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NO. 446A PARLIAMENT OF NEW SOUTH WALES LEGISLATIVE COUNCIL STANDING COMMITTEE ON STATE DEVELOPMENT Interim Report on Provision and operation of rural and regional air services in New South Wales Ordered to be printed Thursday 24 September 1998 REPORT NO. 20, VOLUME ONE SEPTEMBER 1998 ISBN 0-7313-9712-6 INQUIRY’S TERMS OF REFERENCE Provision and operation of rural and regional air services in New South Wales (Reference received 28 May 1998) That the Standing Committee on State Development inquire into and report on the provision and operation of rural and regional air services in New South Wales, and in particular the impact on country communities of: C landing fees at Sydney (Kingsford Smith) Airport; C landing fees at regional airports; C the allocation of slot times at Sydney (Kingsford Smith) Airport; C proposals to limit access to Sydney (Kingsford Smith) Airport and direct country services to Bankstown Airport; and C the impacts of deregulation of New South Wales air services on the provision of services to smaller regional centres and towns in New South Wales including consideration of measures to maintain services. CHAIRMAN’S FOREWORD On 28 May 1998 the Minister for Transport, the Hon Carl Scully, MP, requested that the Standing Committee inquire into and report on the provision and operation of rural and regional air services in New South Wales. The Minister referred this matter to the Standing Committee to ensure that there would be no adverse impacts on rural and regional communities in New South Wales through proposals to deregulate intrastate air services or as a result of changes to pricing and access arrangements at Sydney Airport. The Standing Committee has not addressed the terms of reference in its entirety in this interim report. It addresses the impacts of deregulating New South Wales air services (chapter 2), but does not make a final recommendation on deregulation as the Standing Committee had not fully investigated this matter at the time of tabling the interim report. This report fully addresses landing fees and slot allocations at Sydney Airport (chapter 3) and the direction of regional services to Bankstown (chapter 4). The Standing Committee will report to the Legislative Council on landing fees at regional airports and further report on the impacts of deregulating air services in New South Wales at a later date. During the inquiry process the Standing Committee heard many opinions about deregulating intrastate air services. The overwhelming majority of country councils warned against deregulation, fearing, among other detrimental impacts, the loss of air transport services, the use of smaller planes and hubbing arrangements, and the demise of regional airlines may result. Some regional airlines, including smaller operators, also cautioned against deregulation, stating that they would possibly become unviable in a deregulated environment. There was, however, some support for deregulation, primarily from the larger regional airlines, who support the recent finding of the Independent Pricing and Regulatory Tribunal (IPART) that full deregulation should proceed. However, most of the country councils that gave evidence in this inquiry disputed IPART’s finding. The Standing Committee recognises that, given the expiry of intrastate licences on 30 April 1999, regional airlines must be advised, in the very near future, about arrangements for intrastate operations after that date. The Standing Committee, therefore, completed this interim report in a timely manner. This report recommends that the Minister for Transport not proceed with deregulation until the Standing Committee has further investigated the impacts of deregulation and alternatives to ensure that air services to country communities are maintained. Rural and regional communities are concerned about deregulation in the light of pricing and access arrangements at Sydney Airport. This report, therefore, recommends a package of measures to ensure affordable access to Sydney Airport for regional operators and the Standing Committee intends to consider the Federal Government’s response to these recommendations in its further deliberations on deregulating intrastate air services. Access at Sydney Airport is determined by the slot management scheme, while Sydney Airports Corporations sets prices, subject to prices surveillance by the Australian Competition and Consumer Commission. Sydney Airports Corporation is introducing a new pricing structure from 1 October 1998, which increases the minimum landing fee to $100. Negotiations between Sydney Airport and regional airlines have resulted in a rebate scheme targeted at smaller regional airlines. While commending the slot management scheme and the rebate scheme for regional airlines, the Standing Committee is concerned that these schemes do not ensure affordable access in the future. The Standing Committee has, therefore, recommended that the New South Wales Minister for Transport urge the Federal Minister for Transport and Regional Development to introduce a number of changes that will guarantee affordable access to Sydney Airport for regional air services. Throughout the inquiry process, the Standing Committee heard strong objections to regional air services being directed to Bankstown Airport. Rural and regional communities rejected the redirection to Bankstown, as it would increase travelling time, increase travel costs and is inconvenient, particularly to passengers wanting to connect to interstate or international flights or travel to the centre of Sydney. The airline operators opposed any redirection to Bankstown, primarily for the reason that passengers do not want to travel to Bankstown. Residents in the Bankstown area have been vocal in their objections to regional aircraft using Bankstown Airport for reasons of noise and air pollution and safety considerations. Additionally, residents under the flight paths for Sydney Airport objected to regional aircraft being redirected to Bankstown, as these smaller aircraft provide relief from the noisy jets at Sydney Airport. These residents do not want 200-350 seat jets replacing 18-36 seat turbo-prop aircraft at Sydney Airport. The Standing Committee has therefore firmly recommended that regional air services maintain access to Sydney Airport and that they should not be directed to Bankstown Airport. In my capacity as Chairman and on behalf of the Members of the Standing Committee on State Development, I would like to acknowledge the secretariat staff who worked on the inquiry. Thanks must go to the Director, Ms Anna McNicol, the Senior Project Officer, Ms Anna George, and the Committee Officer, Mr Matthew Scott for their work. I would also like to thank all of the individuals and organisations who gave their time and expertise to lodge submissions and appear before the Standing Committee. Hon. Tony Kelly, MLC Chairman TABLE OF CONTENTS (PAGE NUMBERS MAY DIFFER FROM THOSE IN PUBLISHED REPORT) MEMBERSHIP OF THE STANDING COMMITTEE ..................................................................i ESTABLISHMENT AND FUNCTION OF THE STANDING COMMITTEE....................................ii OPERATION OF THE STANDING COMMITTEE ...................................................................iii PUBLICATIONS BY THE STANDING COMMITTEE .............................................................. iv GLOSSARY ...................................................................................................................viii SUMMARY OF RECOMMENDATIONS................................................................................ ix 1 INTRODUCTION.................................................................................................... 1 1.1 THIS INQUIRY ................................................................................................... 1 1.1.1 The impacts of deregulation and affordable access to Sydney Airport ....... 1 1.1.2 The direction of country services to Bankstown ........................................ 2 1.2 THE IMPORTANCE OF AIR SERVICES .................................................................. 2 2 THE IMPACTS OF DEREGULATING INTRASTATE AIR SERVICES ........................... 4 2.1 CURRENT REGULATORY ENVIRONMENT............................................................ 4 2.1.1 Current legislation .................................................................................... 4 2.1.2 The Air Transport Council ........................................................................ 4 2.1.3 Criticisms of the current regulatory environment and workings of the Air Transport Council..................................................................................... 5 2.2 IPART INVESTIGATION .................................................................................... 8 2.2.1 Reasons for IPART’s inquiry .................................................................... 8 2.2.2 IPART’s findings...................................................................................... 8 2.2.3 Responses to IPART’s findings................................................................. 9 2.3 THE STANDING COMMITTEE’S INQUIRY INTO DEREGULATION ........................ 11 2.3.1 Arguments against deregulating the intrastate air services industry.......... 11 2.3.1.1 Impact on smaller communities ....................................................... 12 2.3.1.2 Increased financial pressures on regional airlines and predatory behaviour.......................................................................................
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