UNRESTRICTED

MERIMBULA

AIRPORT MANAGEMENT & BUSINESS PLAN for Bega Valley Shire Council

Don McDowell March 2013

UNRESTRICTED UNRESTRICTED Study Airport Management & Business Plan

CONTENTS

INTRODUCTION Background 2 Directive for This Study 2

SUMMARY OF CONCLUSION 5

REASONS FOR REVIEW Current Management Arrangement for Merimbula Airport 6 The Review Issues 6 Improvements 7 Enhancing Financial Benefits to Council 8 Expanding the Passenger Traffic Base 11 Managing and Oversighting Airport Business 13

MANAGEMENT MODELS & OPTIONS Council Role & Options Available 16 Details of Options 17 Management Issues in Airport Operations & Businesses 20 Merimbula Airport Master Plan 24

FORECASTING PASSENGER TRAFFIC 26

ANNEX ‘A’ Kothes Report – Executive Summary 28

ANNEX ‘B’ Merimbula Airport list of sub-leases 32 Merimbula Airport – location of sub-lease properties 33

ANNEX ‘C’ Quickfacts – Webber Report on Passenger Trends 34

ANNEX ‘D’ NSW Regional 35

UNRESTRICTED 1 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

INTRODUCTION

BACKGROUND

Merimbula Airport (MIM) is located between the townships of Merimbula and Pambula, and serves the air transport needs of the Bega Valley Shire and surrounding “catchment” areas. It is the only airport within the Shire, the nearest being (south of Bateman’s Bay) in Eurobodalla Shire.

The airport is a Bega Valley Shire Council-owned asset (BVSC), though it is not operated by Council. Instead, the airport is leased to a private company – Airport Agencies Pty Ltd – which operates the airport as the authorised Operator under regulation by the Civil Aviation Safety Authority (CASA). Airport Agencies Pty Ltd also manages the airport and its several on- site businesses and services (the “airport precinct”) as a commercial endeavour.

The terms of the lease guaranteed that BVSC should receive funds from ongoing airport operations from revenue derived from aircraft landing fees plus passenger landing charges for Regular Public Transport (RPT) operations conducted by the sole carrier to and from MIM, Regional Express Airlines. In addition, the operator set aside funds for major maintenance during the course of the lease, with the balance becoming available to Council at the end of the existing extended lease or at some earlier agreed time.

ORIGIN OF DIRECTIVE FOR THIS STUDY

In 2011, Council had prepared a draft Merimbula Airport and Precinct Strategy (MAPS). Informed by preliminary research in aviation, environment, planning, climate change and the like, the Strategy sought the following goals:

1. Grow air services for the Shire in such as way as to become a serious alternative to road transport and travel.

2. Create the infrastructure and commercial environment to encourage competitive air travel services.

3. Provide adequate airport infrastructure and seek to share in any profits generated by airport operations and business.

4. Ensure an adequate supply of serviced business land and utilise lease or sale of developed business sites as a source of funding for capital works.

5. Grow and diversify direct and support business and associated employment as a result of airport, tourist site and business park developments.

UNRESTRICTED 2 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

6. Ensure users of airport facilities contribute adequately towards the community cost of these facilities, at the same time ensuring that the costs of air travel do not adversely impact on tourism.

7. Conserve the core environmental and cultural heritage of the airport and precinct.

8. Partner with the private sector to maximise efficiency, air travel service, and return on the community’s asset.

9. Ensure sound, long terms land use planning of all lands in the airport precinct, ensuring also appropriate protection measures in Council’s LEP and DCP.

In addition to resolving land use issues in the precinct, MAPS suggested economic growth may be underpinned through investment in transport infrastructure – being the strengthening of the runway and expansion of facilities to support larger aircraft in due course but within an expected 20 year time-frame. The Strategy also proposed a pathway to guide investment decisions, being the commissioning of a route feasibility report between , Melbourne and Canberra into MIM, the preparation of a Business Plan for the optimal operational model for the airport, and a Masterplan to define optimal placement of infrastructure, facilities and aviation business on the airport proper.

In the interim, Council extended the existing operational lease with an option to 2014, and expects to undertake renewal works on the runway, taxiway, aprons and lighting during 2013. The regulated route review covering existing Regional Express services was finalised before the due date of March 2013, and Regional Express currently retain exclusive carriage rights over the MIM-MYA-SYD route, though not the MIM-MEL route, all much as before. The timing to achieve decisions concerning the runway and associated works has taken longer than originally anticipated. On a separate timescale, therefore, consultancies to determine options for (1) airport management, and (2) an airport Master Plan, are only now – in early 2013 – coming to fruition. Further work may be done to prepare and lodge applications to the Federal Government for grants to install security screening in event of future potential operating requirements.

Brief for a Business Plan for Merimbula Airport

The Brief for this Business Plan calls for the consultant to focus on business models to operate and develop the airport to optimise financial and economic returns to Council.

In reviewing the status and operations of the airport and the perceived requirement for runway repair and maintenance, Council came to the view that the asset could well be capable of returning increased revenue to the Shire were current management arrangements and options carefully reviewed. This report is presented in response to those expectations.

In addition to the perception that there exists potential for increased revenue to Council depending upon alternative management models considered, there have been some ongoing difficulties and tensions within the airport community over issues relating to sub-leases and

UNRESTRICTED 3 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan conditions. One purpose of this report is to examine overall management to determine and recommend a model amenable to resolving these issues.

More on the reasons for the review is contained in a following section. The entire report maintains its key goal of seeking to amplify returns to the Shire community through Council, while remaining dedicated to ensuring efficient and effective operations of the airport and its precinct.

However the report should also be read in the context of the following caveats:

1. Management Models. The management model options advanced in this report and the discussion of their various and relative merits, are all based on Merimbula Airport operations as they currently exist. To make this absolutely clear, no account has been taken of the various discussions between airport operators, Council officers and/or Councillors, and representatives of the several regional airline operators who may – or may not – be interested in bidding at some future time to operate services linking Merimbula Airport with destinations on existing or potential routes. Since none of these possible future developments have been properly assessed and/or agreed by Council, they remain outside the scope of this study. Changes to the airport runway, taxiway and aprons – already approved – will be implemented within 2013, but have no impact on the key focus of this report: business models for airport management.

2. Cost/Benefit Issues in Airport Management. Although it was requested that this report indicate the revenue cost/benefit analysis for management options discussed and offered, this set of outcomes is beyond the scope of the report. Key financial data that would form the basis of projections has not been made available by the existing airport operator (Airport Agencies Pty. Ltd.), the cost of any Council inputs to future airport operation – should they be necessary – are likewise not available without detailed estimation processes being undertaken by Council staff. Similarly, as outlined in this report, the lack of empirical data made available from Rex and SCT to gauge the scope and potential of business and leisure travel by air into the region, has limited the prospect of operational projections for the airport, and also limited the evidence to support the passenger projections put forward in the Route Feasibility Report.

3. Operating the Airport. This report does not set out to be prescriptive in how to run Merimbula Airport; that is a technical matter and outside the scope of this task. What the report does do is to focus on what have been seen as systemic and problematic issues involved in managing the airport in all its aspects. Within this construct, the role and duties of Council are also a key focus and the subject of recommendations.

4. Due Diligence. While every care has been taken to gather appropriate data, record and analyse it, the opinions expressed are solely those of the consultant, Don McDowell.

UNRESTRICTED 4 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

SUMMARY OF CONCLUSIONS

1. Council currently gets limited income from the operation of Merimbula Airport, derived from passenger head tax. 2. The airport generates a wide range of income streams beyond merely passenger landing fees, including ancillary businesses all owned or controlled and operated by the current lessee. 3. Previous Councils have in recent years shown a “hands off” approach to its ownership of the airport and thus failed to maximise or even explore the potential for increasing its share of potential revenue. 4. Expectations of increased air traffic demand tied to likely income growth, are estimates only and not based on hard data to enable trend analysis and forecasting with any certainty. 5. Preconditions for traffic growth – tourism advertising and accommodation industry preparedness among them – have not yet been developed. 6. The airport is a multi-business opportunity, presently controlled mainly for the benefit of the current lessee. 7. Council should accept a recommendation to take over ownership and operating rights for the airport and its precinct, once the lease has run its course (2014 latest), acknowledging the benefits potentially flowing from such action. 8. For Council to actually run the airport – assuming it becomes the certified Owner/Operator – would be too burdensome in staff and resource terms. A better mechanism is to call for tenders for an agency to operate on Council’s behalf to manage the airport precinct. 9. In establishing a Managing Agent structure, Council should define in any tender call the specific duties required and expected, and the appropriately negotiated fee structure for the successful tenderer. 10. It should be expected that the current lessee would bid, acknowledging that the pattern of his present income stream would substantially change as income is diverted – more appropriately – to Council as the asset owner.

UNRESTRICTED 5 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

REASONS FOR REVIEWING AIRPORT MANAGEMENT

CURRENT MANAGEMENT ARRANGEMENT FOR MERIMBULA AIRPORT

The original lease for operating the airport was executed in 1997, the beneficiary being Airport Agencies Pty. Ltd., with its Managing Director (Ian Baker) becoming Merimbula Airport Manager. The lease continued for its first ten years and was extended by a further five years in 2007 to expire in March 2012.

In recent months, Council has reviewed airport planning and construction requirements and, as an adjunct tasked this management model study, with the overall intention of developing and approving a Merimbula Airport Master Plan.

In consideration of the amount of time necessary to do so, and taking into account also the need for repair and maintenance and strengthening of the existing runway (including taxiways and aprons), Council has approved a further extension of the lease to Airport Agencies Pty. Ltd. on a 1 + 1 basis in advance of the regulated route review by the NSW Ministry of Transport. That review was conducted and conditions of exclusivity for Regional Express on the MIM-SYD route extended for a further 5 years.

The airport operating certificate issued by CASA is held by the lessee (Airport Agencies). While the MIM-SYD route is regulated by the NSW Ministry of Transport, it is understood that existing slots into Sydney are assigned to the MIM route. In contrast, the MIM-MEL route is not regulated and has been the subject of substantial growth since introduced by Rex in recent years.

THE REVIEW ISSUES

For the past few years there has been a continuing discussion in the public domain (largely in the local newspapers and radio) as well as in Council, about the immediate needs of Merimbula Airport and its longer term future. Though difficult to determine exactly what prompted this discussion, the exhibition of the draft MAPS and the later proposal by Council to IPART for rates to fund a loan to carry our runway works were clearly push factors. The key hallmarks of the continuing public and industry discussion have included the issues and opinions listed below and explained in greater detail in following notes in this section.

1. The need for runway renewal, including mention of “upgrades” without necessarily being specific as to length, width, or strength code. These matters have now been resolved insofar as Council’s decisions have resulted in tenders being called and successfully let for construction works due to commence soon.

UNRESTRICTED 6 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

2. The desirability of Council “taking charge” of airport matters in order to enhance economic return/revenue to Council as a result of such income streams as passenger landing charges (from Regional Express), landing fees for light aircraft and other GA1 activities.

3. The potential for increasing passenger traffic levels for RPT2 operations into and out of Merimbula.

4. The consequential potential and justification (from item 3) for construction improvements to enhance terminal operations, increase levels of RPT service, add security screening facilities and revision of the entire layout of the Merimbula Airport Precinct.

5. A separate issue concerns the management and oversight of the airport precinct businesses and while largely beyond public knowledge, matters of concern to individual operators and business owners have been discussed at some length with Council.

It must be noted that much of the above public commentary in the media has been in the form of unsubstantiated opinions from members of the public which, though lacking any useful supporting information, has nonetheless sparked considerable interest and exaggerated optimism about the issues raised. This is especially true of the possibility of increased air passenger traffic to the Shire (item 3) and the resulting downstream economic benefits to the community.

Each of the above issues is described in more detail in the following paragraphs in this section as a means of providing more understanding of the drivers for the current and continuing debate about the airport’s future.

Suggestions of alternative options for airport management and operations are dealt with later in this report.

RUNWAY IMPROVEMENTS/RENEWAL/UPGRADE

Background: Early in 2011, Council applied to IPART for approval to raise rates funds to allow for runway renewals to the existing 1602 metre runway, and associated taxiway and apron facilities. A resolution of Council in November 2011 made allowance for the possibility of extending the runway by a further 200 metres in length at the northern (Merimbula) end.

Current situation: Funds were approved and the process of calling for tender bids was implemented with the goal of carrying out all necessary runway and associated works within 2013. In addition and separate to the quotes sought for upgrade to the existing runway, those

1 GA – General Aviation, i.e. aircraft other than Regular Public Transport flight activities 2 RPT – Regular Public Transport (operations by an airline such as Rex)

UNRESTRICTED 7 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan tender documents requested bidders to indicate the additional cost – if Council approved it – of the possible 200 metre extension of the runway. As at the date of this report, the construction critical path issues that may allow for continued but intermittent operation of the airport3, plus also a short period of complete closure during the construction activity4.

It is widely acknowledged that the runway and related infrastructure requires renewal to support the existing RPT services provided by Rex using SAAB340 aircraft. It is understood that SAAB have discontinued production of those aircraft, so it is presumed that within the next ten years, Rex will transition from that model to alternate aircraft suitable for regional routes. Other carriers currently use Q300/Q400 and ATR72 aircraft to meet 30+ seat requirements. It further appears that turboprop aircraft will remain the most efficient for short-haul needs (i.e. less than 2 hours) on regional routes.

Accordingly, it is appropriate to strengthen the runway and ancillary infrastructure to accommodate the likely turboprop aircraft types flying regional routes. While there is some prospect that SYD airport may in future limit regional carriers to 50+ seat aircraft for peak business slots, the alternate aircraft described above would meet any such requirement whereas the SAAB340 would not.

ENHANCING FINANCIAL BENEFITS TO COUNCIL

Background

Though Merimbula Airport is a Council-owned asset, it does not operate the airport, preferring historically to have leased it out to Airport Agencies Pty. Ltd. since 1997. Under the present leasing conditions, Council receives an amount of funds limited to those derived largely from air passenger charges. The way in which Airport Agencies operates its accounting and data recording has been the subject of a separate report into the lease compliance of Airport Agencies Pty. Ltd. The report was made available to Council in January 2012 by the authors, Kothes Chartered Accountants and highlights both shortcomings and the potential for increasing both transparency in practice and the possibility of increased revenue.

Airport Business Activities

Activities and operations in the airport precinct provides several financially-beneficial opportunities, including

 air passenger handling fees;

 aircraft handling fees for Rex

 aircraft landing fees (GA and other non-RPT aircraft)

3 Initial discussions on this aspect have been held between Council staff and the Board of Regional Express. 4 Recently publicised by Council as being scheduled for closure 14th to 28 June 2013.

UNRESTRICTED 8 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

 sub-lease of hangars and General Aviation businesses;

 operation of car rental agencies under sub-leases;

 operation of the airport café food and souvenir sales;

 overnight secure vehicle parking;

 aircraft fuelling facilities.

Under the current leasing arrangements, as stated above the Council receives its dues from Airport Agencies based on RPT activity income. The other income streams bulleted above are managed and collected by Airport Agencies.

Lease Compliance Audit – Kothes Report

It is not appropriate to repeat the Kothes findings in detail within this report; however, it is worth noting the key elements of the Executive Summary covered in that report5 (these are attached at Annex A). Insofar as the Kothes report was produced and submitted prior to the issue of an extended lease to Airport Agencies Pty. Ltd., the new extended lease included relevant recommendations made by the Kothes report.

 In summary, however, the report identifies a number of questionable practices which were identified as relating to existing or potential dispute between Council and Airport Agencies. All of these cited issues have the potential to enhance the possibility of increased revenue to Council, if the base causes can be resolved.

Council’s Oversight Role

A key consideration for Council is the role it wishes to undertake in connection with the operation of Merimbula Airport. In general, over the past few years Council has adopted a hands-off approach to the airport operation, allowing (and assuming) that the lease-holder, Airport Agencies Pty. Ltd., could and would manage and operate all airport functions in a responsible manner.

 There is no substantive evidence to suggest that this is not the case, but by staying aloof from airport functions Council has both failed to pursue its own responsibilities in terms of oversight of the lease conditions (as evidenced in the Kothes report), and thus been unable to see and consider any opportunities to increase and maximise its potential revenue return.

 To see this is context, the Terms of Lease (1997) as referenced in Kothes, restricted much of Council’s ability to intervene in Airport Agencies’ and other airport operations.

5 Merimbula Airport Lease Compliance Findings – draft report by Kothes Chartered Accountants, 5 January 2012

UNRESTRICTED 9 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

 One important outcome from the Kothes investigation, is that Council should ensure that the ownership of the MRF account is clearly cited as belonging to Council, with it being the sole authorising signatory.

 Council needs to investigate whether all businesses operating at the airport have been approved by Council as provided for in the Head Lease; Council has already sought evidence of DA consents from sub-lessees.

 The lessee needs to ensure that there are formal agreements in place for all businesses at the airport (copies of draft sub-leases would constitute evidence).

 Council should inspect the airport premises to ensure the upkeep of the grounds, car parking areas, toilets, etc. as part of annual asset inspection regime.

 Council should formally adopt a policy that ties CASA reports and technical inspections to an acceptance that these are deemed to meet Council obligations under the Head Lease6.

 The lessee (Airport Agencies) should ensure that all sub-lease insurance policies are extant as required by the sub-lease documentation, noting the requirement for coverage of $20m. Further on this issue, Council should review that appropriate insurance cover is held by the lessee and sub-lessees, on at least an annual basis.

 Since the licence for operating the airport is held by the lessee at present, Counci, should ensure that contingency plans are in place for it – or some other designated party – to obtain the licence if, regardless of circumstance, the current lessee ceases to operate the licence.

 Council should ensure that future audit requirements relating to the airport financial situation will include detailed reconciliation of sub-lease income to the lessee, and will be attached to the annual audited statement of income provided by the lessee to Council.

 Council should direct appropriate valuation of airport property to allow proper setting of sub-lease rents and conditions with provision for rental rates to be modified in accordance with Council’s financial policies on such matters.

 Other user charges for the airport ( including permanent landing rights, pavement concessions) should be subjected to an independent review to ensure rentals and fees represent true market value.

6 Such a resolution to so adopt the CASA inspection regime was resolved affirmatively by Council in January 2012

UNRESTRICTED 10 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

 All lease and sub-lease documents should, in future, contain specific dispute resolution processes to enhance effective management of the aviation industry operations at the airport.

 In a later section, two options for Council involvement in a management and oversight role are discussed.

EXPANDING THE PASSENGER TRAFFIC BASE

Common Claims and Community Opinion

As indicated earlier, there has been considerable – and seemingly plausible – public discussion of this topic over the past few years. Many commentators have claimed, both in the media and in meetings with Council, that the present level of traffic in/out of Merimbula Airport, can be expected to grow significantly over the next few years.

 Much of the commentary makes the point that not only will natural population growth in the Shire have its inevitable impact in growing passenger demand for RPT services, but that proactive campaigns to expand business sector and, more particularly, the tourism industry will also provide substantial potential for such growth.

 Figures quoted by Airport Agencies Pty. Ltd. and picked up by other commentators, mention passenger demand potential of around 150,000 and perhaps even significantly more. The assumption is made that such an increase (from the approximately 51,000 per annum; current figure for 2011) would provide useful growth in passenger landing fees, available to Council to augment income. It should be noted that passenger numbers peaked at 65,000 in 2008/9 (with a then population of 31,000) and has since fallen, presumably as a result of the GFC and the likelihood that families and travellers generally now have less disposable income than before.

 Council has formed a view that growth prospects rest largely in attracting the leisure and baby-boomer travellers, particularly if supported by appropriate marketing by SCT and RPT carriers. This view is supported by the Route Feasibility Report (Webber 2012) and cited in that report’s Executive Summary.

 The demand estimates (Webber) must be interpreted as aspirational, or target levels of demand. They should not be assumed as demand levels that could be immediately realised if an alternate airline were to commence operations at Merimbula Airport. It would take time for the estimated demand levels to be reached, and would be dependent upon:

UNRESTRICTED 11 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

- The success of plans guaranteeing finance for upgrading the airport and constructing the added infrastructure required.

- The amount of time taken to complete the airport’s upgrades and the disruption that might result to normal traffic through Merimbula.

- The identification and relaxation of any constraints in the tourism supply chain (such as local transport, accommodation, public amenities, food and retail outlets).

- The ability to attract new airlines and hence competition to service Merimbula Airport.

- The pace at which airlines could “ramp up” their service levels after start-up.

- The time required for prospective passengers to assess the full benefits of flying to/from Merimbula; and the depth and breadth of the marketing effort that could be applied to Merimbula routes.

 The exact amount of time to realise the aspiration demand levels is clearly uncertain, and constitutes a risk to airport capital expenditure. (For example, in the case of , , Ballina and Broome airports, aspirational demand took up to 10 years to be fully realised, and generally occurred in large discrete steps of 50K to 100K passenger traffic.)

The Statistical Reality of Passenger Demand:

As with all statistics-based forecasts, and with Webber’s caveats in mind, there is no certain basis for estimating with statistical surety the future passenger demand for Merimbula Airport in/out traffic. Nor is it possible using presently-collected statistics to determine and differentiate the nature and extent of future travel within the business or tourism sectors.

There are many variables that apply, nonetheleast of which is the approach taken by the current carrier Rex to fare-setting, with low fares only comparatively rarely available in a limited window of opportunity. Community and business reaction to what are considered widely to be expensive fares out of Merimbula, has been consistent in voicing disappointment. Possibly rather more damaging to the airline’s relationship with the community has been the continuing preference shown by many to opt for travel by bus or car to Canberra to connect with major destinations at cheap airfare or alternatively use train connections to Sydney.

 Air travel is commonly accepted as a largely “elastic” determination, dependent upon a wide range of factors including urgency and price. No data has ever been gathered that illuminates passenger demand levels or preferences; nor is there any data that reflects the state of un-met and unsatisfied demand.

UNRESTRICTED 12 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

 On the other hand, there is reliable data concerning population size and growth, sufficient to enable forecasting of future growth trends, but this does not in itself meet the requirement to assess the demand for air services as a precursor to estimating future passenger demand.

 Without specific data-gathering to enable a proper understanding of would-be passenger preferences, no reliable estimates can be made. As with any business, relying on unsubstantiated forecasts (even well constructed aspirational demand levels cited in the Webber report) as the basis for investment and planning would be risky unless accompanied by aggressive marketing to create increased demand for the services to be provided.

MANAGING AND OVERSIGHTING AIRPORT BUSINESSES

Current situation

Under the terms of the existing lease arrangements, the entire responsibility for operating all aspects of the airport – including the aviation support businesses located within the airport precinct mentioned – falls to the lease-holder, Airport Agencies Pty. Ltd. All precinct businesses operate under sub-leases granted by Airport Agencies Pty. Ltd. and must conduct their activities in accordance with safety, security and operating requirements laid down by the Airport Manager acting on behalf of Airport Agencies Pty. Ltd.

 The Kothes report makes several observations that impact on this matter of management oversight, noting in particular the fact that Council plays no part in approving leasing (sub-lease) conditions. Approvals for development and modification of businesses is wholly exercised by Airport Agencies Pty. Ltd., including location, car parking, construction, sub-lease charges, in addition to setting the airport requirements for security, safety and airside operations.

 In carrying out this responsibility, Airport Agencies is required to ensure that the normal DA process is followed, since Council practice demands an approved DA for sub-lessees. In exercising this role, Airport Agencies as the lessee has discretionary decision-making power over the use of common areas within the airport precinct by sub-lessees, while the sub-lease itself covers solely the building footprint.

Difficulties and Dissatisfaction

Several businesses operate under sub-leases (of the style described above) within the airport precinct, and they are listed in Annex B at page 19 with a diagrammatic layout of their present locations shown on page 20. This group of operators – the Airport Users Group – has expressed considerable dissatisfaction with the management arrangements. Their specific issues relate to wanting security of tenure and fairness in all dealings relating to their

UNRESTRICTED 13 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan businesses, and include the key issues listed following. Note that many of these matters have already been described in previous sections of this report and indeed some have already been dealt with by Council decisions in recent months.

 The lack of Council involvement as the granting authority to approve leases (instead of sub-leases).

 The lack of oversight and implementation of proper, thorough planning and application of normal Council regulatory requirements as it affects their business sites.

 In this context also, the lack of a transparently fair and equitable exercise of decision-making by the lessee.

 The lack of a standardised fee system for leasing charges and associated fees. While fees have been standardised and supported through a formal valuation process by Council-appointed agents, the user group has not clearly understood that their sub-leases cover their building footprints, and that common areas come under the direction of the lessee.

 The lack of any dispute or grievance mechanism in case of disagreement on any issue affecting their leases and operating arrangements or constraints.

The Airport Users Group believes that the list of requirements as described above is properly aimed at providing a secure and equitable business operating environment under the overall direction of Council. The group further considers that such changes would improve their business outlook and remove many of the inconsistencies and inadequacies they consider currently in place. The user group will of course have ample opportunity to contribute to the discussions concerning the development of an Airport Masterplan since this will affect many of them in terms of where their business locations may need to shift to within the precinct.

There appeared to be little, if any, basis for agreement between Airport Agencies Pty. Ltd. and the Airport Users Group on the historical and, in some cases, continuing issues listed above. This is understandable since the current leasing arrangement allows Airport Agencies Pty. Ltd. to exercise full control over all the leasing issues raised, and is silent on the question of Council involvement and dispute resolution.

To a significant degree, the present and continuing situation is allegedly one of irreconcilable differences devoid of any harmony between the various parties. Without commenting upon the relationship issues impacting upon the parties involved, it would seem highly likely that these fundamental differences can be largely defused by simply applying a better structural model of management, perhaps separating airport aviation operations management from management of the individual businesses involved as sub-lessees.

UNRESTRICTED 14 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

In essence, the airport business operators (largely the GA and related business owners) seem to want freedom to operate as they wish, without what they see as inhibitions imposed by Airport Agencies on issues such as parking, and development of their sites, with both permission and fee-setting specific issues that cause concern and tension.

On the other hand, Airport Agencies as the lessee expects to be able to exercise its rights under the lease to “manage” all airport operations and business or, where the lease is deficient in either intent or wording, then as it (Airport Agencies) deems appropriate.

The conclusion drawn from analysis of this continuing situation is that any future management plan for the airport must, without fail, resolve who or which agency has powers to exercise controls; identify over what those controls will be exercised; and provide for a clear chain-of-authority in circumstances of dispute or disagreement.

UNRESTRICTED 15 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

MANAGEMENT MODELS & OPTIONS

There are three key building blocks for effective management of Merimbula Airport:

1. the extent of Council’s role in oversighting the operation of the airport asset

2. management of airport operations (e.g. flying, safety, security of the airport precinct)

3. management of ancillary businesses operating within the airport precinct

COUNCIL ROLE & OPTIONS AVAILABLE

Council (and the Shire community) owns the Merimbula Airport and it is a valuable public asset, capable of gaining revenue and providing income to Council. For the two airport management options advanced below, each emphasises an involvement of the Council to act as caretaker of the public asset, monitoring and oversighting airport operations if not in fact actually running them. This is consistent with the main objectives outlined in the MAPS report and referred to earlier in the Introduction to this report:

 Grow air services to the Shire

 Provide regular and reliable competitive air travel opportunities.

 Retain a share in any profits from airport operations.

 Provide a supply of serviced business land.

 Conserve core environmental values and cultural heritage associated with airport development.

 Ensure that airport users contribute appropriately through fees and charges.

Governing Factors

1. Council must consider and decide upon how it wishes to manage its airport asset. Fundamental to this is a decision first and foremost whether to actually retain the asset, particularly now that funding and construction arrangements are in place for the airport runway, taxiways and aprons to be strengthened and upgraded (whatever is the appropriate technical terminology).

2. Selling the airport outright has been aired previously by the past Council as one solution. In reality, this action would provide a one-time gain with no opportunity to share in whatever economic developments flow from planned airport improvements and potentially-increased air traffic through Merimbula. Of course, sale of the airport would release Council from its future debt burden, but at the expense of cutting off potential income.

UNRESTRICTED 16 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

3. Council retaining ownership of the airport (no change, therefore) leads to two options for management, although each has a range of variables:

A. Leasing out the airport and permitting the lessee to exercise total control over all activities and operations on and through the airport precinct. This option sees conditions largely continuing as they have been without change since 1997.

B. Council takes complete control of the airport itself, actually running all day-to-day operations, possibly using staff deliberately recruited for this purpose if existing staff resources could not cope with this additional workload.

C. Council becomes the airport operator/owner (applying for the appropriate permit to CASA), and lets a contract for managing the airport operations by calling for tenders to identify the suitable business operator.

DETAILS OF THE OPTIONS

Option A – Council continues existing lease arrangement

To continue with the existing arrangement, even allowing for the good work that the present lessee has done to build airport business over the past 15 years or so, is to perpetuate the difficulties that have arisen between all the parties involved in airport precinct activities.

Even if this option were pursued, a new lease must be developed as the basis for any management option in order to overcome the legal and financial difficulties identified in previous reports to Council. Such substantial changes would be necessary if Council was to assert its rights to exercise more control over activities and share more equitably in airport-generated revenue.

This Option A is not recommended when compared with the additional benefits from other Options.

Option B – Council becomes certified Airport Operator and runs the airport

Under this option, Council not only takes on the license as certified Airport Operator, but accepts also the responsibility, benefits and burdens of carrying out all airport and aviation- related functions within the airport precinct.

Certainly this option facilitates Council having any and (almost) all opportunities for increasing both its control over all aviation activities, and hence its due diligence. In doing so, Council would maximise its revenue stream for all airport-related business activities. The quid

UNRESTRICTED 17 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan pro quo would certainly be the burden on staffing and budgets for carrying out the functions involved, including all those listed at Annex E. Moreover, since the airport is a continuing daily operation, Council would have little or no flexibility in how it meets the demands required of those listed activities; normal priority-setting arrangements for staff and equipment use would have to be set aside where safety and security of airport operations was concerned, acknowledging that these issues are paramount.

Though this option has some seriously beneficial positives, the burden on Council resources would have to be managed to ensure primacy of their allocation to airport operations.

Option B is thus NOT preferred or recommended.

Option C – Council takes role as certified Airport Operator in oversight role

While Bega Valley Shire Council (BVSC) has not acted in a hands-on role in recent history (at least 15 years), there is ample precedent throughout NSW, where all but one out of the 31 commercially-served regional airports are legally operated by the local Shire Council. To achieve their status as Operator, Councils apply to the Civil Aviation Safety Authority (CASA) and gain appropriate certification. Merimbula is the sole non-Council operated airport, the licensed operator being the current long-term lessee, Airport Agencies.

 The purpose in becoming the Operator is that it allows Councils full operational control over not only airport operations, in addition to their exercise of regulatory powers in respect of ancillary aviation (and other) businesses operating on the airport precinct. Suitable arrangements would need to be made to ensure that proper separation of roles can be achieved, i.e. in its functions of governance, operator, regulator and financier.

 Council, in taking over the upper management role of airport controller and licensee under CASA certification, would be faced with the choice of hiring a managing agent (business, company) through a tendering process, whereby that agent would do the day-to-day operations involved in running the airport.

 This would require Council to develop a contract agreement that specified the duties to be undertaken, identifying also those functions that would remain with Council. An example of this latter would be Council’s direct control over all sub- leasing permits and Development Applications, leaving the managing agent free of those responsibilities.

 In developing such a contract, industry consultation would be essential in order to identify and consider all those issues of concern to the various parties involved, as the basis for Council determining its position on Terms of Contract.

UNRESTRICTED 18 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

 Under Option C, Council would need to act separately in providing oversight of the management functions, as well as exercising normal regulatory and compliance controls over business within the precinct in accordance with the goals and terms of the Business Plan and the Master Plan. Using the Managing Agent model affords Council control, yet maintaining appropriate regulatory and governance distance from routine operational activities.

 In calling for Expressions of Interest in tendering for the role of Managing Agent, Council should have keen regard for the business proposal as outlined by the tenderers. In particular, capability to operate to produce effective and professional outcomes in terms of airport operational demands, customer expectations and services, business acumen and skill in managing a multi-faceted operation (thus including sub-lessees) and potential to contribute meaningfully to the goals of the Strategic Plan 2030 … all these should be prerequisites for consideration and selection of the successful tenderer.

 Option C should not be established, however, in such a way that Council totally distances itself from the airport functioning. To this end, and allowing for the fact that Council does not appear to have any specific professional/technical knowledge about aviation, it is recommended that Council establish – for oversight and advice – an Airport Advisory Committee comprising persons with aviation and business knowledge and experience, plus a Council representative. This model operated historically in the Shire, though it seems to have been managed “at a distance” and was thus regarded as relatively ineffectual at the time. Setting up a revitalised structure would need to be implemented under strict Terms of Reference to provide guidance and support on aviation business matters to all involved parties. The Shire’s population does not lack for talented and experienced people and thus forms an available pool upon which to draw for membership of the Committee.

1. The function of such a committee would be to provide advice upwards to Council on any matters relating to airport developments and operation

2. It should also to act as an additional focal point (in addition to Council itself) for consultation with the community and in facilitating data gathering as necessary.

3. A third role would be that the committee act as Council’s “agent” in oversighting and reporting on operations and business at the airport, maintaining therefore a distancing of Council from the routine airport operations conducted by the Managing Agent.

UNRESTRICTED 19 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

Option C is recommended as the preferred Management Model, since it establishes Council ownership and control over the airport precinct and its operations, yet leaves the running of the business to a chosen agent.

MANAGEMENT ISSUES IN AIRPORT OPERATIONS & BUSINESSES

Under the present and historical operating model for Merimbula Airport, the entire activity cycle for both aviation and business management is run as a single entity, with the lessee being the sole planner and arbiter of the aviation industry in this location.

Separation of functions

As alluded to earlier, there is perceived to be considerable merit in separating airport aviation operations responsibilities from the business management functions and the regulatory functions relating to other lessees (sub-lessees under existing arrangements) and activities on the airport. Functions that relate to site planning and development and the provision of essential utilities and services arguably fall naturally to Council for implementation and approval in accord with the Masterplan.

Impact on Revenue

The information provided in Annex E concerning airport operating functions is deficient in terms of seeing how much debt burden might accrue and matching that with assumed income from aircraft landing fees, Rex operations and the like.

The deficiency stems from imperfect information available about all the businesses now operating at the airport, alluded to in the Kothes Report mentioned earlier in this paper. For example, the current airport operator receives revenue from those operations listed at page 7, specifically:

 Aircraft re-fuelling (contract held by Airport Agencies)

 Production of airport controlled access identity cards (a business run by the current lessee)

 Lease fees for airport businesses (rental cars, café, GA business leases)

 Car parking

The point here is that Council as Owner/Operator could rightfully expect to collect leasing fees. It could not expect to deprive the current lessee of his income from the re-fuelling contract with the supplier, nor from his ID card-production business.

This all has an impact on the role of any Managing Agent operating the airport on behalf of Council in its Owner/Operator role. Income expected by the Managing Agent would be limited

UNRESTRICTED 20 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan to aircraft operating (landing fees, baggage handling and airport booking/check-in operations for Rex, and the like). The Managing Agent would be tasked to collect other revenue including leasing charges from rental cars and GA businesses, car parking and the café, though only if Council so decided.

There was an expectation originally of this report that finite income/expenditure figures could be provided both as a snapshot of the present situation and as a forecast for future developments as traffic, hopefully, increased. Given the paucity of information available on costings, understandable since that information is confidential to the current lessee, there is no realistic basis for doing a cost/benefit analysis at this time and on this information base.

Certainly the human resource burden can be inferred from the information shown at Annex E, but nothing more substantial can be drawn from this unless comparable information is available to Council regarding the nexus between the types of tasks listed and the typical wage structures that apply.

The single most illusory aspect that comes from the research has been that the airport operations make considerable income. But this cannot be measured without more detailed information than simply that provided to this consultant and Council’s General Manager as a Profit & Loss Statement. Moreover, this difficulty to getting to finite detail about income (and also expenditure) is aggravated by the knowledge – but without details – of those other business activities that the current lessee undertakes.

All this calls attention to the likelihood that setting up any Managing Agent arrangement requires a model that specifies a range of expected functions that must be performed, for a fee that can either be set (1) by Council; or (2) a baseline fee-for-service based on sharing existing income from RPT and GA operations and fee structure, with allowance for growth based either on changes upwards in traffic and fees collected, or CPI movements. The essence of putting a Managing Agent structure in place, rather like a lessee, is that the business proposition must be seen to be attractive to the applicant.

Distribution of income

In this context, bidders should be invited to identify their income expectations and retained profit requirements, taking into account operating costs including staff, equipment, airport usage of utilities, essential repair and maintenance, etc. The model to be applied would envisage that all income/revenue from passenger head tax, landing fees and the like would be repatriated to Council save for the agreed fee allocated to the Managing Agent. The latter could retain other directly-levied charges directed to the RPT carrier(s) for such support activities as flight bookings and baggage handling plus earn further income from ancillary business opportunities, including operation of the airport terminal kiosk and café, as well providing care hire or shuttle services.

UNRESTRICTED 21 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

Calling for tender bids as Managing Agent

To take on the responsibilities of airport aviation operations and airside security and safety, Council should strongly consider calling for Expressions of Interest (EOI) from which tender bids may be selected for the role of Managing Agent as soon as practicable, allowing for current leasing arrangements terminating by June 2013 should the present lease-extension option not be exercised. The business demands (workload, income and profit), will inevitably be less than those currently falling to the present lessee, and thus the call for tender bids should be “open” and would, in all likelihood, also embrace Airport Agencies Pty. Ltd. within its catchment.

Increasing operational income

An obvious pathway to increasing income that is derived predominantly from passenger head-tax, is to negotiate with the carrier(s) to increase the fee charged. Some discussion has already been held within Council and proposed to Regional Express, pointing out that to raise the present fee by a modest $1 or $2 would not seriously affect the airline’s sales and profitability. Provision could be made for the head tax rate to be variable (rather than fixed) according to changes in traffic carried; for example, as traffic rises above a threshold of 50,000 it could be proposed that the head tax rate be discounted in order to encourage growth, particularly if aimed at the leisure market. Comparison with other sectors and carrier fee paid has been advanced as a rationale for the proposal.

 The reaction from Regional Express has been wholly negative to changing the present fee and there is little reason to expect that the airline would change its decision on this, especially given that the Board’s Chairman reminded Council of the constantly changing costs for fuel and the imposition of the carbon tax as far back as one year ago.

 In these circumstances, it is likely that with little or no room to manoeuvre on fees, then the most practical means of increasing revenue through the airport would be to encourage higher demand. This is discussed in a later section.

Council responsibilities

BVSC has several enduring responsibilities and obligations under this Managing Agent model, although some of the functions described below would be open to negotiation with the Managing Agent, balancing functions against fees.

1. Council should bear overall responsibility to overview the operation of the airport and the precinct (as delineated in the appropriate plan of subdivision currently in force), providing regulatory input when required and satisfying itself – on behalf of the community – that all functions are being carried out faithfully and properly by means of separation of roles and internal/external audit of functions and finance.

UNRESTRICTED 22 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

2. Council has the responsibility and the regulatory powers to approve business leases, set rates and fees, approve construction and modification to premises within the precinct; in short, exercising its normal powers.

3. Council should exercise due diligence by applying its audit and accounting oversight of the operations by the Managing Agent.

4. In setting up any management agreements, Council should critically examine the Kothes Report Executive Summary findings, and ensure that it applies appropriate remedial solutions to all issues cited; in addition, Council must make sure that companies that bid for the role of Managing Agent are informed of the findings so that they can build them (and the solutions) into their bids as benchmark requirements. To guard against future failure, the importance of taking this action cannot be overstated. The terms of the continuing “contemporary” lease (as extended) may also be applied as part of the briefing requirements provided to tenderers.

5. Council and the Managing Agent should negotiate an agreed demarcation of responsibilities for such issues as repairs and maintenance to the runway, taxiway and aprons, grass mowing, parking bay surfacing-and-marking, and the like. Given that Council possesses the equipment to carry out these functions, an agreed sharing of responsibilities for fees needs to be resolved as part of the Managing Agent contract negotiation. As a guide to useful models of development, serves to highlight the cooperative nature of relationships that can be established between the Council and the nominated airport operating and management agency and other relevant authorities, even allowing for the fact that Mildura operates at approximately four times the passenger traffic levels of Merimbula. As stated in the Mildura Airport Masterplan7, “planning control of activities at Mildura Airport is vested in Mildura Rural City Council. Noting that the Planning consent process is considered inappropriate for the long term effective and efficient development of the Airport, there is a need to promulgate a Special Use Zone that will convey as of right an ability to treat development matters in- house at the Airport in line with a system of delegation agreed with Council and the Victorian State Government.”

6. The implications for Council relate to the personnel costs involved in providing oversight, monitoring, and due diligence services to ensure that the airport is operating properly.

7 See also http://www.milduraairport.com.au/images/file/2010_05_20%20Master%20Plan.pdf

UNRESTRICTED 23 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

7. The benefit to Council is that all funds other than those paid out to the Managing Agent (or retained by their direct services and business activity at the airport) will be returned to Council, noting the potential obligations under item 4 above. To achieve this, Council should consider establishing a discrete business unit with oversight by a Board having business, governance and aviation expertise.

MERIMBULA AIRPORT MASTER PLAN

One of the necessary developments that has until now been lacking, has been a Master Plan that can be used to facilitate business development over the entire airport precinct. In the very near future Council will have such a plan available, currently prepared in draft form by Rehbein Airport Consulting. Until now, the lack of any such plan has meant that the outline diagram included with this report – an “as is where is” drawing of the precinct – has generally perpetuated the status quo in absence of any proper thought being given to planning principles. Airport Agencies did commission its own Master Plan some years ago but that has never been published to Council or the community and thus has no legal status regardless of how insightful it might be considered.

The imminent Master Plan from Rehbein will inevitably raise some questions not necessarily related to the what-and-where aspects of its findings in respect of placement of airport facilities.

 Firstly, it will take funding and effort to act on the finally-approved Master Plan, and the question arises as to who would benefit? Assuming Council believes that the draft Rehbein Master Plan is both a necessary facilitator for future air services development in the Shire (and that is the recommendation of this report), then Council will need to publish the plan and consult widely with those affected by it, in order to test reaction to the recommendations made.

 A second issue relates to the usefulness of the plan. In the short term, having an “approved Masterplan” will mean that all decisions of a planning and construction nature are made against the template of the plan. Indeed, any application to the Federal Government for airport-related grants requires the existence of an approved Masterplan. But for the longer term, without significant incentive to change or move buildings and facilities, plus appropriate funding arrangements, what is the likelihood that Council or even individual business owners/operators/carriers would want to – or could afford to – make changes in accordance with a Master plan. A relevant consideration is that CASA has notified that, from 2020, it intends to apply ICAO (International Civil Aviation Organization)

UNRESTRICTED 24 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

standards which may impact on the siting of some existing structures in order to achieve the desired 150m runway clearance objectives.

 In essence, the plan could become the key document that identifies desirable future improvements only if and when funds – and significant incentives – are available. Such incentives may include the Council, as operator, achieving approvals to implement the Masterplan from the relevant State planning and environment, as well as Federal aviation, authorities. To this end, a Financial Plan should be developed in conjunction with the Masterplan, identifying passenger traffic, legislation, audit and development thresholds that may trigger financial injections.

 A related issue in terms of encouraging development investment and certainty of RPT operations, is the determination of which entity “gains” from the approvals: the owner (Council) or the operator, whether this be the business unit, the lessee or managing agency. It should be noted too that any investment by Council above certain thresholds may require Department of Local Government approvals via the Capital Expenditure Guidelines (for Council-only funded development) or via Public Private Partnership Guidelines for joint ventures.

UNRESTRICTED 25 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

FORECASTING PASSENGER TRAFFIC

In January/February 2012, a consultancy report was prepared and delivered to Council on the topic of passenger trend forecasting. The study, done by Dr Tony Webber of Webber Quantitative Consulting Pty. Ltd., provided estimates of population and passenger demand growth within the Bega Valley Shire impacting upon Merimbula Airport.

It is not necessary to quote all of the figures cited by Dr Webber but, for ease of reference, the Quickfacts sheet has been included at page 21. As noted earlier (page 7), the estimates of potential demand are high when compared with current travel statistics – some 51,000 in 2011 as against total “current aspiration demand estimates” of over half a million per annum.

Understanding the nature of passenger demand simply by examining the highs and lows of existing statistics, is problematic. This is because other variables about demand have not been identified or measured. The importance of this is clear when considering passenger demand levels given their “elasticity” in light of variables such as convenience, urgency, frequency, connections at transfer points, cost, baggage and cargo restrictions. For example, the higher passenger numbers in 2008/9 are assumed to have dropped due to the global financial crisis. However, this has not been tested (although there are useful comparisons with other business activity experience) and it may be too simplistic to assume that this is the single most important cause of a lowering in passenger demand. One issue certainly appears to be (though not proven by any customer surveys at this time) that the RPT carrier Rex has maintained fares at a high level, especially burdensome to some intending travellers, it seems, when no discount or stand-by fare structure is offered by the airline.

Although Merimbula Airport is the recognised hub for air travel to and from the Shire and its surrounding catchment area, Canberra increasingly offers an alternative to those who can accept the time loss in travelling to CBA by road in order to catch connecting flights to a wider range of destinations, at arguably much cheaper alternative fares on offer by the competing RPT carriers. This leakage from what might have previously been argued as a captive market for Merimbula, could well continue and indeed increase unless more sympathetic marketing and fare structures are offered by Rex. If the planned construction activity during the runway renewal and extension (if approved) period significantly reduces frequency from existing and thus expected flight opportunities, the shift to focus on a Canberra arrival/departure point may increase.

The saving grace for the leisure market sector of air travel will be that Merimbula and its relationship with the hinterland and the Wilderness Coast region, is the likely major destination, and any diversionary routing (for example via Canberra) would be inconsistent with the need to maximise leisure time and expense. In this respect, the example of flying into Alice Springs

UNRESTRICTED 26 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan versus going direct to Yulara has some comparability. If Uluru is one’s destination of choice, then a decision has to be made about saving time and effort and going direct, or landing at Alice Springs and going out by coach – more costly and time-consuming with little in the way of scenic benefits en route.

In an earlier report submitted to Council in September 2011, the author noted that collection of data concerning travel to and from the Bega Valley Shire was relatively poor in that small samples provided the basis for all estimates provided routinely by NSW and Federal tourism bodies. Attempting to determine the likely uplift demand for air travel is dependent upon having quite focused, detailed data to describe not only passenger travel preferences (to/from Merimbula airport) but to gather very specific data to identify air travel patterns, likes and dislikes, decision-making criteria for air travel, unmet and unsatisfied demand … and similar variables. In conversation with Rex, it is clear that the airline is reluctant to assist in any meaningful way in collecting data on web/phone enquiries, their conversion to firm books, and the price-point at which the bookings were made.

The unfortunate reality is that such data is not collected - neither routinely nor purposefully – by any tier of government or the tourism industry here on the far south coast and beyond. To revert to the earlier model of Mildura as discussed, in that case allowance was made for deliberate passenger surveys and customer satisfaction surveys as a precursor to development. The impact of this data-gap affects all extrapolation of the samples, since we have access only to imperfect (small sample) and unusable (wrong questions) data that, at best, can give only a gross overview of likely travel to and from the region. But without additional focused data, particularly specific to air travel, then the estimates could not be used for planning leading to investment.

Two other potential sources of data might in theory be able to assist in gathering relevant impressions of traveller preference: the local Shire tourism/hospitality industry; and Regional Express airline as the carrier. Following discussions with South Coast Tourism and also members of the Board, it is noted that neither party gathers any useful data beyond that collected operationally by the airline: the actual number of paying passengers carried to/from Merimbula Airport.

In sum, without appropriate collection of relevant data in statistically-relevant sample size, it is unwise to make forecasts that lack substance and then to act upon them. At best, the initial recommendation is for Council (in cooperation with SCT and the Chambers of Commerce) to establish a rigorous regime for data collection in appropriate outlets, accommodation houses, transport operators and tourism booking agencies, as well as at Merimbula Airport itself. The essential prerequisite for such a data-gathering exercise will be the proper development of appropriate questionnaires. Conduct of the questioning/interview process could be left to temporary/casual hires, typically university/college students on break.

UNRESTRICTED 27 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan ANNEX ‘A’

UNRESTRICTED 28 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

UNRESTRICTED 29 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

UNRESTRICTED 30 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

UNRESTRICTED 31 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan ANNEX ‘B’ DATABASE OF MERIMBULA AIRPORT SUB-LEASES (Source: Bega Valley Shire Council – 26/3/2012)

Lease Site Salutation Name Business Name Address 1 Suburb State Postcode LS-01 Mr Ian Baker Bakersair Pty Ltd C/- Mr Ian Baker Merimbula NSW 2548 PO Box 24 LS-02 Mr Rex Koerbin PO Box 29 Pambula NSW 2549

LS-03 Mr J A Campbell Merimbula Air Services Pty PO Box 279 Merimbula NSW 2548 Ltd LS-04 Mr K J Devenish 30 St Andrews Drive Pymble NSW 2073

LS-06 Mr Pat Mezzatesta BP Pty Ltd T/as Air L17, 717 Bourke Street Docklands VIC 3008 BP LS-07 Mr John Moffat PO Box 345 Pambula NSW 2549

LS-08 Messers McDonnell, C/- Mr E A Done 1 Lakeview Avenue Merimbula NSW 2548 Done, Phillips, Britliffe, Harris, Rettke & Thompson LS-11 Mr Rex Koerbin Merimbula Aircraft PO Box 29 Pambula NSW 2549 Maintenance Pty Ltd

UNRESTRICTED 32 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

UNRESTRICTED 33 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan ANNEX ‘C’

UNRESTRICTED 34 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan ANNEX D NSW REGIONAL AIRPORTS with scheduled commercial RPT services

CITY SERVED IATA AIRPORT NAME OPERATOR & LOCATION CODE LICENCE HOLDER

Albury ABX Airport Council

Armidale ARM Council

Ballina Byron Gateway Council Ballina BNK Airport

Bathurst BHS Bathurst Airport Council

Broken Hill BHQ Airport Council

Cobar CAZ Council

Coffs Harbour CFS Council

Cooma – Snowy Mountains Council Cooma OOM Airport

Coonamble CNB Coonamble Airport Council

Dubbo DBO Dubbo City Airport Council

Clarence Valley Regional Council Grafton GFN Airport

Griffith GFF Council

UNRESTRICTED 35 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

CITY SERVED IATA AIRPORT NAME OPERATOR & LOCATION CODE LICENCE HOLDER

Inverell IVR Inverell Airport Council

Lightning Ridge LHG Lightning Ridge Airport Council

Lismore LSY Council

Lord Howe Island LDH Airport Lord Howe Island Board

Merimbula MIM Merimbula Airport Airport Agencies Pty Ltd

Moree MRZ Council

Moruya MYA Moruya Airport Council

Mudgee DGE Mudgee Airport Council

Narrabri NAA Council

Narrandera NRA Airport Council

Newcastle Airport (RAAF Council Newcastle NTL Williamtown)

Orange OAG Council

Parkes PKE Council

UNRESTRICTED 36 Don McDowell, Istana Enterprises Pty Ltd March 2013 UNRESTRICTED Merimbula Airport Study Airport Management & Business Plan

CITY SERVED IATA AIRPORT NAME OPERATOR & LOCATION CODE LICENCE HOLDER

Port Macquarie PQQ Council

Tamworth TMW Tamworth Airport Council

Taree TRO Airport Council

Council (operator) Wagga Wagga WGA Airport (RAAF Base Wagga) Defence (owner)

Walgett WGE Council

Illawarra Regional Council Wollongong WOL Airport (Wollongong Airport)

UNRESTRICTED 37 Don McDowell, Istana Enterprises Pty Ltd March 2013