King Island Council

Submission to the Senate Inquiry into the Operation, Regulation and Funding of Air Route Service Delivery to Rural, Regional and Remote Communities

Background King Island lies off the north-west coast of in the Bass Strait, halfway between and Tasmania. Our population has remained stable at ~1,600 for the last five years. Proposed business developments and an anticipated increase in tourism to the island suggests that figure could increase by as much as 200 in the coming three to five years. King Island Council is the owner and operator of . With no passenger-carrying boat service to the island, the airport is the only transit point for residents and visitors to King Island. The airport also handles mail and some freight, particularly perishable and high-value items. The airport has run at a loss over the last few years, recording a net loss of $210,000 in FY2016-17, despite the same period seeing an increase of over 20% in the total number of RPT passengers arriving at the airport.

Social and economic impacts of air route supply and airfare pricing The maintenance of a functional airport with access to affordable flights is essential to our island community’s continued existence. In FY2016-17, figures reported to BITRE indicated 21,200 passengers travelling on RPT services to King Island. Data collected by King Island Council (Council) and the King Island Regional Development Organisation (KIRDO) suggests over 40% of these passengers are residents of the island, with a further 15% travelling here for business purposes. Being a remote, regional community only accessible by air, the cost of doing business is greatly affected by the price of airfares to and from the island. Accessing specialist skills requires flying consultants and contractors to and from the island, and the schedule of flights often requires overnight accommodation for all but the simplest of tasks. A return airfare for a family of four to visit , our closest capital city, costs over $1,000. The same trip to Burnie, our closest regional centre, would

ABN: 47 537 189 282 Telephone (03) 6462 9000; Facsimile (03) 6462 1313 Council Chambers, George Street, email: [email protected] PO Box 147, CURRIE, KING ISLAND 7256 www.kingisland.tas.gov.au cost in the order of $1,750. This makes such a trip a significant expense for many families on the island, and is a consideration for anyone choosing whether or not to live and work on the island. This cost is perhaps most keenly felt by the families whose children wish to continue their education beyond Year 10. As the King Island District High School does not offer Year 11 or 12 subjects, these students have to travel to Tasmania or mainland to attend school, and means another expense to their families on top of school tuition and boarding fees. The cost of airfares is another contributor to a generally high cost of living on the island. While it is accepted that the privilege of living on such a beautiful and productive island comes at a financial cost, this also means that any families or individuals who are under- or unemployed are unable to live here. Tourism is an industry of growing importance to our island, and the development of two world-class golf courses has led to an increase in the number of visitors to our island. However, when you consider that a potential visitor based in Melbourne could buy an 8-hour flight to Kuala Lumpar for just $30 more than the 40-minute flight to King Island, it is easy to see why so many Australians choose to holiday overseas. The cost of airfares limits the number of Australian and international tourists who will choose to visit King Island, thereby limiting the potential economic and social benefits offered by a strong tourism sector.

The determination of airport charges for landing and security fees, aircraft type and customer demand King Island Airport levies landing charges and parking charges to aircraft, as well as having annual licence charges levied to local aircraft operators. operating a check-in desk at the airport are charged an annual lease for the desk and the associated office and baggage handling area. More detail on each of these charges is offered below. Landing charges Non-commercial flights are charged a flat rate landing charge of $11 per flight. Commercial flights are charged based on their MTOW, currently sitting at $23.07 per tonne, inclusive of GST. These charges have only increased by CPI over the last three financial years.

Page 2 of 8 An indication of the total costs paid by each of the three RPT airlines per landing is provided below, compared to an indicative return airfare. The airfares shown below are the cheapest fares available for a return flight to King Island as found on an enquiry to the operator’s own website for a date approximately 3 weeks into the future. Both the charges and the airfares are inclusive of GST. Indicative Aircraft Landing MTOW Return type Charge Airfare1 Regional Express SF34 13,155 $303.50 $257.00

Sharp Airlines (Vic) SW4 7,484 $172.70 $300.00

Sharp Airlines (Tas) SW4 7,484 $172.70 $438.00

King Island Airlines2 PA31 3,342 $77.10 $350.00

Landing fees collected in FY2016-17 totaled $448,000, ex GST. Approximately 70% of these charges were collected from RPT services, 20% from commercial charter services, and the remainder from general aviation and freight aircraft. In figures reported to the Bureau of Infrastructure, Transport and Regional Economics (BITRE), 2,191 RPT aircraft carrying a total of 21,200 passengers landed on King Island in FY2016-17.

Parking charges Parking charges are levied to any aircraft staying on the ground overnight, based on the type of aircraft and number of engines. These charges have also increased by CPI over the last three financial years. None of the RPT services are based on King Island, instead turning around and returning to their port of origin within an hour of landing. The current parking charges are detailed below for information.

Parking charge Aircraft type (per night)

Single engine aircraft $11.00

Twin engine aircraft $16.00

Jet / commercial aircraft $21.00

In FY2016-17 a total of $7,400 ex GST was collected in parking fees.

1 Search on each operator’s website for flights three weeks in advance of Thursday 22 February, returning Monday 26 February. 2 KIA offer a residents’ rate at $300 return. As the search for this submission was done on flights to King Island, the residents’ fare was not available.

Page 3 of 8 Check-in desks and baggage handling areas King Island Airport leases check-in desks, offices and baggage handling bays to each of the three RPT operators (Regional Express, Sharp Airlines, and ) and a regular charter operator / freight carrier, Vortex Airlines / TasFast. The intent of this lease fee is to mitigate some of the costs of operating the terminal building, including power, insurance premiums, and cleaning by sharing costs with the businesses operating at the airport. Similar leases are charged to the airport shop / café operators and the local car hire company based at the airport. For FY2016-17, the four airlines named above were charged a total of $13,260 ex GST.

Airline competition within rural and regional routes Three airlines provide a link to Melbourne (Tullamarine, Essendon and Moorabbin), but only one servicing Tasmania (Burnie and Launceston). No significant increase in any of these fares over the last few years.

Consistency of aircraft supply and retrieval of passengers by airlines during aircraft maintenance and breakdown Maintenance and breakdown seem to be well managed by the airlines, but last minute schedule changes, particularly in the winter months, are not uncommon.

All related costs and charges imposed by the Civil Aviation Safety Authority To maintain our CASA certification, King Island Council is required to complete annual technical inspections, electrical inspections, and obstacle limitation surveys, and provide refresher training to our airport staff every two years. Meeting these requirements in FY2017-18 has cost Council a total of $22,500 ex GST.

Any related matters. The cost of maintaining and operating a regional airport to a safe and consistent standard is significant. For a local government authority with a rate base as small as King Island’s, it is near impossible to achieve this without assistance from state and federal government. King Island applies for grants as they become available, and has received significant funds as a result of this. However, as regulatory requirements increase, and as the need for major capital upgrade approaches, there will only be an increased need for funding. The potential introduction of security screening at remote and regional airports, if mandated by the Federal Government, will increase the operational and capital costs to Council.

Page 4 of 8 https://secure.rex.com.au/RexOBE/CalendarShopping.aspx 16:34 – 2 February 2018

Page 5 of 8 https://www.cloudesoftware.com.au/kg/ebooking/pages/createBooking/flightConfi rm.jsp 16:38 – 2 February 2018

Page 6 of 8 https://secure.sharpairlines.com.au/sharpwbs/SharpOnlineBooking.aspx 16:34 – 2 February 2018

Page 7 of 8 https://secure.sharpairlines.com.au/sharpwbs/SharpOnlineBooking.aspx 16:39 – 2 February 2018

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