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Regional Airport Infrastructure Funding Action Plan

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Regional Airport Infrastructure Funding Action Plan REGIONAL AIRPORT INFRASTRUCTURE FUNDING ACTION PLAN 1 AUSTRALIA’S REGIONAL AIRPORTS The network of over 400 regional Research conducted by ACIL Allen estimates that the total expenditure by the operators of all regional airports with airports and aerodromes across Australia fewer than 500,000 passenger movements per annum was constitutes an integral part of our economic approximately $185.4 million in 2014-15, resulting in an additional $33.4 million in spending in the rest of the infrastructure. It is critical to connecting Australian economy. These airports also employ approximately communities and enhancing broader 1,720 full time staff (2014/15), creating an additional 2,750 full economic performance. time roles in the rest of the economy. As well as providing significant employment opportunities Regional airports play a vital role in sustaining regional in local and regional economies, regional airports also economies and communities both through their direct generate catalytic economic impacts by facilitating increased expenditures, as well as through the flow-on effects of these competition because of readier access to alternative suppliers, expenditures. These airports enable access to specialist enhancing innovation through access to a wider range of skills health, education, commercial and recreational facilities and and human resources, enabling a more flexible labour market facilitate social connections. and facilitating more efficient interaction between different levels of government. They also have the ability to save lives by facilitating medical evacuations, collection and delivery of organ donations and Despite their significant contribution, Australia’s regional search and rescue, as well as supporting firefighting in areas airports face significant challenges in maintaining the services where road transport is impossible or too slow. they provide to their local communities. Photo: Mount Gambier Airport Cover Photo: Wagga Wagga Airport 2 REGIONAL AIRPORT FACTS » There are over 400 regional airports and aerodromes across Australia. » Regional airports play a vital role in sustaining regional economies and facilitate critical emergency and medical services. » In 2014-15 Australia’s regional airports invested $185 million in infrastructure and resources to maintain safe airport operations. This also induced another $83.4 million in spending in the rest of the Australian economy. » These same regional airports also directly employed 1,720 full time workers and created an additional 2,750 jobs in the broader Australian economy. » Australia’s regional communities rely heavily Photo: Tennant Creek Airport on their local airport for fast and efficient access to the rest of the country. » Regional airports operate with very limited staffing resources, with an average of less than 5 direct employees. » The majority of regional airports (approximately 70%) are served by a single airline. » Airports of all sizes are cost intensive businesses, however this issue is exacerbated at regional airports where revenues are limited. » The number of regional airports operating at a financial loss each year has increased from approximately 50% in 2011 to over 60% in 2015. » Many regional airport owners face financial stress from the costs of maintaining and operating these critical community assets. Source: ACIL ALLEN: Regional Airport Infrastructure Study (2016), AAA Australia’s Regional Airports: Facts, Myths and Challenges (2012), Deloitte Access Economics – Connecting Australia: The Economic and Social Contribution of Australia’s Airports (2012) 3 THE ISSUE One of the greatest challenges facing While this challenge has been widely acknowledged anecdotally for many years, there has not been a quantitative many regional airports across the country assessment to determine the likely extent of the funding is access to adequate funding to maintain shortfall for regional airports until now. and develop essential aeronautical The Australian Airports Association (AAA) commissioned ACIL Allen to conduct a study on the economic contribution infrastructure. of regional airports across Australia and analyse the economic The vast majority of regional airports across the country challenges they face in operating and maintaining these are owned and operated by local government councils. airports. These councils often find it difficult to supplement the The findings of the report confirmed what the industry has funding shortfall that exists at many regional airports, known for many years – on average, many regional airports due to limited budgets and the variety of other across Australia do not have adequate funding to maintain or infrastructure and community services that compete for improve their existing airport infrastructure, with the problem local government funding. only growing worse as time goes on. ACIL ALLEN REPORT – KEY FINDINGS: » Nearly 40% of Australia’s regional airports expect persistent budget deficits over the next 10 years. » Due to the typically high cost/low revenue nature of regional airports, simply maintaining the airport to a satisfactory and safe condition often creates significant financial stress. This is further compounded by upgrades to meet future aviation needs. » On average 61% of regional airports had budget deficits in 2014-15, with non-regular public transport (RPT) airports’ costs exceeding revenues by an average 45.6%. » Regional airport expenditure is expected to rise by 38% over the next decade, adding to the already difficult financial environment. » Australia’s regional airports expect an annual budget deficit of $17 million per year, equating to a $170 million shortfall in essential infrastructure and maintenance fundingat regional airports over the next decade. 4 FIGURE 1: PROJECTED INCREASE IN ANNUAL EXPENDITURE OF REGIONAL AIRPORTS (2015-16 TO 2024-25) Figure 1 shows that the annual 40 average expenditure at regional airports is expected to increase 35 considerably over time, from 30 $1.35 million in 2015-16 to $1.86 25 million in 2024-25, a rise of 37.8 per cent over the decade. 20 15 Percentage increase in increase Percentage 10 average annual expenditure average 5 0 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 FIGURE 2: PROJECTED TOTAL REGIONAL AIRPORT FUNDING SHORTFALL (2015-16 TO 2024-25) Figure 2 shows that the total 180 projected budget deficit for regional 160 airports will be $17 million per year, for the next 10 years. Without 140 Government intervention, this 120 deficit will grow to at least $170 100 million by 2025 and will significantly compromise the industry’s ability to 80 $ Millions undertake essential infrastructure 60 and maintenance work. 40 20 0 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 FIGURE 3: REGIONAL AIRPORT INDICATIVE COSTS Minor Maintenance / Small project Significant Infrastructure Works Figures 3 provides an indication of the approximate range and scale Runway, taxiway and apron $50,000 $5 million + of maintenance and infrastructure Airfield Lighting $30,000 $1 million + costs at regional airports. These Airfield fencing $40,000 $500K + costs are associated with ensuring Line marking, windsocks, other $25,000 $400K + airports remain safe and operational, indicators and in compliance with the Civil Aviation Safety Regulations Part 139. 5 CASE STUDY EXAMPLE: CASE STUDY EXAMPLE: FLINDERS ISLAND AIRPORT SCONE REGIONAL AIRPORT In 2015 the Flinders Island Airport was in urgent need of Scone Regional Airport is owned and operated by Government funding in order to ensure the continued the Upper Hunter Shire Council. It currently services serviceability of its main runway. charter and general aviation (GA) flights only, most of which are related to large corporate jets involved in the In such an isolated community the airport is a vital local thoroughbred industry. It is also a base for aerial piece of infrastructure that helps to support and sustain firefighting services and hosts around eight of these the entire population by enabling access to essential planes. The Airport is used by the RFDS, angel care flights, aeromedical air services, such as the Royal Flying Doctor Westpac helicopter and vet services to the region. Service, as well as regular passenger transport and freight services to the rest of Australia and Tasmania. The Over the next three to four years, the Airport anticipates it airport also plays an important social role in connecting will require around eight capital works projects to upgrade individuals, families and communities with the rest of the airside and terminal facilities. This includes improving country by providing critical infrastructure links. the apron and taxiways to make them compliant with legislation, ensuring that the Airport can continue to The AAA supported Flinders Island’s application for service the local charter industry. Other works include funding to the Commonwealth’s Regional Aviation Access replacing the terminal, installing parking and security Programme and fortunately some funding was provided fencing. to assist the airport with priority runway repairs. Due to the airport’s very limited access to funding, without While the Upper Hunter Shire Council will rely on grants this critical Government financial assistance the airport to cover some of the costs of these projects, it will need would have become unserviceable and at risk of closure. to partially fund some of the works. An issue with existing This example demonstrates how critical Government
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