Opportunities & obstacles

A Force For Good

There is no doubt aviation, and regional aviation in particular, is a force for good.

Whether it be supplying men and women to vital resources projects or returning workers to their families, evacuating people from natural disasters, flying in urgent medical assistance, keeping regional Australia connected to the major cities, delivering freight in a very timely manner or training tomorrow’s aviation professionals, regional aviation is operating around the clock.

While the 20th century saw aviation develop into an international industry, it is this century that will see it realise its considerable potential. Australia must understand the scale of aviation opportunities and be cognisant that many other countries also see its potential to enhance their infrastructure and wealth generation.

Boeing and Airbus rarely agree but both signed up recently to the message that the world will need 800,000 new pilots and engineers in the next 20 years.  This number does not take into account the other aviation-related professions that support these pilots and engineers.  

Australia has huge natural training advantages and every effort must be made to attract local and international aviation students to our training facilities. It would an incredible mistake not to send this message to the world. It is potentially a great opportunity for a practical partnership between government and the industry.  

It needs to be remembered also that aviation training facilities are often well suited to regional areas and bring important employment opportunities for local workforces.  

The resources industry needs a wide variety of skilled labour and fly-in/fly-out operations are growing substantially.  Given the resources industry is now the main driver of our economy, regional aviation’s ability to operate into a range of remote and regional airports reinforces the fact that these operations are essential transport infrastructure.  

They must be supported and encouraged but must not be weighed down by over-regulation, mired in red tape or stymied by over-zealous security measures. 

As professionals in the aviation industry, the safety of our passengers and crews is our most important consideration.  Australia has an excellent safety record and we will continue our training and vigilance to ensure this record is strengthened.

We must also be cognisant and strategic in using the spectacular advances in navigation and landing-approach technologies. This journey is only beginning but satellite systems can now enable highly accurate routes to be flown by dint of improved air traffic management and consequent fuel savings and significant decreases in CO2 emissions. 

In future, precision approaches will be made to remote airfields using information from satellites rather than relying on expensive ground-based instrument landing systems. Legislators need to understand that these emerging technologies are essential infrastructure and must be viewed in the same light as roads and seaports. 

This is one of the few aviation fields in which Australia has an international edge and we must not let this advantage go the same way as our aviation manufacturing industry — with the greatest respect to those manufacturers that have survived in our very tough local conditions.

Local conditions will get tougher from July 1.  On this inauspicious date the carbon tax will apply to aviation fuels, the new regional airport security measures will be introduced and the en route scheme will be scrapped.  

We have made our views clear to government on these matters as all three decisions willdrive up the costs of providing high-quality regional aviation services.  

It is not good enough for the government to say that the increased costs amount to a ‘cup of coffee’ per ticket.  It is misleading.  The analogy is simply not true — the combined effects are easily in the $10-20 per sector range.  And such increases will have serious consequences for marginal routes, indeed all regional routes. 

Private vehicles and heavy trucks have been given a carbon holiday but once again aviation is the first to be taxed. This is grossly unfair to the industry and very poor policy. The one exception regarding the carbon tax is aero-medical and that is acknowledged. 

Regional RPT operations have very tight margins and often are on a knife-edge with some of the more marginal regional routes.  These are the routes that provide essential services to the smaller regional centres and enable people to avoid long and sometimes dangerous car journeys.  

Ours is a very large country with a relatively small dispersed population, which makes it a natural partner for regional aviation with its attendant safety and time efficiencies. 

We must never lose sight of these realities and must strive to encourage an industry that continues to generate regional wealth and improve the quality of life for those living and working in regional Australia.

The RAAA recognises that safety regulator CASA has an important and at times difficult job.  But the regulatory reform process has gone on too long. The latest CASA administration is making serious efforts to bring the new regulations to a final reality but there is still some way to go.  

Issues remain, with the new maintenance regulations and the operational regulations yet to be rolled out. Additionally, the new Part 42 and Part 145 maintenance approvals are set down to be completed before June 27 2013. With hundreds of maintenance organisations going through the CASA approval process it is virtually impossible for all to be completed in that timeframe.  

The RAAA will continue to work closely with CASA staff but it must be appreciated that there is a level of frustration and impatience across the industry.

The new and costly regional security arrangements at regional airports are based on the premise that an aircraft with a maximum takeoff weight of 20,000kg now poses a significant threat. Previously, only aircraft of 30,000kg or more attracted enhanced security measures. 

We do not have access to the intelligence nor the research that gave rise to the Office of Transport Security (OTS) reaching this new conclusion.  It must be taken by the industry on faith. 

What we do know is that there has not been any individual airport security threat analysis and although the “one size fits all” approach has been changed to a “seven sizes fits all” approach, it still does not accurately reflect an acceptable security versus cost outcome for many of Australia’s regional communities.  

The RAAA poses the question: if OTS advised a lowering in threat levels in coming years, would there be the will or the political courage to re-adjust the security arrangements at regional airports?  

Extra security measures impose long-term costs on the struggling regional RPT sector.  If the threat level changes so should the imposed security costs on industry.

We must also raise our sights and think globally, as Australian regional operators fly regularly to other countries in our region.  The modern jets and turboprops flown by regional operators are used in many other countries, linking Australia to international airframe, engine and avionics supplier networks.  

Aviation is a large and growing international business, a very dynamic industry — and we must remain across all the significant and emerging trends. It is also important that we do not proscribe ‘Australian only’ solutions to maintenance and operational issues that are usually best served through international harmonisation. 

Regional aviation is tracking the latest technological advances including enhanced GPS and avionics systems, bio-fuels, unmanned aerial systems, carbon-fibre airframes and engine and propeller development leading to quieter, more fuel efficient operations.  

Regional aviation industry is an active contributor to these emerging technologies and must be encouraged to do so if Australia is to remain a leading aviation country.

Michael Bridge is chairman of the RAAA and chairman and previously CEO of Darwin-based Airnorth.

The Four Challenges To Regional Aviation

There is a real decline in regional aviation such that we may well see regional air services being wiped out to all but the biggest regional centres over the next few years.

Overall regional passenger numbers may look healthy but this is due to the growth in mining activity and the emergence of low cost carriers (LCCs) serving major regional tourist centres.

The Australian government’s 2009 Aviation White Paper stated that from 1984 to 2008 the number of regional airports served by scheduled airlines fell from 278 to 138 and the number of airlines serving regional airports fell from 53 to 27. This trend is continuing.

For example, in NSW over the past four years the number of regional passengers on the 10 largest routes — those with over 50,000 passengers a year — rose by 7.8 per cent. In contrast, passenger figures on the remaining routes, which numbered 21 in 2008 deceasing to 16 in 2011, fell by 17 per cent, according to Transport for NSW figures.

Since 2000, 21 regional centres in NSW have lost scheduled air services, a fall from 47 to 26, data from the Bureau of Infrastructure, Transport and Regional Economics shows. The pattern is similar in other states. 

NSW now has only five airlines serving regional NSW — Virgin Australia, Jetstar, QantasLink, Rex and the newly merged Brindabella/Aeropelican. The traditional regional carriers that served the smaller centres have all but disappeared. 

We may one day see only QantasLink operating in country NSW. Good for Qantas but for the smaller regional communities that cannot justify a Q400 it is a disaster. 

 There are four challenges facing regional aviation, some short-term, some long-term — the effects of government policy, access to major airports, demands of new technologies and the lack of new aircraft

Effects Of Government Policy

Government policy is loading extra cost onto a regional industry already struggling for survival. On July 1 three different policy changes will cause substantial cost increases to the industry – the carbon tax, the winding up of the en route scheme and new security requirements for regional airports.

Carbon tax:  The annual cost to RAAA members of the carbon tax, being imposed through an increase in the levy on aviation fuels is estimated at over $20 million a year but it will bring no efficiency gains or reduction in emissions.

Private motor vehicles, our competition on shorter routes, are exempt. Trucks, meanwhile, are exempt until 2014. But there was no exemption for regional air services. Why not?  

En route scheme: The annual cost of just $6 million compares to an overall infrastructure budget of $12.5 billion in FY11 and the cost of Remote Area schemes of almost $20 million.

The need for a replacement scheme was recognised and one was promised in the White Paper by July 1 2010. A new scheme is needed — or at least a delay in the cessation of the current scheme until a new scheme is introduced. 

Security at regional airports: this is intended to require screening of larger regional aircraft but smaller operators are forced out of shared ports when charges also are applied to them.

Screening costs typically average around $1 million a year per airport. So on the smaller routes of 20,000 to 50,000 passengers a year this would add between $20 to $50 to the cost of a ticket. 

If this trend was to continue and screening applied to smaller aircraft it would be a fatal blow to smaller air services.

CASA fuel levy: Last budget saw the fuel excise funding for CASA increasing from $80 million to $124 million over four years, a $44 million increase. 

The proportion of CASA funding from the fuel levy is to increase from 61 per cent to 74 per cent in this period. This means the burden for CASA funding is falling increasingly on users but in an inequitable manner.  

International flights, including those of Qantas and Virgin Australia, Airservices Australia and the capital city airports do not pay the fuel excise even though they consume considerable CASA resources.

The cost to RAAA members of the fuel levy is over $12 million a year. The RAAA would like to see CASA funding provided out of consolidated revenue and not by industry, as with other regulators such as the Office of Transport Security, state rail authorities and the ACCC. 

All these initiatives — the fuel levy, carbon tax, increased security measures and the withdrawal of the en route scheme — taken together add considerable cost to the most vulnerable section of the regional airline industry and will accelerate the decline in regional services to smaller centres. 

For example, the cost to Rex alone of these three measures will be over $6 million a year. Based on the difference in revenue, this would be equivalent to removing about $300 million from Qantas’s bottom line.    

Access To Major Airports

The regional centres have sent a very clear message that they want to retain the same access to capital city airports as people living in the capital cities. They are not second class citizens. 

At the moment this problem is mainly confined to Sydney but may become an issue in other cities as domestic aviation continues to expand. Canberra Airport, for example, has instituted an aggressive pricing structure that has seen all flying schools and some charter operators forced out of the airport.    

At Sydney Airport, access is protected by legislation and the RAAA acknowledges and appreciates government support in this area with last year’s issuing of Declaration 92 under the Trade Practices Act, which provides some protection for regional operators up to 2013.  

However, there is still the potential for airports to drive out smaller operators by increasing non-regulated fees and charges. The Joint Study on Aviation Capacity in the Sydney region, although recommending the retention of existing regional slots, recently explored the idea of phasing out smaller regional aircraft from those slots and of providing turboprop capacity at Bankstown. 

The money to be made by removing regionals from Sydney and the pressure to accommodate more passengers at Sydney means this argument will always arise. 

The light-handed regulatory regime has the potential to be abused and the only way to ensure continued regional access by smaller aircraft is for the ACCC to monitor charge increases at Sydney Airport by having them declared under Part IIIA of the Competition and Consumers Act. 

Demands Of New Technology

Over the past decade we have seen the introduction into the larger regional airlines of GPS instrument approaches, terrain avoidance warning systems (TAWS) and traffic collision avoidance systems (TCAS). These have provided a huge increase in safety but also haverequired a significant investment.  

With no airline aircraft of 30 seats or fewer being built any more low-capacity airlines have had to upgrade older generation aircraft, sometimes at considerable cost. 

For instance, the cost of fitting a dual GPS system into a Saab 340 is about $140,000 per aircraft. TAWS fitment costs us $65,000 and TCAS $245,000. For the Rex Saab fleet this is a total investment of about $23 million. 

Technology continues to evolve and in the future regional aviation will be faced with demands for more expensive technology to be mandated into older aircraft, such as automatic dependent surveillance-broadcast. 

The benefits of this technology must be balanced against the cost. What is mandated for the crowded skies of North America or Europe does not necessarily need to be mandated in Australia. 

On a positive note, the government’s consultative approach through  the Australian Strategic Air Traffic Management Group is to be commended for bringing a rational approach to this debate. Long may that continue. 

Lack Of New Aircraft

Old aircraft are not a new problem. Regional operators have long made do with second-hand aircraft. But what is now changing in our environment is that there is no choice in the matter. 

Back in the 90s and early this century regional turboprop airliners were still coming off production lines and ensuring a future supply for regional fleets. However, between 1999 and 2002 all current 30-seat and 19-seat airline aircraft went out of production. 

Before that, in the 1980s the piston-engined aircraft that had been the previous mainstay of many regional airlines also went out of production. 

Some existing regional airliners have a life of up to 20 years but unless a new type is builtin years to come this too will be a major challenge for the regional aviation industry. 

Jim Davis is an RAAA director, former CEO of Regional Express and remains on the airline’s board.