Improving air access

The AAA believes that the time has come to reform the current approach to negotiating international air services agreements and realise the major boost for Australian tourism that would result. In considering reform, it’s important to recognise that the international aviation market has changed dramatically over the last 20 years. Australia has grown from 7. 7 million inbound seats in 1993 to 21 million in 2013, with an average annual growth rate of 5. 1 per cent. Aviation has also seen the emergence of lowcostcarriers, changing traveller socio-demographics, as well as the rise of technology to stimulate travel availability and accessibility.

With such a dynamic and evolving industry it is important that we take appropriate action to maintain pace with market forces.

In order to demonstrate the benefits that could be derived from reform, the AAA commissioned Deloitte Access Economics to deliver a report that describes the economic impact of liberalising air services agreements. On August 12, the AAA officially released the report ‘Improving Air Access – Liberalising air services agreements’.

The report found that by removing constraints on air services agreements we can achieve some real benefits for tourism and the Australian economy. By 2017‑18 inbound tourism could be increased by around 1. 1 million passengers. This increase in visitors and tourism expenditure could result in an additional $642 million injected into the economy every year. Increased aviation and tourism activity could also result in a net boost of $2. 8 billion to the economy by 2017-18. This boost in economic activity could also lead to the creation of an additional 3,600 new jobs.

It is important to understand that the benefits of liberalising air services agreements also extend beyond those which are modelled in this report. As the economy

There are also a number of markets where capacity limits under current arrangements are acting as a barrier.

strengthens and household spending power is increased, opportunities to grow tourism are improved and the positive factors of social connectedness and global awareness are more easily realised.

At a time when we are heralding the development of major free trade agreements with our key economic partners, the restrictiveness of some of our bilateral air services agreements seems quite inconsistent.

While we recognise that Australia has a handful of more open agreements, there are also a number of markets where capacity limits under current arrangements are acting as a barrier for some of our most important and growing visitor markets. The Productivity Commission’s report on Australia’s international tourism industry highlights the fact that markets such as Hong Kong, Malaysia, Qatar and Fiji are already capacity-constrained and are limiting our ability to grow Australian international tourism. It also notes that the greatest scope to achieve further benefits for tourism is likely to come from further liberalisation within the bilateral agreements system.

Bilateral agreements by their very nature are a two-way street, and the AAA recognises the importance of achieving good outcomes for Australian airlines in international markets. The AAA also recognises that negotiating codesharing arrangements and air freight capacity is essential for the viability, strength and competitive ability of airlines.

However, the top priority in the negotiation of air services agreements should be to promote long-term growth in air transport to and from Australia. This is an approach that has been adopted internationally and has resulted in substantial economic gains for countries such as NewZealand, the United Arab Emirates and Singapore.

Given the national economic and social impacts of air services agreements, the AAA believes that the Australian government should consider a broader whole-of-government approach to the negotiation of agreements.

There needs to be greater involvement by airport operators in the negotiation process, given their commercial arrangements with airlines, detailed market insights, and understanding of industry requirements and trends.

In bringing about reform to the current arrangements for negotiating air services agreements, the AAA believes there are some key steps that need to be taken. As a priority, we must increase capacity in key growth markets, for both domestic and foreign airlines, particularly where current capacity constraints are limiting growth. We must also ensure that a ‘national economic benefit test’ is applied to air services agreements, as well as enable broader representation of business and industry in consultations on the negotiations. There also needs to be reform to modernise the international air services agreement negotiating system through ICAO.

The AAA acknowledges that the government has made progress in growing international aviation and it is important that this continues. By pursuing a more liberalised approach to air services agreements we maximise the potential for growth in Australia’s tourism sector and drive our national economy forward.