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The Budget also allowed a further $350m to enable an additional 50 hectares of land to be resumed to ensure that the presently planned 2900m main runway can ultimately be extended to 4000m and a second runway of 2500m can be provided at a later date. This takes the total Federal funding commitment to Badgerys to $762m. The Federal Government has also pledged $260m to improve transport infrastructure to Badgerys via a rail link between Glenfield in Sydney’s southwest and the new airport and an extension of the M5 tollway from Leppington to Badgerys and from Beverley Hills to KSA. Both will link the two airports as well as providing reasonable access to the Sydney CBD.

However, these links in the past have been costed at around $1bn and the NSW State Government is in no mood to fund the remainder, always stating that this is primarily a Federal responsibility. To make matters worse, NSW Premier Bob Carr made it an election pledge that he would drop the M5 toll if elected at an expected cost in compensation to the operator of around $60m per year. This additional charge upon the State’s already stressed road budget would make it unlikely that the State Government would be eager to pick up a three-quarter of a billion dollar tab over a fast-tracked three or four years just to improve ground transport links with Badgerys Creek airport.

The successful tenderer will be obliged to complete Badgerys as a fully operational airport capable of processing one million passengers per annum by 1999 with a single 2900m runway and a 10,000 sq metre terminal. This would equate roughly to something between Hobart or Darwin and Canberra in size.

Meanwhile the sale of the two Sydney airports will take place next financial year (probably after the next election) along with Melbourne, Brisbane and Perth. Tullamarine is still being sold separately to neighbouring Essendon, which is ominous for the future of the latter whilst it is worth noting that Perth is presently under the cloud of a Mabo claim, something that is bound to cool the ardour of potential investors.

The Government has also moved to ensure competition in the bidding process by making investors bid simultaneously for all the airports on offer rather than all interest being reserved for the three most profitable airports of KSA, Tullamarine and Brisbane. However, the successful bidder for Sydney will then be excluded from any involvement with Brisbane or Melbourne. It is planned to sell off the second tranche of airports, comprising Hobart/Launceston, Townsville, Coolangatta, Darwin and Alice Springs in 1997/98 with the remaining airfields the following year.

Fuel Levy Increased

Announced in the May 9 Budget was an increase of 0.9c per litre of aviation fuel to help pay for the establishment and operation of the new Civil Aviation Safety Agency.

This follows a similar increase in the last budget which was expected to cost industry $18m this financial year. It is expected that the latest rise will raise a similar figure for 1995/96 as the Government is budgeting for $17.3m additional funding for providing safety services via the new CASA, which is set to become operational from July 1 this year along with Airservices Australia which will assume responsibility for the revenue generating units of the present CAA.

Government funding to ensure adequate funds for the CASA will also include a contribution of $34.6m, an increase of $11.6m on 1994/95. There will also be a 6% increase in CASA staff to 671 (now basically the Directorate of Air Safety Regulation within CAA) whilst an additional $1.06m was being allocated to the Bureau of Air Safety Investigation to enable a 13% increase in personnel. It is expected that the operation of CASA would require a budget of at least $70m for its first operational year.

Defence Spending Falls To New Low

Defence’s budget allocation for 1995/96 has fallen slightly to just 2% of GDP, its lowest level since the end of WW2, although in line with Government intentions announced in the recent Defence White Paper.

Funding in real terms (taking inflation into account) has been cut by 0.5% or $48m to $9.99bn, representing 8.1% of Federal Government spending (1994/95’s figure was $9.64bn).

Approved aviation spending in the budget includes the lead-in fighter/Macchi replacement programme, new Navy helicopters for the Anzac frigates, continued upgrades for the F/A-18 Hornet force, electronic counter measures equipment for the F-111s and a replacement for the Jindivik target drone (the oldest jet aircraft in the world currently in production).

Once again the Navy is allocated the lion’s share of the $2.2bn to be spent on major equipment over the next 12 months, including the Collins submarines ($266m), Anzac frigates ($421m) and mine sweepers ($153m), while the Army gets $125m for its Bushranger new light armoured vehicles.

Defence manning levels will rise by 1155 in 1995/96 including 242 permanent personnel, 783 reservists and full time ready reservists, and 117 civilian employees.

While the funding level is in line with expectations and the recent White Paper’s projections, the falling defence budget over the last few years has raised concern among senior defence personnel that the ADF may not be able to fund key capital equipment programmes in the future and that readiness levels will begin to fall.

A full update on the defence budget’s aviation components will appear in next issue’s Defence Update column.

Qantas Foreign Ownership Ceiling Raised

The Federal Government has decided to raise the limits on foreign ownership in Qantas to 49% in a bid to further boost proceeds from the forthcoming float.

The move should allow the Government to realise its projected $2bn sale price for Qantas when it is floated in July. The decision follows lobbying from the float’s joint lead managers Potter Warburg and McIntosh that the previous limit of 35% was too low, and that they could easily sell the remaining 10% previously available to foreign investors. British Airways already owns 25%, acquired in late 1993 for $665m.

Local institutions meanwhile have shown some reluctance to invest in airlines given the shaky nature of aviation. The Government will still limit to 25% the amount of shares a single foreign investor can own.

Very few countries in the world allow such a high level of foreign ownership in their international carrier, but the decision does provide a benchmark for Air New Zealand’s mooted acquisition of a News’ 50% shareholding in Ansett.

KSA Noise Insulation Costs Rise

Airlines will face an average surcharge of $3.40 per passenger for flights operating into Sydney airport from July 1 to pay for the Government’s noise insulation programme – the cost of which has blown out by nearly $80m.

The fully indexed levy to fund the insulation programme could add as much as $1360 to the cost of a 747 landing at Sydney and $680 for a 767. The airlines have expressed a reluctance to pass on the surcharge to passengers as a ticket tax, but may yet be forced to.

The three year long noise insulation programme involves purchasing the 133 worst affected properties, insulating 4200 houses, flats and units, plus affected schools, hospitals and childcare centres.

The $80m blowout to $260m resulted from higher than expected costs and the inclusion of additional homes for insulation. In the longer term the Government also faces the possibility of a class action suit from a coalition of 12 noise affected councils, refer separate Stop Press story.