The new burden of a carbon tax

Regional carriers operate their aircraft at maximum efficiency. The carbon tax is simply a tax on regional aviation because operators cannot use any less fuel. They cannot use aviation biofuels in the near future because the fuel will not exist in commercial quantities for over 20 years, and their current engines are certified only for avtur and avgas. In short, they are being taxed for a problem that they cannot solve.

By comparison, private motor vehicles emit nearly 50 per cent of the total transport emissions and yet do not have to pay the tax. Obviously there are votes among motorists, and regional aviation is political road-kill. In addition, commercial trucks over 4. 5 tonnes do not attract the tax until 2014.

Where is the recognition for the vigorous efforts of regional carriers and their crews, who every day are trying to use expensive fuel as sparingly as possible? They should be encouraged, not taxed further.

The carbon tax begins operation on July 1 2012. On the same day the en route subsidy will end and the new security charges will begin. This is on top of the recent increase in the aviation fuel levy to fund extra CASA staff. Carriers will have no choice but to pass most of these costs on to passengers.

The en route rebate scheme that returns IFR charges to operators on some routes costs the federal budget an annual pittance ($6 million) compared to the overall government infrastructure spend of $12. 5 billion, and yet it could mean the difference between a regional air service and none at all.

And the sting of the carbon tax comes on top of already announced increases in the fuel excise. Over a four year period CASA funding from fuel excise will increase from $80 million to $124 million, which means the proportion of funding from the fuel levy will increase from 61 to 74 per cent.

Due to trade agreements, international flights do not pay the fuel levy even though they consume considerable CASA resources. Airports do not use aviation fuel and thus pay no levy, but also consume a sizeable portion of CASA’s limited resources. Regional and domestic carriers must therefore bear a disproportionate and unfair financial load.

A partial solution would lie in a higher proportion of CASA’s funding being provided from consolidated revenue.

This is already the case with the other government bodies such as the ACCC, the Office of Transport Security and state rail authorities. If CASA needs more resources, the government should not always look to an increase in the fuel levy.

The regional aviation sector has reached its tolerance limit for this type of revenue raising.

As many readers will know, regional RPT carriers operate many of the thinner routes.

They are also the people who try to open up new routes and re-establish old ones. These routes are sometimes commercial gambles in that the returns are often initially very low. They are also the routes that supply vital services such as doctors, nurses and teachers to regional towns and remote areas. The regional carriers are businesses, but they are also encouraging communities to grow, plus supply reasons for people to move from congested cities.

The argument is often put by government that each increase is only small, but the cumulative effect on an industry is rarely analysed. Regional aviation is the proverbial camel with the additional straws in danger of breaking its back.

The can-do attitude of many operators tends to mask the legislated cost loads that the industry must bear, but there is a breaking point.

Between the costs imposed by the monopoly airports and those of government, it is a wonder that the regional industry survives at all. It does survive, however, because the regional carriers and their people work long and hard to keep the routes open and deliver the vital services to regional Australia.

The question remains, when will the regional industry be able to move from surviving to thriving? The industry is keenly awaiting the outcome of the Productivity Commission Airport Inquiry. It welcomes the ACCC questioning the Airservices Australia charging regime. The carbon tax, the loss of the en route subsidy and the new security charges will have a negative impact, and will again have regional carrier CEOs asking, where do they trim their operations? At the moment a thriving regional aviation industry seems a long way off.

The regional aviation sector will not quit the field, but its essential regional support role is not fully understood. A thriving regional aviation industry is one of the main arteries of growth for this country.

But under current policies, the industry is in danger of a premature cardiac arrest.

Fast approaching

The RAAA Annual Convention is fast approaching (September 7-9 at the Hyatt Coolum). There are excellent technical, exhibitor and social programs on offer, so book early and come along to the best convention on the aviation calendar. n Australian Aviation is proud to be the official supporting journal of the Regional Aviation Association of Australia. The views in this column are those of the RAAA, and not necessarily Australian Aviation’s.

The can-do attitude of many operators tends to mask the legislated cost loads that the industry must bear, but there is a breaking point.