Reece

To see just how hypocritical this grab for gold is, then let us backtrack to the ministerial statement relating to the establishment of the CAA in 1988. “At the outset the Government recognises that certain functions to be undertaken by the CAA should not be charged to the aviation industry but should be paid for by Government. Accordingly, the Government agreed to pay the CAA for the following: the development of safety standards; the shortfall in cost recovery of the implementation of safety standards; the monitoring of compliance with safety standards; the maintenance of the capability to undertake Search and Rescue. ”

For 1988/89 the cost of providing these services was $71m, or 13% of the total CAA budget. That extra cost is now to be wholly appropriated (except the actual SAR flight time cost) from industry. The CAA has by its own definition saved industry around $120m due to increases in productivity since it took wing in July 1988 and expects an additional saving of around $30m over the next three years. However, to expect it to be able to wholly absorb the loss of such a large portion of its revenue without greatly increasing charges to industry is naive in the extreme.

The more important point though is that those long overdue savings via increased productivity through a more efficient CAA should be passed directly to the industry, which after all is the only reason that the CAA and FAC exist in the first place. That potential saving is now being sucked straight into the federal coffers of Mr Keating’s treasury.

Indeed the Federal Government must be laughing. Aviation represents a truly vital industry to the nation, employing tens of thousand of highly skilled people and providing the backbone of about the only viable industry (tourism) we have left. Unfortunately our political masters obviously see aviation as little more than a milch cow ready to be milked for all it is worth, day in and day out.

Let us look at recent history.

Back around 1984 the then Minister for Aviation, Kim Beazley, instituted the Bosch Report into Cost Recovery. It was deemed by the Government that the industry must pay its way and few disagreed. Mr Henry Bosch (who is now a CAA board member) recommended that full cost recovery be introduced over 10 years from 1985. The Government endorsed his recommendations and industry generally went along with the sensible proposals engineered by Mr Bosch.

However, barely a year had passed before the Government began to accelerate the program with the result that by 1988/89 full cost recovery was pretty well complete. It was only that the Australian economy had been experiencing a boom that enabled many GA operators to weather this unfair, illogical and hypocritical grab for gold by a Government that was becoming legendary for its subtle increases in taxation.

And this is no personal political statement. Consider for a moment the level of taxes (both direct and indirect) that you were paying per dollar earned a decade ago as against today. The difference for most people is around quarter more taxation overall! So we have the Government accelerating the timetable for Cost Recovery and going back on their own word to phase it in over a decade so that industry doesn’t go bankrupt in the process. So what’s new, after all who believes a politician anyway?

However the story worsens. For all the right reasons the Government decides to replace its much maligned aviation bureaucracy with a separate Civil Aviation Authority to look after the airways, standards, etc, whilst a Federal Airports Corporation will take over the running of the nation’s airports. An idea long overdue that is also generally successful, though again a catalyst for the Government to once more fill its pockets with our money without many people even realising.

Let’s have a look at the FAC as it ‘owns’ the majority of assets.

The Corporation’s 1989/90 annual report shows it making an operating profit of $43. 6m on revenues of $266m. That’s not a bad profit margin in any language, but what we haven’t stated yet is that that is after paying the Government $47. 2m in interest on the massive loan that the FAC was saddled with when it became operational in January 1988. Yes folks, the Government actually sold the FAC all its facilities. The runways, terminals, taxiways, hangars, everything was valued at replacement costs rather than a realistic written down value. Moreover, this investment had already been paid for over many years by the very industry that was now to refinance it all again. The 16/34 runway at Sydney for instance was not suddenly a new expense that had not previously been paid for, yet the Government forced the FAC to pay a price for acquiring it so that the Government could then play banker and reap the windfall for decades to come. After ‘selling’ the infrastructure to the FAC the Government of course still is the real owner and will undoubtedly one day privatise it all and again make a windfall profit at aviation’s expense. The FAC and CAA now have combined assets of over $2bn, most of which is via borrowing from treasury from which it profits nicely at our expense. In short, without its massive interest bill the FAC would have had an 89/90 operating profit of $90m on earnings of only $266 in what was the worst year in modern Australian aviation history. If perchance some of that not insubstantial margin could be translated to cost reduction then we would all be better off. Instead the FAC is forced by its Minister to actually institute a peak period surcharge at Sydney, not to relieve congestion but simply to gain additional revenue from an airport that last year grossed $105m for a before interest profit of just under $58m. If greed has another name then I am still looking for it!

The CAA of course is in the same boat. No matter how efficient it becomes (it looks to have made a small loss this year) its extra efficiencies will be syphoned off by an ever greedy Government. It is also worth noting that when both these authorities took over from the Department of Aviation (or whatever it was called that month) they also had to pay a wide range of additional costs such as sales taxes, payroll taxes, vehicle registrations, etc, that did not apply to Government departments.

Another fiscal gem was the redirection of revenue from the Departure Tax into consolidated revenue at the stroke of a pen by the Federal Treasurer in his May 1988 Economic Statement. Departure tax, for the record, last year earned $39m whilst this year it is expected to gross $44m. This shortfall in potential funds has also been added to the imposts of operators, as the FAC (in this case) has had to find this funding from alternative sources as previously this revenue was used to support airport costs.

And so it goes on and on. The big fear now is that with probably something in the order of $2bn to play with in cold cash from the privatisation of Qantas and Australian, the Government will take the money and run with a plethora of election year handouts. Sounds cynical and FM fetched – let’s wait and see!