Developing a Queensland (Australia) Aviation Network Strategy: Lessons from Three International Contexts

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Donnet, Timothy, Ryley, Tim, Lohmann, Gui, & Spasojevic, Bojana (2018) Developing a Queensland (Australia) aviation network strategy: Lessons from three international contexts. Journal of Air Transport Management, 73, pp. 1-14.

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Abstract

Aviation is a key component of the economy of Queensland, Australia, but the State currently lacks an overarching aviation network strategy to enable improved consistency between state, regional and local policies for economic growth. The objective of this paper is to learn lessons from three international aviation networks to assist the development of an aviation strategy. The Resource-Based View has been mobilised accordingly as a lens for identifying and explaining the benefits and shortfalls of different governance models for aviation networks around the world, with the aviation networks of Florida, California, and Brazil reviewed. Lessons from each network are discussed for the context of the Queensland aviation network, which is framed as a multi-hub network split between the North and South East regions of the State. The three vignettes demonstrate that a more formal network-level approach to generate whole-of-state objectives for aviation is a plausible option for Queensland to pursue, enabling the state to define an overarching strategy that appreciates the reality of a resource-constrained future while pursuing the State’s objectives for overarching social, economic and strategic needs.

Keywords: Aviation Policy; Queensland; Brazil; California; Florida; Network strategy

Highlights

• A more formal aviation approach is plausible for Queensland • US State vignettes have a defined aviation policy network • Further centralisation is possible in dense South East Queensland region • North Queensland routes could feed more into the South East sub-region

1. Introduction

The State of Queensland, with Brisbane the largest city and capital, occupies nearly a quarter of the Australian continent. It has a population of around 4.79 million, an area of 1.73 million km2 and a nominal gross state product of AUD 300 billion, which is USD 251 billion (Queensland Treasury Corporation, 2016). Queensland's dispersed agriculture, mining and tourism industries, three of the main sectors within the State, support many towns and small settlements, making Queensland the most decentralised state in Australia. More than 20 million domestic and international overnight visitors come to Queensland each year (Queensland Government, 2016).

Therefore, aviation is an essential component of Queensland’s economy. The distance between the State’s population centres and core economic assets make air transport the mode of choice for business and leisure travel. As the demand for mobility around Queensland increases, increasing strain is placed on the ability of existing aviation assets and services to meet sustained growth. The political will for State and Federal Governments to invest in increasing the capacity of some airports demonstrates an acknowledged urgency to improve Queensland’s aviation capabilities, but deciding how much and where to invest government funds is a difficult task. Australia’s major airports were privatised via long-term lease agreements in the late 1990s, which creates a political barrier to attracting government investment as investment outcomes may likely be realised in successive political election cycles. Furthermore, investing in aviation assets/infrastructure is an expensive exercise that can, without careful planning that takes into account the broader impacts on the State’s aviation network, lead to inefficiencies and instabilities to other flight routes in the State.

The underlying problem is that Queensland lacks an overarching strategy for the fit of its aviation networks with state, regional and local policies for economic growth, the development of transport corridors and the leveraging of local assets and attractions to sustain communities. That is, an approach for planning aviation growth in Queensland needs to transcend the political and economic complexities of the current privatised aviation system. In doing so, it would provide a unified framework for airports, airlines and local jurisdictions to align to in their individual strategic planning functions so that the state, as a whole system, benefits. To do this, it requires placing individual stakeholder agendas for political gain and profit on hold and, drawing from the insight of contemporary strategic management literature. That is, viewing the problem of aviation network design from a whole-of-state resource-based view. Applying a resource-based view in this context requires re-imagining Queensland’s mix of private and public aviation assets as a single organisation that should be designed in such a way as to optimally serve the socio-economic advantages and needs of the state.

The conceptual framework applied to the paper focuses on the Organisation aspect of the resource- based view’s (see Priem and Butler, 2001) consideration of what makes a resource a component of the competitive framework of a particular region. By re-imagining Queensland (or any region) as a single organisation that has the need to compete with others for socio-economic growth and sustainability, what becomes strategically important for the state/region is the synergy of strategic resources that allow the state-region to flourish. In the strategic management literature (Alexy, West, Klapper and Reitzig, 2018; Wernerfelt, 1984), these strategic resources are viewed in terms of their ability to create value, their rarity and difficulty to be imitated, and the way in which the organisation is ready or able to exploit their value-creating features – termed VRIO resources.

Airports form a core component to a state or region’s ability to create sustainable competitive advantages for achieving economic and societal goals. Extending from Stevens, Baker and Freestone (2010), as a resource that facilitates the attraction and movement of people and economic value, airports are catalysts for the Organisation of VRIO resources as they connect often immobile tangible and intangible strategic resources (i.e. tourism destinations and experiences) of the state/region to the world. Accordingly, this paper interrogates the role of airports and the structure of their networks (within Queensland and the three international vignettes) to act as catalysts for sustainable socio-economic growth.

The utility of systemic approaches to strategic planning and investment for aviation has been highlighted in other jurisdictions (see Howard and Keller, 2000); particularly with respect to managing tensions of land use planning (i.e. cooperative planning in Washington State) and integrating air transport with land transport systems (i.e. Florida Aviation System Plan 2025). Therefore, the objective of this paper is to review the current structure and form of Queensland’s aviation assets and learn from comparable international examples, which mobilise more systemic approaches to aviation planning, to assist the development of what the authors propose should be a Queensland Aviation Network Strategy. It looks to other international aviation networks for insights to the different policy strategies used, their implications for efficiency and effectiveness of aviation-related decision making, and the implications for their airports to aid the organising of each region’s mix of strategic resources. The examples selected are the US States of Florida and California and the South American country of Brazil. It should be noted that due to the scope and available resources for the research project, the examples discussed are smaller in scope and depth than in-depth case studies (Yin, 2017), and provide targeted, descriptive vignettes for the purpose of comparison and discussion. These vignettes were selected for their comparable attributes to the Queensland context across a range of salient transport and economic factors (i.e. trans-Pacific long-haul and dispersed intra-state networks for California; the tyranny of distance between urban centres for Brazil; and the coastal tourism attractions of Florida) to provide targeted insight to the lessons that international aviation governance structures may hold. The paper, therefore, represents an original and relevant comparison of international and State-wide aviation networks.

The paper is organised as follows. An overview of the current Queensland aviation network is initially provided as background context. This context is important for understanding the tyranny of distance between major population centres that, in more densely populates states of countries, would be more readily overcome by alternate modes of transport. Aviation is central to maintaining the quality of life for much of Queensland’s regional population, and accordingly, makes the policy context of aviation salient when planning for the state’s future. This overview includes a summary of Queensland’s airports concerning domestic and international passenger movements and raises questions of the alignment of the current network to the expectations of the resource-based view literature. Following a research design section on the selection of the international examples, the three international aviation vignettes are presented, before the lessons learned for the Queensland context are detailed. Finally, conclusions and practical recommendations are provided.

2. The current Queensland aviation network

Queensland, as the Australian State with the most decentralised aviation network, is served by 191 airports (Department of State Development, Infrastructure and Planning, 2013), of which 40 metropolitan and regional airports are considered to be significant for economic growth. In 2011

(Deloitte Access Economics, 2012), the total revenue of Queensland airport industry (AUD 718 million) was ranked second at a federal level, behind the highest ranked State of New South Wales (AUD 1,235 million).

Brisbane Airport (BNE), the main Queensland air transport gateway, was responsible for 17,000 full-time equivalent (FTE) direct and indirect jobs in 2011. This figure is forecast to increase to 50,000 FTE by 2029 (Department of State Development, Infrastructure and Planning, 2013). As a privatised airport, the continued expansion of BNE plays an important role in regional Queensland development as well as the wider Australian economy. It is forecast that the BNE contribution to the Australian economy will be AUD 13.4 billion in 2034 (Brisbane Airport, 2016), as new aviation assets (new parallel runway, terminal and commercial landside precincts) become operational as part of the airport’s long-term spatial and infrastructure plan. BNE is one of the four capital city airports that are monitored in terms of price and quality within the light-handed regulatory framework established in Australia since early 2000s (Lohmann and Trischler, 2017).

The second largest airport in Queensland, Gold Coast Airport (OOL), has a significant contribution to both south-east Queensland and northern New South Wales economies. An independent report on the privatised Gold Coast Airport estimated that its economic impact would reach AUD 368 million by 2016/2017, while the number of direct and indirect jobs is estimated to rise to 2,350 (Gold Coast Airport, 2016).

As shown in Figure 1, Queensland has some peculiar characteristics in regards to other States. It is the only State to have non-capital city airports in the top ten most active airports in the country. The Gold Coast (sixth) and Cairns (seventh) airports are ahead of Canberra (nation capital), Hobart (state capital) and Darwin (state capital) (respectively 8, 9 and 10 in the list) regarding domestic and international passenger movements (BITRE, 2016). Also, Gold Coast and Cairns are both major international airports that particularly service the inbound leisure market. Therefore, for the international market, Queensland, when compared to other States, has the most dispersed number of international gateways. However, Sydney and Melbourne are positioned as the top two for both international and domestic passenger movements in 2015.

Figure 1. Top 10 Australian airports according to passenger movements

Source: BITRE (2016) for year ending 2015 Note: The Queensland airports presented include Brisbane, Gold Coast and Cairns

The airport hierarchy within Queensland is demonstrated visually in Figure 2, providing a better understanding of the roles of airports across the State (using data from BITRE, 2016). Queensland’s air transport network is mostly established amongst 28 of the 191 airports of the State of Queensland. There is a broad range of airport types, with capabilities ranging from an international airport of the size of Brisbane, capable of handling the largest modern passenger aircraft (i.e. Airbus A380), to remote airfields such as Mornington Island, capable of servicing smaller turboprop passenger aircraft (i.e. SAAB 340). In total, Queensland airports handled 39,045,973 revenue passengers (i.e. someone who has paid a transport operator for their trip) in 2015. International passengers accounted for 17.3% of the overall traffic, or 6,751,943. Besides Brisbane, as the main airport in the state (56.4% of total revenue passenger traffic for the state of Queensland - domestic and international combined), Gold Coast (15.4%), Cairns (11.6%), Townsville (3.9%) and Sunshine Coast (2.3%) comprise the top five airports in Queensland. Altogether, these five airports represent 89.6% of all the revenue passenger traffic of the State of Queensland, and the only airports to regularly operate both domestic and international flights. Brisbane also dominates in the domestic front with triple the number of revenue passengers (16.7 million) than second-ranked Gold Coast airport (just over 5 million).

Figure 2. Revenue Passengers for major and regional airports in Queensland (Source: BITRE, 2016)

In this paper, the Queensland air transport network has been divided into three functional classifications, local (intrastate), regional (interstate) and international. These are shown in Figures 3-5 respectively. From Figure 3, it is clear that air transport within Queensland is centralised to the South East of the State, with intrastate trunk routes between Brisbane and the North Queensland centres of Cairns, Townsville and Mackay, which accounts for approximately half of the intrastate air passenger traffic. Looking beyond the State border, Brisbane Airport and Gold Coast Airport play an important linking role for Queensland passengers to international routes via Sydney and Melbourne. This arrangement presents a potential opportunity to analyse volumes of Queensland’s intrastate air passenger movements concerning onward domestic connections to international routes (e.g. passengers flying from Townsville to Gold Coast Airport, interstate to Sydney and then internationally). Further analysis could determine if sufficient Queensland-based demand could support new international routes directly to-and-from Queensland.

The great distances between Queensland’s Northern and Southern population centres make it impractical for a single hub-and-spoke airport system to service the State’s aviation needs – particularly as aircraft with sufficient fuel capacity to reach communities in the Far North of the State would require runways considerably larger than is practical to maintain due to their relatively small population centres. The current aviation network provides two regions of concentrated aviation activities in the North and the South East. Cairns and Townsville provide a localised hub- and-spoke network to communities in the North of the State, while Brisbane and Gold Coast provide a pseudo-multi-airport system (OOL focusing on budget airlines, BNE focusing on full- service airlines) to act as a hub-and-spoke network for communities in the Southern half of the State.

Figure 4 shows the interstate market (routes with at least 1% of market share). Sydney (SYD) and Melbourne (MEL) are the two destinations that attract most passenger traffic among Queensland airports. BNE-SYD (18.9% of the revenue passenger traffic in the period 2010-2015) and BNE- MEL (14.3%) are the top two most important routes, followed by the Gold Coast routes to SYD (11.9%) and MEL (8.7%). Altogether, these four routes represent more than half of all interstate revenue passenger traffic. These routes are followed by two routes from BNE, CBR (Canberra, 3.0%) and NTL (Newcastle, 2.6%). Overall, BNE accounts for exactly half of all the interstate traffic, followed by OOL routes (24.0%), CNS (11.0%). Apart from TSV, with 1.8%, two predominantly leisure destinations are also important, Sunshine Coast (MCY, 4.2%) and Hamilton Island (HTI, 1.5%), the latter two attracting flights from SYD and MEL. MCY-SYD accounted for 2.2% of the market share, while MCY-MEL totalled 1.9%.

Figure 5 illustrates true origin/destination of international routes of the three main airports in Queensland. It shows the actual traffic to airports beyond those that offer direct flights out of Brisbane (BNE) in blue, Gold Coast (OOL) in orange and Cairns (CNS) in green. Among the top fifteen international markets, four routes are not from BNE, i.e. Gold Coast and Auckland (3.7% of the State international passenger traffic), Cairns to Tokyo-Narita (2.2%), and Gold Coast to Kuala Lumpur and Tokyo-Narita, respectively 2.1% and 1.8%. The major international markets from BNE are Auckland (9.7% of the total international traffic), Singapore (3.8%), Christchurch (3.4%) and London-Heathrow (3.0%).

Figure 3. Intrastate revenue passenger market share of intrastate routes with more than 1% of participation - 2010-2015 (source: AirportIS)

While the international routes illustrated in Figure 5 depict a more market-led (airline-driven) network linking Queensland to the world, government and commercial stakeholders prefer a more diversified approach for linking internationally – seeking to distribute international routes beyond aviation hubs to include regional centres too. That is, much of the focus for attracting business investment suggests a balance of regional and coastal opportunities, particularly with respect to mining industry growth, yet government-led development and aviation growth are not nearly as balanced. This represents a departure from the resource-based view’s expectations for promoting the ability of an organisation exploit strategic resources (Barney, 2001). Emerging economic

drivers should be met by commensurate investment for aviation accessibility if a state/region intends to remain competitive with other regions that are also vying for investment and jobs growth. That is, states compete with other (national and international) economies for attracting (public and private) investment and population growth, leveraging their natural resources, locational advantages, and reputations to do so (Snowdon and Stonehouse, 2006). This mirrors the RBV’s tenets for strategy to identify and make good use of its tangible and intangible resources that are largely difficult to replicate in order to sustain a competitive advantage over others (see Barney, 2001), and includes natural resources (Aragon-Correa & Sharma, 2003) geographic advantages and the ability to adapt over time (Wernerfelt, 2016). By failing to provide commensurate infrastructure investment to emerging sources of value within the state, this demonstrates a strategic limitation in the state’s ability to change investment patterns in response to changes in the value-creating fabric of the state.

Instead, investment in infrastructure remains focused on South East Queensland’s business and tourism hubs (e.g. major terminal and runway expansion plans at BNE and OOL), while aviation growth has been most prevalent in regional areas throughout a prolonged period of fly-in fly-out traffic for mining towns. That is, aviation-focused government funding has targeted the subsidising of routes to rural and remote areas of the state, as a means of shoring up the supply of transport for communities. On the other hand, funding for the expansion of aviation infrastructure has been less forthcoming. Gold Coast Airport’s expansion has been met with federal funding for a terminal upgrade, but Brisbane Airport’s new parallel runway project has been funded privately without federal government assistance. As further demonstration of the paucity of available government funding for aviation infrastructure, Wellcamp (WTB), a new airport West of Brisbane, was privately funded to provide improved freight and international access for the regional mining centres in the Surat Basin. These decisions demonstrate the government’s arm’s length approach to steering aviation growth development; requiring government agencies and airports to negotiate the terms of future development, and framing investment and development decisions regarding the parties’ independent uncertainties, as well as their collective rewards. It is in navigating these independent uncertainties that a unified policy framework (i.e. system-wide strategy) describing and guiding decisions towards a desired aviation future would provide confidence for stakeholders with respect to understanding how aviation investment contributes to their collective rewards.

The growth in regional aviation creates potential bottlenecks concerning the ability of regional airports’ current capabilities to sustain increased operational capacities that may increase the costs of aviation on communities, rather than reducing them. In effect, this limits regional economies’ adaptability to respond to positive fluctuations in passenger demand. Diminishing returns or increasing operational costs from aviation growth may create economic hurdles for communities to overcome (where cost-return or profitable economies of scale are not reached). Furthermore, the increased frequency of flights in and out of regional communities may trigger adverse community responses to increased aircraft noise and other not-in-my-back-yard concerns. This approach places local government at odds with agendas for stimulating economic growth via infrastructure.

Regional airports pursuing international airport status may hinder the overall efficiency of Queensland’s aviation network, resulting in increased mobility costs for passengers and levies for communities. For example, every airport providing international services requires investment for Customs infrastructure and staffing for immigration control, and the proliferation of multi-airport

systems has an upward effect on ticket prices (as per De Neufville, 1995), and in turn reduces the attractiveness of the area to business investment. More recent literature (Derudder, Devriendt and Witlox, 2010) indicates that multi-airport systems can improve functional connectivity for regions with respect to dividing airport roles amongst domestic, international and long-haul capabilities. However, this functional delineating between airports in Queensland has not yet been given direct policy focus – leaving decisions for airport development largely up to the aspirations of local governments and private investors vying to capture market share. Sudden changes in the strategic priorities for a regional airport may impact on its fit concerning surrounding land uses, again sparking negative community responses and potential knock-on costs in changing land use due to airport development. Airports require significant sunk costs (e.g. providing incentives for new routes) and thus require long-term profitable operations to recoup the costs of increasing their capacities and capabilities, which may ultimately limit the ability of the private sector to invest in regional airport development unless confidence for stable and/or continued economic growth can be better supported.

The long-term sustainability of revenues required by airports places an important tension on the ability of airports to maintain relationships with stakeholders beyond the airport boundary (Donnet and Keast, 2014); lest planning decisions for surrounding transport and urban development impede the operational capabilities of an airport (i.e. the infamous residential tower near Boston Logan Airport). While planning restrictions for the height of structures is in place to protect the safety of aviation operations, integrating land use plans and urban growth next to airports has not been formalised into policy. In the case of Brisbane Airport (where airport ownership is privatised), Brisbane City Council, the Queensland Government, and Brisbane Airport Corporation have created a more organic response to the need to coordinate their development decisions with regular round table discussions and ongoing engagement via community consultation groups. In this way, regular dialogue fosters relationship building and information flows between the primary stakeholders for infrastructure development in and close to the airport. This enables better alignment of land use planning and strategic planning for all stakeholders involved, and has led to cooperative agreements between the State Government and airport lessee for land transport projects on and surrounding airport land. However, the mutual trust and good will developed between private, State and Local Government stakeholders may only extend so far as the next election, which impedes (but does not exclude) business confidence in pursuing long-term infrastructure development. Similar tensions exist for airports owned by their Local Government (such as Cairns), however the integration of land use planning decisions is more tenable as there is no competition between airport owner and local planning authority.

Figure 4. Interstate revenue passenger market share of interstate routes with more than 1% of participation, 2010-2015 (source: AirportIS)

Individually, Queensland’s major airports and their local planning authorities already appear to work well with one another to create economic opportunities for growth in tourism (i.e. Gold Coast and Cairns), training (i.e. Cairns and Brisbane) and aerospace (i.e. Townsville and Brisbane). However, in their attempts to generate local economic growth, individual airports increasingly compete with one another for limited government funding for infrastructure development from both the Federal and State budgets. Whilst competition between localities within the state are good for local employment and investment, unstructured or uncoordinated efforts amongst the state’s airports is likely to lead to inefficient growth in infrastructure capacity and routing – adding further weight to the argument for an aviation network strategy for the whole state. In their paper, Derudder, Devriendt and Witlox (2007) explain that while it would be nice for international and domestic passengers to fly directly to their chosen destinations, major hubs within aviation networks are important for creating efficient economies of scale, and that some networks dominated by hubs become increasingly unattractive due to the congestion – improving the attractiveness of regional airports in particular instances. In short, getting the balance between distributed (point-to-point) and hub network designs, for domestic, international and long-haul networks, is important for helping to organise and coordinate strategic resources within a state/region.

Funding is often sought on a case-by-case basis, with the successful attraction of funding at one airport inevitably means missed opportunities for growth at others. The seemingly ad hoc nature of government funding for growing aviation infrastructure in Queensland provides a competitive driver for regions to create coherent economic development strategies that integrate air transport into their plans. However, the same driver also works against the pragmatic needs of long-term planning for airports as government investment appears to follow no set criteria or consistent set of economic goals for the state as a whole. That is, a clear set of goals or objectives for aviation, concerning how aviation and aviation infrastructure contribute to the economic development of Queensland, would help to provide a consistent point of reference for decision making around infrastructure investment, land use planning, and air passenger routing. An overarching strategy that defines a future vision for Queensland’s aviation network, and its integration with state-level strategies for economic development, infrastructure investment and sustainable communities will help to create confidence in Queensland’s aviation business community.

Overall, the Queensland aviation policy environment is that stakeholder interests and current plans for economic investment/development appear to favour a multi-hub network. South-East Queensland would be the primary focal point for domestic and international routes for the State. North Queensland would be the secondary hub servicing rural and remote communities with the capacity to service international routes, providing access to the Northern economy to Asia-Pacific trade partners and linking tourism destinations more readily. State and Federal funding for aviation-related infrastructure are centralised in South East Queensland. However, significant aerospace services and tourism assets for the State are also located to the North concerning Townsville and Cairns. A multi-hub network provides a pragmatic fit with the physical capabilities of aircraft servicing regional and rural areas of Queensland, as well as appreciating existing government and private investment in aviation and aerospace.

Figure 5. International Interstate revenue passenger market share of interstate routes with more than 1% of participation, 2010-2015 (source: AirportIS)

3. Research design: Comparative example selection and analysis

International comparative vignettes are examined to identify important insights for the strategic governance of aviation networks. The vignettes presented in this paper are limited to discussing the potential benefits and pitfalls for airlines, airports and regional economic growth; with insights drawn to their impact on the ability of the state/region to organise its key competitive resources. The second stage of the analysis will discuss policy and strategic implications for Queensland concerning each of the three vignettes, centred on the different types of aviation networks (hub-and-spoke, multi-gateway, point-to-point) and their governance. This approach has the goal of identifying the types of industry-government engagement, the investment in infrastructure, and the structures/policies required to deliver successful outcomes for each type of network.

Regions comparable to the Queensland aviation context have been determined, providing an array of options to study with economic and policy implications. To identify candidate regions for this study, the researchers took the pragmatic position that no two examples would be the same and instead searched for regions that were comparable concerning at least two of the three comparators for economic, geographical and aviation contexts. Concerning Queensland, this meant searching for regions that were framed by coastal population densities, short-haul and long-haul international and intercontinental routes, intra-state (case) routes longer than 700km, and economies that have a substantial focus towards tourism. A secondary sampling screen used the premise of the research to identify candidate regions that were substantially different to Australia’s governance structures for aviation. In particular, regions were seen as favourable if their policy structures enhanced or constrained their ability to change, as this would likely highlight lessons of what to do, and what to avoid, with respect to aviation network policy that could support an RBV-aligned strategy. The following three regions were selected:

1. Florida, as an example of a primary-hub aviation network 2. California, as an example of a dual-hub aviation network 3. Brazil, as an example of a liberalised aviation network

The first vignette presented is the aviation network for Florida, which is characterised by its primary intercontinental hub airport of Miami, with other major airports in the State (Orlando and Tampa) supporting domestic and near-international routes. With respect to general connectivity, Florida could well be described as a multi-hub network. However, when Florida is compared to the Queensland context, the key structural comparison comes from the (not exclusive) dominance of a single airport in the state for intercontinental/long-haul international routes. It could also be argued that Florida is more representative of a distributed system of international points of entry/exit given that many of Florida’s airports have international routes. However, many of these routes service only short-haul international flights (i.e. destinations in Mexico and the Bahamas) that are more comparable to domestic routes when again compared to the context of Queensland. Further, the concentration of international routes is highly skewed to Miami when compared to the other major airports (i.e. 41 direct-route international destinations for Orlando International Airport (MCO) versus 103 for Miami International Airport (MIA) (Miami International Airport, 2016; Miami International Airport, 2016). Geographically and economically, Florida has strong parallels with Queensland’s economic

resources for coastal tourism and distance from the country’s capital and economic engine room of the US North-East region.

The second aviation network discussed is California, which is best described as a twin-hub aviation network. Los Angeles and San Francisco dominate the international linkages available from the West Coast of the United States, although aviation growth sees both Los Angeles and San Francisco supported by Multi-Airport Systems (two to three airports servicing the same population catchment) that compete for domestic and (increasingly) international routes for their cities. The mix of tourism, natural resource and technology industries make California a prime point of comparison to the Queensland context. Additionally, the increasing competition for international routes in South East Queensland echoes some of the network attributes of the Multi-Airport Systems supporting California’s international hubs.

Finally, Brazil is the focus of the final vignette, representing an aviation network that is largely required to overcome the tyranny of distance and land transport networks that are impractical for supporting regional passenger mobility. The historical linkages between Brazil and Portugal facilitate a distributed network for international points of entry – with strong expatriate and familial ties between the two countries creating sufficient demand for trans-Atlantic flights to a range of regional airports across Brazil’s northern coastline. This network is functionally similar to the increasing number of direct flight routes developing between Queensland and New Zealand (although Brazil’s trans-Atlantic routes are considerably longer than Queensland’s trans-Tasman routes in comparison); the increasing demand for tourism-driven direct routes from regional Queensland to New Zealand is currently spurring investment in trans-Tasman route development, and exemplifies Derudder et al.’s (2007) tensions for hub versus regional connectivity for particular segments of passengers.

4. Aviation network vignettes

This section describes a mix of policy and economic factors for the three international vignettes. Table 1 presents some background information on the three aviation network examples before the current aviation network model for each one is reviewed in turn.

Table 1. Information on the three aviation network case studies

General Facts Florida California Brazil Capital city Tallahassee Sacramento Brasília Climate Humid sub-tropical Variable depending on latitude Tropical (North) (North) to tropical and elevation (desert, oceanic, to temperate savannah (South) continental, etc.) (South) Coastline 2170 km 1350 km 7491 km Land area 0.170 million km2 0.424 million km2 8.36 million km2 Population 19.89 million 38.43 million 201.5 million Annual population growth (as 1.7% 0.87% 0.93% at April 2013) Economic Indicators Annual real economic growth 2.2% 2.0% -1.7% (financial year 2012-13)

Annual real economic growth 1.8% 1.8% 0.77% (as at end 2013) Nominal gross domestic AUD 0.88 trillion AUD 2.26 trillion AUD 2.24 trillion product (financial year 2012- 13) Annual employment growth 2.3% 1.03% 1.13% (financial year 2012-13) Average unemployment rate 6.2% 8.9% 5.4% (financial year 2012-13) Annual Inflation (financial 1.5% 1.5% 5.91% year 2012-13) Nominal exports of goods and AUD 106.2 billion AUD 185.1 billion AUD 254 billion services (financial year 2013- 14) Nominal imports of goods AUD 80.87 billion AUD 419.6 billion AUD 247 billion and services (financial year 2013-14) Sources: OECD Data (2016a, 2016b, 2016c), The World Bank (2016a, 2016b), United States Department of Labor (2013) National Conference of State Legislatures (2013), United States Census Bureau (2016a, 2016b), Florida Department of Transportation (2016a, b) Note: Using exchange rate at time of indicators reported in 2013 (AUD 1 = USD 1.10117)

4.1 Florida’s aviation network: Primary hub

Florida’s aviation network is characterised by dense intrastate routes between the major population centres of Miami, Orlando, Tampa and Fort Lauderdale, and large volumes of transiting intercontinental passengers. With a mix of 21 commercial, 107 general aviation and 12 military airfields, aviation contributes to approximately 8.5% of Florida’s Gross State Product, with civilian aviation generating AUD 106 billion in total economic activity (Florida Department of Transportation, 2016a). With close proximity to Mexico, the Bahamas and South America, 14 of the 21 major airports in the State attract international routes; that said, only half of the international airports attract over 1 million PAX annually.

Approximately AUD 5.9 billion in funding for maintaining and developing the State’s Aviation Program is provided via a complex mix of tax and surcharge revenues, and aid from the Federal Government (approximately 34.5% of the State’s Transportation Fund is provided by Federal Aid) (Florida Department of Transportation, 2016a), of which only a small portion (approximately AUD 150 million) is made available for aviation-related activities. The State distributes Transportation Funds into aviation via strategic programs for Airport Improvement, Discretionary Capacity, and a Strategic Intermodal System. The Airport Improvement Program (largely maintenance and some development plans) consistently attracts more than half of the State’s Aviation Funding each year, and Discretionary Capacity projects (targeting strategic aviation growth) receive approximately one-third of the funding allocations. It is through direct funding of ongoing maintenance and development that different airports and regions within the state can be influenced rather directly. That is, the state has the power to favour an area as part of a joined-up approach to economic development for a region (tethering aviation investment with ground transport investment). This policy enables the State to steer economic growth via infrastructure in a way far less arm’s length when compared to Queensland, and in effect, creates a more adaptable approach to responding to market and societal changes due to the relatively short time horizon between successive rounds of funding. In short, this approach

allows the region to support emerging sources of value and support their integration into the network flows of people and economic value.

Strategic decision making for Florida’s aviation network is largely informed by the Florida Aviation System Plan (FASP) for development-related decision making, and approval and permitting processes for operations-related decision making. The FASP provides a 20-year plan (2005-2025) for strategic growth and investment priorities for aviation-related development by drawing upon economic analysis and stakeholder needs to inform Florida’s Department of Transport to guide strategic decision-making; including approvals under the Aviation Grant Program for Airport Planning, Airport Improvement, Land Acquisition and Economic Development. A 20-year plan is important for instilling confidence for long-term investments in heavy infrastructure that requires long periods to recoup return on investment (i.e. new terminals and runways), and the FASP provides insight for airlines and service providers to plan for expected increases in air movement capacity and demand.

The 20-year plan is updated regularly via ongoing process supported by the Federal Aviation Administration and Florida’s Department of Transport to ensure changes in demand, technology and connected intermodal transport are supported by the FASP. The process, called the Continuing Florida Aviation System Planning Process (CFASPP), mobilises large-scale studies to identify economic and social impacts of aviation at State, regional, airport type, and individual airport levels, and has defined nine aviation regions (five “Regions” and four “Metropolitan Areas”) within Florida that have their own Regional Aviation System Plan (Regional Perspectives) (Florida Department of Transportation, 2016b). The Regional Aviation System Plans (RASP) interpret the overarching network/system level goals and objectives, defined in the FASP, to the individual economic and social needs of each of the nine regions, and demonstrates a top-down governance, bottom-up implementation model of strategic decision making for Florida’s aviation network. The functional alignment of the RASP and CFASPP ensures that the 20-year plan does not become stale or outdated. It also ensures flexibility and adaptability of long-term plans to short-term fluctuations in the aviation business environment and emergent trends in location-specific resources (i.e. new market constraints or opportunities).

Given the State’s focus on international trade and tourism, policy mechanisms support the development of synergies between air, land and sea transportation systems. Treating the aviation network as part of an overall logistical fabric for the State’s economy is savvy, given that aviation provides an (almost) two-fold indirect and induced economic benefit to Florida’s industries with interdependent relationships to aviation (George, 2015). The Strategic Intermodal System explicitly aims to integrate “facilities, services, [modes] of transportation and linkages into a single, integrated transportation network” (Florida Department of Transportation, 2016a) as a means of linking State and regional goals for the economic and social benefit. This strategy provides a second layer of governance within the State’s Department of Transport that informs decision making for investment and growth strategies for Florida’s aviation network and gives further emphasis to the integration of aviation development with local and regional ground transport routes. The mix of Discretionary Capacity funding programs, Strategic Intermodal System, and the connectedness and regular updating to the CFASPP and RASP governance mechanisms, creates a joined-up approach that provides benefits for short-term adaptability to meet emerging socio-economic forces and

benefits for longer-term business confidence for transport infrastructure support. In sum, Florida’s approach to governing its aviation network development appears far more comprehensive, compared to Queensland’s, in ensuring the state’s overarching socio-economic goals are translated into strategic planning and investment support for aviation infrastructure development – tailored to the pragmatic economic needs and resource advantages of individual regions.

4.2 California’s aviation network: Twin hub with some regional international points of entry

California’s aviation network is characterised by its two dominant hubs of Los Angeles (LAX) and San Francisco (SFO), which attract the majority of domestic and international routes for the State. The second tier of international-capable airports (San Jose and Oakland for SFO; Santa Ana and Ontario for LAX) are more accessible for budget airlines, domestic business travel, and overflow/diversion capacities for the major hubs. There are several other international capable airports in California (Sacramento, San Diego, Palm Springs, Fresno), each serving economic, regional and tourist centres.

California’s aviation network is supported by a mature policy framework, guided largely by the California Aviation System Plan (CASP), which is administered by the California Department of Transportation’s Division of Aeronautics (State of California Department of Transportation, 2011). The CASP serves as an ongoing aviation system/network plan that works on a five-year planning cycle, unifying four key decision-making pillars of:

 Policy Element (broad policy initiatives for economic growth and societal interests);  Inventory Element (management of core aviation assets);  Airport Capital Improvement Plan (infrastructure investment);  General Aviation System Needs Assessment Element (systemic needs/stakeholder interests).

The CASP formalises a set of goals and objectives for aviation improvements that balance a variety of stakeholder identified needs with the pragmatic requirements for safe aviation. The CASP is transparent, and actively includes the public in consideration of revisions and updates, and serves largely as the primary vehicle for establishing consistent decision-making advice for the California Department of Transportation, Airport Land Use Commissions (ALUCs), and airport sponsors. The CASP aims to improve the integration of aviation into “the fabric of California communities and multimodal transportation planning” (State of California Department of Transportation, 2011). The five-year planning cycle may provide some shortfalls in enabling regions within the state to adapt to rapidly emerging or declining sources of value, however on balance should be tempered against the relatively resource-intensive process of continually reviewing, renegotiating and updating interrelated plans for aviation and ground transport (more akin to the planning processes identified for Florida’s aviation network). This arrangement allows for an open dialogue and understanding to develop between the competing interests of land use and airspace use, as both impact on the safety and amenity of each other. That is, land use planning decisions for land parcels close to airports have access

to readily available information for future aviation/airspace use plans, which help planners to forecast future strains on land transport close to and connecting to airports.

While California’s aviation policy formalises consideration of the State’s aviation system as a whole into transportation and land use decision-making, the CASP’s network-wide approach does not stop individual airports from developing their own long-term plans for growth. That is, airports are active agents within the State’s network of airports. They vie for market share and sustainable operations in an environment where funding, beyond commercial revenues, is increasingly scarce (Chambers, 2007). This internal competition between airports mirrors some of the market realities experienced in Queensland. While the CASP and regional aviation development plans attempt to coordinate growth and investment amongst individual airports in a way that is best for the system, individual airports will continue to pursue development plans that are typically more aligned to their own interests, with little regard for the network as a whole (Howard and Keller, 2000). This provides a critical point of insight with respect to the ability of governance mechanisms to influence individual airports within an aviation system, and demonstrates the power of state-determined funding to steer strategic decision making for their airports. That is, compared to the governance of Florida’s aviation network, California’s aviation network appears more prone to competitive behaviours and politicised decision- making that can create inefficiencies such as duplication of services, inefficient resource investment and the provision of aviation capacity for areas that do not have sustainable levels of demand to warrant investment (as per Short & Kopp, 2005).

Where airports are in reasonably close proximity to one another, and thus compete for overlapping geographical catchments for both origin/outbound and destination/inbound passengers, a multiple airport system (MAS) is created within the State’s aviation network. Competition from a new airport in a region typically increases the volatility of traffic for the entire MAS (Cohas, 1993). In the context of San Francisco, this resulted in 86% higher air traffic volatility at individual airports within the San Francisco MAS (De Neufville, 1995). Greater market volatility is expressed as higher business continuity risk, which in turn creates a need for airports to cost this artificial source of risk into its pricing and revenue models. At the same time, the competition between individual airports within a MAS would provide some balance to the potential for high on-costs (associated with volatility-driven business risk) being passed on to passenger ticket prices.

Ticket pricing, however, is not the only concern for airports within an MAS. Business travellers prefer to fly through airports most convenient to their origins and destinations, while leisure travellers prefer to select flights based on ticket price (Pels, Nijkamp and Rietveld, 2001). This means that an airport within an MAS is more likely to compete with others based on its location nearby to different resources of economic value. From a whole of region perspective, what is important is asking whether the array of airports is adequately connected to local sources of strategic value. California’s governance frameworks for aviation development have the capability of joining these resources together, although the time horizons for responding to change appear less agile than the structures seen in the Florida example.

California provides policy mechanisms to facilitate the coordination of airport development and investment for the betterment of the aviation network and its integration with its communities and complimentary ground transport. However, the interests of individual airports

continue to drive competition and volatility amongst airports that share geographic catchments. Where there is sufficient depth of passenger demand to sustain airline routes through market volatility, the current policy frameworks (CASP) appear to be sufficient to meet the pragmatic decision-making needs for articulating stakeholder interests in aviation infrastructure funding and development approval in a way that allows airports to remain viable and sustainable. However, should the sustainability of passenger demand for a route be questionable or variable, a more hands-on policy framework may be required to secure sufficient business confidence (and thus reduce business risk) and ensure passenger mobility remains affordable.

4.3 Brazil’s aviation network: Distributed network with many international points of entry

Aviation in Brazil accounts for 1.3% of Brazil’s GDP via direct and indirect contributions, spending and catalytic benefits from associated tourism (Oxford Economics, 2011). The governance of air transport in Brazil is characterised by deregulation and ‘open skies’ liberalisation, allowing market forces to guide the supply of aviation to regional and metropolitan centres. By definition, liberalised economies should support the articulation of a country’s sources of value into air transport demand proximal to those sources of value via the natural attraction of business and population (via employment). However, aviation is not an industry subject to the normal assumptions for liberalised economies. For example, airports are typically monopolies (or in MAS contexts, oligopolies) for providing communities with access to air travel, and the operational requirements of aircraft means that the size of an airport’s facilities and availability of supporting aviation services (i.e. heavy maintenance) create hurdles for attracting new aviation routes. For these reasons, government policy is a necessary mechanism for ensuring that communities that are not physically or economically placed to maximise air service provider profitability are still able to access reliable air services.

Brazil’s policy context on aviation, while largely guided by the centralised Government planning, has been described as volatile, and is noted as a driver for airline market concentration to major cities (Koo and Lohmann, 2013), as is the geographical distance between them (Lin, 2012). This volatility largely comes from successive changes to how privatisation has been adopted (Salgado, Vassallo, and Oliveira, 2010), which has the effect of undermining the ability of state and commercial aviation actors to confidently make long-term strategic investments. This suggests that too much adaptability or flexibility within aviation network governance mechanisms could work against the long-term socio-economic aims of an aviation strategy aligned to the resource-based view. That is, agile responses to shifting political, social and economic agendas may work towards individual airports connecting their local strategic resources into the aviation network, but this may come at the cost of other airports’ connectivity – creating the potential for a zero-sum or even negative-sum game for the broader region.

Competition between airports has also seen a tendency for hub-and-spoke networks to form for major cities such as São Paulo and Brasília (Costa et al., 2010), which tends to create efficiencies for airlines hubbing from particular airports by increasing market barriers to rival airlines. That is, hub-and-spoke networks are typically underpinned by a lead carrier/airline that bases a significant proportion of its operations from the hub (Oliveira et al., 2016). This arrangement affords economies of scale in operations and negotiating power to reduce per

passenger overheads and maximise profitability while making it challenging for competing airlines to maintain profitable operations from the same hub (Christidis, 2016). This seems at odds with the tenets of a liberalised aviation market, where competition acts as an important mechanism for ensuring consumers have access to competitively priced airfares.

While this tendency to form hub-and-spoke networks from major centres creates barriers to competition in a deregulated market, it also affords a reduction in hubbing airlines’ business continuity risk; and by extension, creates greater certainty in maintaining existing routes as market pressures to operate as lean as possible are relaxed (Oliveira et al., 2016). While there is a tendency for hub airports to attract full-service carriers (Christidis, 2016), regional airports appear far more suited to point-to-point traffic, which typically attracts budget carriers to provide relatively cheap air services. However, in a way that echoes the relationship between Australia and New Zealand, the historical and cultural ties between Brazil and Portugal provides sufficient demand for trans-Atlantic flights to leave directly from regional centres, particularly those in the North of Brazil. From Brazil’s point of view, this may appear like point-to-point International air traffic, but in reality, these routes form the spokes of an airline’s (e.g. the Portuguese airline TAP) hub-and-spoke network from Lisbon and is only possible because of the ‘open skies’ market liberalisation.

Up until 1999, the authority for strategic planning and operation of Brazil’s airports had been centralised within the Ministry of Aeronautics (Air Force), with the past 17 years characterised by step-changes in commercialisation and privatisation policies (Lohmann and Trischler, 2012). The most recent changes include Public-Private Partnership arrangements for airports responsible for a third of Brazil’s civil aviation traffic and two-thirds of the country’s international passenger movements (ICAO, 2016). The rapid and ongoing nature of privatisation has provided considerable uncertainty to airport investment and development as the rules for ownership, authority and oversight change.

Brazil’s regulatory policies for international travel and fuel are quite different to the majority of developed countries and has been recently criticised by Tony Tyler (outgoing Director General of IATA) as being one of the most difficult countries in South America for airlines to operate (Flight Global, 2016). Economic oversight and the setting of taxes and charges for airport infrastructure and passenger movements is administered by the National Civil Aviation Agency (ANAC). A mix of aeronautic and non-aeronautic revenues are subject to a hybrid-till arrangement that effectively charges airport owners and passengers directly, and there appears to be sufficient political will within ANAC to tailor charges and fee structures to the concerns of private investors and airport users/passengers (ICAO, 2016); and relatively arms length policy frameworks for guiding investment and governance of Brazil’s aviation network

Strategic planning for aviation is guided by the Civil Aviation National Policy which, through a Civil Aviation Strategic Plan, establishes a National Infrastructure Plan that informs the development and management of airports, grant schemes, and regional aviation agendas. While previous planning initiatives attempted to increase the authority of major airports to set (or at least argue for) their own agendas for development to attract funding, the increasing focus to privatise Brazil’s major airports makes it unclear to whether decision making has been further devolved from, or returned to, the centrally steered National Infrastructure Plan. That is, while a centrally-defined agenda for aviation development in Brazil exists, the effectiveness of its

implementation is unclear due to the rapidly changing terrain of airport ownership and the implications this brings to potential changes in authority and negotiating power. By extension, this has the appearance of the centrally controlled aviation infrastructure funding mechanisms needing greater support from a more distributed or localised governance model for attracting and allocating aviation infrastructure development funding. This would allow the liberalised ‘open skies’ airline operations to develop business confidence from what would hopefully be more clearly communicated long-term plans for airport development, and thus promote more local investment in infrastructure that joins aviation networks to local strategic resources across the region.

5. Implications for the Queensland context

5.1 Lessons learned from Florida

The context of Florida has parallels to Queensland with respect to coastal-intensive tourism resources and a political desire to leverage aviation for economic growth and synergistic effects with complementary industries. From a structural level, the governance of aviation in Queensland could use Florida’s focus on joining up plans in aviation investment and growth with multi-modal development, to ensure that growth in aviation is not hampered by sub- performing ground transport networks. Treating transport as an entire system, from a policy perspective, allows for better strategic planning within each of the different transport modes, and for joining up investment in economic development with transport improvement strategies. This has clear implications for placing aviation networks at the centre of planning discussions to focus on identifying opportunities that join up investment in local strategic resource development, airports, and the infrastructures that join them together.

Both US studies reference an Aviation System Plan framework that legitimises an array of stakeholder interests into the information collated and made available for strategic decision making, concerning the allocation of funding for maintenance, development and strategic growth initiatives within aviation. As a point of difference to the California case, Florida displays far more explicit reference and integration with multi-modal transport initiatives, which translates into a more granular application of systemic planning that joins up local sources of value with broader socio-economic fabrics of the state. That is, while the overarching FASP mechanism provides a state-wide set of goals and objectives for aviation, this is in-turn translated into nine separate regional plans that tailor the goals and objectives for the State to suit the specific economic and multi-modal transport goals within each region. This enables the state to join up its regionally distributed sources of value under a coherent framework that remains adaptable to local changes in resource and passenger demand. The nature of the ongoing review mechanism for the FASP also enables plans and objectives to be revised in relatively short timeframes that allow regions and the state to rethink approaches to resource allocation and prioritising in the face of change. That is, Florida can act in a relatively agile way to exploit emerging trends and resources and remain competitive for attracting population and economic growth. The adaptability of their governance framework enables the state to flex to emergent opportunities and avoiding the threat of locking in to infrastructure investment decisions that may be obsolete by the time they are implemented.

If an overarching set of strategic goals and objectives for aviation is desirable for Queensland, policymakers may find the CFASPP, and its multi-level approach to informing strategic planning, a good model of reference for developing its systemic approach to governing Queensland’s aviation network.

5.2 Lessons learned from California

The context of California has interesting links to Queensland’s economic resources context concerning the two distinct coastal population and economic centres that attract the majority of each State’s air passenger traffic. With San Francisco to the North and Los Angeles to the South, California experiences similar patterns (albeit on a much larger scale) of intrastate, interstate and international air travel. Point-to-point regional routes and hub-and-spoke interstate and international routes characterise the aviation network, with the two hubs arranged into MAS to account for the high volumes of air traffic. Important points of learning from the California case are that MAS arrangements do offer overflow capacities for regions, but at the same time introduce a level of instability into routes as the airports compete with one another within the same catchment. While this affords some level of competition that may reduce costs to airlines, the instability also increases business risks to airports (that thrive under certainty), which places upward pressure on airport charges to account for the increased market instability.

California’s experience with a systemic approach to aviation planning (via the CASP) demonstrates that while the policy framework appears effective in collating and articulating the interests of an array of stakeholders, the competitive nature of airports and regions still allows individual airports to pursue growth strategies that may be counterproductive for the network as a whole. That is, the governance structure appears to limit the ability of the state to organise its strategic resources due to the more arm’s length approach to governing individual airport agendas for growth. The reciprocity of the CASP is that the planning and allocation of Government funding align with the goals and objectives set in the CASP, so airports departing from the goals of the CASP may not as readily attract central funding for projects to expand operations and services. This framework allows for a liberalised or free-market approach for airlines to supply air transport within a system of aviation infrastructure that is governed more by stewardship than firm policy mechanisms.

Applying these insights to the Queensland context brings the realisation that the semi- privatised aviation network in Australia is tethered to similar competitive forces that would likely create tension for the introduction of a more direct governance approach for steering the long-term investment decisions for major airports. However, in order to realise a whole-of- state (RBV-aligned) strategy, the difficult (and likely politicised) task of identifying which airports may better suit different types and levels of development is an important one to tackle. Similar to the idea that different airports within an MAS may be better suited to different forms of travel or type of traveller, creating a platform for advocating (if not deciding) which airports should be considered most effective for specialising in long-haul, international, and domestic travel may be appropriate. A platform or plan detailing the roles of different airports would provide a transparent evidence base for justifying (and may also reduce the politicising of) infrastructure funding decisions.

5.3 Lessons learned from Brazil

The rapid liberalisation of Brazil’s aviation sector is still a work in progress. The country’s aviation network has moved towards a network characterised by multiple hub-and-spoke airports, with major population centres attracting a greater certainty of route supply at the cost of competition. While reduced competition would normally signal reduced risk for the aviation sector, the pace of change to airport privatisation, investment in airport renewal and development, and major sporting events (e.g. the Olympic Games in 2016) have created a volatile economic and political environment. This volatility makes it difficult to enable policy making to keep pace with the structural changes promoted by the Government and market environment.

While there has been an attempt to invigorate the country’s aviation sector through systemic change, the pace at which the change has occurred appears to have had some negative impacts on the accessibility of aviation for remote and lower density centres, which sits at odds with the World Bank’s arguments for sustainable mobility (Mohieldin and Vandycke, 2017). This lesson serves as a point of reference for Queensland, that if it does shift towards a more systemic approach to stewarding its aviation network, to be cautious in managing the pace of change and identifying strategies that protect the social goals and objectives of aviation in the State. Adaptability is a core facet of pursuing a RBV-aligned strategy (Priem and Butler, 2001), but in the context of the infrastructure- and investment-heavy aviation industry, too much adaptation can be counterproductive. Further, the case of Brazil reminds governments that centrally defined policy requires decentralised, or ground-level, mechanisms for implementation. So, while Queensland might benefit from a centrally defined strategy for its aviation network, governance mechanisms for effectively translating the overarching goals and values of the strategy into tangible plans and investment at regional and individual airport levels, and just as importantly, the strategic resources they connect to, is still necessary.

6. Conclusions and Recommendations

The review of the current Queensland aviation network has demonstrated a clear airport hierarchy within the State. It has also enabled the comparative international vignettes to be identified and explored in the context of governance mechanisms that may better enable a centrally-defined aviation network strategy to be implemented in the Queensland context. A multi-hub network was identified, split between the North and South East regions of the State, with the latter one being the primary focal point.

Within the South East region of Queensland, we argued that BNE, OOL and WTB exist in a pseudo-MAS configuration that, as the region continues to grow and demand for all three airports increase, could face similar pricing (de Neufville, 1995) and role (Pels, et al., 2001) challenges as was noted for the California vignette. The major challenge of coordinating the strategies of all three airports revolves around the (varying models of) privatisation for all three airports – telling a private entity that they should narrow their scope to something they had not initially envisaged would run the risk of becoming adversarial and litigious - yet the resource- based view literature suggests that surrendering control of particular aspects of an organisation’s responsibilities and sharing them with others can be highly advantageous for

creating new pathways of specialisation and value creation (Alexy, et al., 2017). At a meta- level, this is what airport privatisation has done for the Australian Government, giving up operational control of major airports to free up resources, shifting to a liberalised model of user pays for public infrastructure (Aulich, 2011), and keeping a guiding hand on the long-term planning of privatised airports via the long- (20 year) and mid-term (five-year) planning arrangements embedded into the Airports Act 1996. However, the benefits of airport privatisation have also come at a cost for the direct coordinating of public infrastructure to fit government agendas for public value and economic growth, particularly for connecting ground transportation modes, urban planning and development proximal to airport boundaries. The individual competitiveness between airports for attracting new routes has created tensions between airports and regions, and decisions for allocating public funding to a particular airport (or airports) for development appears to be increasingly politicised. In short, existing governance mechanisms for utilising airports as catalysts for achieving sustainable socio- economic competitive advantages for Queensland can be improved in the way it goes about joining up the value creating resources from across the state.

Lessons can be learned from all three international vignettes. The US examples set out defined goals and objectives for each State’s aviation network to steer decision making for development, operations and planning with other modes of transport. The Florida regional-level plans through the CFASPP enabled more tailored integration to local economic resources, social needs and ground-based transport infrastructure, which could be translated to and implemented in Queensland. The lessons from Florida are particularly relevant for their approach for joining up aviation development with regional multi-modal transport planning to better connect local communities and strategic resources into state, national and international aviation networks. The mix of short-term funding allocation and longer-term development plans also set up a relatively agile governance platform that allows Florida to respond to market shifts and emerging trends in a timely fashion, further improving the ability of the state to remain competitive in a changing world.

The California case showed that, with their CASP example, funding allocation can strongly influence airport decision-making, but there are invariably tensions between the overall strategic plan and individual airport goals that may make implementing an RBV-aligned strategy, at a state level, difficult at best. While difficult, the task of on-boarding airports to a state-wide vision for aviation is not impossible. Brisbane Airport Corporation and Brisbane City Council were able to overcome longstanding planning disagreements by taking a network governance approach to create forums for openly discussing planning and development on both sides of the airport fence. This has led to considerable improvements in the planning and coordination of transport infrastructure between the airport and the city. This demonstrates that legislation and regulation is not the only answer to coordinating the actions of privatised airports and government agendas for public value. Networked forms of governance may be of interest should the idea of a more coordinated approach for harnessing the state’s airports as catalysts for socio-economic success be viewed as fruitful to policy makers and airports alike.

The Brazilian case has demonstrated that a shift to an ‘open skies’ liberalised air transport market has encouraged hub-and-spoke network behaviour and further centralisation of aviation densities to major airports, although caution is needed when managing change. The hub-and- spoke networks appear to increase the certainty of route supply while discouraging competition,

which could be further emphasised in Queensland due to its tendency to fit a dual-hub aviation network form (similar to that of California). The cases also showed that broader aspects need to be considered, both the broader intermodal transportation system and the wider economic and social goals set by the State, and that centrally derived policy can be diluted or made less effective by arms-length governance arrangements. These lessons serve as a prudent reminder that there is such a thing as too much adaptation – particularly for infrastructure that is inherently difficult and expensive to reconfigure. Understanding that responsiveness is important, just as it is to appreciate that moderation of change is important to protect business risk, pricing, and availability of services across aviation networks.

Airport development implementation effectively falls under two aspects, promoting the centre and the regions. For Queensland, a focus on centralising around the population dense South East Queensland region could help return Brisbane Airport to being the second-largest airport in Australia. Such a transition would need to be within a coherent Queensland vision, with the Queensland airports working more closely with each other to understand appropriate overlaps and distinctions between their roles as catalysts for organising the strategic assets of Queensland to capture value. The symbiotic relationship between aviation and economic development creates an opportunity for governments to think broader than the needs of an individual city or region, and to think broader about the implications of a joined-up system that coordinates the flow of people and economic value amongst the rare, immutable and valuable resources of the state. Political goals for regional improvement can often lead to airport development, and together with the need for a Queensland-based approach, it would make sense to develop North Queensland routes that feed into the international gateway of Brisbane Airport for intercontinental passengers. Therefore, strengthening the centre, together with regional improvement (particularly in the North of the State) would help aviation to meet key social and economic goals expressed by Queensland stakeholders.

The interconnected nature of the State’s aviation network means that a network-level strategy would be beneficial to generating dialogue between regions. It would set network-level agendas that would help the Queensland Government better engage with Queensland’s aviation industry and the general public. Given the promising outcomes from the studies reviewed, a more formal approach to generate state-wide goals and objectives for aviation is a plausible option for Queensland’s aviation sector to pursue. It would stimulate critical discussion amongst aviation- tethered stakeholders to develop a policy framework to guide the long-term strategy development and investment in Queensland’s aviation network, to maximise the State’s abilities to meet its overarching social, economic and strategic needs.

For an overarching aviation strategy to become a reality, understanding how Queensland’s airports, as nodes of an interconnected transport network, can support each other’s primary goals for providing public value through the provision of air services to their communities is an essential first step. This requires a more in-depth investigation and reporting of the core resources and values that Queensland’s regions provide, in order to understand how these resources can be supported and aligned, via a coherent aviation network strategy, to achieve synergies that improve the competitiveness of the state and its ability to improve the quality of life for its residents.

Acknowledgements

Removed for purpose of peer review.

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