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Unnecessary drag Regional airlines, as are all other sectors of the aviation industry, are reliant on monopoly CASA and Airservices provided services to get in the air. (Paul Sadler)
When users are forced to pay
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The ‘user pays’ principle that has flourished under the previous two federal governments needs some careful analysis and scrutiny. Both CASA and Airservices Australia are required to provide a dividend to government by charging industry for their services. The 2006 Productivity Commission Report noted that government charges cost airline operators more in total than the cost of doing business with private airport owners. The report also noted the monopoly nature of government aviation services and the need for ongoing monitoring and justification for government charges.
One of the fundamental difficulties with a government monopoly ‘user pays’ policy is where does the user go if the service is below par or non-existent? Recent examples of this dilemma are the highly disruptive and commercially expensive TIBA and TRA declarations forced on Airservices by some industrially motivated air traffic controllers, and long delays by CASA in approving relatively straightforward AOC changes or Chief Pilot approvals. In the latter case, it is recognised that government agencies must display due diligence in their decisions but the operator has no choice but to wait and usually lose money in the process.
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Government aviation agencies do not compete in any market but are forced by policy to recoup some of their costs. Operators cannot fly without these services and approvals so, not only must they deal with a monopoly provider, they are charged for the privilege. This leads to unnecessary resentment in an industry that needs the complex aviation matrix to work smoothly and in partnership, to provide the safest possible outcomes for the travelling public and aircrew.
Given that CASA and Airservices offer essential aviation services it may be timely to scrap the entire user pay policy and fund these major pieces of government aviation infrastructure from consolidated revenue. To continue the user pay policy for aviation is to propagate a myth that government agencies are operating in a competitive market. On occasions, government officers have been heard to brag as to how they were able to increase the dividend to their political masters. There is nothing exceptional in extracting income from customers who have no choice but to buy your product without any of the mitigating forces of a competitive market.
The upcoming Government White Paper is eagerly anticipated by the whole aviation sector. Given the government’s fiscal courage with respect to the car and commercial property industry it will be interesting to see what policy direction the government will take. IATA is predicting a global downturn of 2-3 years with the aviation industry not recovering fully until 2014. Now is the time to have well researched policy and industry incentives in place to provide a soft landing and stimulate growth.
The industry’s response to the Government’s Issues and Green Papers has been detailed and comprehensive. In short, industry has done its job and is looking forward to seeing the final stage of this country’s first aviation policy. This is an opportunity to put a stake in the ground for Australia to commit to developing a world’s best practice aviation industry. In the first instance, the removal of government charges would be an excellent way to stimulate industry growth at a relatively small cost. Given the very small margins enjoyed by regional operators such a policy would have the immediate impact of operators investigating further services to Australia’s regional and remote communities.
The next six months may be the most important in the aviation industry’s history. A bold, creative and targetted Aviation White Paper will give the industry the confidence it needs to grow.
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