6.1
According to the Australian Federation of Air Pilots (AFAP), the pandemic has provided a lesson on how fragile the aviation sector is, while at the same time showing how instrumental it is as a key facet of national infrastructure. AFAP argued that 'this crisis should therefore also be a catalyst to reshape the aviation industry on a more financial and socially sustainable footing, thereby softening the boom-and-bust cycle that has marked the industry for decades'.
6.2
In this final chapter, the committee analyses evidence on options for managing the opportunities and challenges facing the broader aviation sector. The chapter:
looks at arguments in favour of an enhanced role for the Australian Government in aviation;
discusses the Government's Aviation Recovery Framework—a five-year plan for the future of Australian aviation, and regulatory issues raised by submitters;
considers calls for increased support for airports; and
weighs up differing views on airline competition.
The role of the Australian Government in aviation
6.3
Australian governments have traditionally played a significant role as an owner, funder and provider of services to the public, including in relation to aviation. However, from the early 1990s the Australian Government pursued a privatisation agenda: transferring of all of Australia's major airports from the Commonwealth to private companies under long-term leases; changing the regulation of cost recovery at airports, and restructuring charges for aviation services. This included the sale of Qantas and airports owned by the Federal Airports Corporation, as well as divesting regional airports under the Aerodrome Local Ownership Plan.
6.4
It has been argued that these reforms increased flexibility, competition and capacity in the sector. However, evidence received during this inquiry suggests that these reforms have led to significant vulnerabilities in the sector—dramatically exposed by the pandemic.
6.5
The Australian Government continues to be a significant source of infrastructure funding through payments to state and territory governments. According to the Department of Infrastructure, Transport, Regional Development and Communications (the Department of Infrastructure), the Australian Government's primary role in relation to aviation concerns safety and security.
6.6
The Australian Government regulates the security of the Australian aviation environment through the Aviation Transport Security Act 2004 and the Aviation Transport Security Regulations 2005, to help safeguard Australia's aviation transport system from terrorism and acts of unlawful interference. In addition, airways services—comprised of airspace management, en-route and airport terminal-related air traffic control, aviation environment services, rescue and firefighting services—remain a Commonwealth responsibility. However, it is the responsibility of aviation industry participants, such as airport and aircraft operations to manage their day-to-day aviation security operations.
6.7
The committee notes that responsibility for aspects of Australian aviation services and airports are shared across a number of government bodies:
The Civil Aviation Safety Authority (CASA) is the national authority responsible for civil aviation. This includes licensing pilots, registering aircraft, overseeing aviation safety and promoting safety awareness.
The Australian Competition and Consumer Commission (ACCC) monitors prices, costs and profits of domestic airlines and major airports to promote transparency about services and performance.
Airservices Australia (Airservices) is Australia's principal civil air navigation service provider. The functions of Airservices are outlined in the Air Services Act 1995 and include the provision of air navigation services, aeronautical information and aviation rescue and firefighting services.
6.8
Together with state, territory and local governments, the Australian Government also has a role in ensuring minimum access to essential aviation services and connectivity in regional Australia.
6.9
Over the course of the inquiry a number of participants raised concerns about the impacts that privatisation has had on the sector. Participants largely agreed that the pandemic has exposed the weakness of the aviation sector, and its vulnerability to external shocks.
6.10
During the pandemic, the Australian Government provided over $5.3 billion to the sector, across 'multiple agencies' and programs. Without this support, these companies would likely not have survived. The sector's total reliance on government support during the pandemic has been clear, leading many participants to argue for greater government intervention to ensure the long‑term sustainability of aviation as a national asset.
6.11
Transport Workers Union (TWU), in particular, maintained that aviation is too important to leave to the market and 'requires government intervention … on two basic levels':
Firstly, protection for working conditions, to ensure the industry can thrive, and is attractive and sustainable—achieved by putting 'stabilisers put in place', 'laws … that allow workers to be supported' and prevent companies from attacking workers' conditions.
Secondly, because of the critical role aviation plays in Australia, the Australian Government should have 'a direct financial interest in aviation companies', because government will be called upon to 'level out these peaks and troughs that inevitably come'.
6.12
The following section considers evidence provided over the course of the inquiry on number of issues relating to the Australian Government's role in aviation policy and coordination. It specifically looks at:
proposals for better coordination of Australia's internal borders;
responses to the Australian Government's Aviation Recovery Framework, released in December 2021;
industry calls for slot allocation reform;
issues with the funding model of regulatory agencies that have been exposed by the pandemic; and
inquiry participants' calls for better consultation.
National coordination of border closures
6.13
Complexity and poor coordination of aviation policy was a clear theme throughout the inquiry. Participants also noted the devastating impacts of sudden state border closures on the aviation industry, and suggested there may be a possible role for the Australian Government in coordinating domestic borders. Better coordination in future crises could reduce inconsistency and improve customer confidence.
6.14
The Australian Airports Association (AAA) submitted that a 'better coordinated, unified and consistent approach to controlling domestic borders during a future crisis is an important lesson learned from the pandemic'. Similarly, Mr Richard Fleming, General Manager of the Airline Competition Taskforce at ACCC, argued for better coordination of border closures.
6.15
Ms Jayne Hrdlicka, Chief Executive Officer and Managing Director of Virgin Australia (Virgin), argued that a key priority should be 'a coordinated national framework where the state and territory decisions on borders and the associated regulations are aligned and are more manageable'.
6.16
Mr Adam Rowe, Executive General Manager, Business Development and Marketing at Queensland Airports, echoed these concerns:
The single factor most impacting our business and the aviation sector as a whole is the lack of clear and consistent state and territory controls for travel. Establishing and adhering to a national framework is an absolute priority. Until there are practical, transparent and nationally consistent rules in place for the management of COVID-19 cases confidence in travel will continue to be impacted.
6.17
Adelaide Airport Limited and Parafield Airport Limited argued that the Australian Government should take control of domestic borders via an emergency proclamation. It argued that these emergency measures would be 'in the best interests of the national economy and the aviation and tourism sectors'.
6.18
Canberra Airport argued that National Cabinet should be responsible for coordinating state and territory borders 'to facilitate free trade, the free passage of people and freight within Australia'.
6.19
Captain Murray Butt, President of the Australian and International Pilots Association (AIPA), claimed that 'COVID-19 has exposed all the vulnerabilities of our historical approach to nurturing Australia's aviation capabilities'. He went on to say, Australia's 'domestic connectivity is fragile and hostage to inconsistent and uncoordinated state government actions'.
The Aviation Recovery Framework
6.20
As discussed in Chapter 5, a major concern for participants in the inquiry what they saw as a lack of vision and long-term planning for the aviation sector's recovery from the impacts of the pandemic.
6.21
In its initial submission to the inquiry (dated January 2021), the Department of Infrastructure stated that the Australian Government was intending to 'release a Five Year Plan for Aviation in the first half of 2021'. However, the plan was not published until December 2021.
6.22
The Framework lays out the Government's 'long term vision for Australian aviation', which 'focuses on a strong and competitive sector; safe, secure and sustainable aviation; and ensuring connectivity in Australia's regions through access to essential aviation services'.
6.23
Included in the Framework are 'six strategic priorities to boost the sector's recovery and achieve [the Government's] vision', which are:
Supporting aviation efficiency;
Building a sustainable pipeline of workforce skills;
Optimising airport infrastructure;
Connecting regional communities;
Revitalising General Aviation; and
Embracing new technologies, including drones.
6.24
The Framework recognises that there is a need to 'review, streamline and align regulatory pathways and frameworks' in order to support a growing aviation workforce. The Government expects that this will involve a review of, and possible changes to, 'licencing pathways' and the way certain regulations are connected to certain qualifications. The Framework states that Government will 'work with industry to determine how best to address these issues and promote the sector to build a reliable supply of fit-for-purpose workforce skills'.
6.25
One component of the Framework is an independent review—to be led by former Secretary of the Department of Employment, Skills, Small and Family Business, Ms Kerri Hartland—into aviation and maritime transport security, 'with a view to reducing unnecessary costs and red tape for industry':
The priority for the review will be to identify ready-to-implement regulatory reform priorities that will help to facilitate the industry-led economic recovery from the COVID-19 pandemic.
6.26
Another key component is a suite of measures relating to general aviation (GA), including a 'Roadmap to Revitalising GA in Australia', and a $30 million investment in Automatic Dependent Surveillance Broadcast (ADS-B) transponder technology, paid through rebates to aircraft operators.
6.27
Issues relating to the future of general aviation have been explored in detail by the Senate Rural and Regional Affairs and Transport Legislation Committee in its inquiry into Australia's general aviation industry.
6.28
A number of other key components of the Framework relate to issues specifically raised by inquiry participants, and are discussed in those sections, further on this chapter. The Framework's response to workforce capacity issues is discussed below.
Workforce skills and capacity
6.29
The Government's Aviation Recovery Framework acknowledges that there are significant 'workforce pressures' returning as the aviation sector begins to emerge from its pandemic-induced downturn. The Government concedes that:
long-term workforce capacity 'may suffer as a direct result of the
COVID‑19 pandemic';
skilled workers 'may be leaving the sector';
students studying aviation have been impacted by international border closures, reduced student numbers and the 'extended closures of flight training schools'; and
ongoing 'uncertainty and volatility appears to be deterring new entrants to the industry'.
6.30
Short-term initiatives (such as the Aviation Services Accreditation Support, International Aviation Support, and Retaining Domestic Airline Capability program) may have helped 'preserve critical capability over the short term', but the Government acknowledges that 'further action is required to address longer term challenges'. Also that these workforce challenges are not new, having been clearly articulated in the Report from the Expert Panel on Aviation Skills and Training in July 2018.
6.31
The Framework notes recommendations from the 2018 Expert Panel, which were designed to create 'a sustainable and successful aviation training sector', but says that 'work to address the challenges identified in the Report was derailed by the global pandemic'. To address these challenges, the Framework proposes prioritising regulatory reforms:
… relating to the need to review, streamline and align regulatory pathways and frameworks. These frameworks relate to, among other things, licencing pathways and the relationship between CASA regulations and the Vocational Education and Training framework under Australian Skills Quality Authority (ASQA), and flight examiner upgrade pathways and examiner/instructor qualifications.
6.32
It also includes information about the Government's general investments in the broader Vocational Education and Training (VET) sector, including: the JobTrainer Fund, Boosting Apprenticeships Commencements (BAC) wage subsidy; establishment of the National Skills Commission and National Careers Institute; and 'immediate reforms under the Heads of Agreement for Skills Reform' that will 'strengthen the role of industry and employers' in 'industry Clusters'—including the 'Wholesale, Retail, Transport and Logistics cluster', which will include aviation.
6.33
However, while the Framework was accompanied by over '$78 million in new funding', and provides a high level of detail on initiatives under a number of other strategic priority areas, it only includes one substantive workforce initiative: a $4 million extension to the existing Women in Aviation program. The strategic priority item entitled, 'building a sustainable pipeleine of workforce skills', contains little other detail, promising only to deliver:
Ongoing activities at domestic and international conferences, workshops and careers events, publishing complementary online resources, and working with industry to market Australia as an ideal place to study aviation.
6.34
Asked why the Framework is so 'light' on detail in relation to workforce issues, First Assistant Secretary of Domestic Aviation and Reform, Ms Janet Quigley, said the Department is looking at vocational and university training, and 'how that's aligned', at 'regulatory factors', and 'making sure they're not overly burdensome'. However, Ms Quigley said issues like industrial action 'would normally fit' within the Attorney-General's portfolio and Fair Work Australia:
As the department of infrastructure, we're very focused on that pipeline and ensuring that there are career pathways and appropriate academic support for them to reach their skill sets.
6.35
Ms Quigley was asked if the Department of Infrastructure would take a greater interest in workforce issues if the 'pipeline' of workers into the sector was not functioning to provide sufficient supply. Ms Quigley replied that the Department has 'certainly heard from the sector that the workforce is not impeding recovery'. However, the Department acknowledged that workforce issues 'were there pre-COVID', so they are likely to 'present themselves within the sector as it returns to full operation'.
Monitoring and evaluation
6.36
The Aviation Recovery Framework includes the creation of 'a time-limited industry Forum', which is designed to 'advise Government on the sector's recovery via annual 'health checks''. The Framework states that this Forum will function as a means of bringing the 'concerns and views of the sector to the Government through the recovery period', and will 'inform targeted research on priority topics'.
6.37
The Department emphasised that the recovery is 'a fluid situation … at the moment', and it is 'reliant upon … engagement with the sector', through its annual health checks to gauge the success 'of the implementation of the activities under the framework'.
Slot allocation reform
6.38
Witnesses, such as the Hon John Sharp, Deputy Chairman, Rex Airlines (Rex), continued to call for slot allocation reform.
6.39
The committee notes that, in October 2020, the Australian Government commissioned an independent review of the demand management scheme at Sydney Airport (the Harris Review), following the Productivity Commission's 2019 inquiry into the economic regulation of airports.
6.40
The Harris Review found that the Australian Government should continue to regulate demand management at Sydney Airport. It made 17 recommendations aimed at improving efficiency and meeting the full suite of demand management objectives applied to Sydney Airport, including the Australian Government's ongoing commitment to managing noise impacts on the residents of Sydney and retaining access for NSW regional communities.
6.41
The Government's Aviation Recovery Framework states that the Government is 'consulting with stakeholders through technical working groups before providing its response to the Harris Review'. Along with responding to the specific recommendations of the Harris Review, the consultation includes discussion of 'potential reforms to Sydney Airport Demand Management more broadly.
Funding models of regulatory agencies
6.42
The committee heard that funding for aviation agencies—including Australia's air safety regulator, CASA, and air traffic management provider, Airservices Australia—has been disrupted by the pandemic. Many government services (such as air traffic control, aviation rescue firefighting services and safety oversight) are funded through fees collected from industry which are related to flight movements and fuel usage.
6.43
According to the Future of Aviation Reference Panel, the pandemic has exposed the vulnerability of the current activity-based funding model for CASA and Airservices Australia. This finding was supported by submitters and witnesses during this inquiry.
6.44
Airservices Australia quantified the financial impact of the pandemic, saying its revenue 'fell by 24 per cent' in 2019–2020 after an initial drop of 80 per cent (year-on-year revenue) in the April to June 2020 quarter. Airservices explained that 'urgent government financial support was required to fund the delivery of ongoing critical aviation services'.
6.45
Professionals Australia explained that the majority of Airservices Australia's revenue traditionally comes from per-sector charges paid by airlines in relation to international flights. Mr Dale Beasely, from Professionals Australia, explained:
When these flights stopped, the funding model more or less collapsed, even though the domestic aviation industry—general aviation, aviation firefighting, agriculture and all of our domestic aviation industry—needed to go on. The flow-on impact of the government's direction to CASA and Airservices is driving redundancies and significant restructuring in these agencies, and that can only deliver further challenges to the broader industry as it seeks to recover from COVID.
6.46
In response to the economic impact of the pandemic on the domestic airline industry, the Australian Government introduced a number of measures to waive government charges—including aviation fuel excise, Airservices Australia charges on domestic airline operations, and domestic and regional aviation security changes—under the Australian Airline Financial Relief Package. At the same time, the Australian Government provided additional funding to ensure that Airservices and CASA could continue to perform their critical safety functions and provision of essential aviation services during the pandemic.
6.47
Regardless, a number of submitters argued that the reduction in aviation traffic due to the pandemic has highlighted deficiencies in the aviation services funding model. For example, ACTU submitted that 'it would be impossible to justify cost recovery for Airservices and CASA when activity levels have crashed', while Professionals Australia commented that:
The reliance on the operation of industry, particularly commercial aviation, to generate funding for the functioning of CASA and Airservices Australia has been demonstrated as deficient by the COVID-19 driven downturn.
6.48
Inquiry participants made a number of arguments in favour of supporting aviation regulation authorities, which Professionals Australia submitted are currently affected by issues of understaffing and workload intensification which have been exacerbated by the COVID-19 pandemic. Professionals Australia also observed that CASA and Airservices Australia do not just support commercial aviation, but these agencies also 'perform critical roles which enable the safe, reliable operation of Defence and general aviation in Australian cities and across our regions'.
The need for better consultation
6.49
Lack of consultation with industry, stakeholders and workers by the Australian Government was a recurrent theme throughout the inquiry. AFAP observed an 'incomplete consultation feedback and discussion loop', and was concerned that there is no clear 'contact point' in government for aviation stakeholders. It suggested this could be rectified by establishing a designated stakeholder engagement liaison, and through the inclusion of a representative from AFAP or the Australian Airline Pilots' Association on the Future of Aviation Reference Panel. Meanwhile, AIPA relayed concerns about 'consultation fatigue' and ignored outcomes.
6.50
AAA recommended that the Australian Government 'engage in extensive and authentic consultation with airports before decisions are made, rather than imposing impractical and cost prohibitive solutions on the sector'.
6.51
Mr Kaine argued that consultation with workers 'has been non-existent' throughout the pandemic 'from this federal government'. He said trade unions 'have a lot to offer, because of their understanding of and embeddedness … in the sectors the government is making critical decisions about'. The committee heard that, despite TWU's repeated attempts to engage with key ministers, 'there's been a deafening silence' in response.
6.52
Each of the Australian Aviation Ground Handlers Industry Alliance, the Australian Services Union, and the Tourism and Transport Forum, told the committee that concerns they raised had not been properly considered by the Australian Government.
6.53
As previously mentioned, the Government's Aviation Recovery Framework includes the creation of 'a time-limited industry Forum to advise Government on the sector's recovery'. This Forum will be responsible for bringing 'the concerns and views of the sector to the Government through the recovery period', and identifying 'priority topics' for research. The Framework does not include any detail on the proposed members of the industry Forum.
Support for airports
6.54
As noted in Chapter 3, the pandemic resulted in an unprecedented hit to the operations of Australia's major airports.
6.55
In response to COVID-19, the Australian Government introduced several measures intended to support airport operations, including the Domestic Airports Security Costs Support and ex-gratia land tax relief. Submitters largely welcomed this assistance. Both Queensland Airport Limited and the AAA argued that 'continuation of these programs for on-airport tenants would be useful'.
6.56
However, participants were concerned that the majority of aviation support had been directed to airlines, rather than airports or other critical segments of the aviation supply chain. According to Queensland Airports, 'it is increasingly clear the Federal Government's support to the aviation industry during the pandemic has not adequately assisted airports'.
6.57
The committee heard that Australian Government support 'was underwritten largely by airports absorbing their high fixed operating costs'. Councillor Rod Kendall from Wagga Wagga City Council, explained that revenue from aeronautical charges and other airport services are dependent on passenger numbers. He continued:
… the operational aspects of an airport have to continue whether or not air traffic is passing through that airport, and of course the income from that, particularly regular passenger transport, hasn't eventuated, largely, through COVID, and significant losses to those airports have occurred. because of it.
6.58
Mr Peter Thomson, General Manager of Wagga Wagga City Council, advised that, as a result, Wagga Wagga Airport suffered a net loss of $1.083 million in 2020. The committee heard that the airport was in a particularly challenging situation. Current leasing arrangements have impeded Wagga Wagga City Council's ability to secure grant funding, make upgrades or improvements to the airport, and make the facility attractive to capital investment from the private sector.
6.59
Airport representatives argued that government funding must be maintained until demand for travel recovers. Mr Rowe argued that recovery 'is still in its early stages and could take years', meaning 'funding support will continue to be required for an extended period'.
6.60
Further, Mr Adrian Beresford-Wylie, Chief Executive of the Australian Local Government Association, argued more should be done 'for airports at a local level' as they 'are vital community assets'. He warned that council owned airports are going to 'face substantial costs going into the future, in terms of increasing operational costs'.
6.61
The AAA identified a number of opportunities for the Australian Government to provide immediate and long-term support to the airport sector through an $835 million Airport Relief and Recovery Plan. It argued that 'an immediate focus for airports must be on financial relief from government-mandated charges', while in the longer term 'a pathway to recovery must include strategic government investment in airports to make them economically, socially and environmentally sustainable'.
6.62
The Government's Aviation Recovery Framework outlines a plan to 'reduce red tape and administrative burden, and promote greater flexibility for federally‑leased airports as they emerge from the COVID-19 pandemic'. Specifically, the plan says the Government is working modernise regulations under the Airports Act 1996, which are 'due to sunset on 1 April 2024'.
Security screening costs
6.63
In 2018, the Australian Government introduced a number of measures to further strengthen Australia's domestic and international aviation security, including the requirement that advanced body scanners and other security screening equipment be installed at major and regional airports.
6.64
In response to COVID-19, the Australian Government provided relief in the form of the Australian Airline Financial Relief Package, which encompassed a Domestic Aviation Security Charges rebate and other measures to provide infrastructure support and offset the operational costs of security screening requirements. In addition, on 18 December 2020, the Australian Government announced $66 million in grants under the Regional Airports Screening Infrastructure program to reduce the cost of security screening compliance at regional airports.
6.65
The committee heard evidence that, pre-pandemic, security screening costs were covered by passengers through a modest charge on each airline ticket. However, the drop in passenger numbers due to the pandemic has left airports to cover the difference between the fixed costs of providing screening and the per-passenger charge.
6.66
Inquiry participants, including the AAA, Canberra Airport, Adelaide Airport Limited and Parafield Airport Limited, highlighted security screening costs as a significant issue for airports during the pandemic. Mr Goodwin quantified this impact. He explained that airports are 'shouldering at the moment about $110 million in unrecovered government mandated security screening charges, because there are just very few passengers to pass those costs on to'. Furthermore, the AAA estimated the shortfall in security screening charges in 2020 was approximately $110 million, despite $173 million in Australian Government assistance for domestic security screening rebates.
6.67
Canberra Airport warned that cessation of the Domestic Aviation Security Charges rebate would impose further financial pressure on airlines, security providers and, ultimately, airports. Mr Stephen Byron, Managing Director of Canberra Airport, added that:
… without the security funding, we basically would have closed for the whole lot or been open two or three days a week, because the security cost when you have almost no passengers is unbelievably large … Where we are now is that passenger numbers have recovered to almost 40 per cent—so they're down 60 per cent—and the security cost is a very significant burden that is now not being supported by the Commonwealth.
6.68
Participants called for a continuation of the domestic and regional aviation security relief measures. For example, Mr Trevor Willcock, CEO of Mildura Airport, called for the continuation of the security screening rebate for a further 12 or 24 months, while Adelaide Airport Limited and Parafield Airport Limited recommended 'grants for capital works, rebates for fixed security screening costs and deferments in implementation of the new security regimes'.
6.69
Mr Goodwin recommended that the programs be extended for up to nine months, with funding for an additional program to rebate international security screening charges, which he argued have become more prominent and pronounced with the repatriation flights.
6.70
AAA argued that a reduction in airport costs, which are passed on to airlines and passengers, would encourage travellers to return to flying. This ought to include, it argued, the 'full government funding of all costs directly connected to the provision, implementation and maintenance of security screening equipment, as well as associated operating expenses'.
6.71
AAA contended that a 'pragmatic and immediate solution' to the problem would be for the Australian Government to 'fully cover the costs of domestic and international aviation security screening' through recovery.
This will allow airports to recover actual costs incurred in the delivery of security services without potential to further increase losses. It will also remove a potentially significant cost barrier to a recovery in air traffic volumes for business and leisure travel. It is believed that this relatively short-term assistance will begin tapering of its own accord once passenger volume comes back into the aviation industry.
6.72
The committee heard that, while the pandemic has created urgency around the question of how mandated security should be funded, this was not a new problem. In the long-term, AAA called for a post-COVID review of security screening charges to reform the funding of the aviation security system.
6.73
The Government's Aviation Recovery Framework states that, as the sector emerges from the pandemic, the Government 'will evaluate these programs, in consultation with industry, to ensure they remain fit for purpose'. As part of this evaluation, the Government will review 'the Airservices Australia Enroute Charges Payment Scheme, which is not currently operating' because of pandemic support measures.
6.74
In addition, the Department said, while a lack of data from airports is a significant issue, it is 'continuing to work with Home Affairs', which is conducting an independent review into 'broader security impacts on the sector'. Ms Quigley said that review is expected to finish in March 2022, and after that, the Department expects 'to be able to come up with some options that we could put to government in terms of that more enduring support'.
6.75
In the meantime, Ms Quigley said, the regional airport security initiative will continue until 2023.
Airline competition
6.76
In June 2020, the Treasurer directed ACCC to monitor the prices, costs and profits relating to the supply of domestic air passenger transport services for
3 years. In announcing the direction, the Treasurer stated that ACCC's monitoring will assist in protecting competition in the sector and provide another avenue for raising concerns about anticompetitive conduct.
6.77
In August 2020, Virgin announced a plan to streamline its services as it prepares to exit voluntary administration under the new ownership of Bain Capital. Virgin explained it was 'resetting … to meet lower global and Australian demand'. This will include reducing its cost base by reducing staff numbers until demand recovers, streamlining its fleet of aircraft by operating an all-737 mainline fleet and the retention of the regional and charter fleet, but removing ATR, 777, A330 and A320 aircraft types, and discontinuing its low-cost carrier brand, Tigerair.
6.78
ACCC submitted that Virgin's plans to reposition itself as a mid-market carrier are likely have significant (albeit unclear) implications for competition in the domestic airline industry, as Virgin was previously the main competitor to Qantas in offering full services.
6.79
On 19 November 2020, ACCC granted interim authorisation to Virgin and Alliance Airlines allowing them to cooperate on 41 regional routes and two short-haul international routes. ACCC submitted that these arrangements are 'likely to result in a public benefit by assisting in the re-establishment of Virgin's national network of routes, thereby promoting competition'.
6.80
The committee acknowledges that ACCC is continuing to monitor the domestic air passenger services industry to 'facilitate and protect competition in the domestic air passenger services industry as it recovers from the impacts of COVID-19'.
Anti-competitive effect of policy interventions
6.81
The COVID-19 pandemic took a swift and significant toll on the aviation sector. In the course of a few months, Australian airlines had suspended flights, grounded planes and stood down thousands of workers. To mitigate the effects of the downturn, the Australian Government stepped in to maintain specific policy objectives. These included maintaining essential air connectivity, preserving critical aviation capacity and protecting supply chains for air freight imports and exports.
6.82
However, the committee heard that policy interventions addressing COVID-19 may have had an anticompetitive impact. Inquiry participants suggested that the Australian Government failed to strike the balance between the need for support and the risk of distorting competition.
Committee view
National coordination of border closures
6.83
The committee understands the frustrations of inquiry participants in relation to state border closures. There is no doubt that a coordinated national approach to imposing and lifting travel restrictions would have meant less confusion for travellers, airlines, the tourism and accommodation sectors, and those whose livelihoods depend on tourism.
6.84
However, the committee also notes that the right of the states to impose restrictions in the interests of protecting the health of the public during a crisis has been recently recognised by the High Court.
6.85
Legal commentators have suggested that the High Court is likely to uphold state-imposed restrictions, as long as they are:
in place to protect the health of the public;
appropriate to achieving that purpose without being unduly restrictive; and
apply only for so long as the crisis persists.
6.86
The committee accepts that Australian states and territories have a legal and moral basis for putting in place arrangements to protect their populations during a crisis—including border restrictions—as long as they are proportionate and temporary. However, this does not negate the possibility of better coordination on a national level.
6.87
The Australian Government could have used the National Cabinet process to engender greater coordination of border closures on a consensus basis. While it may not have been possible to stop border closures, the Commonwealth may have been able to negotiate for more sufficient warnings, and worked with states and territories to develop better communication systems, as well as better targeting support for the aviation and tourism sectors in the areas hardest hit by border closures.
6.88
The committee urges the Government to increase transparency around National Cabinet—its processes, discussions and documentation—to ensure these lessons are not lost, and the same confusion is not repeated in the next national crisis.
The Aviation Recovery Framework
6.89
The Government's Aviation Recovery Framework is a disappointingly thin document. It provides detail in certain areas—including in relation to supporting regional airports, reducing red tape, and embracing new technology, including drones—but it is surprisingly vague on how the Government intends to build 'a sustainable pipeline of workforce skills'.
6.90
The committee supports the extension of the Women in Aviation initiative and encourages government and employers to prioritise programs that support and promote women having successful and rewarding careers in aviation. However, more needs to be done.
6.91
The committee supports, in principle, the creation of an industry Forum to 'advise Government on the sector's recovery', relay 'concerns and views of the sector', and identify 'priority topics' for research. However, we are concerned that the Framework does not identify proposed members of the industry Forum, or list which stakeholders will be invited to participate.
Continuing issues
6.92
A number of the issues raised over the course of this inquiry have yet to play out. The committee has insufficient evidence to form a view on matters such as funding models for regulatory agencies, slot allocation reform, or security screening costs at airports; though these issues remain of interest to the committee.
6.93
The committee will receive updates on these and other matters through briefings from the Department of Infrastructure, Transport, Regional Development and Communications, and will seek to undertake a brief, focussed inquiry into the implementation of the Aviation Recovery Framework in late 2022 or early 2023, should concerns remain.
6.94
Participants largely agreed that the pandemic has exposed the weakness of the aviation sector, and its vulnerability to external shocks. If the Commonwealth had not provided over $5.3 billion in support to the sector during the pandemic, many aviation companies would simply not have survived.
6.95
The sector's reliance on government is reflective of Australia's reliance on the aviation sector. As a vast island nation, separated by the tyranny of distance and surrounded by oceans, we are reliant on aviation for many facets of our economic and social wellbeing.
6.96
However, this should not mean airlines get a blank cheque when it comes to government money. This inquiry has demonstrated that there is a need for greater accountability; precious resources provided to airlines during a crisis must represent an investment the long‑term sustainability of aviation as a national asset.
6.97
The Australian Government has enormous influence over the commercial aviation industry through its funding and subsidisation of the sector, particularly during crisis events such as the COVID-19 pandemic. It also has influence over the sector through its procurement practices, as evidenced by the its decision to engage Qantas to operate repatriation flights during the pandemic.
6.98
While the Australian Government stepped up its financial support for Qantas and others during the pandemic, it chose not to materially increase its expectations or requirements for how funding and procurement recipients behave and operate. 2,000 Qantas ground handlers, thousands of Qantas international flight attendants, and many others have suffered the consequences of this decision.
6.99
The Australian Government has an obligation through all its procurement activities to ensure that its spending is driving fair wages growth, job security and that tenderers are not acting contrary to the national interest.
6.100
The committee recommends the Australian Government leverages its procurement processes and spending within the aviation sector to protect and lift standards, promote fair wages, conditions and job security, and ensure the effective operation of an aviation industry in the national interest.
Senator Glenn Sterle
Chair