Interview – David Jull MHR

A: We see aviation as a vital part of Australia’s total economic infrastructure. We realise that there are enormous problems, and while there have been reforms in recent years we still have a long way to go. We have got one particu- lar area of the industry that is in dire straits and that is the General Aviation sector and consequently our policies will be aimed at providing the most efficient operations we can for Australian avia- tion, but more importantly than that, the policies are aimed squarely at reducing cost as far as we can and that really spreads over all sectors of the industry. It’s not only GA but also the airlines and the entire aerospace industry. So the bottom line of the policy really is that we want to get the least expensive and safest operations we can.

Q: How will a 15% GST on everyday tourism expenditures be a benefit to domestic tourism when most of the industry is too small to be able to benefit from cost reductions which are primarily of benefit only to larger operators?

A: A major criticism of our policy by Labor priorto the election was that travel would incur a 15% GST. There will be a GST component but there are also some enormous savings in there and the abo- lition of seven existing taxes on October 1 1994 will see the infrastructure costs of aviation reduced substantially. The abolition of those taxes will be considerable and the abolition of payroll tax on Qantas alone will be worth around $42m. On the wholesale sales tax there is a saving of about $16m while there is also going to be room to move in the industrial relations system and I think you will see some fairly massive decreases in their costs.

We’ve got a couple of examples overseas that are worth examining. The one that is closest to home and the most interesting is Air New Zealand, who in the first full year of operation under their new tax/industrial relations regime had a bottom line saving of $NZ54m. Now you can probably relate a lot of those benefits to the Australian carriers so when you get all those cost impediments out of the way and add 15% GSTI don’t think you will see all that much movement in the price of airfares.

The 19c a litre reduction in petrol and the fact that higher rates of sales tax than the GST are gone also means cheaper motoring for the 80% of Australians who use their cars for holidays. Our tax cuts will also boost most people’s disposable income by between $40 and $60 a week. At the end of the day what you want to see is people in jobs and the more people you have in jobs the more people can afford to go on holidays, so I think you will see in some areas of the industry some pretty big savings.

Q: What is the logic in charging a 15% GST on Australian holiday packages sold abroad when that income is 100% equivalent export revenue and the imposition of such a tax is only going to make our overall travel product dearer than it needs to be in an intensely competitive world market?

A: Both the international and domestic airfare component of the ticket that is sold offshore will be GST free, that of course represents a major proportion of the total cost of the holiday package. The real dilemma is what do you do in terms of the ground component. For example, if you have a foreign tourist staying at the Hilton and he has got his room tax free is it really fair that you might have an Australian next door who in fact has his tax included in the tariff.

The other thing of course is that tour- ists do use our infrastructure and I think the general feeling abroad is that there should be some contribution to the provision of that infrastructure rather than have it to come out of the Australian taxpayers pocket.

Q: Aviation and Tourism will be joined under the auspices of a common department under the Coalition. Can you tell us why this will be a positive move for the relevant industries and would, for instance, bilateral negotiations, etc move from the Department of Trans- port & Communications to Trade, as has often been rumoured.

A: At this stage the final structure of the department has not been completed, but the policy guideline is that we want that very close relationship between tourism and aviation. Australian aviation now to a great extent is governed by the inflow of tourists and that’s going to become more and more so as we head towards the targeted figure of 10 million international visitors by the year 2000.

I would tend to think that we will keep bilateralnegotiations, etc within the avia- tion department as it is necessary to have a very close liaison with people like Foreign Affairs and Trade and at this stage we are looking at how best we do that on some type of regular departmen- tal arrangement, but basically we would like to keep it all under the same roof and we would be looking into opening up the system as best we can.

Q: Would the recently formed International Air Services Commission continue in its current form?

A: Well we have always backed the idea of an independent body so the answer to that is yes. Although in terms of its current form I think you might see a few changes. We have looked at the legislation to see if we can streamline some areas and whether or not there are sufficient resources available for the IASC to be able to fulfil its role as quickly and efficiently as possible.

Q: Will you be looking at immediately improving the ATC situation at Sydney by implementing the Stars system that was canned by nervous Labor politicians last December?

A: Well I thought the Stars system (refer p6 Dec 92 AA) made a lot of sense and while we have not made a firm decision on it I believe we should look seriously at any option for speeding the traffic flow at our premier airport. The cost to the airlines with the present delays in Sydney is astronomical. I’ve been quoted various figures from $30,000 on a good day to $300,000 for a bad day while Ansett and Australian talk about extra costs of $28m a year in additional fuel burn alone that’s all adding to the cost of travelling within Australia.

The other area where I have very real concerns is some of the feedback that the international tourism operators are getting about the delays coming in and out of Sydney for international passengers and that is becoming a real turn off and if Sydney is not careful you may see that a lot of the tour operators may use Brisbane as an alternate gateway. I should imagine that one of the attractions of Cairns is that you can get them straight in and that’s why you are starting to see that sort of traffic coming into Cairns as the first stop.

Q: So, if it upsets the likes of Laurie Brereton, Peter Baldwinor Gary Punch it’s not something you would lose sleep over?

A: Well no. (laughing) The reality is that their electorates in fact will probably get a lot less noise. I have really never quite worked out the logic of some of their campaigns, even on the parallel runway. It’s a fact that less people are going to be affected by aircraft noise with that parallel runway and indeed with the Stars system it was actually going to take a lot of traffic away from their electorates. I’ve never worked it out, but I’ve no doubt that they will jump up and down. We have got to do something about Sydney in a big hurry.

Q: What about the Sydney curfew?

A: It’s not coming off. It was never designed to come off. There was some confusion about it early in the election campaign with references to 24 hour operations which really applied to new developments like Badgerys Creek, but at this stage certainly we will not be withdrawing the Mascot curfew and I don’t see us even approaching that subject in the future.

Q: Your policy document states that “The Coalition’s industrial relations policy is designed to allow the aviation industry to maximise the use of its high capital investment in equipment and facilities”. What do you precisely mean by this?.

A: I think it means a number of things. It means that in some areas where awards get tricky there will be room for operators to renegotiate some of those working conditions which could give them a wider spread of hours. This not only applies to airlines, it applies to all sorts of areas. There are a number of on-airport companies that undertake a whole range of tasks and if they’ve got the freedom to come to some arrangements on the working conditions and awards and it’s okay by their workforce then I think it will give them an opportunity to spread those hours and gain greater utilization of their infrastructure. It’s a broad statement that really covers all aspects of industry within Australia though in aviation, if you can get greater utilization then there is the opportunity for cost savings across the board.

Q: To better liaise with government, the CAA and FAC, you will form an Aviation Council which will bring together every industry association under the one umbrella to avoid the serious communication and consultation problems of the past. Can you tell us a little more about how this Council will operate?

A: I think one ofthe things that has really struck me over the three or four years that I have had the shadow ministry is the incredibly diverse nature of the in-dustry, the fragmentation of the industry and dare I say it the capacity of some sections of the industry to play off other sections of the industry when there is some controversy on. Our thinking is that we would really like to establish an industry group. One that covers all sections of the industry. I think we would want to make sure it is financed prop- erly, it would have a proper secretariat, it would have the capacity to link together without some of the difficulties and the worries that are facing many of the smaller groups within the industry. I think it would be a useful tool for government because really if matters of great moment erupted in discussion you would see the group was getting everyone concerned together fighting it out and coming to a common solution and I think that is very important. This does not happen now and the industry is worse for it. There is certainly going to have to be an awful lot government commitment in there. I also would see that committee really divorced in the first instance away from the government regulatory authorities as best we can.

I must say talking to a number of the industry groups prior to the election we had some tremendous support for the concept. I hope that we would see its establishment pretty soon and use it very much as firstly, a forum where problems could be sorted out within the in-dustry itself and secondly as an liaison body for government.

Q: Qantas is now quarter owned by a foreign carrier and Ansett is a prime candidate for taking on a strategic international partner. Under a Coalition government what would be your attitude to foreign corporations buying into Australian owned airlines and will you be staying with the existing Foreign Investment Review Board (FIRB) guidelines?

A: Well the FIRB does stay and those foreign ownership guidelines also stay. We would have great difficulty internationally if there was any more than 35% of Qantas being foreign owned and while I have the policy responsibilities the ministry for privatisation will in fact be the organisation that looks after the privatisation of Qantas.

Julian Beale (the shadow minister for privatisation) and I have been working together over the last year or two on this and we feel that we should be looking at maximising Australian ownership of these organisations where we possibly can and Julian is hopeful that he will be able to get the remainder of the float of Qantas/Australian off the decks with a maximum Australian shareholding with staff participation in it and I think that it would be fair to say that we really want to see Australians controlling these as- sets and to a degree the same applies to Ansett now that it is an international carrier.

Q: So, if Air New Zealand for instance wanted to purchase a major shareholding in ATI, say Murdoch’s shareholding of 50%, would it be able to do that or wouldn’t it be able to do that?

A: Well it would. But they may have some real difficulties with it in terms of bilateral arrangements and they would have to make sure they fitted in with those international guidelines otherwise there may be some difficulty with it. But I’m sure that Ansett is fully aware of that and from what I hear of what is going on at the moment they are.

Q: Would, for instance, British Airways be able to increase their present 25% stake in Qantas via teaming with domestic institutions to buy blocs of shares when Qantas is privatised later this year?

A: We hope that we will be able to get to a stage where we have got the maximum Australian holding. However, until Julian Beale has the opportunity to get further into that whole area I suppose it is hard to give you a firm yes or no answer on it, but Julian is pretty confident he would be able to float the rest ofit to Australian interests.

Q: A controversial aspect of your aviation/tourism policy is to sell off the individual high performance capital city airports. Would this mean the end of the FAC as we know it and what would happen to the essentially un- profitable GA airports which are presently subsidised by the majors?

A: We have a lot of options there and to be perfectly honest there is going to have to be an awful lot of work done when we look towards the privatisation of the airports. My bet is it would probably take a good 18 months before we know exactly what the position is.

We’ve really got three options. We can either privatise the Federal Airports Corporation as an entity and that’s the way the British Airports Authority went and there is some valid argument for that. We can either split off each individual airport and sell it in its own right, or you may in fact have some clusters of airports that would go, so that in the case of airports that may not be profitable there may still be a little bit of cross-subsidisation going on.

An example of this might be Bankstown. What we would want to be looking at is whether or not Bankstown is a commercial proposition on its own or better combined with Kingsford Smith to have something like Sydney Airport Pty Ltd. That ideology could for instance apply right around Australia.

Airports also represent fantastic assets in terms of developing non aviation assets to offset the overall aeronautical cost burden to industry. Sydney is space constrained but Brisbane and Tullamarine, for instance, have massive areas available to develop all sorts of profitable ventures. We would not just sell of the airports to raise money for government, the real motive would be to enhance competition and so reduce the cost to industry by forcing individual airports to be more competitive in the first place. However, I think there has got to be a lot of work done by the finance community and the private sector to see whether or not they are willing to invest in some of those airports before we make the final decision as to which way we go.

Q: Wouldn’t it be better to leave the FAC as it is and privatise it as a single high yield entity, after all, its value, particularly if forgiven its paper’ government debt, would have to be considerable?

A: It is certainly one of the options we are looking at. If I can be a bit outrageous in a personal sense, and I might be proved wrong, there is probably only one thing worse in the world today than a government monopoly and that is a private monopoly and I would like to see some real competition come in. If for example we did decide to keep the FAC as it is, you could still get some competition into the system.

Look at Badgerys Creek for example, there is no reason why if we went that way that Badgerys Creek couldn’t remain a private entity and this in fact would put Badgerys Creekin direct competition with Sydney, so whichever way it goes we would want to see those competitive forces develop and at the end of the day our policy will be designed to get the most efficient and cost effective infrastructure that we possibly can.

Q: Of the FAC’s 23 airports, last year only seven made a profit, what will happen to the majority that are unprofitable and won’t this mean additional costs for GA, which relies upon these loss making secondary airports.

A: It’s quite interesting talking to GA operators on some of these airports. I mean they’ve all got ideas of how their airport should be run and where they can find some cost savings and there are actually some local airport groups who are looking at buying out some of those smaller airports because they think that they can run them profitably and they can see some potential in there for making a profit.

The prices of some of them may be very low indeed as there are airports that are never likely to be profitable and I guess that’s the balance that we’ve got to make – whether or not you get rid of them for the sake of getting rid of them or whether at the end of the day you may be obliged to keep a couple of them on as government entities if they are in the national interest. There is an awful lot of work to be done on them.

Q: Though Sydney is the FAC’s jewel in the crown’ in terms of profitability, that airport will consume over $800m in investment through the 1988-97 period. How would a private consortium raise such huge sums without the overall financial clout of the FAC?

A: Well can I just say that the poor old FAC is just about stretched for cash at the moment and I think that that is an area of concem that if we keep the present system going the government may have to come in with all sorts of guarantees and get involved in airports again which is the last thing I would like to see happen. A great deal of commercial judgement will have to be made by potential investors. I know there are a number of them around looking at them already. At the end of the day it is really going to be their decision as to whether or not they take on some of these obligations and whether its worth their while.

Q: The Coalition has promised $50m for Badgerys Creek infrastructure development with the rest coming from industry. Who is going to invest hundreds of millions of dollars in getting Badgerys to international jet standard when the requirement for such an airport won’t emerge till probably after 2010?

A: We have some concern that the 2010 figure is going to be pretty conservative. If you go back to our tourism policy, we have as our objective 10 million international visitors coming into Australia by the year 2000. Better than 50% of them will want to come through Sydney.

It would mean in today’s operations a tripling in the capacity in and out of Australia. I think that Sydney is going to be very tight towards the end of this decade even with the parallel runway so we are looking at the option of going witha privatised Badgerys Creek as soon as possible.

Can I also say that there has been some interest from overseas but there is also a great deal of interest from the Western Sydney Regional Councils who are looking together at the possibility of putting together a consortium to develop the airport. One of the things though that has never really been properly done is the development planning for Badgerys Creek and I think that will be the first thing that we are really going to have to tackle. The $50m infrastructure funding that we have pledged is to make sure that Badgerys will have the capacity to compete, not the least is access for road, rail the supply of water, electricity and fuel. There are a number of things that are going to require government investment.

Q: It is no secret that the CAA has had a torrid time these past two years. What is the Coalition’s attitude to getting the CAA back into shape and how would you achieve this?

A: Well the first thing we would want to do is a complete audit of the CAA. In principle the CAA is already there, an entity with an independent board. We believe the board should have the capacity to do that job and basically we will be telling the board to get on with the job without government obstruction.

We hope that will happen over the coming months and we will have a look at the situation once we get that audit in and we have got a full knowledge of the entire operation and what’s going to be needed.

Q: Your policy document states that a number of existing CAA services would be put out for private tender, what specifically might they be and what opportunities would be expected to flow on to industry?

A: We continually get this criticism of the costing structure and I don’t think that there is any doubt that some aspects of the CAA could go out to tender and it may be everything from airport inspections to pilot licencing to goodness knows what.

One of the more radical things, and we don’t plan to do this just yet, but I think it is worth examination, is whether or not you privatise air traffic control services and weather to see if we can get some further efficiencies and cost savings. At the end of the day there will always be a CAA and the Authority will be there as a setter of standards, as a monitoring device on the way the sys- tem operates but in a commercial sense what I would personally like to see is where industry gets the best and most cost efficient deal so that if there is any area that private enterprise can prove that they can provide a better and cheaper deal then let private enterprise have it.

Q: Would the CAA remain as a hamstrung government owned Government Business Enterprise playing at being a private enterprise corporation whilst still really being little more than a monopoly government department set up to raise ever increasing amounts of revenue for its single shareholder?

A: Well at the end of the day I would want to see a smaller CAA and it would be principally a regulatory body. As a regulatory body the government does have some obligations to make sure it is properly funded and while this audit is going on it is a bit hard to say exactly what we want to do but ultimately that is why I want to see the CAA really give industry as best we can to make sure that they have a cost infrastructure in which they can be competitive and which the industry can start to build again.

Q: Your policy document basically states that the spectre of the Safety Tax will be gone entirely if the Coalition is elected. Can you give an emphatic statement that this is so?

A: Well at this stage we are still getting this audit done. I can’t presently give you an emphatic statement one way or the other, except to say that since the publication for the original Fightback information in late ’91 things have changed. You have heard of the great necessity of imposing the Safety Tax from government, then the industry blew up with mass meetings left right and centre with plenty of media coverage and miraculously the CAA finds cost savings of more than $90m. I would really rather leave it until the audit is over but once again what we really want to do is make sure we get every cost input we can off the industry.

Last year the CAA paid out something like $76m in redundancies which was a one off cost. With the savings this current year through less staff, and other efficiencies, then we see the CAA prob- ably returning something approaching a $100m surplus for 92/93. We really do have some room to move here so even if a Safety Tax is still there in some form or other it might well be a very minor part of an operators cost structure.

Q: Presently 25c of the 27c per litre augas fuel tax goes to the CAA, a figure of $78. 3m in 1991/92. The ALP was of course progressively cutting this back and making up the operational short-fall from industry in the form of the controversial Safety Tax. Will now all monies payable to government on fuel sales (ie GST) go to consolidated rev- enue while your government would also take directly from consolidated revenue whatever monies are required to fund the CAA?

A: We have said that one of the first things we would do under the new taxation regime from October 1 1994 is to get rid of all the input taxes and one of those input taxes is in a form of a fuel excise. That excise applies to avgas, it does not apply to avtur and there will be a short-fall there. In the original we gave a commitment that ifthere was a shortfall in the operating costs of the CAA, in actual fact that would be paid by a one time allocation out of general revenue and that is still the di- rection we would wish to take.

Q: Finally, the Coalition has won power and you are now the minister for Aviation & Tourism. What is your vision of the future for aviation, from GA through to the airlines, and how does this differ from what an ALP government would deliver.

A: We want to get the heavy hand of bureaucracy off the industry as best we possibly can. We want to make sure that we don’t compromise any safety standards but we want also to make sure that we don’t have restrictions that make the industry non competitive.

What I personally want to see is an industry that is viable, is competitive and is building again. I think there are enormous opportunities for us in terms of light aircraft design and construction and we would want to make sure that we have the international standards operating there so that everybody from the people building FAR23 aircraft to some of the ultralights have no artificial restrictions placed against them.

I would also want to make sure that with the business cost savings in the overall Fightback package that people like ASTA will have a greater opportunity to get into further maintenance work. I also think that there are enormous opportunities in terms of pilot training and we would want to give the colleges every assistance we could. With opening up international aviation we are looking towards 10m international visitors by the end of the decade which will give GA and all our airlines, big and small a chance to have a go in a much bigger market that will bring down costs and give room for expansion and opportunity and at the end of the day provide more jobs.

The kindest thing we can do for aviation is to get the full economy firing again and if we can do that then some of the problems that we are presently facing may go away.