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Tuesday, 29 August 1972
Page: 475

Senator COTTON (New South WalesMinister for Civil Aviation) - by leave - Mr Acting President, the Government has, in the past few weeks, reached decisions on several major matters of civil aviation policy, and it is appropriate that I should report the details of those decisions to Parliament. The Government and the Australian people have every reason to be proud of the civil aviation achievements of this country, both in the domestic and the international fields. Civil aviation is one of Australia's major industries. The Commonwealth itself has approximately $425m invested in a wide network of airports and airway facilities, while the value of aircraft and other assets of the airlines and general aviation operators exceeds $680m. Total employment in the industry is more than 50,000 people. Last financial year our airlines carried 8 million passengers. Our aviation policies, therefore, are of utmost concern to the nation.

As honourable senators know, for some time now the Government has been conducting an extensive review of Australia's competitive 2 airline system. The 2 airline system, established in 1952 and renewed in 1961, is the cornerstone of our domestic aviation policy and provides for 2, and not more than 2, domestic airlines operating on the trunk routes of the Australian mainland. That review was, in part, deferred for some months earlier this year because of a takeover bid for Ansett Transport Industries Ltd which is the private enterprise party to the 2 airline system, and because of subsequent actions taken both by the Senate, through its standing committee system, and by the Victorian State Parliament. The Government has now decided that the 2 airline competitive system should be extended for at least a further 5 years beyond 1977. We have based that decision on the widely recognised fact that the competitive 2 airline system has produced for Australia a safe, stable, modern, well-equipped, efficient and economic airline system of great value not only to Australian air travellers but also to the nation.

The system is really a duopoly operated by a Government owned arm. the Australian National Airlines Commission operating Trans-Australia Airlines., and a private enterprise arm, Ansett Transport Industries Ltd. They are free to compete with each other, the purpose being to give equality of access and opportunity for both themselves and the Australian people. In saying this, we are pleased that, after many years of criticism, the Opposition agreed recently, through its spokesman on civil aviation matters in another place, that the competitive 2 airline system had sufficient merit to warrant its continuation. Australia is a large country both in a geographical and civil aviation sense. In terms of work performed, our domestic services are fifth in the world in size and our international flag carrier Qantas is eleventh. Overall we rank sixth in world standing. This would not have been achieved without the system that we have adopted.

The present agreements on which the competitive 2 airline system is based are due to expire on 1.8th November 1977. We have decided that it would be appropriate to extend those agreements, subject to 5 years notice of cancellation by the Government or ATI at any time after 18th November 1977. The practical effect of this is to extend the competitive 2 airline system for at least 5 years until 1982. Legislation to approve a new agreement will be prepared for introduction in the Senate as soon as possible during this session. This decision to extend the agreements at this lime is based on the Government's belief that the competitive 2 airline system not only is the best policy for Australian domestic air services but also is supported by the very large majority of Australians. Ansett Transport Industries sought a 7 year extension. The crux of the company's case was that continuation of the stable economic environment created by the competitive 2 airline system was absolutely vital before the ATI board could involve its 50,000 investors in the substantial loan commitments needed for additional aircraft, the repayment of which would extend well past the present agreement expiry date of 1977. To underscore the importance of this point, I should mention that in the mid 1960s, the funds invested by Ansett Transport Industries in aircraft totalled S44m. By the mid 1970s they will reach an estimated $130m. Equipment costs are bound to continue to rise, making the problem even more acute.

The Australian civil aviation industry has been characterised by high growth rates. These have been on the average well above the growth rates of the economy as a whole. Although there has been a temporary slackening in the last year, the industry must continue to plan for a substantial growth. The re-equipment plans to cater for this have to be thought out many years ahead. New types of equipment like the wide-bodied jets must come up for consideration, lt is only fair and sensible in the interests of the Australian community and the operators that security should exist for proper plans to be made well enough ahead. In the circumstances, therefore, the Government believes that its proposed 5 year period of notice is fair and reasonable and adequately safeguards the public interest and the interests of future parliaments. I anticipate, of course, that there will be some who will criticise the Government for extending the competitive 2 airline system late in the life of the present Parliament. The simple answer to this is that no government can allow the legitimate business of the country to stagnate simply because an election is approaching. If this philosophy were to be followed no government would take any major decisions in an election year. Another factor to be considered, of course, is the point that I mentioned before: The Government had hoped to complete its review early this year, but had to suspend this consideration until other matters outside its immediate control were resolved.

Let me outline the other major decisions the Government has made in connection with this extension of the competitive 2 airline system. The legislation we plan to introduce into Parliament will include a provision making the new agreement determinable by the Commonwealth if a certain proportion of the voting power in the private enterprise airline, which is party to the agreement, is in the hands of any one foreign owner, or if total overseas ownership and control exceeds certain limits. The precise limits have yet to be determined, but the matter is under close study by the Government advisers.

Before leaving this particular aspect, honourable senators will recall that the Senate Standing Committee on Industry and Trade, in its excellent and thorough report on the Thomas Nationwide Transport Ltd-Ansett Transport Industries Ltd affair, considered in detail the matter of foreign ownership and control of air transport enterprises operating in Australia. The Committee expressed the view that Air Navigation Regulation No. 322, which covers this question, was imprecise and it did not offer adequate guidelines to the Director-General of Civil Aviation or to the Minister for Civil Aviation in their consideration of licence applications by enterprises having some foreign participation. The Government agrees with the general views of the Committee and proposes to have the regulation examined and amended. In doing so, the comments by the Committee, and any subsequent views put forward by the Senate Select Committee on Foreign Ownership and Control, will be taken into account. I believe that all members of this Parliament, and indeed the vast majority of Australians, will support these proposals to maintain ownership of air transport enterprises in the hands of the Australian people. I am sure there will also be universal support for the requirement that Ansett Transport Industries Ltd should produce separate accounts of its airline operations. These will be presented to Parliament and thus permit more informed debate and assessments of the competitive 2 airline system.

Another major decision arising from the Government s review is to give additional routes and opportunities to the Government's own airline, Trans-Australia Airlines, which will be authorised to operate air services between Perth and Darwin in competition with the Ansett subsidiary, Mac Robertson Miller Airline Services. These TAA services will be phased in over a 2-year period starting next June and having regard to the slate of the traffic on the route from time to time. This arrangement is designed specifically to minimise any disruptive effect on the staffing of MacRobertson Miller's present operations. Although traffic growth on routes throughout Western Australia has fallen considerably in recent months, due mainly to reduced mining activities in the north west, the Government nevertheless decided that the Perth-Darwin route could no longer be denied the benefits that competitive services have brought on other major trunk routes throughout Australia. It is interesting to recall that, in pursuance of this policy of granting equal access when economically justified, Ansett Airlines of Australia received rights from Adelaide to Darwin and Brisbane to Darwin in 1961. The total revenue on the network of services linking Perth-Darwin is now sufficiently large to justify competition by all the yardsticks adopted in previous instances where monopoly routes have become competitive, as 1 referred to earlier.

I should add that the approval for TAA to enter the Perth-Darwin route does not involve the Commonwealth Government in any express commitment to upgrade airport facilities at any proposed intermediate airport to cater for a particular aircraft type. Trans-Australia Airlines also will be given immediate rights to operate air services in competition with the Ansett airlines between Darwin-Gove and between Cairns-Weipa-Thursday Island. In the case of this latter route, the Department of Civil Aviation will take all practical steps to minimise the effects of the operation on Bush Pilots Airways Ltd which operates a service calling at intermediate points. The Government has decided further to give TAA greater opportunity to undertake outside engineering works, including Government contracts, and to enter into mutually beneficial arrangements with surface transport carriers and hotel/motel operators. This is designed to improve TransAustralia Airlines' abilities to continue to compete effectively, especially now that it faces additional competition.

Mr Acting Deputy President,let me add that the Government does not pretend that the competitive 2 airline system is faultless, even with the proposed changes that I have outlined. Therefore, in negotiating a new agreement, we propose to require, as a prerequisite, several additional special undertakings from TAA and Ansett designed to: Further reduce some of the more objectionable areas of parallel scheduling; maintain and encourage the operation of country air services; encourage the airlines to pursue actively the introduction of further promotional fares to stimulate the domestic tourist industry; stimulate air freight growth; and keep operations during

Jet curfew hours at Sydney, Brisbane and Adelaide, to an absolute minimum. Nor have we neglected the important role played by operators outside the competitive 2 airline system.

Regional operators like East-West Airlines Ltd, Connair Pty Ltd, Brain and Brown Airfreighters Pty Ltd, Air Express International and Business Jets Pty Ltd will be encouraged to continue to show initiative and enterprise and, according to their specialist abilities, develop such traffic as low-cost inclusive tours, tourist traffic to country centres and specialist freight and passenger services. This encouragement and expansion will be permitted within the framework of an economic 2 airline policy. As concrete evidence of this, the Government has decided to authorise Business Jets to acquire a Fokker Friendship to develop tourist traffic particularly to country centres like Swan Hill. Brain and Brown Airfreighters, which has a long record of successful air freight operations to the Bass Strait Islands, has been given approval to import a Carvair freighter aircraft, and East-West Airlines has been given a clear indication that it can introduce a medium jet on to its regional routes when it considers this economically justifiable.

The role of Connair Pty Ltd in maintaining air services to more than 120 centres throughout the Northern Territory over a period of 34 years is well known. Faced with steeply rising costs of operation, Connair has had to receive much higher subsidy payments from the Commonwealth in recent years, and the Government, in consultation with the company, is seeking ways and means of arresting this trend and reducing Connair's dependence on Commonwealth support, while ensuring the continuation of essential services in the Northern Territory. Here again, the Government has been able to facilitate some expansion of Connair's activities with the prospects of beneficial financial results, and other avenues of this nature will be explored. Each of these moves separately and collectively will be of benefit to rural air services and tourism.

The Government has closely examined applications by TAA and Ansett Airlines for airline licences to operate over the route Alice Springs-Mount Isa-Cairns. At present, Bush Pilots Airways Ltd provides a commuter service between Cairns and Mount Isa and Connair operates an airline service between Alice Springs and Mount Isa. Both the major airlines operate many charter flights over the route between Cairns and Alice Springs, catering specifically for parties of overseas tourists, but normal sector traffic is not carried on these flights. It has been decided to defer a decision on the airlines' applications for Alice Springs-Mount Isa-Cairns licences so that further studies can be made to determine precisely what impact the operation of such regular services would have on Connair and Bush Pilots. In the meantime, the major airlines will continue to enjoy unrestricted rights to operate charter flights to cater for the important tourist trade.

Although not part of the competitive 2 airline system, it is appropriate that I refer to the proposed new arrangements on TAA staff superannuation schemes. As mentioned by the Treasurer (Mr Snedden) in his Budget Speech, the Government is requiring Trans-Australia Airlines to change its accounting arrangements relevant to the operation of these superannuation schemes. The changes proposed will mean that Trans-Australia Airlines' superannuation arrangements will be similar to those adopted by over 30 other Commonwealth instrumentalities, including the Australian Coastal Shipping Commission, the Overseas Telecommunications Commission and the Snowy Mountains Engineering Corporation. At present, TAA uses a large part of its accrued employer's contributions to staff superannuation in financing capital works and day-today operations. The use of superannuation funds in the business in this way is contrary to the normal practice for the commercial enterprise of the Commonwealth. In the circumstances, the Government believes that TAA should terminate this unique arrangement.

In effect, TAA has 2 superannuation schemes. The first is for its non-flying staff, who are contributors to the Commonwealth superannuation scheme. It is proposed that, in this case, TAA will pay to the Commonwealth its employer's contributions to the scheme under pay-as-you-go arrangements similar to those applying to Commonwealth authorities generally. The

Commonwealth will then assume responsibility for pensions when they fall due. The second scheme is that of TAA's flying staff. The proposal here is that the employer's contributions will be paid into a trust fund, as are the employees' contributions at present, and the trustees will be responsible for investing the funds and meeting pension commitments.

The proposed new arrangements involve a payment by TAA to the Commonwealth of an estimated $21m to discharge its accrued liability in respect of non-flying staff as at 30th June 1972, and the liability accruing this year. Provision has been made in the Budget for an advance of $25m to enable TAA to do this, and to withdraw from the business and pay to trustees its accrued contributions to the flying staff superannuation fund amounting to an estimated $4m. This advance will be made by way of loan moneys at commercial rates of interest, and will not form part of the capital of TAA. It will be necessary to amend the Australian National Airlines Act to enable TAA to borrow this amount, and an appropriate Bill will be introduced for this purpose. I stress that the entitlements of TAA employees under the various superannuation schemes are in no way affected by the new arrangements. Nor is any change proposed in respect of employee superannuation contributions; these have always been invested outside the business. The changes relate only to employer superannuation contributions.

The general aviation operators experienced difficulties in 1971-72 similar to those of the previous year. However, this important segment of the industry again flew over one million hours last year and reports suggest that, in the closing months of the year, there was some improvement in activity and that this was tied to the recovery in general economic activity.

The Government welcomed the move in March 1972 by the Australian Aerial Agricultural Association and the Association of Commercial Flying Organisations to merge and form the General Aviation Association (Australia). The Government approved a special establishment grant of $8,000 to enable this new Association to develop as an effective force in the industry.

Recognising the depressed economic state of the general aviation industry, the Government has decided that the 5 per cent increase in air navigation charges announced in the Budget to become effective on 1st December 1972, will not be applied to the great majority of general aviation operators. The Department of Civil Aviation will join with the General Aviation Association to conduct an economic survey of the industry in the next few months, and this will be valuable background material for both the Government and the Association in formulating policies which affect general aviation.

Turning now to our international operator, the Government has decided to increase Qantas' capital by $25m, and appropriate provision has been made in the Budget. This will raise Qantas' capital to $64.4m. It is the first time for 10 years that the Government has had to advance additional capital to the airline. Qantas Airways Ltd has been a most remarkable Australian company. Prior to the injection of these additional funds, capital has been stationary for quite a long time and, in the last 10 years, in dividends and taxation, the company has returned to the Australian taxpayer more than its capital. It has been a substantial earner of foreign exchange for Australia as well as carrying the flag of a great trading nation around the world. Due to over capacity on the world's air routes and increasing costs, it is going through a difficult time, but we are quite confident as a Government that it will emerge from this to show greater growth and success in the future. The money will help to meet essential commitments such as Qantas' fifth Boeing 747 jumbo jet and the repayment of loans raised earlier to finance aircraft and building projects.

I believe this capital increase, together with the Government approval which I announced a few days ago for Qantas to proceed with the $44m first stage of its new Australian headquarters, indicates very clearly the Australian Government's intention to support Qantas and provide it with the facilities, capital and backing necessary to maintain its pre-eminent position in international aviation. 1 wish to comment briefly on one other important subject. This is the special position of aviation in Papua New Guinea. More than half a million passengers and almost 20,000 tons of freight and mail were carried by airline operators in Papua New Guinea in 1971-72. Charter operators also continue to play their traditional and significant part in providing air services to more isolated communities. Air transport and the aeroplane obviously have a vital role in almost every phase of Papua New Guinea's development.

This extensive, safe and efficient aviation industry which now exists in Papua New Guinea is soundly based on the network of aviation facilities and supporting services developed and maintained by the Department of Civil Aviation over many years. This has cost a great deal in money and effort. It is pleasing to note, therefore, that a Select Transport Committee of the Papua New Guinea House of Assembly has acknowledged that, when Papua New Guinea becomes independent, it will inherit a more advanced and efficient aviation system than probably any emerging country in the same position.

The Government has encouraged the move of Papua New Guinea to self government and eventual independence. In civil aviation, we have in mind the eventual handing over to the new nation of responsibility for the operation of air services and the maintenance of the complementary network of aviation facilities. To further this aim, I propose to visit New Guinea shortly for personal discussions with the Chief Minister (Mr Somare). These detailed discussions follow talks recently between the Minister for External Territories (Mr Peacock) and the Chief Minister. I am confident that we can work out with the Chief Minister and his colleagues a programme for the acceptance by the local authorities of responsibility for civil aviation in Papua New Guinea.

At the outset I referred to the size of the civil aviation industry and the important place it occupies in Australia. In particular, the industry is a major one in terms of governmental control and policy, and I have made this statement to the Senate to indicate some of the things this Government has done and proposes to do in this vital area of its responsibilities. I hope that honourable senators will have found my remarks both informative and helpful. I move:

That the Senate take note of the statement.

Debate (on motion by Senator Wriedt) adjourned.

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