ALOP Airports Under Threat

The changes outlined have caused so much discontent that some councils and shires (accounting for most AAOA members) are obtaining legal opinions on what they believe could be a breach of a contractual arrangement, initially made when the government drew up the ALOP scheme in the late 1950s.

However, the Transport and Communications Department appears to have done its homework on the new strategy by introducing what it calls a “site specific landing charge” which, if extrapolated to its most lethal potential, according to AAOA members, could see them held over the barrel on taking over complete control of their airport.

But more on that later.

Addressing the AAOA conference on September 6, First Assistant Secretary with the Domestic Aviation Division of the Department, David Buckingham, coloured the new arrangements with rhetoricaligning it with a ‘challenge’ to the local communities concerned, to be masters of their own airport’s destiny.

As well, Mr Buckingham told AAOA members that because DoTC had progressively handed over control of its major airports to the FAC, it was no longer well equipped to handle the maintenance and development of other airports; saying local communities could do a better job.

Commonwealth Aerodromes

Of the remaining 30 Commonwealth aerodromes in Australia, the new arrangements propose they be handed over to full local ownership. In addition to these there are seven civil areas at defence aerodromes (such as Nowra and Williamtown for example) which will be available for transfer to local communities on a long term basis.

The first step in the transfer process will be to invite expressions of interest on full local ownership. When inviting expressions of interest the Commonwealth will identify each aerodrome’s ‘economic status’. Those deemed not viable will attract what’s called a social benefit subsidy.

Put simply, it’s a one-off Commonwealth grant to be held in perpetuity, with the interest raised on its investment being used for the ongoing development and maintenance of the facility. Those submitting interest will be invited to nominate the conditions under which they’re prepared to take over full responsibility for the aerodrome. The Commonwealth says that this will allow ‘negative tenders’ to cater for those facilities deemed non viable.

Getting onto the defence aerodromes, the Commonwealth says that their civil areas will be handed over to local operators on a long term lease arrangement. The lease is expected to be of a minimum of at least 30 years with an option to continue at the end of the term. In all other respects civil areas at defence facilities will be the same as normal Commonwealth aerodromes. In the event of there being no expressions of interest the Commonwealth has proposed it will determine if the state government is interested in responsibility. If this is not an option the facility will face either downgrading to authorised landing area status or complete closure. In a nutshell, the transfers will be based on the model of full local ownership, and these are:

• The local owner accepts full responsibility for the facility with no ongoing Commonwealth commitment;

• Existing Commonwealth investment in land, plant and equipment will be written off and the assets transferred to the local owner;

• The Commonwealth ceases collecting landing charges and the local owner establishes its own charging regime, having regard to the costs of operating the aerodrome at a standard consistent rate with local community needs;

• The Commonwealth provides an upfront, once only grant toward agreed transfer works where this is necessary to bring The aerodrome up to a good condition. The grant is not attributable to the industry;

• The local owner is required to operate the aerodrome as a licenced facility and permit open, unrestricted and non discriminatory access to all airlines, aircraft operators and the public;

• Responsibility for all visual aids, which are site specific, are transferred to the local owner;

• The Government in some cases will provide a capitalised social benefits subsidy for those aerodromes which qualify. Provision of this subsidy will be considered on a case by case basis against a set criteria.

Alop Airports

Under the new regime the Commonwealth is encouraging all local aerodrome owners who participate in the ALOP to withdraw from the plan.

The Commonwealth will no longer allow any new entries to the ALOP and will not provide any more funding for development works. The government has also ceased providing funding suppor t for aerodromes located at pastoral stations. The decision was effective from August 21, 1990. While the government’s allocation to these 36 pastoral aerodromes was only $18,000 over the 1988/89 financial year, the Commonwealth says that it can no longer justify providing public funds to what it considers is money serving only private needs.

The arrangements under which airports are to be withdrawn from the ALOP are to be the same as those agreed to in a number of recent withdrawals of aerodromes, such as those at Karratha, Cairns, Forbes, Thangool and Gladstone. The terms under which airports would withdraw from the ALOP are:

• The airport owner agrees to accept full responsibility for the facility, including full funding responsibility;

• The Commonwealth stops collecting landing charges and the local owner develops its own overall charging regime to cover operational costs consistent with a standard of service demanded by the local community;

• The Commonwealth writes off any past investment in the aerodrome;

• The Federal Government will consider funding works necessary to meet aviation industry needs by providing a once only, non attributable grant; Responsibility for all visual aids which are site specific will be transferred to the local owner;

• The Commonwealth will provide a capitalised social benefit subsidy to those airports which satisfy certain criteria.

Officers of the DoTC will be contacting aerodrome owners individually to discuss the implications of the new policy. This is expected to take some time because there are 270 airports under the ALOP throughout Australia. If the Commonwealth is unable to secure a withdrawal agreement regarding the ALOP, it will examine other options including phasing out ALOP funding to the airports concerned.

Social Benefit Study

Under the new arrangements, the Commonwealth will consider providing what it calls a Social Benefit Subsidy (SBS) for both Commonwealth and ALOP aerodromes which agree to go to full local ownership. In short, the SBS will be provided to those facilities as a one off grant to be held in perpetuity so interest raised can pay for development and maintenance.

The provision of the subsidy, however, will only be considered on those facilities which are assessed by the DoTC as not being commercially viable. Such airports would be those at which ongoing maintenance costs exceed potential revenue. At these facilities a decision on whether or not an SBS will be provided are:

• The size of the population served by the airport;

• How close that community is to other population centres which can provide social requirements such as food, medical and hospital services etc;

• The quality of road access, that is, whether roads servicing the community are impassable at certain times of the year, whether they are rain or flood affected, whether they are of a standard that allows traffic movement year round;

• The proximity of the community to a higher category aerodrome.

The DoTC says these criteria have been designed to ensure that the needs of smaller or remote communities are catered for with reasonable levels of access to services. Each of the ALOP airports which fit the SBS criteria will be given a point score assessed above all of these criteria. Depending on this ranking the facility will be eligible for a subsidy in full or in part to be the expected annual contribution the Commonwealth would make to maintenance costs. According to their ranking, non viable airports will receive either a 100%, 75%, 50% or 25% subsidy, or no SBS at all.

Although this sounds reasonably impressive, it only relates to the amount that the Commonwealth put in under the ALOP, which really represents only half the total maintenance cost to the airport, as the other is contributed by the ALOP member. However, the Commonwealth says the sum, once determined, will be capitalised to a sum which will return an annuity which is equivalent to the annual subsidy entitlement as it stood under the ALOP. This capitalised figure will be a one off payment on the

withdrawal of the airport from the ALOP. The rationale behind the SBS system is twofold:

• It provides the local owner with the certainty as to howmuch it will receive in perpetuity;

• It avoids the need for the Commonwealth and the local owner to reassess each year whether the level of subsidy should be assessed.

This, the Commonwealth says, enables local owners to make judgments about the long term viability of their airport under full local ownership.

Location-Specific Landing Charges

It’s this item that worries many local owners, simply because it’s being seen as the shotgun that can be put to their heads if they don’t opt out of the ALOP. As the name suggests, the Commonwealth will be able to introduce new AVTUR landing charges to what it says is “at a level adequate to fully recover the costs incurred by the Commonwealth in respect of it’s involvement with civil aerodromes”.

In short, local councils, who are the major beneficiaries of the ALOP, are seeing site specific charges rather dimly. They believe if they don’t opt out of the ALOP, avtur landing charges could be hiked up to such an extent that RPT aircraft will turn away from using the facility. The end result, they believe, is that with no RPT services the airport could be politically downgraded, forcing their hand.

The carrot being dangled is that if you’re a local owner, you pull out of the ALOP or take over the Commonwealth aerodrome so you don’t pay the avtur landing levy. The new avtur levy is expected to be phased in starting January 1, 1991.

Avgas Levy

One of the better aspects of the system is that the Commonwealth says it will phase out the 2. 868 cents per litre avgas levy. Just when this will occur is open ended and will depend on a number of factors, including the progress with the implementation of the aerodrome full ownership plan.

The bottom line is that the element of excise will cease altogether once aerodromes are no longer financially supported through the Department. Looking through this arrangement, up until full ownership, the avgas levy in its entirety could remain if one belligerent ALOP owner holds out.

The Commonwealth indicates that the avgas levy will be used to fund maintenance on ALOP stalwarts who dig in and refuse to opt out.

Regional Office Closures

There will be a considerable impact c, 1 the DoTC from the new arrangements. The Department predicts that as full ownership takes over there will progressively be less need for it to have any aviation staff in each region. This is with the exception of the air incident investigation function of the Bureau of Air Safety Investigation, and the Aviation Security section.

The regional offices will be progressively closed, with South Australia/Northern Territory and the Victoria/Tasmania branches shutting down in March 1991. South Australia/Northern Territory will become the responsibility of the West Australian office, however W/!\s office days are also numbered with it destined to close in 1994 and relocating to Canberra. By 1994 all regional office responsibilities are expected to be located in Canberra. The Canberra based unit will be responsible on the same level as when the ALOP regime was in place, says the Department. The staff, it says, will be able to provide technical and administrative advice to the local airport owner:

The Last Word

The Commonwealth says it believes the new local ownership strategy provides the best opportunity for local airports to be managed as an integral part of the development needs of individual regions. It says that the arrangements give greater flexibility in managing the development of aerodromes to reflect the needs of local communities and industry. It also’says that while the new arrangements will require a more· entrepreneurial approach to aerodrome management by some local owners, the Commonwealth is confident it will result in facilities that are more appropriately targeted to local community expectations.

However, with the general rumblings of disquiet over the new arrangements it appears there could be a battle looming on the government’s dismantling of the ALOP, which recipients are claiming was a contractual arrangement. The bottom line, they’re saying, is many airports will have to ultimately close down.