VICTORIAN TRANSPORT STUDY

REPORT ON INTRASTATE AIR SERVICES

Ordered by the Legislative Assembly to be printed

F. D. ATKINSON, GOVERNMENT PRINTER.

No. 46

VICTORIAN TRANSPORT STUDY

The Honourable R.R.C. Maclellan, M.L.A., Minister of Transport, 570 Bourke Street, MELBOURNE, VIC. 3000,

Dear Mr. Maclellan, I have the pleasure to submit herewith a report on Intrastate Air Services. This is one of a series of reports being prepared to make known the results of the Victorian Transport Study. Yours sincerely,

W.M. Lonie. INTRASTATE AIR SERVICES

CONTENTS:

Summary 1. Introduction 2. Background 3. Submissions 4. Discussion 5. Recommendation 6. References SUMMARY

Features of 's aviation activities include a network of 36 major aerodromes, eight of which are owned by the Commonwealth Government, and a wide range of regular scheduled air services operated by international, national intrastate and commuter operators. Because of the importance of aviation to country people in communications with the State capital and other centres, and for connections to interstate and international air carriers, local government bodies throughout Victoria have accepted responsibility for the development and management of 27 licensed aerodromes. These aerodromes also form the basis of a number of other activities associated with aviation. Financial responsibility for them rests with Local Government, except that Commonwealth Government assistance is available for approved development and maintenance works under the Aerodrome Local Assistance Plan on a 50/50 basis with Local Government. Unfortunately, the atronage level of intrastate and commuter passenger and ight services, and the costs involved, have largely militated against the development of financially successful intrastate airline services, and against a level of charges by Local Government necessary to offset a proportion of the costs of maintaining and operating country aerodromes. The Study Group considers that there is a strong case for a modest short term participation by the State Government in financing aerodrome development and maintenance, and in assisting the development of intrastate aerial services as key factors in the continuing balanced development of the State.

1. INTRODUCTION

1.1 The State of Victoria, whilst being relatively small when compared with the other mainland States, is approximately of the dimensions of the British Isles, and substantially larger than a number of European countries.

1.2 Although it enjoys a moderate climate, well suited for aircraft operation, Victoria seems to lag behind other States and countries of similar area in the air mindedness of its people, and in the utilisation of aircraft as a mode of transport of both passengers and freight in intrastate activities. On the other hand, because the alternatives these days are less attractive both physically and financially, or in some cases non-existent, Victorians use air transport widely in interstate and international travel and freight activities.

1.3 A number of factors no doubt contribute to the lack of desire for intrastate air travel, including lack of need, the central location of the State capital, the extent of car ownership, the relatively small and dispersed population in country areas, and the relatively small scale industrial developments at distances of the order of + 300 km from Melbourne where the time element in travel could be advantageous to the use of aircraft in preference to car travel. 1.4 When discussing reasons for the selection of alternative modes of transport with people in the more remote areas of the State, the Study Group received the almost universal comment that the cost of flying compared with the cost and convenience of the use of the motor car for trips to Melbourne nearly always favoured the use of the car. Very little consideration was given to the possibilities of cross country air travel in the intrastate Victorian scene, except for recreational purposes.

~ 5 Some of the regular scheduled aircraft movements to and from country centres such as Mildura, Albury-Wodonga, Swan Hill, Portland, Horsham and Sale are operated by the major airline companies, and others are classified as general aviation activities. Patronage of scheduled intrastate movements varies from good to poor. A feature of aircraft operation within Victoria is the less than successful financial results of the numerous organisations that have attempted to operate and maintain a commuter type airline service within Victoria and to and from adjacent States. 2.

1.6 This report reviews a brief investigation made into the usE nf aircraft as a mode of freight and pass r transport within Victoria, and to and from Victoria, an into the involvement of country communities in the provision and utilisation of services related to air transport in the State. 3.

2. BACKGROUND

Classification of Flying Activities1 2.1 Control of aviation, including the classlfication of aircraft and facilities concerned with flying in Victoria, are subject to jurisdiction of the Commonwealth Department of Transport by statute. Accordingly, flying activities within Victoria are classified according to the Commonwealth Department of Transport regulations and rules, and broadly fall within the following operational categories: Private.

Aerial work.

Charter. Commuter. Regular public transport. 2.2 Private operations are those in which an aircraft is used for personal transportation for private and business purposes, carriage of persons or goods other than for hire or reward, or other activities of a non-commercial nature. Within Victoria there were 763 aircraft classified in the private category and proximately 4,250 licensed private aeroplane pilots at th July 1978. 2.3 Aerial work operations are those in which an aircraft is used for aerial survey, spotting, photography, agriculture, flying training, and the carriage of goods for purposes of trade. In terms of hours flown, the most significant operations are agricultural and flying training. 2.4 Charter operations are those in which an aircraft is used for the carriage of passengers or cargo for hire or reward, but which may not be notified to the general public as being operated between fixed terminals or to fixed schedules, or for the carri of passengers or cargo between fixed terminals to xed schedules in circumstances in which the service in the aircraft is not available to members of the public. At 30th June 1977, there were 97 Victorian based operators licensed to conduct charter operations. Over 58,800 hours were flown by these organisations. 4.

2.5 Commuter operations are those in which an aircraft that meets ar·propriate requirements and standards is permitted to operate air services between centres to a fixed schedule and on a regular basis. At June 1978, Victorian commuter services of the type in question were operating on a regular basis between Melbourne and centres such as Flinders Island, Sale - Bairnsdale, Queenstown, Warrnambool - Portland, Mallacoota - Merimbula, Bendigo - Swan Hill - Mildura, and Geelong.

2.6 Regular public transport operations are those in which an aircraft is operated in accordance with an airline licence, to carry passengers and cargo according to fixed schedules and on specified routes. Both domestic and international services of this type are based at, or terminate at Melbourne .

V1ctor1an. ' . Aero d romes l

2.7 The major aerodromes in Victoria are owned and operated by the Commonwealth Government through the Department of Transport. Since 1957, Commonwealth Government policy has been that aerodromes (except capital city ) should be owned and operated by local authorities under the Local Ownership Plan.

2.8 At present there are eight Commonwealth Government owned aerodromes at Melbourne (Tullamarine), Avalon, Bacchus Marsh, Essendon, Mallacoota, Mangalore, Moorabbin and Sale and twenty eight licensed aerodromes at Ararat, Bairnsdale, Ballarat, Benalla, Bendigo, Birchip, Corryong, Echuca, Hamilton, Hopetoun, Horsham, Kerang, Latrobe Valley, Maryborough, Mildura, Nhill, Orbost, Portland, Robinvale, St. Arnaud, Shepparton, Stawell, Swan Hill, Warracknabeal, Warrnambool, Whittlesea, Wycheproof, and Yarram.

2.9 The licences of all licensed aerodromes, except Whittlesea, are held by the local government authority, in ~·:ose municipality the aerodrome is located. Under the local ownership plan, the Commonwealth Government will pay 50 percent of the development costs of new aerodromes or transfer existing aerodromes free of cost to local authorities and then pay 50 percent of future approved maintenance and development costs. Similar assistance is given to a local authority to develop and maintain aerodromes which are, or will be served by a regular public transport service. Local authorities which have received developmental assistance include Ballarat, Bendigo, Birchip, Hopetoun, Latrobe Valley, Maryborough, Portland, Robinvale, St. Arnaud, Shepparton and Warrnambool. 5.

2.10 The assistance authorised by the Commonwealth Government to Victorian local authorities for aerodrome works during the year ending 30th June 1978 was $47,254 for development, and $191,034 for maintenance works.

2.11 In addition to these main aerodromes, there are hundreds of authorised landing areas which serve the needs of the increasing number of 1 ht aircraft and glider users throughout Victoria.

Administration. 2.12 Commonwealth Govenment authority for regulatory control of civil aviation rests in the Air Navigation Act 1920 as amended. Aircraft licensing provisions were included in the Victorian Transport Act 1951, but these were replaced in 1955. The Victorian Air Navigation Act 1958 prescribes that control of aviation within Victoria shall be vested in the Commonwealth Government. The Air Navigation Act and Regulations in Victoria are consequently administered by the Commonwealth Department of Transport through its Director in Melbourne.

2.13 The functions performed by the Department include the following:

Registration and marking of aircraft. Determination and enforcement of airworthiness requirements for aircraft and the issue of certificates of airworthiness, certificates of type approval, and supervision of aircraft design. Licensing of pilots, navigators, aircraft radio o~erators, flight engineers, and aircraft maintenance engineers.

Licensing of airline, charter and aerial work operators and supervision of their activities.

Provision and maintenance of aeronautical communications, navigation aids, earodromes and landing grounds.

Establishment and operation of air traffic control, flight service, aeronautical information, search and rescue, and fire fighting and rescue services.

Investi ion of aircraft accidents, incidents and defects. 6.

2.14 It might be noted that Victoria and South Australia are the only two States that are not involved in the control of intrastate aviation. In these two States an intrastate service may be commenced after Commonwealth Department of Transport requirements are met. In the other States, both Commonwealth and State requirements must be satisfied before a service commences. The licensing provisions and criteria used in the States that exercise these controls are summarised in the Department of Transport's "Domestic Air Transport Policy Review Report- Part 2 11 (September 1978)2.

Air Traffic Control.

2.15 Control of air traffic is maintained by the Commonwealth Department of Transport through its Air Traffic Control organisation. This includes the closely coordinated sections of:

Operational Control - which is concerned with each individual flight.

Airport Control - which applies to all movements on, or within 32 kilometres of an aerodrome.

Area Control - which controls aircraft along the main air routes to ensure the avoidance of collisions.

The Aerodrome Local Ownership Plan.

2.16 The Aerodrome Local Ownership Plan was introduced in 1958. In its submission to the Study, the Victorian Municipal Airport Operator's Association, explains the background to the Aerodrome Local Ownership Plan as follows:

11 ~1any military aerodromes built during World War II were suitably located to serve local needs. In the post War period, the Commonwealth accepted responsibility for provision and maintenance of aerodromes required to support regular passenger air services. Subsequently, the airline industry expanded with the introduction of faster and heavier types of piston engined aircraft, then the pressurised turbo-prop machines leading up to the present day jet airliner. These heavier and faster aircraft, operating with increasing frequency to the larger aerodromes, required extensive development as well as the provision of modern air navigation and air traffic control systems, at huge cost to the Government". 7.

"As a consequence of this development, national aviation demqnds received a h er priority than country aerodromes". "Whereas the spirit of the policy adopted by the Commonwealth would have provided a new aerodrome wherever a requirement for an air service could be economically justified, funds were just not available to meet the many requests. Thus there arose the position where many country communities required aerodro~es, but the Government did not have the funds to provide them".

"A modified policy was then adopted whereby any community wishing to have an aerodrome was giveri an undertaking that should it build one, the Government would acquire it in due course, providing the aerodrome had been constructed to acceptable standards and that sufficient time had elapsed to substantiate that the air service was economic and likely to continue".

"This policy placed the onus on the local community to back its own judgement as to its ability to support a regular air service. l~any Local Authorities constructed aerodromes under this policy and some were acquired by the Government, as funds become available".

2.17 This was the position at the time the Aerodrome Local Ownership Plan was implemented in 1958.

2.18 The Association goes on to explain that: "The Plan provided for payment by the Commonwealth Government of grants of fifty percent of the cost of approved dsvelopment and maintenance works at Local Authority Licensed Aerodromes with a ar public transport service; and payment of fifty percent of approved maintenance costs at Local Authority Aerodromes without a regular service. The Government retained responsibility for the provision of essential air safety services such as air traffic control, communications, navi onal aids and fire oervices". "Government owned aerodromes serving local needs, were also transferred gratis to the relevant municipalities".

"An extension of the Plan in 1972, permitted payment of development grants to general aviation aerodromes owned by Local Authorities, even though a regular air service was not operating". 8.

"Port Phillip Airport Needs" Study.

2.19 A joint Commonwealth-State Committee is undertaking a Study of airport needs in the Port Phill area. In the first part of the Study it was found that would be adequ e for airline transport needs for the rest f this centurj • Further studies of the general aviation n eds in the Port Phillip area, and of surface access requirements for Melbourne Airport, are in hand.

Domestic Air Transoort Policy Review. 2. A review of Australia's domestic aviation policies has been carried out. The results have been reported in a tw part Report2. Part 1 of the Report dealing mainly with two airline policy matters, was releas July 1978, and Part II, relating to regional and local uter airline o erations, was released in October 19

2.21 Regional and local/commuter s rvices are distinct froM the national trunk services. R ional services provide the air services between centres with n a limited (but often quite large) geographical area where there is a community of interest. Local/commuter servic s provide air services to the smaller centres which are not served adequately by regional and trunk operators.

2.22 As far as interstate and intrastate services are concerned, it is noted that the Secretary to the Commonwealth Department of Transport is requested to "have regard to matters concerned with safety, r ularity and efficiency of air navigation and to no other ma ters" in deciding whether or not to grant licences for intrastate services2. In those States that are involved in the licensing of intrastate services (~.e., the States other than Victoria and South Australia) the State laws relate to matters such as public transport needs and the suitability and fitness of the operator. Thus, New South Wales, Queensland, Tasmania and Western Australia have 1 islation for the economic r:gulation by those States o intrastate air transport services, but such provisions do not apply in Victoria and South Australia. 9.

3. SUBMISSIONS

Victorian Municioal Airport Operators' Association.

3.1 The Victorian Municipal Airport Operators' Association has made a submission tothe Study, and its representatives have had discussions with the Study Group. The Association. which was formally constituted in 1969. has twenty seven member Councils. They are either single Local Authorities or Joint Committees, in which two or more Authorities combine administratively and/or financially to operate an aerodrome. A relatively few member Authorities operate authorised landing grounds.

3.2 Th major part of the Association's submission deals with the Aerodrome Local Ownership Plan. The Association says that:

"Since its inception, the Victorian Municipal Airport Operators' Association has supported the basic aim of the Local Ownership Plan, namely that aerodromes serving a local rather than a national need, should be operated by the communities they serve. with technical and financial assistance from Government. However, the Association draws attention to the following inherent defects in and/or disadvantages of the A.L.O.P. to country airport Local Authorities Operators: i) Metropolitan ratepayers do not contribute through rate revenue to the outstanding airport facilities available to them at Tullamarine, Essendon and Moorabbin. This is discriminatory against rural and provincial ratepayers. ii) Municipal airport operators find it very difficult to recover any significant revenue from the users of the airport facilities. Income derived from hanger and site rentals, farming rights. fuel installations. etc., is relatively minimal. Landing fees can be cha ed. but the system is totally ineffectual. Co s of collection invariably exceeds revenue received. Where the honour system has been tried. it has been abused.

iii) Many municipal aerodromes serve areas far beyond the boundaries of the municipalities in which they are situated. But there is no statutory right for the operating authority to recover any capital or maintenance contributions from surrounding municipalities. This problem is further exacerbated where an aerodrome also serves people resident in another State. 10.

iv) Aerodromes in rural and provincial centres are - positive aid to decentralisation. Yet the Victvrian Government makes no contribution to capital and operating costs incurred by Local Authorities outside the metropolis.

v) The Department of Transport system of levying air navigation charges militates against the Local Ounership Plan because a louer charge is imposed uhere the aircraft is not ordinarily based at an aerodrome operated by the Commonuealth or in resoect of uhich the Commonuealth provides financial assistance.

vi) In many instances uhere municipalities have inherited "military" aerodromes they are nou finding that they face virtually insurmountable financial difficulties in maintaining their depreciating and deteriorating aerodrome assets, uhich are frequently uell in excess of reouirements to meet local needs".

3.3 The Association recommends that 11 the Aerodrome Local Ounership Plan should continue to operate, and be improved by:

a) The Commonwealth Government maintaining its fifty percent sunsidy for capital and maintenance costs at Local Authority Airports and increasing the volume of funds available for these purposes so that country airports can adequately and effectively service local and NATIONAL STRATEGIC DEFENCE needs. b) Deletion of the concessional air navigation charge where an aeroplane is primarily based away from a Local Authority Aerodrome. c) The Victorian Government tangibly recognises that country airports are vital to promotion of decentralised industry and tourism, by agreeing to accept responsibility for 25 percent of the capital and maintenance costs of such aerodromes so that the tripartite funding of these costs will be Commonwealth 50%, State 25% and Local 2 11.

d) The Department of Transport undertaking an inves igation into practicable ways and means of raising and redirecting to Municipal Airport Operators, additional revenue as an alternative to the totally ineffectual imposition of landing fees; such investigation to consider "interalia" levies on aircraft according to hours flown per annum and/or number of movements; and charging a premier on Avgas used". 3.4 The other part of the Association's submission deals with the future of Essendon Airport. It states that it "has maintained a consistent policy of stron y supporting all re resentations directed towards retaining Essendon Airport r general aviation purposes. It firmly believes that Essendon should be retained and where necessary, further developed as an int ral part of the aviation framework of Victoria and Austr ia". It goes on to say that it is ~leased that the Australian Government has decided to retain Essendon Airport for the foreseeable future, but it "strongly believes that the subject must be kept under very close surveillance lest there should be any weakening in this policy, because loss of Essendon Airport to general aviation would be a serious loss to the metropolitan area and an absolute tragedy for the rural community".

H.C. Sleigh Aviation Limited.

3.5 H.C. Sleigh Aviation Limited has made a detailed submission to the Study. The Company's submission is concerned largely with local/commuter services. 3.6 The Company refers to Part II of the Report by the Domestic Ajr Transport Policy Review Committee and says that, while the Committee has "recommended that a freely competitive market exists between operators in order that the ~assengers by their choice, would determine the most suitable set of services with the lowest possible air fpres", the company considers;

"it is evident that of the economic analyses from which the Committee drew information, none would support the doctrine of free competition for local/commuter operators but that the recommendation is simJly a by-product of the proposed abolition of the Two Airlines Policy combined with the wholly theoretical concept that economic efficiency is the automatic outcome of free competition and that minimum cost to the consumer and obviation of a monoJoly are the only economic goalsu. 12.

3.7 The Company goes on to say: "Fro,, our experience over the past 15 years, it is evident that free competition between two or more operators over the same route will in the short term lead to the financial failure of one of the operators. Price competition and reduced load factors will cause liquidity problems particularly if the aircraft are financed through bank loan, lease or hire purchase. The result may be change of ownersh or liquidation of the airline businesb or repossession of the aircraft. Alternatively, such competition may lead to a reduction in operating standards as competing airlines cut costs". "Impending and eventual financial failure will lead to cancelled flights, changed timetables and discontinuity of regular public air transport".

"Instability as a result of competition may also affect organisations related to the operating ariline, for example - airport workers and travel agents at r anal towns. We consider therefore that such competition would not necessarily affect efficiencies nor would it automatically imply minimum costs to the consumer".

"We are basically in agreement with the Domestic Air Transport Policy Review Committee's recommendation that the most appropriate airline(s) should serve a particular region or port, however, we do not believe that it should be the operation of a free market which determines which airline service(s) are the most appropriate, as in the long term the resulting instability may be to the net detriment of the public". 3.8 ThP Company points out that New South Wales, Queensland, Tasmania and Western Australia 1 islation which provides for the economic regulation of te air services, and that recently a bill to confer similar legislative powers on the Northern Territory Government was introduced. It goes on to say that: "It is thus recommended that the Victorian Government enact similar legislation enabling it to regulate intrastate air services. The substance of the Act may be taken from other State Acts, such as the Northern Territory Aviation Act 1979, and the Aviation Amendment Bill 1980. Regulation would necessarily preclude a monopoly situation arising on intrastate services". 13.

3.9 The Company points out that many of the early local/commuter intrastate services were based on the need for a daily return service for regional businessmen, and that the majority of services today remain business oriented. It suggests that "intrastate air services are most app riate over distances in excess of say 300 km, operated times convenient to business travellers".

3.10 On the assumption that regulatory powers are established, the Company suggests procedures as follows:

The applicant for a route licence would would prepare a formal submission, adequately documented, demonstrating technical and operational capability as well as economic viability. The submission would be forwarded to the Commonwealth Department of Transport and to the appropriate Victorian Department. After preliminary approval, the Governmany may invite comment from interested parties for a limited period - perhaps 30 days.

If a second operator wishes to operate on the same route, an ap ication should be submitted and comments invited. Government representatives could then meet with the operators and other concerned parties (as is done in Tasmania).

If the request for a local/commuter air service originates from a country town, and is deemed necessary by the Victorian Government, the operator may need to be subsidised or offered some Form of development grant • Other Submissions. 3.11 The other submissions to the Study generally are 'slated to air services to various parts of the State.

3.12 The Albury-~odon a Development Corporation advises that han es over 100,000 passengers yearly, with direct connections to Melbourne (T.A.A.), Canberra (Masling Airlines on a T.A.A. licence) and Sydney (East-~est Airlines). It is the 16th busiest airport in Australia and is operated by Albury City Council. The Corporation says that "the relatively quick alternative transport modes between Albury-~odonga and Melbourne reduce the number of air travellers. The only realistic method of travel to and from Sydney is by air". 14.

3.13 The Corporation also says that "Albury Airport, although sixteenth nationally in terms of passenger embarkations, has a number of limitations which may inhibit its future growth. No instrument landing system (and difficulty in installing them satisfactorily in the future), limitations imposed by topography and location (in relation to urban areas), too short a runway/insufficient depth of pavement for large air-freighters which should form a key part of a national distribution complex". "Clearly medium sized or larger jets could not operate at the present location. To move elsewhere would offset the advantage of closeness to the city - the airport's big advantage is its proximity to the urban areas. By continued use of smaller aircraft where possible (e.g. 18 seater to Canberra) and greater frequency of flights, the existing airport could be maintained for many years yet". "The successful introduction of Masling's 18 seater Bondeirante on the Albury-Canberra run has enabled more frequent flights. Its one draw back is that the aircraft has to supply a steward if passengers exceed 15 in number. This has led to the situation where sometimes the aircraft leaves with empty seats and potential passengers stranded".

3.14 The Corporation says that there is a need for "expansion of the air ort runway, terminal, etc., as well as air traffic contr tower and instrument landing systems".

3.15 Tre Corporation has made available a copy of a report on 11 Albury Wodonga Growth Centre Aerodrome, Road 11 Safety and Standards Authority and the Transport Urlib3 , prepared by the Commonwealth Department of Transport ln December 1974.

3.16 The Shire of Tallangatta says that "the Albury Wodonga district needs a jet airport. The construction of a jetport would enable larger planes to be used which would result in lower fares, particularly if a two class fare structure were introduced. A greater frequency of air service is also needed. Domestic Australian air fares are very dear compared with fares from Australia to overseas". 15.

3.17 The Shire of Bright has advised that it has two authorised landing areas, one at Porepunkah with an operational length of 840 metres, and the other at Mt. Beauty, with an operational length of 815 metres. Both these authorised landing areas are used by Government Departments, glider clubs and private operators. In addition, the Porepunkah strip has been used by the Army for exercises lasting 14 days.

3.18 The Council also says that the "Air Ambulance Service has advised that it would use both sti s every week, but for the restriction in length. Ideally, 890 metres is required, but even so, ambulance passengers were flown out from Mt. Beauty in the past 12 months and from Porepunkah". The Council has also given details of tourist air traffic to the skiing areas.

3.19 It concludes that "both airstr s will require a considerable amount of money to develop ••...... •••• to cater for the Air Ambulance, Government Departments, tourist flights and private operators. The Council without Government assistance, will not be in a position to finance this work".

3.20 The Loddon Campaspe Regional Planning Authority says that "Air services in the r ion are provided by timetabled flights connecting Mil ura - Swan Hill - Bendigo - Melbourne and by charter flights as required. Licensed aerodromes are located at Bendigo, Echuca, Maryborough and St. Arnaud, while authorised landing areas are at Boort, Castlemaine, Coonooer Bridge, Elmore and Kyneton. The factor limitin further expansion of the air traffic services is that dis ces within the Region are too short to provide significant time savings".

3.21 ThP Authority goes on to say: "Air transport provides a means of moving passengers and freight which is both competitive with, and complementary to, the land transport s em. Speed is generally air transport's greatest advantage. Wit in the Loddon-Campaspe Region and bdtween the Region and Melbourne, distances are too short to afford air transport any great advantage over land transport. Although it is realised that the licensing and funding of aerodromes is a function of the Commonwealth Government and of local Councils, air transport provides a part of the State's transport system and some comment should be made on it in this submission". 16.

3.22 It also says:

"Generally, the Loddon-Campaspe Region is well served by air facilities. In terms of the balanced development of the State though this region suffers a distinct disadvantage in not having an aerodrome capable of handling aeroplanes with a capacity of more than about 10 - 15 passengers. Centres such as Albury-Wodonga and Mildura, or interstate such as Launceston in Tasmania or Dubbo in New South Wales are able to act as important stopover points for tourists and businessmen because of their airport facilities, Regions which possess no such facilities such as this region are therefore disadvantaged".

3.23 The City of Echuca says that "In Echuca 1 s location in relation to Melbourne, no satisfactory air service has been continued by any Company". 3,24 The Portland Development Committee says that it has been suggested to it "that the Government should consider subsidising a commuter air service an much the same basis that Melbourne residents enjoy, i.e. subsidised travel throughout the metropolitan transport system". It goes on to say that "whatever type of system may be recommended as a result of this Study, it is strongly suggested that the main considerations should be the speed, comfort and efficiency of a regular time-table". 3.25 The Geelong Regional Commission has advised that: "Geelong has no regular air services linking it with metropolitan or country centres. A commuter service (Geelong Air Travel) did operate from Grovedale airfield to Tullamarine for some 18 months but ceased activities as the price of aviation gasoline rose dramatically, and as a result of restrictions imposed on operations after dark 11 • "The Commission has for three years been engaged :, the planning of a regional airport for Geelong, capable of receiving light commuter aircraft and ultimately aircraft of the Fokker Friendship type. Unfortunately, difficulties in obtaining supporting funds from the Commonwealth have delayed construction of this facility". "HoLJever, LJhen it is completed, the Commission considers that it will be possible either for major airlines or for commuter operators to commence regular services between Geelong and Melbourne, and Geelong and other regional centres. At the time the earlier service was operating, the benefits to Geelong of that service were both substantial and obvious". 17.

3.26 The Geelong Harbour Trust Commissioners consider that "Geelong suffers from having no air service linking the City to the domestic and international air network and the metrooolitan area of Melbourne. The Commissioners believe that this deficiency should be corrected and have reserved an area for a heliport in the development plans for the harbour foreshore fronting the City. This heliport will have unobstructed over-water access providing maximum safety, together with a central location. The Commissioners believe that the Study should be awaie of plans for provision of this service to enable the Study to fully assess all aspects of public transport services in Geelong".

~.27 Mrs. G. Groves of Ballarat considers there is a need for commercial air services to and from Ballarat. She says that such services could encourage development of the area. 3.28 The State Electricity Commission says that as far as services to and from the Latrobe Valley are concerned, "there have been regular commercial services in existance from time to time. ~o such service is at present operating between the Latrobe Valley and Melbourne. Charter flights are arranged as and when.required. The nearest regular air service operates from Sale". 3.29 The Study Group has had discussions on the subject with: Mr. C.J. Smith, Director Victoria-Tasmania Region, Commonwealth Department of Transport. Representatives of the Victorian Municipal Operators' Association. Representatives of North-West Skyways. Albury-Wodonga Development Corporation Loddon Campaspe Regional Planning Authority. Portland Development Committee. Geelong Regional Commission. Geelong Harbour Trust Commissioners.

Representatives of several municipal Councils in various parts of the State. Some individuals and groups, 18.

3.30 There is consensus that there is a need for intrastate air services that provide a regular and reliable service at a reasonable cost. 19.

4.

4.1 The Study Group is of the opinion that there is a need to provide some intrastate air services in Victoria to:

Connect the larger and more distant country centres with regional centre~ and Melbourne, mainly for business purposes, and to a lesser extent, for emer ncy use, and to promote tourist and recreational raffic.

Connect to the national trunk air network. 4.2 Victoria is a relatively small state, and much of the population is within reasonable road and rail travel time of Melbourne. However, the Study Group believes there is a place for regular air services between Melbourne and centres such as Portland, Hamilton, Hrosham, Mildura, Swan Hill, Echuca, Wodonga, Bairnsdale, Sale and other country centres. Such services would be beneficial in assisting State development. It is clearly in the State's interest to maintain an effective network of aerodromes thro hout Victoria, even if they are normally only lightly us

The Aerodrome Local Ownership Plan.

4.3 The Study Group is impressed with the case ut to it by the Victorian Municipal Airport Operators' Asso ation for the Victorian Government to fund 25% of the capital and maintenance cost of aerodromes covered by the Plan. It considers that all of the reasons put forward by the Association, and listed in paragr h 3.2, are sound and compelling. It therefore recommen s that the Victorian Government agrees tn contribute to these costs on the basis of Commonwealth 50%, State and Local 25%. 4.4 In this regard, the sums of money likely to be lnvolved are not large. For the 1977/78 financial year, assistance authorised by the Commonwealth Government to local authorities amounted to $47,254 for development, and $191,034 for maintenancel, although of course these figures could be expected to fluctuate from year to year, and also to increase if the State agreed to bear half the current local contribution. Costs to the State of the order of $150,000 to $200,000 per year are likely. 20.

Assistance to Operators.

4 5 In the interests of State develoPment, ople in the more remote parts of Victoria should be ent tled to reasonably close access to an air service that connects to the interstate and international network. For this reason, and because intrastate air services in Victoria (both those now existing and potential) are likely to be fairly lightly trafficked, at least until they become established, on the basis of regular services and realistic fares, the Study Group considers there may be a case for the Victorian Government to provide incentives or encouragement to at least selected air services. These could take several forms, such as: A guaranteed minimum revenue corresponding to an economic aircraft loading on a specified number of scheduled flights.

Encouraging State Government employees on Government business, and those in the private sector on Government business to use the airline.

Encouraging use of the airline for the carriage of appropriate Government freights, etc .• Assisting in advertising and promotion of the service for passenger and freight transport.

4.6 Another possibility may be a direct State development ty e subsidy particularly for services to developing areas such as ortland and Bairnsdale - Sale. 4.7 Any assistance given should be limited to those services ~hat would appear to have a prospect of becoming commercially viable within a reasonable time. Any assistance should be for a relatively short period, say 2 to 3 years, to give the service a chance to become established, after which it could be reviewed.

4.8 As earlier indicated, Victoria and South Australia are the only States that currently do not have legislation enabling them to ate intrastate services.

4.9 In this regard, Part II of the Report of the Domestic Air Transport Policy Review Committee2 says: 21.

"Given the nature of the costs of providing regional and local/commuter air services, the Committee concluded that, in general, facilitation of entry and exit by operators providing local/commuter air services (subject only to operational standards) is desirable in the public interest, since it fosters economic efficiency, through competition and flexibility in the supply of specific services". "The Committee recognised that the present level of demand for many services or groups of services, is such that a viable oper~tion involves only one operation. However, the Committee concluded that, although a service may be provided by one operator, the fact that entry is open to other operators minimises, if not removes, the danger of monopoly power being exercised". 4.10 In general, the Study Group supports the views of the Committee, although it is mindful of the points on this aspect made by H.C. Sleigh Aviation Limited in its submission. 4.11 It could well turn out that, if the Government decides to provide some incentive or support for intrastate air services, it may prove necessary to introduce some form of area or route franchise which in turn could lead to some type of regulation, depending on the nature of the incentive or support. In this case, enabling legislation would be necessary. The Study Group, however, believes legislation should not be enacted it it can be avoided. 22.

5. RECOMMENDATION

5.1 It is recommended that:

The State Government agrees to contribute to the cost of capital and maintenance costs of aerodromes covered by the Aerodrome Local Ownership Plan on the basis of Commonwealth 50%, State 25% and Local 25%. The State Government give consideration to ways in which it can provide assistance, incentives or encouragement to operators of intrastate air services, on the basis that this will be for a limited period of say 2 to 3 years while the service is being established, and that the position will be reviewed at the end of the period. Assistance should be limited to those services that pear to have a prospect of becoming commercially v able within a reasonable time.

The State Government only legislate to regulate intrastate air services if this proves the only way in which practical assistance, incentives or encouragement can be provided. 23.

6. REFERENCES

1. Victorian Year Book 1979.

2. Department of Transport, "Domestic Air Transport Policy Review Report - Parts I and II", 1978.

3. Department of Transport "Australian Transport 1978-79 11 , 1980.