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Thursday, 30 May 1996
Page: 1383

Senator KEMP (Parliamentary Secretary to the Minister for Social Security)(10.00 a.m.) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard

Leave granted.

The speeches read as follows—


Government's Approach to Airports

The Government recognises that airports are vitally important to the communities and regions which they serve.

In circumstances where airport usage is increasing rapidly, passenger and freight users need airports which are operating efficiently, are responsive to user requirements and which deliver the services necessary to meet the requirements of the Australian tourism, export and service industries which depend on air transport to compete in world markets.

At the same time, airports can generate substantial adverse impacts, particularly for the communities located in the immediate vicinity of airports. The Government is acutely aware of the aircraft noise issues related to Sydney and Sydney West in particular. Our election commitments therefore included that:

.   Sydney and Sydney West would be withdrawn from the airport leasing process until there is a solution to the aircraft noise issues there

.   the east west runway would be opened

.   a full EIS would be undertaken on Sydney West Airport.

We have already taken decisive steps to deal with these issues, and processes are underway to ensure permanent solutions to aircraft noise issues in Sydney.

In essence this bill and the Airports (Transitional) Bill 1996 provide the legislative framework for granting of leases to airport specific companies and the transfer of assets and obligations associated with those airport operations from the Federal Airports Corporation to the companies. They restart a process which stopped under the previous Government's heavy-handed approach to Sydney Airport and its role in the sales process. We have excised Sydney and Sydney West from the first tranche of sales. The process can thus recommence.

The bills before the House substantially match those previously put forward by the Labor Party. The sales process demands continuity, if it is to proceed quickly. Given the familiarity of the House with the basic provisions of the regime previously proposed, I will run through the essential provisions and then concentrate on the improvements we have made. These improvements meet our election commitments which reflect the interests of airport users; the interests of local communities; and the interests of bidders.

Government Airports Policy

The Government's decision to establish long-term leasehold arrangements at Federal airports will improve the efficiency of airport investment and operations in the interests of users and the general community.

Leasing of the airports will facilitate innovative management and greater local involvement and input to decisions on their operation and development.

Airports deliver highly specialised services to the Australian economy. There will be opportunities for greater autonomy of individual airports post leasing and for airports to cater better for the particular markets which they serve and therefore to meet the needs of local and regional economies.

Aviation Regulatory Arrangements

Leasing of airports does not change the regulatory arrangements in other areas of the Government's aviation policy nor the fundamental roles played by the individual agencies.

The Civil Aviation Safety Authority will continue to have primary responsibility for air safety in Australia. Airservices Australia will continue to provide facilities and services required for the operation of the national airways system.

Regulatory provisions authorise the establishment and monitoring of quality of service performance indicators and Australian Competition and Consumer Commission scrutiny to back up these aspects of the business.

With the advent of leasing, the Government is also aware that significant market power will move from the public sector to the private sector. The Government is thus committed to putting into place an appropriate regulatory framework to protect the interests of current and future airport users and local communities.

At present, the Federal Airports Corporation operates as a self-regulating Government authority in respect of land use, planning and building and on-airport pollution control. Post leasing, these responsibilities will need to be assumed by the Government itself to ensure appropriate public interest regulation of the activities of airport lessees and other users.

As well as providing a regulatory regime which can replace those regulatory functions currently performed by the FAC, the Airports Bill establishes appropriate transparency and reporting obligations on airport operators.

In summary the provisions ensure:

-majority Australian ownership

-a 5% limit on airline (and associate) ownership

-environment strategy requirements

-financial transparency.

These provisions apply to `core regulated airports' and other airports specified in the regulations. Core regulated airports are: Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Hobart, Launceston, Townsville, Coolangatta, Canberra, Alice Springs and Sydney West.

There are also provisions relating to demand management, protection of airspace around airports and other on-airport activities.

Airport Regulation—Post leasing

I turn now to the essential provisions of the Airports Bill.

Leasing and management of airports

The bill establishes several key rules for the leasing of Australia's major international and interstate gateways including:

.   the lessee must be a company specifically established to operate the airport

.   the terms of the initial leases are to be 50 years, with or without an option for renewal for a further 49 years

.   only one company will be able to lease an airport.

The bill will make it mandatory for joint ownership by the same airport-operator company of Sydney and Sydney West airports. The bill allows for Sydney and Sydney West to be structured as separate companies and leased together. Other airports will be leased separately.

Current leasing arrangements for airlines and other on-airport businesses will be transferred with existing obligations and benefits, in accordance with normal practice.

Restrictions on ownership of airport-operator companies

We will be ensuring that airport-operator companies are majority Australian owned with central management to be exercised from within Australia and a majority of directors being either Australian citizens and/or residents.

The airport-operator company will be subject to the following ownership controls:

.   a 49% limit on foreign ownership of the airport-operator company

.   a 5% limit on airline (and associates) ownership of the airport-operator company.

The bill includes significant anti-avoidance provisions to cover schemes to circumvent the leasing, management and ownership rules.

The Government, in recognition of the excision of Sydney/Sydney West airports from the first set of sales, has not set down cross ownership provisions in the bill. Such restrictions could reduce the number of potential bidders for the first tranche airports.

Land use, planning and building controls

There needs to be clarity and certainty on processes which allow Government and community input; and a greater compatibility between on and off airport development.

Accordingly each regulated airport operator will be required to establish:

.   an airport master plan—essentially a long term land use plan to cover a 20 year period

.   major development plans for projects (eg runway, terminal development) at airports which can, where significant environmental impacts result, require appropriate environmental impact assessment processes as is currently the case and

.   airport operators will also need approval for new building activities on airport sites.

Master and major development plans, and environment strategies will be subject to Ministerial approval.

The bill ensures that the airport-operator company undertakes a `public comment' process providing the opportunity for all interested parties to comment on master plans, major development plans and environment strategies. The views of airport users such as the airlines and other tenants, State and local Governments will be a significant part of the comment process.

Environment management

Under no circumstances will airport lessees or other persons on airports be able to escape environmental obligations post leasing.

The development of airport regulatory arrangements post leasing supplements the operation of existing legislation and regulations which cover the curfew, runway operations, flight path and noise acquisition/insulation programs.

An important requirement imposed on airport operators will be the need to develop and implement approved environment strategies. These strategies will include specific measures which the airport lessee proposes to adopt to prevent, control or reduce environmental impacts associated with airport operations.

In developing such strategies, operators must have due regard to public comment requirements and report on consultations held with State and local Governments, airport users and others. Environmental strategies proposed by airport operators will be subject to Ministerial approval.

The bill will also provide the ability to make regulations on environmental standards and impose requirements to be complied with, in relation to the prevention or minimisation of pollution at airport sites. Significant penalties will apply to breaches of these standards backed by the ability for court injunctions if necessary to ensure regulatory compliance. Monitoring and remedying breaches of environmental standards is also provided for under the bill.

Accounts and reports of airport-operator company

Reporting and accounting requirements within the bill and the use of common terminology will facilitate the comparison of airport performance in a transparent manner. Airport operators will be required to publish annually, reports on their operations as determined by the ACCC.

Pricing and Quality of Service

The Government's aim is to ensure there is no abuse of the potential market power of airport operators. Our election commitment was to cap landing charges at the airports using a CPI-X system. The necessary prices oversight can be undertaken by the ACCC. The Government is giving careful consideration to the detailed pricing oversight arrangements.

Future Airport Operations

The bill places a restraint on the Commonwealth not to close or vary airport leases without the consent of the lessee.

Under the proposed airports regime, Australia will require airport operators to meet international air-service obligations, and if necessary, specific regulations can be made to this effect. This provision can cover all major airports in Australia as well as those currently operated by the FAC.

Regulations can be made under the bill to control on-airport activities including liquor, commercial trading, vehicle movements, gambling and smoking. The Government intends to discuss the control of these on-airport activities with the States and Territories. In the absence of regulations being made by the Commonwealth, State/Territory legislation would apply.

Protection of airspace

An important protection for the current and future operation of airports is established in the bill by provisions relating to the protection of airspace.

The bill provides that if it is in the interests of safety, efficiency or regularity of air transport operations, a declaration of prescribed airspace can be made.

New Provisions

The Airports bill 1996 gives effect to the Government's election commitment to access provisions for new airlines, and provides more certainty and clarity in several key areas.

Access for New Entrant Airlines

Provisions have been included in the bill on access for new entrants which will trigger the access provisions of the national competition policy reforms. Airport operators will have to satisfy the ACCC on how they intend to provide access for civil aviation operations; or be deemed a `declared facility' for the purposes of these services. It is the Government's intention to maximise the opportunity for commercial negotiation to solve access issues, but the ACCC may take an arbitration role if negotiation is unsuccessful. This approach will apply at the core regulated airports ie the major twelve FAC airports.

Of course the Government will maintain its discretion to introduce demand management schemes—thus access provided would be subject to the demand management provisions of this bill.

Status of FAC Master Plans

The Airports Bill provisions require Ministerial approval of airport master plans, which relate to a period of 20 years. These provisions are designed to provide a very high level of public consultation. There is a provision, too, which will allow the new airport operator to adopt an FAC master plan for the airport as its own draft master plan, but this plan cannot be approved without complying with the public comment provisions of the bill.

Demand management

Demand management is a power essential to ensuring our election commitment to cap movements at Sydney's Kingsford Smith airport can be enforced, should circumstances so require. Importantly, we will allow airport operators to provide their input into any decisions; but the ultimate decision remains with the Government. Given the importance of the potential use of demand management powers for the airport operator, the bill includes the opportunity for the airport operator to provide the Minister with a submission for consideration before demand management measures are introduced at an airport.

Explanatory Statements

A small number of Ministerial decisions provided for in the bill are not subject to review by the Administrative Appeals Tribunal, given that the Minister is the appropriate final arbiter in these areas of public interest and regulatory control.

To assist with transparency in the exercise of these discretionary powers the bill requires the Minister to table in Parliament a statement when exercising these powers, except where disclosure could prejudice substantially the commercial interests of an affected party.

Rescue and fire fighting services

The bill includes provision for Airservices Australia to generally oversee the provision of rescue and fire fighting services at Federal airports. There is a need for flexibility in circumstances where these services can be more efficiently provided, working to standards set by the Civil Aviation Safety Authority and with relevant equipment and training.

The bill therefore enables the Minister to approve these services at Federal airports.

Definition of a Major Development

Major development approval provisions are included primarily to allow all such developments to which airport operators or other parties are committed to be examined for their environmental impact. The bill now before the House provides that the definition of major airport developments encompasses, as well as passenger terminals, all proposed new buildings over $10 million and other significant developments.


The bill also provides for priority of access to airports for Defence-related purposes and for emergency and disaster relief.


While more certainty and clarity has been provided in the bill, regulations will still play an important part in the final regulatory framework.

I intend to ensure that draft regulations will be provided for consultation and comment before finalisation. In this cooperative and responsible way, the best outcomes can be achieved for Government, the travelling public, potential airport operators and investors and the community at large.


The Airports Bill 1996 will form the central part of the regulatory oversight of the operations at Australia's major airports post leasing.

The leasing of airports represents an important part of the Government's transport reform program. The Government's Airports Bill 1996 and companion Airports Transitional Bill 1996 will allow the leasing to proceed swiftly and with strong protection of the public interest.

The Government's airport reforms will provide a significant boost to employment and investment in the Australian economy.


The sale of long-term leases over airports currently operated by the Federal Airports Corporation (FAC) forms an important part of this government's privatisation program. The government is confident that the leasing process for the Federal airports offers a number of long-term benefits to the Australian people.

The decision to sell long-term leases offers benefits to airport users and the community as a whole. The leasing process should lead to further improvements in the operating efficiency and quality of service of the airports by exposing them to private sector disciplines. It will also provide an opportunity for the funds of Australians to be productively employed in the provision of national infrastructure through the involvement of superannuation and investment managers.

The provision of airport infrastructure has traditionally been considered the responsibility of government due to the large amount of capital required. However today, Australia's capital markets have reached a level of maturity and sophistication capable of supporting the evolving infrastructure requirements of airports. The commonwealth's involvement in the provision of such infrastructure will no longer be necessary given the protection to public interest considerations afforded by the proposed regulatory regime of the Airports Bill 1996.

The primary purpose of this bill is to put into place a framework to facilitate leasing of all Federal airports effectively as ongoing businesses under a two stage sales process. It is proposed that Mel bourne, Brisbane and Perth airports will be included in the first phase leasehold sales. Adelaide will also be added to the first tranche consistent with our election commitment, subject to decisions to be taken in the budget. The leasing of Sydney and Sydney-West airports will be deferred pending resolution of noise issues at Sydney airport and an environmental impact study being conducted on Sydney-West Airport. In the meantime, consideration will be given to how best to position Sydney and Sydney-West airports for future sale.

The bill provides for the transfer of airport land and other assets from the FAC to the commonwealth; the granting of leases over the airports and transfer of associated assets to individual airport companies; and the orderly treatment of the FAC's debts during the sales process. Provision has also been made in the bill for the transfer of airport staff employed by the FAC to the airport companies.

The companion bill, the Airports Bill 1996, will establish the regulatory regime for airports post-leasing. This regulatory regime is designed to improve the efficiency of airport operations while ensuring the protection of airport user and community interests.

Leasing the airports permits the government to retain some control over the land on which the airports are located. The long term of the lease will ensure that sales proceeds are similar to sale under freehold title.

The sale of long term leases is expected to produce a significant net offset to outlays in the forthcoming financial years. Provision has been made in the bill to allow for the orderly disposal of the FAC's assets and facilitate and account for the leasing process. The transactions associated with these provisions are expected to be budget neutral. As Honourable Members would appreciate, it would not be appropriate for the government to disclose details of expected proceeds from the leasing of the airports, as it is likely this would influence the outcome of the sale process, possibly reducing proceeds.

As I have indicated, a number of measures designed to facilitate the leasing of the Federal airports are contained in the bill now before the House. These measures provide for the land and associated assets of the FAC to be transferred to the commonwealth, as well as provide for the commonwealth to grant a lease over land at a particular airport to a company referred to as an airport lessee company. Following this, the bill provides the government with a flexible disposal strategy to grant an airport lease to a company either established by the commonwealth or the purchaser. In both instances when the lease is granted, the FAC's contractual rights, obligations and liabilities are transferred to the airport lessee company.

The bill also provides for airport staff to transfer to the airport lessee companies at the time a lease is granted over the relevant airport. The bill also contains provisions to enable transfer of accrued benefits and leave entitlements post sale. These provisions are designed to ensure fair and consistent treatment of staff.

To ensure that state and territory governments receive duties to which they are entitled on sale transactions which take place in their state or territory, the sale of shares in airport lessee companies or the sale of leases over the airports will be subject to state and territory taxes and stamp duties. The bill does, however, provide for the transfer of the lease or assets that take place while the airport lessee company is owned by the commonwealth to be exempt from stamp duty. This exemption does not cover the sale by the commonwealth of its shares in the company, nor the transfer of the lease or assets to a company where that transfer takes place after sale time.

A number of taxation provisions have been provided for in the bill to ensure that both the purchasers and existing lessees of the FAC are not disadvantaged from a taxation perspective. The government has adopted these provisions in respect of transactions between the FAC, the commonwealth and the airport lessee company, to ensure that the tax effect of the transactions would be the same as if it were a sale by the FAC in the private market place.

Provisions have also been made in the bill to deal with the FAC's debt, which comprises both commonwealth and non-commonwealth debt. These provisions, along with the existing provisions in the FAC's statute, provide the government flexibility to deal with the FAC's debts in the most appropriate manner. In managing the FAC's debt during the sale process, the government can assure the Honourable Members that the FAC bondholder's interests will be taken into account. The bill also provides for the treatment of the debt during the sale process to be properly recorded in the commonwealth's accounts.

Following the leasing of the major Federal airports, the FAC Head Office will continue to have a role in overseeing the management of the remaining Federal airports prior to their leasing in the second phase of the sale process.

These second phase airports present specific regional and administrative issues which will need to be addressed prior to their lease. Among these are the joint user airports at Canberra, Darwin and Townsville which are jointly operated by the FAC and the Department of Defence. The development of new operating arrangements with Defence will be required before the civil facilities at these airports can be leased.

It is expected that a number of the second phase airports which have been unprofitable in the past, should prove commercially viable under private ownership through cost reductions and improved revenues. The government will examine options to secure the future of the remaining few airports that may prove to be commercially non-viable by taking into account the specific financial characteristics of each airport, as well as regional interests and concerns.

This bill is intended to provide a framework for the sale of leases over the airports currently operated by the Federal Airports Corporation. This bill and the companion Airports Bill 1996 are designed to promote the most efficient operation and maintenance of Australia's airport infrastructure, while ensuring that the benefits of increased efficiency are passed on to airport users and the community as a whole. The government is confident that these arrangements will ensure a fair return from the airports while allowing it to divest itself of a function in which its involvement is no longer essential.

Ordered that further consideration of the second reading of these bills be adjourned until the first day of sitting in the Spring sittings, in accordance with the order agreed to on 29 November 1994.