DECISION NO. I CABINET MINUTE

BRISBANE, fi? I I0/19

SUBJECT :. ___A_ i_r_ S_e_r_v_i·_ c_e_s_ t_o_ W_e_i__:· p:.._a__ a _n _d_ H_o_r_n_ I_s_l_a_n_d_.______

______(Submission No. __~o=c> .c...... ,7L..:1:.....:6=--

a.m. opies Received at f/,?A?ILL /0-35 fli't. Copies Made CIRCULATION DETAILS Premier's • ~o~y ?t relevar.t d6 1 MR GOSS 21 B~ •Ubm1ss1on ~,, :..1,-+,e d 2 MR BURNS 22 Housing & LG Police & Emerg, 3 MR MACKENROTH 23 Services

4 MR DE LACY 24 Treasury Copy of reJevaflt Q? 8~u'bmi~~inn !:a ..... _ - • • - - 5 MR GIBBS 25 Tourism, Sport - & Racing liopy ot relevant ... 6 MR HAMILL Copy of relevan 26 Transport ~~ 1hmi~~inn !:a ..... - · ::lrl ~ ubmission :;:itt~~hed .. ·- - 7 MR WARBUR TON 27 DEVET & IR Resource Indus1 8 MR VAUGHAN 28 - 9 MR CASEY 29 Primary Indust 10 MR McELLIGOTT 30 Health

11 MR BRADDY 31 Education

12 MR COMBEN 32 Env & Heritage

13 MR WELLS 33 Attorney-Gener, l - , v01-,Jy UI 1t .t 1. Fam Serv & ~ 14 MS WARNER 34 Ab&Is Affrs •Ubmission attacned Jus t ice and 15 MR MI LLINER 35 Correct Serv 16 MR McLEAN 36 Admin Services

Manuf & Commer< ~e 17 MR SMITH 37

18 MR EATON 38 Land Managemen

PSMC 19 GOVERNOR 39

20 Mas t er File 40 Queensland Department of Transport

From the office of the Director-General Capital Hill Building, Cm George and Mary Streets, Brisbane. Telephone: (07) 237 9801 International: + 61 7 237 9801 Facsimile: (07)237 9648 International: + 6172379648

Postal Address: G.PO. Box 1549 Brisbane Queensland Australia 4001

The Secretary of Cabinet 13th Floor - Executive Building 100 George Street - BRISBANE 4000 Dear Mr Tait

Enclosed are 50 copies of a Cabinet Submission entitled : ­

Air Services to Weipa and Horn Island

A total of 52 copies of the Submission have been produced.

- I have arranged distribution of the submission:-

Copy No. Department/Branch Officer

1-50 Cabinet Secretariat S. Tait 51 and 52 CLLO w. R:rligar- - For further information please contact me on 2371953.

(W. Rediger) CABINET LEGISLATION AND LIAISON OFFICER

2 October 1990 Copy No. ~ Q _

C O N F I D E N T I A L

C A B I N E T M I N U T E Brisbane, 8 October 1990

Decision No. 00759

Submission No. 00715 TITLE: Air Services to weipa and Horn - Island. CABINET decided:-

That at the request of the Honourable the Acting Minister for Transport, the Submission be withdrawn .

• IRCULATION: Implementation Responsibility Department of Transport and copy to Minister. Departmental Records Department of the Premier, Economic and Trade Development. Treasury Department. Department of Family Services and Aboriginal and Islander Affairs. Perusal and Return All other Ministers and Chief Executives.

Certified True Copy ------, CABINET-IN-CONFIDENCE 00715 SECURITY CLASSIFICATION "C" SUBMISSION NO. CABINET SUBMISSION COPY NO. 20

COVER SHEET

TITLE Air Services to Weipa and Horn Island.

MINISTER - Minister for Transport Minister Assisting the Premier on Economic and Trade Development. ISSUE - Air services between Cairns and Weipa and between Cairns and Horn Island (Thursday Island) are currently operated by Australian Regional Airlines (Queensland) Pty Ltd under the authority of an exclusive State Air License which expires on 31 December 1990. The Cairns - Weipa and Cairns - Horn Island routes are the only Queensland air routes, apart from the subsidised western air routes, which are not subject to open competition. - With the current license expiring at the end of this year, it is an appropriate time to consider whether or not regulation of these routes should continue. If regulation is to continue, new licensing rights for the - routes for 1991 and beyond should be awarded now, to allow sufficient time for any proposed changes to be put in place by 1 January 1991. Following an assessment by the Department of Transport it is considered that the exclusion from the "open skies" policy of the Cairns - Weipa and Cairns - Horn Island air routes is no longer appropriate.

OBJECTIVE OF SUBMISSION

To establish policy with regard to the Cairns - Wei pa and Cairns - Horn Island air routes for implementation from 1 January 1991.

URGENCY An urgent decision is required to allow the aviation industry and affected communities to plan and implement changes by 1 January 1991.

This document is the property of the Government that created it and is held in trust by the Public Service. It may not be copied or reproduced. For further information contact the Cabinet Office.

CABINET-IN-CONFIDENCE CABINET-IN-CONFIDENCE

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CONSULTATION Consultation has taken place with aviation industry repre8entatives, Comalco Aluminium Ltd, Torres Island Co-ordinating Council (ICC), the Department of Family Services and Aboriginal and Islander Affairs and the Member for Cook. - RESULTS OF CONSULTATION All parties generally agreed that if more than one operator was licensed for either route, there was a risk that the level of service, particularly with regard to aircraft type, - could be downgraded. Individual airline operators indicated that they would be prepared to compete on the route although they would naturally prefer ·to have exclusive rights to either or preferably both of the routes. Comalco support the continuation of an exclusive licensing arrangement between Cairns and Wei pa. Comalco are of the view the Cairns - Weipa route will be better served in the - long run if only one operator is licensed for the route. The ICC and the Department of Family Services and Aboriginal and Islander Affairs are concerned that deregulation of the Cairns - Horn Island route could result in a reduction in - the quality of air services to the Torres Strait. The Member for Cook has been consulted on this proposal and he is in agreement with the recommendation.

FINANCIAL CONSIDERATIONS

There are no financial implications for the Government in this proposal.

PUBLIC PRESENTATION

A draft media release i _s attached.

This document is the property of the Government that created it and is held in trust by the Public Service. It may not be copied or reproduced. For further information contact the Cabinet Office.

CABINET-IN-CONFIDENCE CABIN ET-IN-CONFIDENCE

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RECOMMENDATION

It is recommended that the exemption of the Cairns - Weipa and Cairns - Horn Island air routes from the "open skies" policy be discontinued from 31 December 1990. -

Ho.. ~AfiD · ✓Hamill~- MLA - Mi is er for Transport Mini=ster Assisting the Premier on Economic and Trade Development - -

This document is the property of the Government that created it and is held in trust by the Public Service. It may not be copied or reproduced. For further information contact the Cabinet Office.

CABIN ET-IN-CONFIDENCE ------=-=--=-c==---:-:------=---=-c~-:-=-==--=--=-=------CABINET-IN-CONFIDENCE

SECURITY CLASSIFICATION "C" CABINET SUBMISSION -4-

BODY OF SUBMISSION

BACKGROUND

1 . Australian Regional Airlines (Qld) Pty Ltd has exclusive State licensing rights to operate regular scheduled air services between Cairns and Weipa and - between Cairns and Horn Island (Thursday Island). 2. This license which was recently transferred from Australian Airlines, expires on 31 December 1990.

3. The Cairns - Weipa and Cairns - Horn Island routes are - the only Queensland air routes, apart from the subsidised western air routes, which are not subject to open competition.

4. These routes were excluded from the "open skies" policy because they are vital transport links and it was considered that they should remain regulated until the effects of deregulation in other areas could be evaluated.

5. The services provided by Australian Regional Airlines - are provided without Government subsidy. 6. Cabinet, by Decision Number 54116 of 26 April 1988 decided as follows:- - "1. That the exemption of the Cairns Weipa and Cairns - Thursday Island (Horn Island) air routes in respect of air passenger travel from the "open skies" policy be continued until 31 December 1990.

2. That in keeping with the exemption mentioned above, exclusive licensing rights be given to Australian Airlines trading as Air Queensland to operate the abovementioned services until 31 December 1990.

3. That in late 1990 th~ Commissioner for Transport prepare a report for Cabinet's consideration regarding the continuance or otherwise of the exemption of the Cairns Weipa and Cairns Thursday Island air routes from the "open skies" policy".

This document is the property of the Government that created it and is held in trust by the Public Service. It may not be copied or reproduced. For further information contact the Cabinet Office .

COPR/NT.. CAB IN ET-IN-CONFIDENCE CABIN ET-IN-CONFIDENCE

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7. A review of the air service requirements of Weipa and Torres Strait has recently been carried out by the Department of Transport. As part of this review, expressions of interest in operating air services over the Cairns - Weipa and Cairns- Horn Island routes have been obtained from various airlines, including the existing operator, Australian Regional Airlines. The outcomes of this review are detailed below. - OBJECTIVE 8. The objective of this submission is to determine policy as to whether the Cairns - Weipa and Cairns - Horn Island air routes should remain regulated or opened to - competition. ISSUES

9. An analysis of the expressions of interest received gives a good indication of the level of service that can be expected under continued regulation.

10. Proposals were submitted for the operation of services over both routes as a combined operation and over either or both of the routes on a single route, stand - alone basis. 11. A brief summary of the proposals received is at Attachment 1. - 12. All proposals received, whether for both routes or for one route only, requested exclusive licensing rights over the proposed routes.

13. Proposals received were examined and compared on the basis of:-

Aircraft type; Frequency of service; Availability of back up aircraft; Proposed fares; Experience of operator making the submission; and Size of existing operation.

14. The proposal submitted by Ansett for F28 jet services between Cairns and Weipa is clearly superior to the other P+Oposals as far as Weipa is concerned.

15. If the Ansett proposal was accepted and Ansett were awarded exclusive licensing rights over the Cairns - Weipa route, a separate arrangement would have to be considered for the Cairns - Horn Island route.

This document is the property of the Government that created it and is held in trust by the Public Service. $ It may not be copied or reproduced. For further information contact the Cabinet Office. COPR/NT CAB IN ET-IN-CONFIDENCE CABINET-IN-CONFIDENCE

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16. It is considered that the best proposal for the Cairns - Horn Island route, on a one route only basis, is that of the existing operator, Australian Regional Airlines. 17. Although the Ansett proposal is attractive, there is some doubt about its viability given existing passenger numbers. Because of this doubt, Ansett have been requested to provide a written commitment to the - provision of the proposed level of service, for an extended period. To date, this commitment has not been forthcoming from Ansett. - 18. If the Ansett proposal is excluded, it is considered that the best option is the Cairns - Weipa -Horn Island combined proposal put forward by Australian Regional Ai.rlines

19. On the basis of the above considerations, continued regulation could result in a daily F28 jet service to Weipa and a daily, or better, Dash 8 service to Horn Island and would, at least, result in a regular Dash 8 schedule over both routes. 20. Because these air routes have always been regulated, - there is no certainty as to the level of service that would be provided under deregulation. 21. In other areas of the State, deregulation has in some instances resulted in a lower standard of aircraft - being operated but has generally resulted in increases in frequency, seat availability, direct services and same day return flights. In addition, there has been some fare discounting and a general reluctance to increase fares. 22. Given the experience on other routes it is, therefore, possible that deregulation of the Cairns - Weipa - Horn Island routes could result in the lowering of the quality of aircraft used on the routes. However, deregulation is almost certain to result in an increased frequency of services, greater seat availability, more direct services to Horn Island and possibly, discounted air fares.

This document is the property of the Government that cre_ated it a_nd is held in trust by the Pl:lblic Service. $ It may not be copied or reproduced. For further mformat,on contact the Cabinet Office. COPR/NT CAB IN ET-IN-CONFIDENCE CABINET-IN-CONFIDENCE

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23. Although all interested parties have submitted proposals on the basis of exclusive licensing rights, Australian Regional Airlines, Flight West Airlines Norfolk Airlines and Torres Air have indicated a willingness to compete over the Cairns - Weipa and/or Cairns - Horn Island routes using the type of aircraft nominated in their proposals. These airlines have suggested, however, that only one operator of this type of aircraft could survive on the Cairns - Weipa - Horn Island routes and that the frequency provided by that operator would be less than under an exclusive - arrangement because of competition from operators of smaller aircraft. 24. Based on the above and the experience of deregulation - in other areas it is predicted that the Cairns - Weipa and Cairns - Horn Island routes would receive good quality air services in terms of frequency, number of direct services, and seat availability under deregulation. 25. It is believed that in the event of deregulation, Comalco, who control 50 - 75 percent of the Cairns - Weipa business, would enter into commercial agreements which would limit the effect of deregulation on that route. The major effects of deregulation of these routes will therefore be felt on the Cairns - Horn - Island route. 26. Thursday Island residents and other travellers between Cairns and Horn Island have shown by their past actions that they are prepared to fly in smaller aircraft if it - means they can fly direct and when they want to, rather than fly via Bamaga and Weipa, when they can get a seat on the existing Australian Regional Airlines service. Deregulation, if it results in greater frequency and more direct services is likely to be preferred by regular travellers on this route.

27. Travellers to and from Horn Island have been able to take the light aircraft direct service option by using the, at times, freely available illegal services which have been common in the far north.

28. There have been many illegal operators (in terms of the licensing provisions of the State Transport Act) in the Cape York, lower Gulf and Torres Strait areas over the years and because of the isolation of these areas it has been difficult to take action to stop these activities.

This document is the property of the Government that created it and is held in trust by the Public Service. $ It may not be copied or reproduced. For further information contact the Cabinet Office. COPR✓NT CABIN ET-IN-CONFIDENCE CABINET-IN-CONFIDENCE

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29. Deregulation could bring an end to illegal operations in the area because of the increases in frequency and the number of direct services that are expected to result from deregulation. 30. As all other Queensland air routes, except the subsidised western routes, are deregulated, irrespective of route density, the possibility of a - downgrading of aircraft type is not considered to be a valid reason why the Cairns - Weipa and Cairns - Horn Island routes should be treated any differently from the many other medium to low density routes in Queensland which cannot support larger aircraft, - without regulation. It is therefore considered that the Cairns - Weipa and Cairns - Horn Island air routes should be deregulated. 31. In view of the above it is considered that the exclusion from the "open skies" policy of the Cairns - Weipa and Cairns - Horn Island air routes is no longer appropriate.

URGENCY 32. An urgent decision is required to allow the aviation - industry and affected communities to plan and implement changes by 1 January 1991.

CONSULTATION 33. As part of the abovementioned examination of expressions of interest, airline representatives were interviewed regarding their proposals and on other matters relating to the region's air services. 34. Extensive discussions have been held with Comalco Aluminium Ltd ( in relation to Weipa) and the Torres Island Co-ordinating Council (in relation to Horn Island). 35. The Member for Cook and the Department of Family Services and Aboriginal and Island Affairs have also been consulted regarding the Cape York air services.

RESULTS OF CONSULTATION 36. Individual airline operators indicated that they would be prepared to compete on the route although they would naturally prefer to have exclusive rights to either or preferably both of the routes.

This document is the property of the Government that created it and is held in trust by the Public Service. if It may not be copied or reproduced. For further information contact the Cabinet Office. COPRfNT CAB IN ET-IN-CONFIDENCE CAB IN ET-IN-CONFIDENCE

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37. Comalco favours the continuation of an exclusive licensing arrangement over the Cairns - Wei pa route. Comalco is of the view that the Cairns - Weipa route will be better served in the long run if only one operator is licensed on the route. 38. The Island Co-ordinating Council supports the Torres Air proposal for Cairns - Horn Island air services and - gave the following reasons for doing so:- The Torres air proposal is the best in terms of frequency and viability; - Torres Air will be an Islander owned airline and its profits will be returned to the islands; The Torres Air profits can be used to improve aviation facilities on the islands including the air strips which are badly in need of repair;

.• As an Islander owned airline Torres Air will be more receptive than other airlines to the needs of the island communities; The Cairns - Horn Island route is crucial to the - success of Torres Air services within the Strait; Torres Air proposes to train Islanders as aircraft engineers, pilots and in other facets of the - industry. This social benefit will be lost if Torres Air was not successful. 39. The Department of Family Services and Aboriginal and Island Affairs also supports the Torres Air proposal on the basis of the possible social benefits which might accrue to the Torres Strait Island communities. 40. Both the Island Co-ordinating Council and the Department of Family Services and Aboriginal and Islander Affairs are concerned that Cairns Horn Island air services may deteriorate as a result of deregulation. 41 . The Island Co-ordinating Council is opposed to total deregulation and seeks protection for Torres Air over the Cairns - Horn Island route. 42. The Member for Cook has also been consulted on this proposal and he has no objection to the recommendation to no longer exempt the Cape York services from the "open skies" policy.

This document is the property of the Government that created it and is held in trust by the Public Service. $ It may not be copied or reproduced. For further information contact the Cabinet Office. COPR,NT CABINET-IN-CONFIDENCE CABINET-IN-CONFIDENCE

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FINANCIAL CONSIDERATIONS

43. This matter does not have any financial implications for Government.

PUBLIC PRESENTATION - 44. A draft media release on this matter is attached. RECOMMENDATION

45. It is recommended that the exemption of the Cairns - Weipa and Cairns - Horn Island air routes from the - "open skies" policy be discontinued from 31 December 1990. - -

This document is the property of the Government that created it and is held in trust by the Public Service. $ It may not be copied or reproduced. For further information contact the Cabinet Office. COPRINT CABINET-IN-CONFIDENCE ATTACHMENT 1

EXPRESSIONS OF INTEREST

Operator Routes 1 Aircraft2

Ansett CNS-WEI Only Fokker F28

Charter Cruise Air Both Routes Fokker F27 Brasilia

- National Jet Systems Both Routes CASA 235

Australian Regional Both Routes Dash 8 Airlines CNS-WEI Only CNS-HID Only - Flight West Airlines Both Routes Dash 8/Brasilia Norfolk Airlines Both Routes Dash 8 CNS-WEI Only CNS-HID Only

Torres Air CNS-HID Only Grumman G 159

Air North Both Routes Dash 8

- Note 1.

CNS = Cairns WEI = Weipa - HID = Horn Island

Note 2.

Features of the proposed aircraft type are contained at Attachment 2. ------~ - - - -

PROPOSED AIRCRAFT DETAILS

AIRCRAFT TYPE POWER PASSENGER CRUISING PRESSURISED GALLEY TOILET FLIGHT FLIGHT TIMES COMMENTS CAPACITY SPEED ATTENDANT CNS-WEI CNS-HID

Fokker F28 Jet 65 340 Knots Yes Yes Yes Yes 1hr 15min N/A

Fokker F27 Turbo 40 220 Knots Yes Yes Yes Yes 1hr 45min 2hr 15min Old technology Prop. aircraft. Requires regular major overhauls . Boeing Canada- Turbo 36 240 Knots Yes Yes Yes Yes 1hr 35min 2hr 05min Dash 8 Prop. Embraer Turbo 30 300 Knots Yes Yes Yes Yes 1hr 25min 1hr 40min Brasilia Prop. Grumman G159 Turbo 24 280 Knots Yes Yes Yes Yes N/A 1hr 45min Old technology Prop. aircraft. Not used in Aust. for regular scheduled services. Casa 235 Turbo 40 240 Knots Yes Yes Yes Yes 1hr 35min 2hr 05min Not currently operated in this country.

N DRAFT MEDIA STATEMENT

To Cabinet /1990

DEREGULATION OF CAIRNS - WEIPA AND CAIRNS - HORN ISLAND AIR ROUTES

Acting Transport Minister Pat Comben today announced deregulation of the Cairns - Weipa and Cairns - Horn Island air routes from 1 January 1991. Air services over these routes are currently operated by Australian Regional Airlines under an exclusive license which - expires on 31 December 1990. The Cairns - Weipa and Cairns - Horn Island routes are the only Queensland air routes apart from subsidised Western Queensland air routes which are not currently subject to open - competition. These routes were excluded from the Queensland Government's "open skies" policy, which was introduced in 1987, because they are vital transport links and it was considered at that time that they should remain regulated until the effects of deregulation in other areas could be evaluated. "The "open skies" policy has now been in place for over three years and it has been established that where competition has been introduced as a result of deregulation, travellers have benefited from increased flight frequency, better seat - availability and some fare discounting. In some areas, flight times have also been reduced as a result of smaller but faster aircraft being used or because more direct flights are being offered" Mr. Comben said. - "In view of the benefits that have come from deregulation in other areas the continued exclusion of the Cairns - Weipa and Cairns - Horn Island routes from the "open skies" policy is considered to be no longer warranted" the Minister said. Australian Regional Airlines will continue to have exclusive rights to the routes until 31 December 1990.

"From 1 January 1991 other operators will be licensed to operate over the routes provided they meet the "open skies" qualitative criteria of safety and reliability, character and repute, adequate insurance, operational capacity and financial capacity," Mr. Comben said.

Information: Mick Mcshea (Transport House) 253 4799 Compiled by: John McReynolds (Transport House) Telephone: 253 4812