Aug 7, 2013

Key Note Address to CAPA-Australia-Pacific Aviation Summit, Sydney

INTRODUCTION

Thank you for the warm welcome Peter [Harbison, Executive Chairman, CAPA Centre for Aviation].

Spike Milligan once famously said: “We don’t have a plan, so nothing can go wrong”.

That is very much the approach we inherited when we came to office in 2007.

There really was no plan.

Regional aviation was way down.

There were 31 fewer airports receiving passenger services and 5 million fewer passengers than there are now.

There was a chronic shortage of pilots, engineers and air traffic controllers.

And Australia was still feeling the impact of the collapse of Ansett in 2001

AVIATION WHITE PAPER

With no coherent plan in place for the industry in 2007, we knew this had to change.

After a lot of hard work, we released at the end of 2009 the first ever strategic plan for growth for the next 20 years – the Aviation White Paper.

We have now implemented almost all of its 134 initiatives.

This has given the aviation industry the long-term confidence it needs to plan, invest and grow the market.

AVIATION IN AUSTRALIA TODAY

The statistics are clear – Australians love to fly.

We took 57 million trips within our country last year.

And a further 16.5 million international flights.

Not bad for a nation of 23 million.

Domestically, growth is a healthy four per cent – a rate that is the envy of the world.

Growth is about six times as strong as the US and UK markets.

WHAT WE HAVE DONE

And with the growing Asian middle class right on our doorstep, there is no sense that things are going backwards anytime soon.

Indeed, we’re well placed to take advantage of Asia’s growth.

Since 2007, we have made sure that we have negotiated air services agreements with every ASEAN nation.

Most of these agreements have been liberalised over the past three years to allow for further growth.

We now have more flights and more airlines than ever operating into Australia.

And there are now many more destinations where our own Australian airlines can fly to.

We have doubled capacity with both China and Indonesia.

In the past three years, Chinese visitors to Australia have increased by almost 70 per cent.

And it won’t be stopping there.

By 2021, around one million Chinese tourists are expected to visit our shores each year, spending a collective $7.6 billion while here.

The Federal Labor Government has also signed open-skies style arrangements with Japan, and increased capacity entitlements with India, Thailand, Malaysia, Viet Nam and the Philippines.

In 2021, the economic value of these tourists is projected to be around $5.7 billion.

That means economic growth and more jobs for Australians right across the country.

All this hard work has helped to secure the futures of Qantas and Virgin.

Both airlines can now compete in new markets using their competitive alliances with foreign carriers.

The Government’s Asian Century White Paper, released last year, not only identified the importance of increasing air services between Asia and Australia.

It also stressed the need for Australia to work with the business sector and partner governments to reduce impediments to trade and travel.

Arrivals from Asia are forecast to reach 3.6 million by 2020 requiring targeted tourism products and good infrastructure.

We will need an additional 70,000 more hotel rooms to meet this projected demand.

UNITED STATES OPEN-SKIES AGREEMENT

Our advocacy isn’t just confined to Asia.

Our 2008 Open Skies agreement with the United States has provided great opportunities for increasing trade and commercial links between Australia and the United States.

Not only did this agreement open the door for Virgin Australia to enter the US market, it also allowed for Qantas and Jetstar to increase services.

That means greater service levels, more destinations, lower air fares.

And in response, the numbers flying between Australia and the US have increased from 1.9 million in 2008 to almost 2.8 million in the past year.

REGIONAL AIR SERVICES

It is also a healthy picture at home where growth is particularly evident at our regional airports.

Passenger numbers last year  topped  24 million.

That’s a rise of 25 per cent since 2007.

More flights and greater competition have helped bring down the average price of a regional flight by 35 per cent over the past decade alone.

It’s not just regional passenger numbers that have grown since we came to government in 2007.

We have made unprecedented investments in regional and remote airport infrastructure.

For people living in remote Australia, air services aren’t a luxury – they are a lifeline for basic provisions and health services.

That’s why since coming to Government, we have invested more than $261 million in upgrades and services at regional and remote airports  – more than five times what was spent by the former Coalition Government in the preceding six years.

Our record speaks for itself.

I also reaffirm the White Paper commitment that regional airlines will retain access to slots at Sydney airport in the morning and evening peaks.

Just recently the Government extended to 2016 the special pricing arrangements at Sydney Airport for regional services.

This protects regional airlines from being pushed out in favour of larger commercial interstate and international airlines.

CONSUMERS AND OPERATORS

We have delivered on our promise in the White Paper  to improve the rights of consumers.

In March we increased the domestic passenger liability cap and mandatory insurance requirements for airlines by 45 per cent to $725,000.

We all aim for an industry free of accidents.

But when the unthinkable happens, this provides extra assurance to customers.

We changed the Damage By Aircraft Act to balance the allocation of risk by including a provision on contributory negligence.

An important piece of law, missing since the Act was passed in 1999.

We now have an Airline Customer Advocate, airline customer charters and much better plans in place for people with a disability so that airlines are clear about their roles and responsibilities.

Simple, common-sense improvements that improve the travelling experience for everyone.

CHEAPER AIRCRAFT

Recently, legislation passed the Parliament enabling Australia to sign up to the Cape Town Convention.

Capital costs are a concern for any industry and the Convention means airlines can now find cheaper finance when buying aircraft.

This reduces the risk for creditors, giving your industry greater certainty.

It could mean a saving of up to $2.5 million on a new Airbus A380, and about $1.7 million on the cost of a new Boeing 787-8.

But it’s not just for the big guys.

It will also help regional airlines expand and renew their fleets with savings of up to $330,000 on an ATR-72.

SYDNEY’S AVIATION CAPACITY

One area where serious questions remain is the capacity of Sydney Airport to service future demand.

Last year, the Federal and NSW Governments released a Joint Study on Aviation Capacity for the Sydney Region, a 3,200 report which made an irrefutable case for a new Sydney airport.

Kingsford Smith Airport is reaching capacity.

All the tinkering in the world won’t change that fact.

This size of the airport restricts its growth.

Melbourne Airport is 2 ½ times bigger than Sydney Airport and Brisbane is three times bigger.

Without a second Sydney airport, we will be saying no to jobs, no to economic growth and no to securing Sydney’s future as a global city.

With four out of every 10 flights passing each day through Sydney, this is no longer an issue just for this city.

A delay at Sydney spreads like influenza around the nation.

Australia – not just Sydney – needs a second Sydney airport sooner than later.

It must be dealt with in a bipartisan way.

The problems of Sydney are already affecting business.

Over the last five years alone, Melbourne’s international traffic has grown by twice that of Sydney.

Sydney’s share of international business now sits at 42 per cent, down from 50 per cent a decade ago.

All this comes at a time when international passenger numbers for Australia overall are at a record high.

HEALTH OF THE SECTOR

A healthy aviation sector is not just good for business, it’s also good for jobs.

There are 50,000 people directly employed in aviation.

And half a million more are employed in tourism jobs.

The air freight industry now carries $110 billion in cargo each year.

And aviation overall is now worth a remarkable $32 billion to the Australian economy.

The Federal Government is absolutely committed to ensuring that we get the policy settings right so that Australian aviation can continue to thrive in the future.

CONCLUSION

I have painted a pretty clear picture of the state of aviation in Australia.

No plan in place when we arrived.

And no policy agenda to address the industry’s problems.

Today, the market has never looked better.

We have passenger growth levels that are the envy of the world.

Our White Paper sets out a constructive, 20-year blueprint for growth, and we’ve enabled the industry to tend to its core business without excessive intervention.

We sit today on the doorstep of the fastest growing region of the planet.

And the people in the many countries that make up the Asian region are choosing to fly here in greater numbers than ever before.

Our aviation sector is in a great position to secure national economic benefits that future growth will bring.

I look forward to working with the sector to secure that future.

ENDS