Interview – David Irons

DI: It is a combination of several factors not entirely related to the Australian situation.

Australia’s international purchasing power has dropped very dramatically in recent years, simply because we have not been able to compete in overseas markets and following the devaluation it has made it extremely difficult for people to look at the purchase of aircraft. Traditionally, aircraft have always followed very closely the fortunes of the gross domestic product both here and in the US and in most developed countries.

The downturn in Australia is almost exactly parallel with what they had in the US.

The US is showing the lowest rate of aircraft sales at any time in the last 25 years and yet basically their economy has probably not been affected by some of the factors we have had here.

They have had a government that people generally support. They have not had the rate of inflation we have had here or the effects of drought. Our market has been very badly affected by the drought because of a multiplier effect. Even though we do not sell huge numbers of aircraft to graziers, the country charter operator and agricultural operator, the people who work in and around the rural industries, have been very badly affected.

JS: Would it be true to say that this is a good time to buy an aeroplane?

DI: It is a great time to buy an aeroplane if you can get on to the very rapidly dwindling numbers of 1982 pre-devaluation stock. They are the greatest bargains that will ever be around.

JS: Why?

DI: Most distributors still have some aircraft in stock which were purchased prior to devaluation and at 1982 prices. Most manufacturers raised their prices by 10-15 per cent in 1982 and 1983 and the Australian market has yet to come to terms with this.

If anybody is trying to buy a new aircraft and can find any 1982 stock – and there is not much left now – he would get the best value for money he is going to get for quite a long time.

JS: What do you see as the outlook for recovery on the GA scene? What particular areas do you think are likely to pick up first and where do you see the greatest potential for growth over the medium and longer term, assuming that the economic situation continues to improve generally?

DI: There will be very little significant improvement in the market at least until early 1984. If recovery occurs in the economy, and the general consensus now is that it will as interest rates slowly come down, the aircraft buying sector of the market will have to adjust to the 1983 model prices, which, coupled with devaluation, are about 30 per cent more than they would have expected to pay in 1982. People will wait to see that there is significant growth or improvement in their businesses or private financial affairs before they get around to making decisions for aircraft.

At present there is a strong tendency for people who have aircraft to weigh the pros and cons of refurbishing their existing one or buying a new one. At present, they tend to spend more money on refurbishing or trying to get a good late-model fairly low-time aircraft. Most of the bargains in that area are just about gone because that is where most of the activity has been in the last few months.

Anybody who had a good 1978/79 aircraft with not too many hours has been getting top dollar for it and the smart operators who have been looking for this sort of thing have generally got most of the bargains. The distressed stock in this country is virtually sold now.

Much the same is occurring in the US. The fact that there are allegedly thousands of well used aircraft lying around the US in 1982stock is largely a myth because most of the popular models have been out of production for the best part of 18 months and with the improvement in the US economy the price of used aircraft is firming very rapidly and most of the good bargains are gone.

There is considerable doubt hanging over us in respect of the federal sales tax of 20 per cent. There seem to be different definitions of where it applies and who to, depending on which State you are talking to.

This will have to be resolved this year.

JS: Do you see any particular areas or types of aircraft and categories of operation leading the way in the recovery or developing more strongly than others?

DI: New models always tend to have an advantage in this. Anyone who produces a totally new model tends to get a bit of an early start because they have no previous history to base on what it cost last year. There are always those willing to look at a new model because it offers certain specific advantages in performance and comfort and so forth. Any manufacturer actually introducing a new model on the market may have at least an initial advantage.

As business recovers there will be a return of interest in corporate aircraft. We have had a very large number of people in recent years who have been on the verge of buying a corporate aircraft because of the specific advantages they see. But they tended to back off, because when their economic fortunes were declining and their competitiveness and profitability dropped, the first thing to be deferred was the capital purchase of an aircraft. But the concept is well-established in Australia. One of the things that has helped us has been the very major impact of the commuters and supplemental airlines.

They have got a tremendous number of people used to the idea of flying in small aircraft. They have found that they are not really the hazard that a lot of people used to believe.

JS: What about the General Aviation Association? There has been a certain amount of re-orientation and re-enlivening. What were the precise aims of these changes and to what extent have these been fulfilled?

DI: The problems were trying to really define what GAA’s job is. Essentially it is an industry organisation designed to be the link between industry and government. It should be a source of dissemination of information and supportive of the industry. It should be working not only with the federal government but with state governments and with industrial bodies. It should present a unified industry front to the public at large.

JS: You agree there has been a long-term problem with factions in the industry?

DI: The industry tends to fragment itself because GA is made up of agricultural, commuter and charter operators as well as workshops, and flying schools. They have a wide diversity of interests and they are often in conflict between themselves. This has led to some splinter organisations but we are trying to bring them back together at least so we are all working together. We have difficulties in our industry that transcend those sorts of barriers.

JS: How fundamental has been the participation of GAA in AVIAC? Are the issues being fought there central to the future of the GA industry?

DI: Since I have been national president we have only had one meeting. One was postponed due to the election and there has only been one since.

The major issue in the Sydney area is Sydney Airport. Our position is that the second runway for Sydney is still the best solution. However, we have other ongoing cases through AVIAC – the sales tax as it affects aero clubs and flying schools. We have taken up with the government the question of charter operators who operate heavy aircraft, above 12,500 pounds, such as DC-3s through to C-130s which would not normally be considered GA types, and the air navigation charges they pay. While the airlines have a totally different basis for paying ANCs on aircraft like that, the independent charter operator who may use a DC-9 is paying ANCs based on the category and weight of this aircraft. As their annual utilisation is substantially less than the airlines, it is a very big burden. Then there is the hardy-annual of cost recovery.

JS: You seem to be moving towards some type of confrontation with the government on this.

DI: We have said to the government that we are completely going down the wrong track. We have looked at the total revenues of GA and the total amount of money the government expects to recover from GA. They are totally incompatible.

If all the profits and earnings of GA collectively in good years were handed over to the government we would still have a shortfall in their cost-recovery targets. We have said we will not participate in endless discussions on the present basis. We have stated to the government through AVIAC that we would definitely support a new inquiry – not into general aviation cost recovery – but a new inquiry into cost recovery.

We have set out what we consider the terms of reference should be and have asked that the Government have the inquiry headed by people who are not associated with either the government or the industry, to try to keep it more independent and that it should take an entirely fresh approach to the question of cost recovery.

Even the government realises that the present system just will not work because there is not enough money there to do 1t. For example, the maximum we have been able to pay is about $18 million when the government’s cost recovery two years ago was $121 million.

The cost recovery program is in no way related to Department of Aviation expenditures, the DofA says to the government it will have to spend $500-$600 million or whatever it might be. When those decisions are taken, there is no thought of how cost recovery should occur.

Then, obviously initiated by the Treasury, someone comes along and says they are going to have to recover. So automatically, on GA even a penny though of benefit it may from not that have expansion received of the budget, would automatically be assumed to pick up a portion of it.

This is patently not going to work and it is useless us to spin our wheels and make ourselves perennially unpopular by trying to defend our position.

It is obvious that a totally fresh approach to the question of cost recovery has got to be taken. I feel that this view is now being accepted by the DofA and the Minister because he has said that he is endeavouring to get a fresh inquiry initiated into the question of cost recovery.

We have stressed that it should be a cost-recovery inquiry, not just general aviation cost recovery.

JS: It becomes more a question of cost apportionment rather than cost recovery.

DI: That is really what it boils down to. When we asked the Bureau of Transport Economics if it knew what the revenues earned by GA were, they admitted they had no information. When we asked how the government could decide on a cost recovery target if it did not know how much the industry earned, they said, ‘We have never been asked. ‘

JS: You have suggested in the past that a lot of airport and airways facilities provided out of this budget are not really for the benefit of GA and are not wanted or required by GA.

DI: This is true. We have worked out that the total revenue GA can expect from flying operations – admittedly based on what we expect in this present economic environment- is about $196 million. The government’s target for cost recovery two years ago was$121 million. There is no income from GA to generate this.

In the US, UK and Canada, according to industry associations and accurate sources, the level of cost recovery is always about 15 per cent of what they consider attributable costs – which is not far different from what we are doing. We have also discovered here that if we took the combined revenues of our major airlines and added the combined revenues of GA, GA adds up to about 12 per cent of all aviation revenue.

Probably the cost recovery we are paying is about right.

JS: Airlines are going increasingly to new nav systems like, GPS-Omega, which do not rely on ground navaids and they are talking about direct routing. Eventually, they may no longer need most of the current ground facilities. If the airlines can be shown to be not using these on a regular basis the government could ask GA to pay the entire cost of these or they could remove some and smaller GA aircraft could be faced with installing some of these sophisticated nav systems themselves.

DI: The top end of the sophisticated GA fleets already has this equipment. Most of the IFR traffic operating in Australia at the moment is GA. Our proliferation of aid has been based on the Fokker Friendship era when they went around all the country centres. A lot of the non-lFR GA traffic would be able to function pretty well if some of those aids were withdrawn. But most of them are pretty automatic today. Even if a substantial number were withdrawn I do not think GA would be too inconvenienced. With the standard of equipment people have in their aeroplanes and the standard of pilots we have I think if we had hardly any aids I am sure they would be able to get around most of the time. Usually, in the outlying areas, aircraft are operated by people familiar with their own area.

JS: What about relations with the new Department of Aviation? There are some suggestions that the department is trying harder to have better relations and more regular consultation with the industry. How much evidence of that have you seen and how much more would you like to see?

DI: From where I sit the evidence is very clear that they are doing as much as they can to foster good relations with the industry. Col Freeland has been very accessible and very visible. He attends quite a lot of industry functions and ensures that there are senior department people attending them. They are adopting a very good policy of putting out notices of proposals. For example, we have one which everybody is looking at now on airspace allocation which is a major change – the first change in airspace allocation since the 1950s.

JS: At the same time you have been outspoken in the past about some problems at the operational level. You mentioned pilots come into your office almost having blood pressure attacks over what has been done to them?

DI: There is still a hang-up that most people in GA feel that our air traffic control system in and around the capital city airports is unduly restricted and too much time is spent holding simply because they will not develop new techniques and there has been a reluctance on the part of the department to be more flexible in the approach to ATC procedures, the flow of traffic, the scheduling, and this leads to extraordinary delays and carrying extra fuel for holding which is not really wanted even under the most perfect conditions. That level of frustration still exists. However the airspace allocation proposal they have circulated for comment may go towards alleviating that.

In recent times there has been some improvement in the Sydney airport area. Whether this is due to the reduction in movements or whether there is a genuine attempt to streamline the position I am not completely sure.

I am sure they will address themselves to it. It has become a very thorny subject.

JS: Talking of Sydney airport, and the decision by the new Federal Government not to go ahead with the parallel runway (which is obviously a political decision for which there is no real justification), if, as they claim; the problem is the volume of movement by small commuter aircraft, why is it necessary to build a huge international standard airport with very long and deep runways? Surely a secondary airport, such as you find around most US cities, preferably on the north shore of Sydney, which currently lacks any airfield, capable of taking up to say F-27 or even smaller aircraft, with very strict noise and environment controls, would make Sydney as a whole better served by airports in general and would save many millions of dollars – particularly if it was close enough to the CBD, so that commuters using it would not be seriously disadvantaged?

DI: Sydney airport is a totally political situation. The Liberal Government, after exhaustive examination and input from all of the best-qualified people who are presumably around, decided on the second runway option after ten years of looking at it. The labor Government had made pre-election commitments to not go ahead with it and it had to be seen to be honouring that commitment. As far as I can tell all they have done so far is stop work on the new runway and select a site for a potential new airport. At present, we have a great advantage in an inner-city airport. If you took the international traffic out of Sydney you would not make much difference to the total number of movements per day because international movements are not a large proportion of the total.

At present airport planning takes little recognition of the later modern generation-wide bodies which are quieter the 767 and things like that. They complain about the proliferation of GA but the reason GA has so many movements into Sydney is that it has taken over the transportation role the major airlines are no longer prepared to do – serving the country centres.

Some of the biggest users of Sydney Airport are State Government instrumentalities themselves. The Health Commission is a substantic1I user and practically every section of the State government is using charter and commuter services on a daily basis.

Maybe there is a case for eventually establishing a new airport, but that means no guarantee that Sydney Airport itself will be closed. We may well be faced with the situation New York had when they built Kennedy airport – what they originally called Idlewild. They thought La Guardia would close but La Guardia is busier than ever. I do not believe that a city the size of Sydney can ever forego an airport as close in as we have and even if it was only used for domestic traffic it is still a priceless asset. The city would suffer in the long run if that airport was moved to a place that is politically neutral because it would only encourage international traffic to go to Brisbane and Melbourne.

It would become unpopular because of the travel distance and somebody has yet to bite the bullet as to who would pay for the enormous cost of shifting Qantas and all of the other major facilities at Sydney airport. The removal of Qantas alone could very well cost almost as much as the airport because of the size of their facility.

JS: Why do you think the public has such an adverse reaction to airports? Obviously, there is a certain amount of noise and there is a perceived safety problem although it is doubtful whether that is a significant factor. But airports are major employers and major stimulants to local economies. If you suggest putting an airport within 10 miles of people, they immediately fall off their chairs. Do you think the GA industry has not made an adequate public case for the benefits of airports for the community in general, not just the air traveller?

DI: It is a public education problem. Our industry is as guilty as anybody else because we have not been able to mount the same level of publicity as the antiairport factions.

It relates right back, I am sure, to the fact that airports in Australia are owned by a government located in Canberra. Therefore the city of Sydney has no interest in its airport. The Opera House, the Harbour Bridge, and the Harbour are part of Sydney, but airports are always something for the federal government and it is a historical thing related back to the time when the federal government assumed all responsibility for aviation. The States had little knowledge of it. It was entirely based on the two airline policy. At the time Sydney airport was developed and most of our aviation planning was done in the immediate post-war years it was entirely based on the fact that there would be a two-engineer policy that would take care of it forever.

Nobody ever envisaged that GA would come in and develop using equipment and having standards equal to those of the airlines and nobody envisaged that the fleet of GA aircraft would become such a major part of the total transport scene.

It is very difficult now to go back.

I am a great advocate of airports being owned and operated by the cities they serve.

JS: This is the case in most overseas countries.

DI: In the US the Federal Aviation Administration actually owns only two airports – Washington National and its own operational centre in Oklahoma City.

The day Sydney airport became operated by the City of Sydney with local businessmen and politicians operating it as an airports commission, it would not deteriorate one scrap from the control of the Department of Aviation, because they would still be responsible for manning the control towers and deciding the operational airworthiness standards of what went on around the airport. But the airport itself would become a major centre. It could be operated as a profit centre for the city. The commercial aspects of the airport could be developed to a great extent. For example, if there was land adjacent a trade centre it could be developed. There could be more money made from concessions allowing hotels, and it could be developed like most other airports in the world where it is owned by the city.

The Frankfurt airport in Germany is a municipal borough in its own right, like Bankstown or Rockdale, with its own aldermen and people who control it.

The Lord Mayor of Sydney recently said the council should be on a committee running Sydney airport which should be in the boundaries of the city of Sydney, so the message may slowly be getting through. We have raised this with the Minister. It is only an extension of the airfield’s local ownership plan.

JS: That appears to be temporarily stalled.

DI: We are in favour of it really.

JS: There appear to be problems with charges in some cases.

DI: This is true, but it has to come. If the federal government continues to own all the airports, there is no way they can ever be turned to local advantage.

Even at Bankstown airport there are acres and acres of land which could be used commercially for non-aviation but suitable industrial enterprises, which would reduce the government’s cost in terms of holding that land and servicing it, be a source of income and need not encroach on tarmac areas.

Airports, for example, could be an excellent industrial park. Most of the factories we have to the east of Bankstown airport, which are high class low-pollution type industries, could be located within Bankstown airport and alleviate the government of cost-recovery.

Sydney airport is a bit short in space but there is adjacent land around the airport that could be acquired and Sydney airport even today could be developed into a very attractive place and one that would be contributing to the State, and certainly contributing to the cost of its own operation.

They now have formed an airport local ownership association for the towns that have taken over airports. I think that is the beginning of an honest attempt to try to run their airports as commercial propositions. Lismore is a good example. It has attracted a lot of industry into and around the airport simply by being a bit entrepreneurial and taking a long-sighted view of it.

It is quite common in the US for the airport to be owned by the city but leased to a local operator who is an aviation man and he pays the government so much. There is a precedent here because many of the council swimming pools have been leased to swimming coaches and people like that.

JS: Most of them really money but there tends to be a reduced cost to the council.

DI: It is certainly very difficult for a small country town such as Cowra, which may not have a lot of movements per day, to be loaded with the airport. But there are things that can be done.

The biggest cost of an airport is the original capital cost; the runways, unless they have deteriorated, do not take much maintenance, and in most cases, you are looking after a mile of very good road that does not have any heavy traffic. The grass has to be mowed in some areas but I have seen a lot of airports around the world where the fences come up to a safe distance from the runway and they put sheep on the rest. Too many of our airports have miles and miles of grass with a runway here and there and the rest just wasted land which someone spends an awful lot of time mowing.

We will certainly continue to encourage the local ownership plan and if we can assist the association in developing an airport management plan we will get as much information as we can to try and make it work.

This is one of the greatest breakthroughs we can see in Australian aviation – getting the local communities involved with the airport, and that includes the city of Sydney.

JS: Flying training is a major part of GA. I have been somewhat depressed with the number of ab initio people starting although I gather there is still a fairly healthy level of more advanced training. How do you see the problems and how might they be adjusted in this area? Is flying training in real terms still cheaper than it has ever been? Is it relatively less popular here than overseas?

DI: In the last two or three years flying training has been pretty much depressed in the country centres as a function of the drought. But that has not been entirely true in the city. In our own school at Bankstown, the level of flying training has kept up pretty well and there is a very strong movement for people to go on to commercial licences and instrument ratings and so forth.

The problem facing the flying schools today is the one of re-equipment. The traditional flying training aircraft, such as the Piper Tomahawk and Cessna 152 are getting very expensive today because of the effects we discussed earlier – devaluation, and factory price increases. They have always been fairly marginal profit aircraft as far as the manufacturers are concerned. They have largely subsidised these. Some of the problems from the manufacturers’ point of view is that people want a cheap aeroplane to teach people to fly but they also want it to be equipped virtually up to the latest standards. It has to meet all the latest regulation standards, be a safe aeroplane; it has to meet all the latest FAR 23 requirements and it has to have plenty of radios and a reliable electrical system, capable of being flown by day or night because it is used for night VMC training and flights into controlled airspace. Virtually, most flying training aircraft are almost up at the limited IFR standards. This has all forced up costs.

The other problem facing flying schools is that those that adhere to the letter of the law in paying flight instructors find themselves with a very hefty wages bill, while on the other hand, it is very difficult to increase productivity.

A flight instructor is only allowed to fly so many hours per year but he is now paid today in accordance with AFAP awards which are really based on a commercial operation and even on airline standards. Most instructors today have not only their commercial licence and instructor rating but they have various check and training approvals, instrument ratings, and other things – all of which have to be paid for even though they may not necessarily be used in ab initio training.

However, if we look at the cost of flying training today, as related to average weekly earnings, it is probably still a little bit better than it has ever been. Average weekly earnings in Australia today are running about $360. We are probably looking at most flying training under $85-$90 dual. Most are cheaper although some schools are getting up to about that rate. If they are substantially cheaper they are probably using very old aeroplanes and their instructors are not full-time instructors and who if you look at the books may not necessarily be listed as instructors, who are just working for so much an hour.

This is always a vexed problem with some schools that pay the full rates where a lot of aero clubs are still using honorary instructors.

It seems to me there is going to be somewhere in the next few years some development of the more basic aircraft for the more basic training for the recreational pilot. I think most of the initiatives for this will come from Europe where there seems to be a move to try and develop flying training in comparatively simple aircraft which really are no more than ultralights. It is almost as if we are getting a second generation of light aircraft coming along for sport and recreational flying. We are seeing evidence of this in the tremendous growth of the ultralights and home-builts for the people who just want to fly for recreation. A lot of people really start learning to fly for recreation, get to like it, discover they might be rather good at it, and eventually decide they might pursue it as a career.

We now have more pilots in Australia than we have ever had in history. They have been training towards a very high standard.

JS: That is in numbers. What about as a proportion of the population?

DI: I think there would be a higher proportion of the population. I think we have had a greater penetration into the market in the last 10 years. This has come about by better training systems, and integrated training courses, which have modernised the flight training system and made it possible for people to predict more accurately exactly how they will go through their training.

JS: How do you see the total future of the GA industry?

DI: There will be a lot of changes.

There is a distinct possibility that some of the major manufacturers who have always built a wide range of aeroplanes may opt-out at least for a number of years of some of the models they have traditionally produced. They will do this for economic reasons because some of them are probably no longer able to produce in terms of the numbers they sell and the difficulties in building them.

I can see some of the major distributors, such as ourselves, concentrating more on the upper end of the market where you may not sell as many aeroplanes but you can concentrate the best efforts of your top marketing, flying and engineering people in them and specialise more in that.

Possibly we will see a new generation of distributors who are small without the large overhead structure handling the smaller and cheaper aeroplanes where they can do it without huge initial investment and where the profit margins will be very slim in the future but possibly a small one-man show can handle that.

There will be a tendency from the major manufacturers’ point of view, particularly on the US domestic market, to handle their own marketing because they will find difficulty finding too many people who have the resources to stock and properly support their aeroplanes which may cost several million dollars. To underwrite their own production and development costs they are going to have to take a greater degree of supervisory control on how these aircraft are marketed.

Irrespective of how it goes in the US, inevitably we will have to follow.

Particularly at the upper end, I think there may be quite a few changes. We may see GA aircraft marketed at two levels. The smaller and newer models which I think will come along for sport and recreational flying will be handled by a new generation of people.

This is already happening.