VOCA

An aviation researcher, writer, aviation participant, pilot & agricultural researcher. Author of over 35 scientific publications world wide.

Categories

Good reads

Oil Prices

#ozaviation

Warren Truss talks to the Regional Aviation Conference Coolum 2012

The coalition policy as released by Warren Truss in August 2013

The Coalition’s plan for Aviation

30-August-2013

Warren Truss MP –

The Coalition will strengthen our aviation industry to ensure that it is safe, reliable, competitive and proud to be Australian.

The Coalition’s Policy for Aviation will improve consultation, reform the structure of key safety agencies and provide support to struggling sectors of the industry.

The Coalition will invest an additional $3.5 million to support regional aviation by introducing a new and better targeted En Route Rebate Scheme for regional commercial airline carriers to support low volume and new routes to small and remote communities.

The Coalition will establish a high level external review of aviation safety and regulation in Australia to provide a root and branch assessment of current practices and provide a long-term framework for the future of aviation safety regulation in Australia.

Additionally, the Coalition will:

  • focus on the better utilization of Australian airspace, including tasking Airservices Australia with fast-tracking technological and navigational improvements at airports and pursuing methods to decrease aircraft noise for communities; 
  • recognise the importance of Australian airports to the economy, from our major gateway airports and small regional airports, to those that support flight training and general aviation; 
  • revitalise the General Aviation Action Agenda and establish a regular dialogue with the general aviation sector to address industry issues; 
  • continue to promote aviation liberalisation while recognising the need to protect our national interest; 
  •  enhance aviation skills, training and development by undertaking a study into skills shortages in the broader aviation industry; and 
  • ensure that aviation security measures are risk based and implemented in a practical and common sense way.

Over the past six years Labor’s approach to aviation policy has seen cost after cost added to the bottom lines of airlines and airports, pilots and passengers.

Labor has introduced the carbon tax, increased red tape, raised the Passenger Movement Charge and abolished the En Route Rebate Scheme for small regional airlines.

The Coalition recognises that our aviation sector is a vital part of the economy. It employs in excess of 100,000 people and contributes an estimated $17.3 billion to the Australian economy.

The Coalition’s Policy for Aviation will invest $6 million to boost the productivity, safety and competitiveness of our aviation sector.

_____________________________________________________

The speech in full is as follows:

‘Regional Airlines’ bumpy ride needs a smooth landing’

12-October-2012

Warren Truss Address to  Regional Aviation Association of Australia Conference

Palmer Coolum Resort, Sunshine Coast, Coolum

‘Regional Airlines’ bumpy ride needs a smooth landing’
12 October 2012

RAAA Chairman Michael Bridge, CEO Paul Tyrrell, RAAA Directors, ladies and gentlemen.

Thank you for the opportunity to address your conference today.

The aviation industry is incredibly diverse and dynamic, extending far beyond our big national and international carriers to the smaller operators, many of whom are represented here today.

Regional aviation especially dear to me. It connects people and communities.

It provides access to important medical and emergency services, education opportunities, tourism and, increasingly, is the mode of transport many Australians take to work.

According to figures released earlier this year by the Bureau of Infrastructure, Transport and Regional Economics passenger numbers on regional carriers have increased significantly from 950,000 in 1984 to almost 5.7 million in 2010.

However, over the same period, the number of regional airlines decreased from 52 to 27 and the number of regional airports receiving scheduled services fell from 278 to 138.

So while passenger growth is strong, the overall network is patchy.

A recent article by a European based aviation consultant highlighted many of the issues facing regional aviation across the globe.

Patrick Edmond argues in his article that higher fuel prices, hub feeding challenges and higher seat costs on larger aircraft operating on thin routes are significantly affecting the profitability of regional carriers in Europe and the US.

In America, regional carriers American Eagle and Pinnacle are in Chapter 11 bankruptcy, SkyWest is struggling to break even and other regional carriers are restructuring to survive.

Australia’s regional carriers face the same challenges and a few more, but the future offers opportunities and some carriers are reporting good profitability.

Fly in Fly Out

As I said earlier, increasingly, regional aviation provides the link between communities and their place of employment and there can be no doubt that fly-in fly-out services have transformed regional aviation in Australia.

Just consider the numbers:

In Western Australia, the Perth-Port Hedland route saw 16% growth in 2010-11, Perth-Newman grew by over 20% and Paraburdoo-Perth was up a staggering 42%.

In Queensland, Brisbane-Gladstone grew by 33% and Brisbane-Emerald was up 34% in that year alone.

Qantaslink told me this week that they have up to 15 services on busy days to Moranbah, which has no service at all just five years ago.

Alan Joyce in his address to the National Press Club earlier this week noted that Qantas’ intra-state services in Western Australia grew by 22% largely due to demand from the mining and energy sector.

Flights are appearing on departure boards to destinations no-one had heard of a year or two ago.

Clearly the mining and resources industry is one of the key drivers of growth in regional aviation in Australia and will be for many years ahead.

And, for the most part, the aviation industry has responded well to the opportunities provided by the fly-in fly-out model.

Whole new airlines have been created. I have noted more and more 6-8 seat aircraft being based at regional airports to link regional cities to mining towns.

However, with this growth, new and different challenges arise.

Perth and Brisbane Airports are taking over from Sydney as airports where scheduling delays are common and aircraft waste fuel and everyone’s time in holding patterns.

Delayed flights and delay shifts shatter productivity on the site. New slot management systems will help, but opportunities to grow could be constrained.

Permanent relief seems a long way off – in Brisbane at least a decade.

All this is good reason to offer more direct flights from regional airports direct to mining centres.

The fly-in fly-out environment has created social and economic pressures in regional Australia and has put immense strain on existing infrastructure in regional communities, including regional airports that are mostly run by local councils.

For too long the idea of regional development and fly-in fly-out mining development have been seen as mutually exclusive.

Regional communities have been bearing the pressures associated with a rapid rise in population without the associated increase in its permanent population of ratepayers.

With the right focus, the mining boom has the potential to leave a legacy of stronger regional communities across the country, with better permanent economic and social infrastructure.

There is also the opportunity for the expansion of the mining and resources industries to play a role in assisting regional and growing communities further afield. In doing so, it can help these economies take advantage of the employment opportunities the mining and resources industry provides.

Providing greater employment opportunities to areas like the Gold Coast, Sunshine and Fraser Coasts, northern NSW and Bunbury in Western Australia, is an opportunity that hasn’t been fully realised.

In 2011, the Wide Bay Burnett RDA, which covers my electorate, undertook a study which highlighted the benefits that having access to fly-in fly-out would have locally.

Currently the Wide Bay Burnett region has the highest unemployment rate in Australia at around double the national average. It was below the national average before the Howard Government left office.

The region is one of the most disadvantaged in Queensland and it has been consistently overlooked when funding for regional development projects is being handed out.

Access to fly-in fly-out opportunities would help diversify the economy, boost employment and prosperity in the region and have flow-on positive impacts for small businesses closer to home.

Regional communities are great places to live, offering a pleasant, community-conscious lifestyle and support for the families left behind by the fly-in fly-out workforce.

At you last conference I suggested the potential for an ‘Adopt a Mine’ approach, where regional cities can become the residential base for a particular mine, with fly-in fly-out services provided from the base community direct to the mine.

From regional aviation’s perspective, as our fly-in fly-out employment model continues to develop there are further opportunities for your industry to expand into new markets and continue to grow.

There are real challenges and the slowdown will give the sector cause for concern as projects are delayed and layoffs become more common.

Carbon tax

The Gillard government is not helping to create an economic environment that encourages development and investment.

In fact, they are actively discouraging it – the carbon tax, mining tax, another 20 other new taxes and more on the way, red and green tape delays for approvals, shattered confidence and sovereign risk.

The most obvious disincentive is the carbon tax, which as we all know came into effect from the 1 July this year.

As you are only too well aware, the aviation excise for domestic fuel use has been increased as part of the Labor Government’s carbon tax regime.

In the first year alone of its operation, 6 cents per litre has been added to the cost of aviation kerosene and just over 5 cents per litre has been added to the cost of avgas.

That excise will continue to rise year after year.

This is at a time when the price of aviation fuels has already skyrocketed… an increase that has only been compounded by the high Australian dollar, which has broader implications for our economy.

It’s hard to imagine a tougher environment for all businesses in this country, but true to form, Labor has created it with their carbon tax. The worst possible policy at the worst possible time.

Before the global economic downturn jet fuel averaged $87 per barrel but now the average has spiked to more than $100 per barrel.

Qantas has said that their carbon tax bill will be $115 million in the first year.

Virgin’s is estimated at $45 million.

Rex has said that this impost, together with other government policy changes will cost the airline $6 million per year.

Brindabella airlines has estimated that the carbon tax will add about $1,000 a day to its fuel bill.

And all this is only the beginning.

The carbon tax will continue to ratchet up and the increasing cost pressures across the board will continue to mount – especially in regional Australia where people and businesses already pay over the odds.

Despite the Gillard Government’s claims that agriculture is exempt from the carbon tax, excise on aviation fuels used for aerial agriculture will increase and, alarmingly, the carbon tax has been estimated to add $18 per hour to the cost of aerial agriculture and emergency firebombing services – a critical part of fire emergency management in our arid, fire-prone country.

The philosophy underpinning the carbon tax – which is that government needs to take a big stick to business to impose environmental improvements – is simply ignorant.

The aviation industry was and is already a leader in research and development and seizing upon advances to become more fuel efficient.

It is fundamental to your industry’s commercial survival to decrease costs.

The industry certainly does not need a carbon tax to encourage innovation or to become more efficient, to your credit you are already doing it.

In the end, the carbon tax is simply another cost impost for you and a revenue raiser for the government.

For an industry that is already doing what it can to reduce fuel use, and is already struggling to cope with higher costs, the carbon tax is a serious impediment that has the potential to wipe out many marginal routes in regional Australia.

On top of that, the carbon tax only applies to domestic aviation services. So taking a holiday in Bali or Phuket is exempt from the carbon tax but flights to Broome, Coffs Harbour and here on the Sunshine Coast will be taxed.

The Coalition will abolishing the carbon tax. No ifs, no buts.

On day one of a Coalition Government we will instruct the public service to begin the work to get rid of this economy-wide tax.

En route rebate scheme

The carbon tax was just one element of a so-called ‘triple whammy’ of government policy changes that affected regional aviation from 1 July.

As you know, the $6 million per year en route rebate scheme was also wound back from 1 July.

At that time, eight of our regional carriers ceased to receive the subsidy for 81 routes across the country.

This represents yet another cost that will make even more regional air services more marginal.

Regional aviation security changes

The third element of the 1 July ‘triple whammy’ are changes to regional aviation security requirements that have seen increased costs at 21 regional airports across Australia for never explained and dubious security benefits.

A grant was provided by the government for the purchase of the equipment and then weeks prior to the introduction of the scheme limited extra funding was provided for certain airports for capital upgrades.

However, these funds are woefully short of covering the full cost of implementation, which in some cases required major terminal upgrades.

The funding certainly doesn’t cover the cost of ongoing operation and maintenance.

The impact of these increased costs on regional airports, the airlines that service them and passengers is yet to be fully realised, but what is clear is that regional airports with limited budgets will inevitably try and pass on the ongoing operating costs of this equipment, which at some airports has been estimated to top $1 million per year.

Some small airports with RPT services will have to add hundreds of dollars to the cost of air tickets if they hope to achieve cost recovery.

Now we have a government announcement that it intends to recover AFP policing costs from airport owners. This is simple another tax on airport users and will inevitably have to be passed on to passengers.

What’s next? Charging victims of crime if you want a criminal caught?

Effects

We are already beginning to see the effects of these policy changes.

Brindabella Airlines has cut services between Canberra and Albury and Brisbane and Armidale citing increased costs caused by the cessation of the en route subsidy, the carbon tax and other government policy changes as a “major factor” in their decision.

Rex has axed services between Griffith and Melbourne and has stated that “more routes may be cut once the full impact of the new Government taxes has been digested.”

The future? More costs to come

But wait, the government has flagged there are more costs to come.

Earlier this year the Government’s Business Tax Working Group recommended changes to aviation’s depreciation arrangements, which would put our airlines at a further disadvantage when compared to overseas competitors.

For example, Singapore airlines has an effective life of three years for aircraft and New Zealand has a five year effective life. The taxation advantages offered to Middle Eastern airlines like Emirates and Etihad are well known.

Longer depreciation schedules will affect every purchaser and make it even more difficult to modernise the regional and general aviation fleets.

Given the Gillard Government’s track record of hitting Australia’s aviation and tourism industries with increases to the passenger movement charge and the introduction of an airport charge for community policing carried out by the AFP, it is not surprising that industry is uneasy about the prospects of this proposal.

It will only further disadvantage Australian carriers and our local tourism industry.

Conclusion

I am sorry to have to report to you on such a litany of government-induced problems for your industry.

The Coalition is well aware of the challenges regional aviation faces in Australia and the importance we place on your role in connecting regional Australia – economically and socially.

We want to re-engage and re-establish lines of communication between government and your industry to ensure that you can continue to perform this vital role and grow in doing so.

Rather than dismissing your concerns, we will strive to work with you to ensure Australian aviation has a bright future.

We need to work together to make sure policy settings are geared to encourage a diverse and sustainable aviation industry in this country.

I look forward to continuing to work with you to foster an efficient, safe and viable industry for many years to come.

Thank you and I’m happy to take your questions.