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Airports Amendment Bill 2002

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2002

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

AIRPORTS AMENDMENT BILL 2002

 

 

 

 

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Transport and Regional Services,

the Honourable John Anderson, MP)



 

AIRPORTS AMENDMENT BILL 2002

 

 

OUTLINE

 

The purpose of the Bill is to amend the Airports Act 1996 (the Act) to:

 

·         Apply the airline ownership provisions of the Act only to airport operator companies for core regulated airports and airports specified in the regulations;

·         Make terms used in clause 9 of the Schedule (which deals with disregarding certain interests for the purpose of the ownership provisions) consistent with those used elsewhere in the ownership provisions;

·         Provide that a person may be declared by the regulations not to be an associate of another person for the purposes of the ownership provisions; and

·         Provide that certain matters contained in documents specified in the regulations may be referred to as in force or existing from time to time.

 

Amendment to the airline ownership provisions

 

The Act imposes limitations on the ownership of Federal airports by airlines and foreign persons, and on the cross-ownership of certain airports.  The ownership rules of the Act are set out in Part 3 of the Act and the Schedule to the Act.

 

One of the objects of the Act is to limit the ownership of airports by airlines.  Sections 44 to 46 of the Act limit any airline to a 5% “stake” in an airport operator company.  A “stake” is defined as the aggregate of the direct control interests the airline has and the direct control interests “associates” of the airline have in the company.  The definition of “associate” is deliberately broad and includes anyone who holds 15% or more of the airline.

 

In light of the economic challenges facing the airline and airport industries in the wake of the terrorist attacks of 11 September 2001 on the United States of America and Ansett’s demise, the Government decided to relax particular aspects of the regulatory arrangements at certain leased Federal airports.  Regulations were made under Clause 9(1)(c) of the Schedule to the Act to increase the scope for investment in general aviation airports by permitting airlines or associates of airlines to take a greater than 5% stake in an airport operator company for any privately leased Federal general aviation airport.  These airports are Essendon, Moorabbin, Archerfield, Parafield and Jandakot.

 

The Regulations made were also part of the Government’s response to the final proposal that the Tesna consortium put to the Government in support of its bid for Ansett Australia.  Linfox, one of the joint-venture partners in the Tesna consortium, is the joint owner of the company that leases Essendon Airport.  The Government announced on 27 November 2001 that it would exempt all of the general aviation airports, including Essendon, from the airline ownership provisions of the Airports Act 1996 .

 

The policy is intended to apply provided that Federal general aviation airports do not fundamentally change their operational character.  For example, the Government does not intend to exempt general aviation airports which make major regular scheduled passenger transport services the basis of their aviation-related activities.  The Government has therefore reserved the right to prescribe any Federal general aviation airport to be subject to the airline ownership restrictions should an airport not comply with the above operational restrictions.

 

The purpose of the proposed key amendment to the Act is to clarify the Government’s reviewed policy on airline ownership so as to provide more legal certainty to general aviation airport lessee companies on the regulatory arrangements under which they are required to operate, and to strengthen the Government’s commitment to provide the Tesna consortium with every opportunity for success without adversely affecting its competitors.

 

This amendment will also have the effect of excluding Bankstown, Camden and Hoxton Park Airports from the airline ownership provisions of the Act.  However, this arrangement will be reviewed during the privatisation process for the Sydney basin airports.  The timetable for privatisation is yet to be finalised.  The amendment will also exempt airport operator companies for Tennant Creek Airport and Mt Isa Airport which are regular passenger transport airports from the airline ownership restrictions, however regulations will be made to address this anomoly.  The policy was to remove the restriction from general aviation airports not regular passenger transport airports.

 

Amendment to the regulation making power under certain clauses of the Schedule to the Act.

 

The current formulation of clause 9(1)(c) of the Schedule to the Act has made it necessary to express regulations made under that clause in a convoluted way in order to fit them within the technical requirements of the clause.  This is because the clause allows interests in shares to be disregarded when the concepts used elsewhere in the Act are direct control interests, stakes and associates.  Therefore a number of minor technical amendments are proposed to make terms used in clause 9(1)(c) consistent with those used elsewhere in the ownership provisions and to add an additional subclause 5(3) to provide that a person may be declared by the regulations not to be an associate of another person for the purposes of the ownership provisions.

 

Amendment to enable reference to documents in the regulations to be as in force or existing from time to time.

 

Unless the contrary intention appears, section 49A of the Acts Interpretation Act 1901 prevents regulations from making provision for or in relation to any matter by applying, adopting or incorporating an instrument that is not an Act or a regulation by reference to that instrument as in force or existing from time to time.  The instrument can only be applied, adopted or incorporated as it was in force on or prior to the time the regulation takes effect.

 

It is proposed that a technical amendment be made to the Act to express a contrary intention for the purposes of section 49A of the Acts Interpretation Act to enable the regulations to provide for the Airside Vehicle Control Handbook and the ICAO document 8168 OPS-611 to be referred to in the regulations as they are updated from time to time.  This will eliminate the need to amend the relevant regulations each time one of these documents is updated.

 

Financial impact statement

 

There is no financial impact.

 

Regulation impact statement

 

The only amendment contained in this Bill which may have an impact on business is the amendment to strengthen Australia’s existing legislation governing the airline ownership rules at leased Federal general aviation airports.

 

1.         ISSUE IDENTIFICATION

 

The Airports Act 1996 (the Act) imposes limitations on the ownership of leased Federal airports by airlines and foreign persons, and on the cross-ownership of certain airports.  The ownership and control rules are set out in Part 3 of the Act and the Schedule to the Act.

 

Sections 44 to 46 of the Act limits any airline to a 5% stake in a Federal airport.  The practical effect of these provisions is that if any individual (or one of their companies or associates) controls 15% or more of an airline, they (or their companies and associates) are limited to a 5% stake in any Federal airport.  Alternatively, if they have a stake of more than 5% in a Federal airport, any individual (together with their companies or associates) are limited to less than a 15% stake in an airline.

 

The policy underpinning the original application of this restriction was to ensure that major airlines are not able to wield significant influence on airports of related ownership to influence the airport’s future directions in ways which reduce, or have the capacity to reduce competition in the aviation industry.  This is particularly important at Sydney Airport for example where, due to physical constraints associated with the limited size of the site, options for future facilities development may conceivably have different impacts on individual airline users.

 

Linfox is the joint owner of the company that leases Essendon Airport, a general aviation airport.  Linfox is also involved through the Tesna consortium in a bid to purchase Ansett Airlines.  The nature of the bid was certain to create an unacceptable airline ownership situation in relation to the airport operator company for Essendon Airport.

 

However, in light of the current economic challenges facing the airline and airport industries flowing from both Ansett’s demise and the September 11 terrorist attacks on the United States of America, the Government decided to relax particular aspects of the regulatory arrangements at certain Federal airports.  Given the different nature of the airport businesses operated by general aviation (GA) Federal airports, compared to the major Federal airports which operate regular public jet services (eg Tullamarine), it was considered appropriate to apply a different airline ownership policy to the GA airports.  Under the new operating environment, it was acknowledged that the airline ownership restrictions imposed an unnecessary restriction on the operation of the Federal GA airports and also impeded the re-establishment of Ansett via the Tesna consortium’s bid for the airline.  The Government announced on 27 November 2001 the measures it was prepared to take to address the demise of Ansett.  In this context the Government stated that it would make immediate transitional regulations to dissapply the airline ownership restrictions at all privately leased Federal general aviation airports and would reinforce its new position on airline ownership through an amendment to the Airport’s Act 1996 in the Autumn sitting of parliament.

 

The Government’s intention was twofold.  Firstly the implementation of its decision removed an unnecessary restriction on the operation of the general aviation airports and in doing so increased the scope for investment in airport operator companies for Federal GA airports.  Secondly it would enable the Tesna bid to conclude without a breach of the airline ownership provisions of the Act.

 

Paragraph 9(1)(c) of the Schedule to the Act provides that, for the purposes of the ownership provisions, an interest held by such persons who are prescribed, can be disregarded.  This mechanism for creating regulations was used to amend the Airports (Ownership - Interest In Shares) Regulations 1996 to provide that an interest in a share that resulted in an airline having a stake in an airport operator company for a Federal GA airport would be disregarded for the airline ownership provisions of the Act.

 

In amending the regulations, the Government has reserved the right to reapply the restriction to any one of the GA airports should that become necessary and GA airport lessee companies (ALCs) have been advised on the Government’s reviewed policy position on airline ownership with respect to GA operations.

 

2.         OBJECTIVES

 

The primary objective of the proposed amendment to the Airports Act is to clarify the Government’s reviewed policy position on airline ownership to a) provide legal certainty to ALCs on the regulatory arrangements under which they are required to operate, and b) strengthen the Government’s commitment to enable the Tesna consortium to conclude its bid without a breach of the airline ownership provisions of the Act.

 

3.         OPTIONS

 

(i)                   Not amend the Act so that the current arrangements are unchanged.

Under this option the Tesna bid for Ansett will not technically breach the airline ownership provisions of the Act.  Pursuant to new Regulation 10AA of the Airports (Ownership - Interest in Shares) Regulations 1996 , the new airline’s stake in Essendon will be disregarded for the airline ownership provisions of the Act.

 

(ii)            Exclude Essendon from the scope of the Act .  This would be achieved by amending the Airports Regulations 1997 to remove reference to Essendon Airport under Part 2.  This would result in the airport lease no longer being an airport lease for the purposes of the Act with the consequential result that the airport would no longer be or be able to be regulated under the Act with the exceptions of Parts 10 and 12 of the Act.  The consent of the ALC would be required under section 162 of the Act.

 

(iii)           Amend the Act to insert an application provision so that airline ownership limits only apply to airport operator companies for core regulated airports and airports specified in the regulations .  The practical effect of this would permit airlines or associates of airlines to take a greater than 5% stake in an airport operator company for any Federal GA airport.

 

4.         IMPACT ANALYSIS

 

Option (i)

While the recent amendment under Clause 9(1)(c) of the Schedule to the Act to the Airports (Ownership - Interest in Shares) Regulations technically enables the Tesna consortium bid to conclude without a breach of the airline ownership provisions of the Act, by doing nothing further, the Government’s reviewed policy on airline ownership restrictions at Federal GA airports risks being perceived as artificial from a policy perspective and may not provide legal certainty to GA ALCs on the regulatory framework under which they must operate.

 

The ownership and control provisions outlined in Part 3 of the Act do not currently contain application provisions.  Thus, unlike some other parts of the Act, it is not possible to apply Part 3 of the Act to selected airports.  In other words, once an airport is subject to an airport lease under the Act, the ALC for that airport is automatically subject to all of the ownership restrictions.  This general situation can only be addressed by amending the Act to include an application provision.

 

In the absence of a parliamentary sitting period, the Government announced that the regulation amendment was a temporary solution for the Tesna consortium prior to an opportunity to amend the Act.

 

Without the certainty afforded by an amendment to the Act, the GA airports may be reluctant to seek investment from consortia which include airlines or associates of airlines.  Although this may not result in a nett loss to the ALC it may inhibit potential business and economic growth opportunities for both ALCs of GA airports and airlines in general.

 

Further, this option may result in significant costs to the Federal Government.  The Sydney basin airports are yet to be privatised.  The current regulatory framework governs the privatisation of Sydney Airport and the other Sydney basin airports.  Bidders for Sydney Airport have focussed on regulatory uncertainty as one of the key risks for the sale.  Any change to the basic regulatory framework for ownership and control needs to be explicit so that the bidders for the Sydney basin airports are certain of the regulatory regime.  Regulatory uncertainty may undermine the Government’s objective of obtaining maximum proceeds from privatisation whilst achieving all its specified policy objectives.

 

Option (ii)

Although not fully explored, the impact of the airport site declaration being repealed from the regulations would have a considerable impact on the status of the airport lease including in particular the cost to both the Government and the ALC of arranging a surrender of the airport lease so as to regrant a lease pursuant to the Lands Acquisitions Act .  In practice it may be that such a move would need to be accompanied by a decision, in the public interest, to hand regulatory control in relation to the airport to the State Government.

 

Although this option would reduce the Federal Government’s regulatory costs, these costs would be transferred to State Government.  It would be expected that this would take some time to negotiate at a cost to all parties concerned.  It is likely that the site may become a liability for the Commonwealth in that, although it owns the land, it would be unable to regulate the majority of activities undertaken on site.

 

Option (iii)

The option of an Amendment to the Act to apply the airline ownership provisions only to airport operator companies for core regulated airports and airports specified in the regulations is the most practical option for achieving the Government’s objectives.

 

This option benefits the GA ALCs by enabling them to seek investments through avenues previously denied them.  Greater investment options have the potential to result in GA airports being in stronger economic positions with flow on effects (eg higher quality of service) for GA airport users.  A stronger economic position may result in greater prospects of ongoing successful operation and increased asset value to the Commonwealth (as lessor).

 

Maintaining the Airports Act’s regulatory controls under this option ensures the continued protection of the public interest.

 

There is the potential under this option for increased regular passenger transport services at the GA airports.  Where a party has both a controlling interest in a GA airport and a passenger airline that could potentially operate from that airport there is a risk that the party will be able to influence airline and/or airport policies and decisions in such a way as to disadvantage competing airlines or other non-Federal GA airports.  The risk of such anti-competitive conduct is considered to be very low, given the current nature and scale of aviation operations at GA airports and constraints (for example noise regulations) on future operations.  However, the Government has also written to the airport lessee companies for Federal GA airports to clarify its position on airline ownership of Federal GA airports and stated that while it may be prepared to allow some regional regular passenger transport (RPT) services such as that previously operated by Impulse Airlines using Beech 1900 aircraft out of Essendon Airport, the commencement of RPT services that might typically be operated by larger jet aircraft will attract the reapplication of the airline ownership restrictions.

 

Under this option the Government will still reserve the right and ability to reapply the airline ownership restrictions at any of the GA airports should that be deemed necessary, for example if these GA airports commenced operating services more akin to the operations of larger core regulated airports, or if their conduct was considered anti-competitive.

 

5.                   CONSULTATION

 

Following Ansett’s demise an Ansett Task Force was established to advise the Government on the most appropriate way to respond to the crisis.  This Task Force, consisting of a number of Departmental Secretaries, reported to senior Ministers including the Prime Minister, the Deputy Prime Minister, the Treasurer and the Minister for Employment and Workplace Relations.  All decisions on how to respond to the crisis were taken by this group of senior Ministers.

 

Below this structure and reporting to the Ansett Task Force was an Inter-Department Committee consisting of senior officers from the Department of Prime Minister and Cabinet, Treasury, the Department of Finance and Administration, the Department of Employment and Workplace Relations and the Department of Transport and Regional Services.

 

On 27 November 2001 the Government announced what measures it would take to assist competition in the aviation industry and in that context announced that it would make transitional regulations immediately before an amendment to the Act to exempt GA airports from the airline ownership provisions of the Act in an attempt to provide the Tesna consortium every opportunity for success without adversely affecting its competitors.

 

Upon amending the regulations, the Minister for Transport and Regional Services wrote to the Airport Lessee Companies for the GA airports specified in the regulations to advise them of the new regulatory arrangements.

 

Although the issues have only been in the public domain since the Government’s media announcement, no opposition to the proposal has been identified.  However, given the tight time frame under which the department was required to respond to the decisions of the Ansett Task Force, complete consultation was not undertaken.

 

6.                   CONCLUSION

 

The preferred option is Option (iii), namely to amend the Airports Act so as to apply the airline ownership provisions to airport operator companies for core regulated airports and airport specified in the regulations.  This will clarify the Government’s reviewed policy position on airline ownership to a) provide legal certainty to ALCs on the regulatory arrangements under which they are required to operate, and b) strengthen the Government’s commitment to enable the Tesna consortium to conclude its bid without a breach of the airline ownership provisions of the Act.

 

7.                   IMPLEMENTATION AND REVIEW

 

Consistent with the recent amendment to the Airports (Ownership - Interest in Shares) Regulations , the Government will formally advise the GA ALCs of the new regulatory arrangements.

 

The Department of Transport and Regional Services is responsible for the regulatory oversight of all the leased Federal airports.  As part of their arrangements for monitoring compliance with Government regulation, the Department undertakes annual lease review meetings with ALCs.  This forum would be an appropriate avenue to monitor the ALCs understanding of and compliance with the amended regulatory arrangements.

 

In addition, the Department is undertaking a review of the Airports Act this year.  In this context, all regulatory arrangements in place at leased Federal airports will be reviewed. ALCs and relevant stakeholders will be consulted during this process.

 

Should GA ALCs not comply with the spirit as well as the letter of the legislation there is sufficient scope within the Act to bring any or all of the GA airports back under the airline ownership provisions.  An example in which this may be deemed necessary would be where a GA airport seeks to take on the characteristics of a core regulated airports (eg operating regular passenger transport jet services).

 

 



AIRPORTS AMENDMENT BILL 2002

 

 

NOTES ON CLAUSES

 

Clause 1: Short Title

 

1.       Clause 1 is a formal provision specifying the title of the proposed Act.

 

Clause 2: Commencement

 

2.       Sections 1-3 and items 2-4 of Schedule 1 of the proposed Act will commence on the day on which it receives the Royal Assent.  Item 1 of Schedule 1 will commence on a day to be fixed by proclamation.

 

Clause 3: Schedule(s)

 

3.       Clause 3 is a formal clause indicating that each Act specified in a Schedule to the Bill is amended as set out in the Schedule.

 

SCHEDULE 1 - Airports Act 1996

 

The purpose of Schedule 1 is to amend the Airports Act 1996 .

 

Item 1 - Before section 44 (in Division 4 of Part 3)

 

Item 1 inserts an application provision into Division 4 of Part 3 of the Act.  The ownership and control provisions outlined in Part 3 do not currently contain application provisions unlike may other parts of the Act.  The insertion of the proposed application provision will have the effect of applying the airline ownership restrictions only to airport-operator companies for core regulated airports (defined in the Act) and airports specified in the regulations if there is an airport lease for the airport.

 

Item 2 - At the end of section 252

 

Item 2 adds words to express a contrary intention for the purposes of section 49A of the Acts Interpretation Act so as to enable the specified documents to be referred to in regulations as in force or existing from time to time. 

 

Item 3 - At the end of clause 5 of the Schedule

 

Item 3 adds an additional subclause in clause 5 of the Schedule to the Act.  This subclause provides that regulations may be made to declare that a person may be taken not to be an associate of another person for the purposes of the ownership provisions or specified parts of the ownership provisions.

 

Item 4 - After paragraph 9(1)(c) of the Schedule

 

Item 4 adds a new paragraph 9(1)(ca) to subclause 9(1) to allow prescribed direct control interests or stakes in companies held by such persons as are prescribed to be disregarded for the purposes of the ownership provisions.  This amendment supplements the existing paragraph 9(1)(c) which allows prescribed interests in shares to be disregarded and aligns terms used in clause 9 with the major concepts used under the ownership provisions (ie stakes and direct control interests).