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Wednesday, 21 August 1996
Page: 2841


Senator MacGIBBON(5.30 p.m.) —I wish to speak on the Airports Bill 1996 and the Airports (Transitional) Bill 1996. Both these bills aid the privatisation and the sale of the leases on the airports held by the Federal Airports Corporation at the present time. I do not wish to canvass the detail of the bills other than in a very superficial sense because that has been dealt with by previous speakers on this side.

What I want to do is review the operation of the Federal Airports Corporation in the six to eight years it has been in existence, as its existence is clearly now drawing to a close, and to highlight the very great conceptual failures that led the Labor government to set up both the Federal Airports Corporation and what was the Civil Aviation Authority before it got broken up further under the guise or the concept of GBEs, government business enterprises.

A GBE is a very fine sounding title, but in practice, administratively, it has been one of the great failures of Australian public admin istration. At the end of the day it has been a failure simply because there was no accountability or negligible accountability built into the system. It is all very well to talk about having discrete bodies, government business enterprises, but they did have great power—and, in the case of the FAC, it had both power and economic power—and they really did not have to account for the exercise of that power to anyone at all. In the case of both the FAC and the CAA they were monopoly powers.

They were set up to be self-regulating authorities. The concept was generally based on the belief of user pays, which was quite fashionable in the Labor government, particularly in its earlier years. It is a fair enough proposition in a very broad sense to talk about user pays and about not being a burden on the rest of society, but in the case of these two authorities—the Civil Aviation Authority, as it was then, and the Federal Airports Corporation—there is a demonstrable public interest and a public benefit from those authorities.

You cannot attribute the entire cost of an airport or of the regulation of the airways services to the passengers or to the freight that is carried by the airlines. There is a genuine public interest and the public benefits by those transport facilities, by the development of commerce and all that flows from it.

The other great problem with the user-pays concept in this dimension is that the user literally had no control over the expenditure. There is no requirement on the people providing the service to provide it in the most efficient and, therefore, the most economic form.

The belief was that, if the government business enterprises were set up, they could be self-funding. Not only would that lower taxation to the community at large, which of course never happened, but also there was the belief that, because they were called business enterprises, they would be run more efficiently than when they were departments of state and that thereby costs would be made lower to the users—namely, the industry.

In actual fact all we saw was a great explosion of costs. Costs to the aviation industry have gone up as a consequence of the introduction of the CAA and the Federal Airports Corporation in 1986, when the legislation was passed by the then transport minister Gareth Evans. The regrettable point is that it does not matter what happens from now on, those high costs are now built into the aviation industry. It will be impossible to get them back to a more equitable figure.

In the case of the Federal Airports Corporation, it was argued that, in the light of experience overseas, particularly the experience in Europe and the United Kingdom, privatisation of airports had been a great commercial success for the authorities that were administering them. That was perfectly true, but there are some significant differences between the European or the United Kingdom experience and Australia.

First of all, in places like Belgium, Holland and London there is great pressure on land. Land is a very scarce resource. If you have a huge area tied up for an airport which has only runways and hangars on it, you are wasting a valuable resource. Given the high population densities around there, it was quite an attractive proposition commercially to develop the land that was not being used for aviation purposes but which was required in any case to enclose runways and hangars for commercial services. That yielded a great benefit.

That argument is not quite transferable to Australia. As someone who has had a long involvement with the aviation industry, I agree that there is a lot of waste land and a waste of resource in all the airports we have in Australia. If we can use that profitably to reduce the costs and the overheads of the airports, I am more than happy to do that. But you have to remember that airports have certain characteristics. They are there for aircraft to operate on and off. They do have a lot of noise associated with them, regrettably. You do need a certain amount of space for aircraft to land and take off. Those requirements for the operation of aircraft must have primacy over any other commercial development which takes place on the airfield site.

The trouble started with the Federal Airports Corporation right at the outset, because the Labor Party in their usual style were quite dishonest when it came to finance. All the airports in Australia had been paid for by the Australian taxpayers—some of them going back to the 1930s and possibly earlier in one or two other occasions. Not only were they paid for by the taxpayer but their value had been depreciated.

Instead of gifting them to the Federal Airports Corporation, which would have been the correct thing for them to do, they valued them at top dollar at the time as prime development land, transferred that notional value across to the FAC and said, `We will loan you the money to buy these facilities. Furthermore, we require you to pay a high rate of dividend as a return for the nominal value that we have placed on those airports.' So the FAC got off to a very bad start and, in many ways, a totally unrealistic load was placed on them.

In that sense the management plan was quite wrong. The effect of that has been to build this huge multiplier effect into the overheads of airports, which impacts on Australia's competitiveness internationally. I will give an example of this.

For many years I have been operating out of Archerfield, the secondary airport in Brisbane. When the old Department of Civil Aviation operated the airfields that the DCA owned in Australia, there was a small planning staff in Canberra. I do not how many were in it—maybe half a dozen or a dozen engineers who understood the requirements of airfield civil engineering and air traffic control. They planned what was required for the whole of Australia. All the airports around the country were each manned by probably two or three groundsmen, with two groundsmen for most of the secondary airports. They were people who mowed the grass. Development works, like sealing runways and construction, went out to contractors.

As soon as the FAC was set up not only did we have a huge expansion—dozens more people moved into the central planning authority, with very high salaries for the senior personnel—but we got these huge teams on every airport they control in Australia. Archerfield has maybe 10 or 12 people— all with very high executive salaries, all with fine titles, such as business manager, development manager, engineering manager, promotions manager and so on. I presume all of them are getting at least $60,000 to $80,000 a year and have new cars with mobile phones and radios. That is an overhead that secondary airports simply cannot bear.

When you take on the FAC about the fact they are losing money on these airports, they say that they are losing $500,000 or $1 million on X, Y and Z and the only airports they are really making money out of are the primary airports at Brisbane, Sydney and Tullamarine. The reason they are losing money on the others is that they are carrying these absurd overheads that simply cannot be supported.

I declare a personal interest because I am a tenant of the FAC. I have had the unfortunate experience of having to deal with them since they have been in power. I do say quite seriously that they have abused the monopoly powers that were granted to them. Aircraft can be operated only from airfields. They cannot be operated from industrial land, residential land or anything like that. If you live in a capital city, you are obliged to operate from the secondary airport.

The FAC have abused their monopolistic power by being quite unable or unprepared to negotiate on any reasonable terms with their tenants. I originally signed a contract with the old Department of Civil Aviation for a hangar that a group of us had built. That was fairly represented in a lease agreement that took 10 pages. It represented the interests of the tenant and the landlord.

When that lease expired, we were given a 50-page lease agreement from the FAC. Every page of that document was marked and overprinted with the slogan `For discussion purposes only'. When we came to discuss this 50-page document, which listed every conceivable event and incident which could befall the FAC and protected them and gave no rights to the tenant at all, we met a brick wall. We were told, `It's non-negotiable. You sign or else.'

The real sticking point of course was the rent. The rent went up very many times. A tenant simply has no negotiating power with a monopoly landlord who is behaving in this manner. The rental rate was several times that of comparable industrial land over the street. The industrial land over the street is worthless to us. We cannot operate there. We have to operate off the airport. Arguably, we ought to pay a lower rate than that for comparable industrial land rather than pay two or three times the rate for commercial land on the perimeter of the airports.

At the end of the day we are in a position where we just have to give in to the FAC. They very clearly have abused their position and the monopoly powers they have over their tenants. They take one tenant aside and say in private that someone else is paying a certain rate for the rental of a certain property—this is usually someone who has a burning desire to get onto the airfield and knows nothing about the history of it—and, having signed up that person, they then use that as a lever against everyone else with the proviso that, if you do not sign the lease, you take your hangar and return the land to its original condition or they seize your hangar.

They are legally entitled to do that, but it is a pretty draconian way to go about it. It overlooks the fact that some tenants who are on those airports came there under a totally different regime when they dealt with the Department of Civil Aviation. You simply cannot pull down a hangar, dig up six inches of concrete and go.

The way the FAC has gone about this has led to a great flight of people from the secondary airports. That is socially undesirable because the community must have a resource that is an airport. If you do have a designated airport, you can control noise, you can define your approach and departure paths, and you can have a degree of environmental control, which is impossible if people are operating out of a whole lot of small airports.

The other very important point is that it aggregates pilots, maintenance people and aircraft in the one site, which makes oversight and regulation of them very much easier. It becomes very difficult for the regulatory authority if they have to chase after tiny backyard airports all over the place to try to find out who is up to speed on their maintenance and what operating practices might be. So there are very real social benefits in setting up these secondary airports around the capital areas and running them in an economically efficient way.

We have gotten to the position now where all governments see that the name of the game is to maximise the profits from the sale of the airports. So we have the FAC embarking on an even more rabid rental rise program. Everyone would have seen in the last two to three weeks that Qantas and Ansett had refused to even discuss with the FAC the 13 per cent plus rise that it was trying to put onto their lease agreements. The name of the game is to build incomes up as high as they can for the airports so that the government can maximise the sale price of the airports. The other side of that is that you are building in costs to the industry which are going to be permanent. It neglects the original concept, which was to provide a lowering of cost to industry—not to increase them.

The difficulty with all of this is that there simply is no accountability. There is no way you could bring the FAC to account; they were a law unto themselves. The minister has minimal control legally over them and any complaints are met with a deaf ear. I think it is very undesirable in society to have a group with monopoly power—let alone monopoly economic power—which is not accountable effectively to shareholders, only its own board of directors. That has been the great problem with the FAC. Hopefully, though, they will ride off into the pages of history in the next year or two.

But we are still left with the business of what happens to the CAA. It is time we had a look at the CAA, which has now been split into the Civil Aviation and Safety Authority, CASA, Airservices Australia—looking after the air traffic control procedures—and BASI, which is a bit of an outrider unit and does not quite fit into the category of the other two. I think that Airservices Australia in some way can be privatised. It is very difficult to get competition into the provision of air traffic control services, and I do not wish to take the time of the Senate tonight going into that because the whip was trying to wind me up about five minutes ago.

There is a very cogent argument for CASA to be returned as a department of state to this parliament under the control of a minister. CASA really is a regulatory authority and therefore is a policeman. I do not see police forces being privatised or run as government business enterprises. Their role is to ensure the safe navigation of aircraft and the safe operation of aircraft in Australia. They exist to form regulations and see that those regulations are applied. Their role is very similar to a police force and I think the concept of them staying as a government business enterprise is no longer tenable.

I do not expect my own government to fall over and accept this proposition straightaway, but I do think we have to seriously look at that. In the end that authority has to be brought back into the parliament because it has a well defined role and it ought to be accountable to the parliament and a minister.

I hope those few words have not impeded the passage of the Airports (Transitional) Bill 1996 and the Airports Bill 1996, because in general they provide worthwhile amendments to the proposed sale. I hope different authorities buy the two major airports in Brisbane and in Melbourne, because in the interest of competition within the states we ought to have a competitive game running between all the major airports.

The other point is that it is highly desirable that in Brisbane, Sydney and Melbourne the primary airport and the secondary airport are linked together and operated together—that the purchaser of the primary airport should also buy the secondary airport so that one can support the other, because there is a very genuine need to have cooperation between those two.