that we were dealing with Order of the Day No. 12. However, we are dealing with Order of the Day No. 1 1.

Amendment negatived.

Original question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

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