Feb 25, 2013

Asia Pacific Aviation/Aerospace Leaders Summit 2013 – Melbourne

Australia is riding a wave of great change.

We are an island nation, blessed with natural advantages, that sits at the doorstep of the Asia-Pacific region.

Throughout most of the 20th century, our trade and cultural focus was to our traditional markets in Europe, the United Kingdom and the USA.

Now in this 21st century, we turn increasingly to our much nearer neighbours.

We are witnessing a seismic shift in the centre of global activity.

And nowhere is this focus starker than in our aviation market.

What was once a tyranny of distance has become a benefit of proximity.

Here, just to our north, lies the fastest growing market on the planet.

It is already the most populous region and before long, it will be home to the world’s largest middle class.

As history is proving, the happy mix of growing wealth, greater competition and a proliferation of low cost carriers, means that people are taking to the skies like never before.

Last year alone, international passenger traffic in the Asia-Pacific grew by 5.2 per cent.

And today I am releasing updated figures from my department which show that Australia’s growth is matching Asia’s growth – at 5.2 per cent.

In fact, in 2012 almost 30 million people took international flights in and out of Australia – a record.

Everything about Australian international traffic is growing: load factors are up, both Qantas and Virgin have experienced passenger growth, freight is up, and the low cost carrier market is also growing.

Indeed in Australia we have seen consistent growth since the Global Financial Crisis.

And this growth will continue.

Boeing forecasts that by the early 2030s, the Asia-Pacific will account for an astonishing half of the world’s air traffic.

Here in Australia, the strongest growth rates are from passengers from the region.

Just listen to these figures.

  • Arrivals from Malaysia up 24 per cent.
  • From China and India, both up 18 per cent.
  • From Thailand 22 per cent and Indonesia 7 per cent.

Driven largely by this growth, last year Australia passed six million international visitors for the first time.

The United Kingdom, until not long ago the source of our greatest numbers of arrivals, now ranks well behind China.

A decade ago, only three Chinese carriers offered just 11 services per week from China to Australia, while none of our airlines flew there.

Now there are 82 weekly flights between our two countries, with both QANTAS and Jetstar flying into Chinese destinations.

The dynamics pushing these shifts are at the heart of the Australian Government’s agenda which we outlined last October in our White Paper, Australia in the Asian Century.

All of you here are guiding the direction of aviation in the Asia-Pacific, but the Commonwealth also has a role to play.

Our job is to help build both the ‘hard’ and the ‘soft’ infrastructure, as well as create the policy environment which our aviation industry needs.

So let me now share with you what we are doing in these areas.

 

BILATERAL AIR SERVICES ARRANGEMENTS

Let’s look firstly at the all-important bilateral air services arrangements negotiated between Australia and other countries.

These are vital to our engagement in international aviation.

In negotiating them, we aim to balance the many benefits that flow from opening up markets, with the need for a strong locally-based aviation industry.

We have one of the most open international markets in the world.

In 2010, we began talks which have now resulted in a doubling of capacity with Indonesia and a 160 per cent increase in capacity entitlements with China.

In 2011, we negotiated a negotiated a landmark ‘open skies’-style arrangement with Japan.

In 2012, we doubled capacity with Vietnam and established a new agreement with Thailand which will allow each country to operate up to 20,000 weekly seats to and from Australia.

This year we will be seeking further discussions with the EU, China, Hong Kong and other key markets in Asia.

These practical steps are critical for our trade and tourism markets.

But opening up international aviation markets involves much more than simply negotiating with aviation partners.

Airlines alone cannot expand their network, even by code sharing with other airlines, unless the Australian Government first secures the right for them to do so.

The Australian Government therefore pursues a steady and substantial negotiating agenda aimed at helping our airlines to expand their global networks.

In the last two years alone, we have held negotiations with markets such as Peru, Egypt, The Seychelles, Greece, Romania, Uruguay, Papua New Guinea, and New Caledonia.

We are seeing an increasing global trend towards regional or multilateral approaches to air services regulation.

Europe now has an open skies arrangement, and ASEAN’s Open Skies Agreement comes into effect in 2015.

Next month, the International Civil Aviation Organization (ICAO) will be discussing how best to proceed beyond the long-standing bilateral approach.

Australia will again be at the forefront of these talks.

 

INFRASTRUCTURE UPGRADES

As our engagement with Asia continues to grow, there will be many challenges and questions about how best to develop the aviation industry and the infrastructure that supports it.

For example, despite substantial investment, Australia’s privately-operated airport network is experiencing increasing congestion.

Estimates suggest that at least $13 billion will be required over the next 10 years alone to tackle this.

In a post-GFC world, sourcing such sums has become ever more difficult.

One way the Australian Government is helping is by offering tri-partite deeds to all 21 Commonwealth-leased airports.

These deeds give creditors the confidence to invest and airport operators the certainty to plan for the future.

 

AREAS AROUND AIRPORTS

Aviation cannot be viewed in isolation from infrastructure needs generally – and in the areas surrounding airports in particular.

As aviation demand grows, so does the need for better road and rail links connecting to our airports. We can see this clearly at Perth Airport.

Growth in passenger numbers from the mining boom and industrial developments have greatly increased road congestion around it.

To alleviate this, work recently began on the Gateway Project in Perth with the help of $686 million from the Australian Government.

Once done, it will bring welcome relief to Perth’s commuters and air travellers.

It also underscores the relationship between infrastructure investment, and economic and social progress.

 

SYDNEY AIRPORT GROWTH CAPACITY

Let’s turn now to Sydney, our national aviation gateway, through which 40 per cent of all flights within Australia pass.

It’s the busiest airport in the nation with nearly 40 million passenger movements last year.

That number is predicted to double over the next twenty years.

Unfortunately, Sydney Airport is nearing capacity.

By 2015 – just two years from now – there will be no slots available for new services during peak times, including international flights.

Last year, in partnership with the NSW Government, we commissioned a The Joint Study on Aviation Capacity in the Sydney Region.

This extensive 3,200 page report was pretty clear.

Sydney’s Kingsford Smith is simply unable to meet demand.

By 2060, unmet demand will total 54 million movements – equivalent to the current movements through Melbourne and Brisbane combined.

Flights are facing increasing delays.

The growth in passenger traffic at Sydney Airport is slowing.

Its share of international traffic has fallen from 50 per cent of all arrivals in 2000, to 40 per cent today.

By comparison, in 2011 Melbourne’s share of international business grew by four times that of Sydney.

Ultimately, faced with congestion and delays, airlines will be forced to decide whether to fly into Sydney, or indeed Australia, at all.

The study finds that by 2035, the cost to GDP of turning away flights from Sydney Airport will be $6 billion.

That is a completely unacceptable loss to our national economy.

Sydney needs a second airport sooner rather than later.

Right now we are completing a scoping study into the suitability of Wilton in Sydney’s south west.

It is worth making clear that no decision about any future airport site will be made unilaterally.

Community involvement will be fundamental.

 

UPDATE ON PROGRESS OF THE CAPE TOWN CONVENTION

Let’s turn now to the Cape Town Convention.

Late last year, I announced that the Government would accede to this important convention.

It would provide Australian airlines with access to lower cost finance to improve their fleet.

Australia will join 48 other countries and the EU in adopting an internationally-recognised legal framework for securing financial interests in aircraft assets.

This lowers the risks for lenders and provides Australian airlines with cheaper finance for aircraft, jet engines and helicopters, right through from the Australian-manufactured eight-seater GippsAero GA8 Airvan, to the Airbus A380.

This deal would allow airlines to save up to $2.5 million on the cost of an Airbus A380.

Operators of, say, an ATR72 could save around $330,000.

The arrangement will also apply to the purchases of certain second-hand aircraft – a significant benefit for smaller regional airlines.

Signing up to this Convention will help operators renew their fleet, resulting in newer, more fuel-efficient, environmentally-friendly aircraft flying in our skies.

The Cape Town Convention was tabled in Federal Parliament in November last year, and we are working to bring it into domestic law in 2014.

 

BODY SCANNERS

You will all be aware that late last year we introduced full body scanners at our international gateway airports.

These offer the best screening protection available anywhere.

The roll-out of the scanners has been smooth.

We are also completing an extensive overhaul of security at our regional airports.

With targeted grants, airports have been helped with the cost of building screening rooms and installing upgraded equipment.

 

CONCLUSION

In conclusion, it’s worth noting the words of Sir Keith Smith, a pioneer of Australian aviation who said on this day 85 years ago:

“…Australia will not support many aerial services. Flying cannot be forced on the community but it will grow as the demand warrants.”

Sir Keith, in keeping with the times, also believed Australia should form part of a global British imperial aviation network.

Events would prove him both wrong – and right.

Some 52 international scheduled airlines now operate to and from Australia.

Australia’s international traffic is now 30 million – almost three times the numbers of 20 years ago.

And that takes me right back to where I began this speech, to the engine-room of our aviation future, Asia’s flourishing middle class.

By 2020 – and that’s not many years from now – nearly half of all inbound arrivals through our ports will have originated in the Asia-Pacific region.

So, Sir Keith was right in his imagining that our aviation future lay in strengthening our links with the rest of the world.

He was also right in the need to sharply target out markets.

But in this 21st century that future lies right in front of us – the Asia-Pacific.

Thank you all very much.

 

[ENDS]