Sep 8, 2011

Keynote Address to Regional Aviation Association of Australia Annual Convention

Keynote Address to Regional Aviation Association of Australia Annual Convention

Managing The Winds Of Change

Coolum, QLD

The Hon Anthony Albanese MP

Minister for Infrastructure & Transport

Leader of the House

Member for Grayndler

8 September 2011

In Australia, aviation was once all regional.

QANTAS, as I’m sure you know, started by offering joy rides and air taxi trips.

Its fleet began with two aircraft.

The first was an Avro 504K, powered by a 100 horse-power water-cooled Sunbeam Dyak engine.

The second was a BE2E powered by a whopping 90 horsepower.

The latter plane was a great buy.

It cost only 450 pounds.

Its former and very brief owner, Longreach stock and station agent Charles Knight, put it up for sale after enjoying a particularly turbulent delivery trip, saying nothing would induce him to fly again.

Throughout that first year of 1921, 871 passengers were taken aloft in those two planes, without serious mishap.

By way of contrast, Australian regional airlines last year carried almost six million passengers.

Since the first days of flight in Australia, our aviators have been a tough and resilient bunch.

That is still the case today, where you are defined by your ingenuity, mechanical talents and outstanding professionalism.

And it is also the case today that as regional operators, you face your own unique constraints and challenges.

Typically, compared to the larger commercial airlines, your markets are smaller and your profit margins thinner.

You generally fly with lower load capacity than for capital city flights.

Your sector is capital intensive, and at times you are subject to costs which are higher per passenger than for the other airlines.

On the fuel side, the high Aussie dollar has made the price cheaper.

However, it has also curtailed the number of visitors coming into Australia.

That said, there are plenty of positive regional aviation stories.

Let me list just a few:

Just yesterday, the Government announced that $3.5 million would be made available to extend and upgrade the Ballina Byron Gateway Airport, $1.9 million for Griffith Airport and $4.5 million for Port Lincoln Airport.

These were three of 35 shovel-ready projects funded under Round One of the $1 billion Regional Development Infrastructure Fund.

Townsville Airport, despite being closed for a couple of days during the cyclone, enjoyed record passenger numbers last financial year.

Last month, a Dash 8-300 landed for the first time at Toowoomba Airport – the largest plane ever to land there.

This was possible because of the newly completed $10 million upgrade.

There’s also been a big rise in passenger numbers at Mt Isa Airport – up 20 percent in the last year.

I note that Skywest has taken possession of the first aircraft – a brand new ATR 72-500 – to operate under its new partnership deal with Virgin Australia.

This shows how a regional airline can leverage its experience and know-how to grow its business and capitalise on ‘fly in, fly out’ traffic from the resources boom.

I also note Skywest enjoyed an 11 per cent increase in revenue last financial year.

And REX’s chairman said recently he was more optimistic and confident about the outlook for his airline than at any time over the past nine years.

This followed Rex’s recent announcement of $17.6 million profit last financial year.

 

Snap Shot Of Regional Industry

Regional aviation in Australia has always had a remarkable ability to face up to and adapt to new challenges, but the recent pace of change has been particularly dramatic.

Though the industry is expanding, growth is not evenly shared around the country.

Some towns have lost services as airlines withdraw for commercial reasons.

Some regional airlines have exited the industry altogether.

The Bureau of Infrastructure, Transport and Regional Economics found that between 1984 and 2008 the number of regional airports served by scheduled airline services fell from 278 to 138.

The number of airlines serving regional airports also fell – from 53 to 27.

Despite all this, the number of passengers carried on regional airlines increased from just under than one million in 1984 to – as I mentioned a moment ago – almost six million in the past year.

More people are flying today than ever before.

Flights are now more affordable – and regional Australians are more connected as a result.

Most of this growth has occurred on routes that connect cities and major regional towns, particularly towns with thriving tourism sectors, or in the resource-rich areas.

 

What The Government Is Doing

While your industry constantly proves its ability to adapt to the times, the Australian Government is aware it must play its role in providing a supportive policy environment.

The Aviation White Paper sets out the foundation for the Government’s approach.

In the 18 months since its release, almost every one of the 134 major policy initiatives has been either fully implemented or is well down the path to completion.

There has been a lot of work in the priority areas of safety, security and airport planning.

Before I go any further, let me mention two issues which I know are of keen interest to you – the en-route charges rebate and the implementation of a carbon price.

The en-route scheme was introduced as a transitional measure following the Ansett collapse in 2001.

It was always intended to operate for a limited period and had annual reviews. In our first budget in 2008 we extended the scheme until 30 June 2012 and determined that it would conclude then.

On the carbon front, I am sure all of you are aware that the Australian Government has a comprehensive plan for a clean energy future.

Central to that is placing a price on carbon pollution.

We understand that this will have some affect on both costs and prices.

Indeed, that point was repeated to me at a recent meeting with one of your members.

Let me assure you that the direct impact will be only a small fraction of world fuel price fluctuations we have seen over the past several years.

In the last decade alone, oil prices have ranged from US$40 to US$130 a barrel.

When the new arrangements are in place, a typical flight from Sydney to Armidale, or Adelaide to Whyalla – would involve a carbon price impact from fuel of around a dollar a seat.

Likewise, a flight from Mildura to Melbourne, or Brisbane to Rockhampton, would see an impact of under $2 per seat.

There will be special assistance for air ambulances and the Royal Flying Doctor Service through the Low Carbon Communities Scheme.

We want to be sure that people in rural and isolated areas of Australia continue to have access to the best possible medical care.

 

Safety

Let me turn to safety.

The White Paper makes it very clear that aviation safety is the Government’s overriding priority.

Accordingly, the May 2010 Budget provided an additional $89.9 million for CASA over the next four years funded by a small increase in aviation fuel excise.

As many of you will be aware, CASA recently established a task force to review safety regulation of general aviation.

This will include looking at pilot licensing and air operator certificates.

Its early focus will be on the aerial agriculture sector.

CASA has also announced it will host a general aviation forum next year, providing the sector with yet another opportunity to discuss regulatory issues.

 

Security

The White Paper contained 13 security specific initiatives and the implementation of these is progressing.

We have introduced more sensible rules for prohibited items, unaccompanied baggage and oversized duty-free liquid purchases.

We have strengthened the aviation security identity card scheme and extended international co-operation measures.

We are also introducing an airport security classification system so that the most appropriate measures are in place at each airport.

This supports our decision to shift the primary determinant for screening from propulsion type to maximum take-off weight.

This change means a number of airports in regional Australia will be required to screen passengers and checked bags from July next year.

The Australian Government is supporting this change through the Strengthening Aviation Security Initiative.

This provides $200 million across customs, policing and security agencies to improve Australian transport security.

It includes $32.9 million for improved security across the regional sector.

Up to $650,000 is available for each airport required to introduce screening.

 

Regional Aviation Access Program

The Government continues to provide direct support for aviation services to some of the country’s most remote communities.

In this year’s budget, $26 million was provided to upgrade remote aerodromes and support essential air services at them.

The Regional Aviation Access Program is helping to fund safety and access upgrades, inspection services, and ad hoc aviation technical advice for Indigenous communities.

This helps them stay connected to the wider Australian community.

Flying Into Sydney

I want to talk now about Sydney Airport – the country’s busiest airport.

Under the Gillard Government, regional communities will continue to have access to Sydney Airport.

In May last year, we extended for a further three years regulatory controls limiting to the CPI any increases in airport charges for regional airlines.

Increased charges must also be approved by the ACCC.

The Government has also ensured that regional operators have access to peak time slots at Sydney Airport.

Productivity Commission Inquiry

Last year I asked the Productivity Commission to bring forward its inquiry into the Economic Regulation of Airport Services, which was scheduled for 2012.

The aim of the inquiry was to look at fees and charges at regional airports, to see whether they were fair and reasonable.

I am aware that your association has lodged two submissions to the inquiry and is a co-contributor to a third.

The Commission has recently released a draft report for further comment and will hold public hearings next month.

 

Conclusion

Let me conclude today by announcing the results of some interesting new research from BITRE – or the Bureau of Infrastructure, Transport and Regional Economics.

It looked at domestic aviation and found that a record 55 million passengers took more than 600,000 flights to the end of June this year.

This was a 5.8 percent rise on the previous year and accounted for a staggering 63 billion kilometres of air travel.

The fastest passenger growth of all was between capital cities and regional centres.

Cairns to Melbourne up 30 percent.

Newman to Perth up 21 percent.

Melbourne to Newcastle – 18 percent.

Sunshine Coast to Sydney – 18 percent.

And Brisbane to Mackay – 16 percent.

In the midst of all this change and growth there are two constants.

The first is the remarkable adaptability and competence of your 2,500-strong workforce, something evident since the earliest days of Australian aviation.

The second is the determination of the Australian Government to do what is right by the nation, by the community, and by you.

I look forward to a continuing close partnership.

Thank you.

[ENDS]