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Friday, 30 April 1971

Senator KEEFFE (Queensland) - I take the opportunity on the first reading of this money Bill to introduce a matter which I think is of very serious importance. It is probably a matter which ought to have been the subject of an urgency motion or debated -in this chamber in some other way. I refer to the mini-scandal of the Jetair affair. Honourable senators will recall that on 16th, 17th and 18th February many members of the Opposition asked detailed questions as to a contract between the Government and Jetair Australia Ltd. This contract had apparently been well on the way to completion just prior to the commencement of the sitting of the Parliament this year. On 16th February 1971, 1 asked a question of the Leader of the Government in the Senate and Minister for Supply (Senator Sir Kenneth Anderson) on this subject.

I want to make it quite clear that it will be necessary for me to go through the whole case in chronological order. Because of the fact that there are certain time limitations in this chamber it will be necessary for one or two of my colleagues to supplement the case with additional evidence. There are certain things to which I must refer in order to put the case in its right perspective. The question I asked on 16th February, 1971 was whether one or more of the DC3 aircraft purchased from Jetair and donated to Cambodia and other countries was previously owned by a Commonwealth department and sold to Jetair and, if so, what was the original sale price to Jetair and what was the purchase price from Jetair. The Leader of the Government went into a lengthy reply. He was obviously caught off guard. It will become obvious as I go along that in this case the Leader of the Government and Minister for Supply had or appeared to have' perfectly clean hands in this transaction. It is unfortunate that other people, acting on behalf of the Government, committed the Government to the purchase of these aircraft under, shall I say, extremely doubtful circumstances,, to use the most charitable term. The Leader of the Government" included in his answer to my question of 16th. February the following statement:

The Minister for Foreign Affairs issued a statement on 14th February which I presume the honourable senator would 'have received by now. In it he indicated that -Australia had agreed to supply 11 DC3 aircraft .to 3 countries, the Khmer Republic, which was formerly Cambodia, Nepal and Laos, as a foreign aid project. In that project there was a component of 6 DC3 aircraft which are to be purchased from Jetair Australia Ltd. Those are the aircraft involved In the questions asked by the honourable senator. At this point of time the Department of Supply has no policy initiatives in this matter at all.

I think those words are very significant. On the same date Senator Turnbull also asked a question of the Leader of the Government on this subject. The Leader of the Government said, in reply, that the honourable senator's question about prices concerned a transaction that was proceeding at that time and that when the transaction had been completed the information would be made available. It was pretty obvious at that time that the Leader of the Government was over a barrel and that secrecy was being maintained until such time as the deal - I refer to it advisedly as an under the counter deal - had been completed. On the same date I directed a question to the Minister for Air (Senator Drake-Brockman) in relation to aircraft that are surplus. The Minister replied:

Any aircraft which we have surplus to requirements are sent to the Department of Supply for disposal

My colleague, Senator Poyser,, interjected with the comment:

The honourable senator is giving us the run around..

The run around started at that point of time. On' 17th February Senator Georges asked what I thought was a most interesting question. It was as follows:

In addressing my question to the Minister for Air I refer to the purchase of DC3 aircraft from Jetair. Is it a fact that the Royal Australian Air Force had 7 DC3 aircraft available . for disposal at Laverton? Can he explain why only 3 of them were made available for external aid and 4 were allowed to remain rotting away at the base? How does this fit in with- the- Government's austerity campaign, especially since these planes needed only $5,000 to be spent , on them to make them airworthy whereas the Department of Foreign Affairs is reported to have paid Jetair $40,000 for each of the. aircraft obtained from that company?

The Minister for Air replied that there were in fact aircraft which were surplus. He then went on with a fair bit of follow up information which I will not go into in detail at this stage. The fact is that there were other aircraft available for purchase at a much cheaper price. It . is extremely strange that this deal should have been done while the Parliament was not sitting and should have .been disposed of- sealed, signed and delivered - -before the Leader of the Government brought anything ' into this chamber. On 18th February the Leader of the Government indicated that the then Minister for Foreign Affairs had that morning spoken at some length in reply to questions about this matter. This was about the time that we started to get little bits of information about the transaction. The Leader of the Government went on to say that he agreed that in view of the interest being shown in the matter it may be necessary to have a completely consolidated, chronological statement of the circumstances. He said that he was in some personal difficulty because, as the Senate, knew, he had been 'overseas and there was ari acting Minister for Supply in his absence. He said that within 24 hours of his return somebody telephoned him - he thought it was the Australian ' Broadcasting Commission-and asked him about the matter. He said that he; had to say that he was in the process of taking over his: Department again and would have to obtain the information.

The Leader of the Government went on to say that before Tuesday of the next week he would collaborate with the Department of Foreign Affairs to obtain a complete chronological statement setting ' out' what had happened. It is obvious that the Department of Supply would have had to finalise this deal, but here we find that the Minister was in a situation in .which he did not know what was going on while other people were doing the deal for. him. I think it is a pretty poor way of running a. country to keep a senior member of the Cabinet in the dark about aeroplanes that are flying in the daylight. I think that I ought to quote the parley that went on across the chamber on 18th February in relation to this matter. Senator Douglas McClelland asked whether anyone had looked '&t any aircraft other than those owned by Jetair. The Leader of the Government, said that he could not answer that question. He went on to say that if his Department were invited to look at certain aircraft those were the ones it would look at. Senator Turnbull then made the- following interjection:

I was going to allow the matter rest after the Minister made his statement, bm he ended that statement by saying that the purchases were .made.

The Leader of the Government, replied that they were iri the process of being made. Senator Turnbull came back with the following interjection:

You said they were -made.. Even if they are being made the Minister must know the. -price. '.

The Leader of the Government said that of course he did. Senator Turnbull again interjected and said:

Why can we not be told?

The amazing reply , of . the Leader , of the Government was as follows: , .

The answer to that question is pretty .simple. I think in any area of business when ..a transaction of that nature is" being carried on . both the buyer and seller have obligations not to disclose prices. It amazed .me that somebody suggested that we should bandy about the prices while' .the transaction is still proceeding. The Department of Supply never does' that.' I should imagine that no Government Department does that, nor would I imagine that it is done within the commercial community. But the Parliament has a right to know this information in due course, and I will be the first to see -that it ;is given the information at the appropriate lime. . ,

I would like to know who was applying pressure on the Leader of the' Government not to disclose information at that stage. It is perfectly obvious' that, while' he had the information, he was not prepared to disclose it to the Parliament. The Parliament represents the people of Australia. Therefore, it ought to be given any information of this nature, particularly in view of the fact that something like a little under $50,000, plus the cost of this and that which still has to be added to these aircraft, was paid for these aircraft when the same type of aircraft in a similar condition were obviously available at prices ranging from between$7,000 and $8,000 up to about $15,000. Around 15th March replies to questions on notice started to seep through. Prior to that date I had placed a question on notice concerning the latest developments in the Jetair DC3 case.I also asked the Leader of the Government whether the Government had completed the transaction. The Leader of the Government replied a month later in the following terms:

The format documentation needed to complete the transaction was finalised on19th February 1971 when an order was issued to Jetair Australia Ltd for the supply of 6 DC3 aircraft and spares.

He said that the purchase price for the aircraft and spares was $275,000. Then he said that minor repairs to the extent of $4,000 would be necessary on each aircraft; that is another $24,000. He said also that the delivery costs would be of the order of $10,000 per aircraft. That is another $100,000, in round figures, that we Can add to the price of the aircraft. There were other replies to questions on this matter on 15th March. I will not go through all the questions, but I did ask how many aircraft had been purchased for government departments since 1st January 1965, for which departments were the aircraft purchased, how many were new and how many were second hand. This question was also tied up with the DC3s. The Minister replied:

(1)   Apart from the military aircraft manufac tured locally by Department of Supply, 8 aircraft have been purchased since 1st January 1965 for government departments.

(2)   The 8 aircraft purchased, were the 6 'secondhand' aircraft purchased from Jetair (Australia) Ltd, and 2 new aircraft for the Bureau of Mineral Resources.

(3)   No. All 8 aircraft were purchased by private treaty. The 2 new aircraft for the Bureau of Mineral Resources were specific types needed for specialised purposes and each was available from only one local source of supply.

That is a fair enough reply to a question of that nature. The purchase of the 2 planes for the Bureau of Mineral Resources is not under any suspicion whatsoever. Then on the same date I asked another question about this matter. I asked:

(1)   How many government-owned surplus or obsolescent aircraft have been sold in Australia since 1st January 1965.

(2)   How many were sold by public tender or auction and how many were disposed of by private treaty.

The Minister was able to say in reply to the first question that 44 Governmentowned surplus or obsolescent aircraft had been sold in Australia since 1st January 1965. He was able to say, in reply to the second question, that 37 of the 44 aircraft were sold by public tender. I ask: Was this great departure from procedure made in only this one instance? The Minister's reply continued: 7 were disposed of by private treaty, including the 5 ex-RAAF DC3 aircraft purchased by Department of Foreign Affairs for foreign aid. The other 2 aircraft disposed of by private treaty were a Mosquito and a Fairy Firefly sold for use in a London to Sydney air race and to a British military museum respectively.

Of course, those 2 aircraft are not in question. But in the Minister's statement to this House he said:

The Royal Australian Air Force declared surplus 6 DC3 aircraft over the period August to November 1969. Following negotiations between the Departments of Foreign Affairs and Supply 5 of these aircraft were bought for a total of $60,000. Two were purchased on 21st November 1969 and 3 on 15th April 1970. The aircraft were' in a military configuration and it was intended to convert them to the civilian configuration required and to do work necessary to bring the aircraft up to a standard where they could be issued with a certificate of airworthiness for civilian aircraft. As at December 1970 the estimated cost of this commission and renovation was estimated to be $425,000.

In December 1970 Jetair Australia Ltd advertised its fleet for sale in the Sydney Press.

There is no need for me to go into the Ministers statement in any more detail because reference has been made to it in this chamber at other times during the current session. But I think it is interesting to refresh our minds on the manner in. which the offer was made. The Minister's statement concludes:

A written offer was made by the Department of Foreign Affairs to Jetair on 6th January 1971. This was accepted by Jetair.

This quiet little deal was still going on on 6th January 1971. Obviously this House was not in session. In fact, we find that nothing very much leaked to the Press until about the 11th or 12th February, and that was about 5 weeks later. It was a very wellkept deal. The Minister's statement continued:

When the Department of Supply was asked to proceed with preparing the formal contracts it made inquiries to ascertain whether other suitable aircraft were available. The inquiries revealed that other suitable aircraft were not available and the Chairman of the Contracts Board therefore issued a certificate that it was impracticable and inexpedient to call tenders.

The Department of Supply also reported thai having ' regard to the condition of the aircraft, and working out a price' on the method used by Trans Australia Airlines to place a value on similar aircraft, the price to be paid, that is $275,000 which included a small quantity of spare parts, was a reasonable price. The aircraft were bought for this price.

Then there was the additional question about spares to which I referred to a moment ago. One wonders whether the spare parts consisted of a tyre repair outfit. These spare parts have not been listed at any time in any document. I wonder why there is secrecy on this matter, too, because it really does not build up the background to the argument. Then at a later date, in question No. 926, I asked the Minister representing the .Minister for Foreign Affairs the following question:

Did all the countries to which DC3s are now being donated as part of our foreign aid programme request that such aid take the form of aircraft?

Then I asked whether the Minister would make available copies of the written request seeking such aid. A very lengthy reply was given to these questions, and it was a good old passing-the-buck job. In the final part of the answer the Minister said:

These discussions are very often informal-

Referring to discussions with various diplomatic missions and what have you, which one presumes took place at tea parties and on the cocktail circuit - particularly where it is a case of supplying used equipment, lt was as a result of this kind of discussion that the Department became aware of the desire of a number of countries to build up their fleets of DC3 aircraft. As it became, possible to fund the purchase of available aircraft, the consultations were finalised with Nepal (2 aircraft), Laos (3 aircraft) and the Khmer Republic (6 aircraft). The acceptance of Australian offers was received by the respective diplomatic missions as follows:


There is a very serious discrepancy there, because hotourable senators will recall that we were miking this big deal with Jetair 2 days before Cambodia said that it wanted the planes; 2 days before they formalised it. If this matter was discussed on the cocktail circuit earlier, it is obvious that Cambodia was not greatly interested. But apparently Australia said: 'We have now got the planes in our hot little hands at an exorbitant price.' Cambodia said: .'Yes, we will have our share.' In the case. of Laos the request was made personally by. the Laotian Prime Minister to the Australian Ambassador. .We do not have a diplomatic mission in Nepal, so we had to go through the Australian High Commissioner to India who is also accredited as the Ambassador to Nepal. The request was- made through the Nepalese Ambassador to India. In the case of Cambodia - and I use this name of the country instead of the name Khmer Republic under which it is " now known, because people know Cambodia well; it has been in the news a fair bit in the last year or so - the request was formalised by a diplomatic note from the Ministry for Foreign Affairs. This request" was for 5' planes. That was 2 days after, we had purchased them at this exorbitant price and before Cambodia said that' it wanted the planes.

On 18th February 1971. Senator Sir Kenneth Anderson, in a continuation of the Jetair debate in this chamber - the question and answer session - said: .

As I said on, 1 think, the first .day we discussed, this matter, my Department has the responsibility of completing the transaction. When the Department of Supply disposes of aircraft it does so in accordance with a procedure. This purchase was the present lime. I do not propose that we should of Foreign Affairs. Having been made the matter comes to my Department for completion of the transaction. That is the process that is going on at the present time. I do not propose that wc should alter our procedures at all. -

I asked a further question, rather, rudely, in these terms:

Did the initial negotiating discussions regarding the purchase of DC3 aircraft from Jetair (Australia) Limited take place between 'the Minister for Foreign Affairs and Mr Alexander Barton of

Jetair (Australia) Limited? If not, who were involved in such preliminary discussions?

We were told this:

There have been no negotiating discussions between the former Minister for Foreign Affairs and Mr Alexander Barton of Jetair (Australia) Limited. Following advertisements in the press by Jetair (Australia) Limited inviting offers for their DC3 fleet, initial negotiating discussions were held between representatives of Jetair (Australia) Limited and senior officers of the Department of Foreign Affairs with an officer of the Aircraft, Guided Weapons and Electronics Supply Division of the Department of Supply present as technical adviser.

I suggest, with all due respect, that if this is the way in which deals are done some senior officer should be asked to explain how a deal of that nature was permitted. I still suspect that he got his orders from elsewhere. In order to clear that officer somebody in the Department has to come clean and give us details. We were also told:

Treasury Regulation 52 under the Audit Act provides that invitation of public tenders may be dispensed with where the Secretary to the Department of the Treasury, or an officer authorised by him in writing for the purpose, certifies that invitation of tenders would be impracticable or inexpedient. The regulation does not impose any limitation on the value of contracts for which public tenders may be dispensed with.

That information was contained in a reply to a question asked by Senator Georges which related to the manner in which this deal was made. The reply continues:

In the circumstances of this purchase, no good purpose would have been served by the calling of public tenders. The availability situation as known to the Department of Supply at the time of entering into the contract with Jetair may be summarised as follows:

There were 36 DC3 military and civil aircraft in operation or derlared for disposal in Australia. Of these 5 were already owned by Foreign Affairs for overseas aid purposes. Of the remaining 51 aircraft only 13 were 'on the market' to the timing required to meet such overseas aid purposes; these were: 5 military aircraft ex-RAAF and held by Department of Supply for disposal. 6 civil-aircraft on offer from Jetair. 1 specially fitted aircraft ex-Bureau of Mineral Resources. 1 civil aircraft owned privately in Darwin but not in active service.

It was clear to the Departments that the cost of buying the 6 aircraft in the required civilian configuration from Jetair to meet foreign aid purposes represented considerable savings to the Commonwealth as against meeting the requirement from the other available 7 aircraft which would have required substantial work to bring them to the desired standard and configuration.

It might be interesting to note that at about this time aviation journals were carrying advertisements which offered for sale numbers of DC3 aircraft which were available in India, apparently in excellent order, at a very cheap price. One would have thought that, if the Government was so anxious to assist with foreign aid, it would have purchased aircraft in this area thereby reducing transportation costs. In other words, the Government could have completed the deal for one-third of what it cost the taxpayer. It is significant that in a newspaper published at about the time of this cosy deal was an article which carried this heading:

Jetair: Wangling profits from old planes. .

The article states:

Substantially below $50,000' for a used DC3 may possibly be a good buy for the Australian . Government, as the Foreign Minister, Mr McMahon, assured the House of Representatives on Thursday. But if this is 'the case the $8,396 for which the Government originally sold 2 of the 6' it is now buying back from Jetair was an absolute steal.

That was a journalist's pertinent and most appropriate comment. For a long time I have not seen so much buck passing on any issue in this Parliament as happened in this case. I am. not blaming the Minister for Supply. I believe that he was given the bag with the dozen dead cats in it- in this case, the 1 1 bad aircraft- and the smell was oozing to the ceilings of both chambers of the Parliament. He was left to hold the bag. However,I am suggesting that something not quite ethical - I presume I can use that word without getting turfed out on my neck for one month - went on between representatives of this Government and representatives of Jetair.

To get the record straight, let us look at the firm. Jetair was incorporated on 12th May 1969. It was not a very old company when it blew up. The authorised capital was $5m in 50c shares. Some 155 shares were paid for, of which 51 were owned by Alexander Barton of Liberal - Party and other fame, 50 were owned by Mr J. O. Bovill and 50 were owned by Mr R. A. Rydge who is a distant relative of Sir Norman Rydge. We will not hold that against Sir Norman or Rydges Business Journal'. The company's operations were planned at over $100,000 annually, or more than 14,000 times the paid up capital of 577.50. It had a fleet of DC3s bat no licence for the third airline although obviously that was what it was angling for in the long term. The Department of Supply previously sold 2 DC3s to Stenair for $8,369. As I quoted a while ago, we repurchased those aircraft at almost 5 times that price - more than 4 times the price, anyway, with a bit to spare. When Stenair went out of operation h was found that the debt was owing to Harbourside Oil and Bounty Oil. Both of those companies are Alexander companies. I have a suspicious mind and an awful lot of circumstantial evidence is coming out. The companies took over the aircraft and sold them to Jetair. This was a nice cosy little company deal. We do not know the price for which they were sold. No price has been disclosed but in a paper deal of that nature it could have been as low as $5 or less. One could say that in this tragic blowup of Jetair the Prime Minister might have been worried about seeing another firm - 1 give him the highest motives - going bankrupt. I remind honourable senators that he was then the Minister for Foreign Affairs. It is easy to say to an aide: 'Let us get them off the hook. We need some aircraft for Cambodia. Before we do anything about it, we will have to ascertain whether Cambodia needs aircraft'. I claim that so far as Jetair and the Government are concerned unethical deals went on. The Government had been very cagey and very secretive. It has been afraid to come out in the open and tell us the real story. A departmental inquiry or even a governmental inquiry into the whole show should be set up so that the people of Australia will not be hoodwinked again by under the counter deals such as the Jetair-Australian Government mini scandal.

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