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2002
THE PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF REPRESENTATIVES
AIRPORTS
AMENDMENT BILL 2002
EXPLANATORY
MEMORANDUM
(Circulated by authority of the Minister for Transport
and Regional Services,
the Honourable John Anderson, MP)
AIRPORTS AMENDMENT BILL 2002
The purpose of the Bill is to amend the Airports Act 1996 (the
Act) to:
• Apply the airline ownership
provisions of the Act only to airport operator companies for core regulated
airports and airports specified in the
regulations;
• Make terms used in clause 9 of the
Schedule (which deals with disregarding certain interests for the purpose of the
ownership provisions) consistent with those used elsewhere in the ownership
provisions;
• Provide that a person may be
declared by the regulations not to be an associate of another person for the
purposes of the ownership provisions;
and
• Provide that certain matters contained in
documents specified in the regulations may be referred to as in force or
existing from time to time.
The Act imposes limitations on the ownership of Federal airports by
airlines and foreign persons, and on the cross-ownership of certain airports.
The ownership rules of the Act are set out in Part 3 of the Act and the Schedule
to the Act.
One of the objects of the Act is to limit the ownership of
airports by airlines. Sections 44 to 46 of the Act limit any airline to a 5%
“stake” in an airport operator company. A “stake” is
defined as the aggregate of the direct control interests the airline has and the
direct control interests “associates” of the airline have in the
company. The definition of “associate” is deliberately broad and
includes anyone who holds 15% or more of the airline.
In light of the
economic challenges facing the airline and airport industries in the wake of the
terrorist attacks of 11 September 2001 on the United States of America and
Ansett’s demise, the Government decided to relax particular aspects of the
regulatory arrangements at certain leased Federal airports. Regulations were
made under Clause 9(1)(c) of the Schedule to the Act to increase the scope for
investment in general aviation airports by permitting airlines or associates of
airlines to take a greater than 5% stake in an airport operator company for any
privately leased Federal general aviation airport. These airports are Essendon,
Moorabbin, Archerfield, Parafield and Jandakot.
The Regulations made were
also part of the Government’s response to the final proposal that the
Tesna consortium put to the Government in support of its bid for Ansett
Australia. Linfox, one of the joint-venture partners in the Tesna consortium,
is the joint owner of the company that leases Essendon Airport. The Government
announced on 27 November 2001 that it would exempt all of the general aviation
airports, including Essendon, from the airline ownership provisions of the
Airports Act 1996.
The policy is intended to apply provided that
Federal general aviation airports do not fundamentally change their operational
character. For example, the Government does not intend to exempt general
aviation airports which make major regular scheduled passenger transport
services the basis of their aviation-related activities. The Government has
therefore reserved the right to prescribe any Federal general aviation airport
to be subject to the airline ownership restrictions should an airport not comply
with the above operational restrictions.
The purpose of the proposed key
amendment to the Act is to clarify the Government’s reviewed policy on
airline ownership so as to provide more legal certainty to general aviation
airport lessee companies on the regulatory arrangements under which they are
required to operate, and to strengthen the Government’s commitment to
provide the Tesna consortium with every opportunity for success without
adversely affecting its competitors.
This amendment will also have the
effect of excluding Bankstown, Camden and Hoxton Park Airports from the airline
ownership provisions of the Act. However, this arrangement will be reviewed
during the privatisation process for the Sydney basin airports. The timetable
for privatisation is yet to be finalised. The amendment will also exempt
airport operator companies for Tennant Creek Airport and Mt Isa Airport which
are regular passenger transport airports from the airline ownership
restrictions, however regulations will be made to address this anomoly. The
policy was to remove the restriction from general aviation airports not regular
passenger transport airports.
Amendment to the regulation making power
under certain clauses of the Schedule to the Act.
The current
formulation of clause 9(1)(c) of the Schedule to the Act has made it necessary
to express regulations made under that clause in a convoluted way in order to
fit them within the technical requirements of the clause. This is because the
clause allows interests in shares to be disregarded when the concepts used
elsewhere in the Act are direct control interests, stakes and associates.
Therefore a number of minor technical amendments are proposed to make terms used
in clause 9(1)(c) consistent with those used elsewhere in the ownership
provisions and to add an additional subclause 5(3) to provide that a person may
be declared by the regulations not to be an associate of another person for the
purposes of the ownership provisions.
Amendment to enable reference to
documents in the regulations to be as in force or existing from time to
time.
Unless the contrary intention appears, section 49A of the
Acts Interpretation Act 1901 prevents regulations from making provision
for or in relation to any matter by applying, adopting or incorporating an
instrument that is not an Act or a regulation by reference to that instrument as
in force or existing from time to time. The instrument can only be applied,
adopted or incorporated as it was in force on or prior to the time the
regulation takes effect.
It is proposed that a technical amendment be made to the Act to express a contrary intention for the purposes of section 49A of the Acts Interpretation Act to enable the regulations to provide for the Airside Vehicle Control Handbook and the ICAO document 8168 OPS-611 to be referred to in the regulations as they are updated from time to time. This will eliminate the need to amend the relevant regulations each time one of these documents is updated.
There is no financial impact.
The only amendment contained in this Bill which may have an impact on
business is the amendment to strengthen Australia’s existing legislation
governing the airline ownership rules at leased Federal general aviation
airports.
The Airports Act 1996 (the Act) imposes limitations on the
ownership of leased Federal airports by airlines and foreign persons, and on the
cross-ownership of certain airports. The ownership and control rules are set
out in Part 3 of the Act and the Schedule to the Act.
Sections 44 to 46
of the Act limits any airline to a 5% stake in a Federal airport. The practical
effect of these provisions is that if any individual (or one of their companies
or associates) controls 15% or more of an airline, they (or their companies and
associates) are limited to a 5% stake in any Federal airport. Alternatively, if
they have a stake of more than 5% in a Federal airport, any individual (together
with their companies or associates) are limited to less than a 15% stake in an
airline.
The policy underpinning the original application of this
restriction was to ensure that major airlines are not able to wield significant
influence on airports of related ownership to influence the airport’s
future directions in ways which reduce, or have the capacity to reduce
competition in the aviation industry. This is particularly important at Sydney
Airport for example where, due to physical constraints associated with the
limited size of the site, options for future facilities development may
conceivably have different impacts on individual airline users.
Linfox is
the joint owner of the company that leases Essendon Airport, a general aviation
airport. Linfox is also involved through the Tesna consortium in a bid to
purchase Ansett Airlines. The nature of the bid was certain to create an
unacceptable airline ownership situation in relation to the airport operator
company for Essendon Airport.
However, in light of the current economic
challenges facing the airline and airport industries flowing from both
Ansett’s demise and the September 11 terrorist attacks on the United
States of America, the Government decided to relax particular aspects of the
regulatory arrangements at certain Federal airports. Given the different nature
of the airport businesses operated by general aviation (GA) Federal airports,
compared to the major Federal airports which operate regular public jet services
(eg Tullamarine), it was considered appropriate to apply a different airline
ownership policy to the GA airports. Under the new operating environment, it
was acknowledged that the airline ownership restrictions imposed an unnecessary
restriction on the operation of the Federal GA airports and also impeded the
re-establishment of Ansett via the Tesna consortium’s bid for the airline.
The Government announced on 27 November 2001 the measures it was prepared to
take to address the demise of Ansett. In this context the Government stated
that it would make immediate transitional regulations to dissapply the airline
ownership restrictions at all privately leased Federal general aviation airports
and would reinforce its new position on airline ownership through an amendment
to the Airport’s Act 1996 in the Autumn sitting of
parliament.
The Government’s intention was twofold. Firstly the
implementation of its decision removed an unnecessary restriction on the
operation of the general aviation airports and in doing so increased the scope
for investment in airport operator companies for Federal GA airports. Secondly
it would enable the Tesna bid to conclude without a breach of the airline
ownership provisions of the Act.
Paragraph 9(1)(c) of the Schedule to the
Act provides that, for the purposes of the ownership provisions, an interest
held by such persons who are prescribed, can be disregarded. This mechanism for
creating regulations was used to amend the Airports (Ownership –
Interest In Shares) Regulations 1996 to provide that an interest in a share
that resulted in an airline having a stake in an airport operator company for a
Federal GA airport would be disregarded for the airline ownership provisions of
the Act.
In amending the regulations, the Government has reserved the
right to reapply the restriction to any one of the GA airports should that
become necessary and GA airport lessee companies (ALCs) have been advised on the
Government’s reviewed policy position on airline ownership with respect to
GA operations.
The primary objective of the proposed amendment to the Airports Act
is to clarify the Government’s reviewed policy position on airline
ownership to a) provide legal certainty to ALCs on the regulatory arrangements
under which they are required to operate, and b) strengthen the
Government’s commitment to enable the Tesna consortium to conclude its bid
without a breach of the airline ownership provisions of the Act.
(i) Not amend the Act so that the current arrangements are
unchanged.
Under this option the Tesna bid for Ansett will not
technically breach the airline ownership provisions of the Act. Pursuant to new
Regulation 10AA of the Airports (Ownership – Interest in Shares)
Regulations 1996, the new airline’s stake in Essendon will be
disregarded for the airline ownership provisions of the
Act.
(i) Exclude Essendon from the scope of the Act. This would
be achieved by amending the Airports Regulations 1997 to remove reference
to Essendon Airport under Part 2. This would result in the airport lease no
longer being an airport lease for the purposes of the Act with the consequential
result that the airport would no longer be or be able to be regulated under the
Act with the exceptions of Parts 10 and 12 of the Act. The consent of the ALC
would be required under section 162 of the Act.
(ii) Amend the Act to
insert an application provision so that airline ownership limits only apply to
airport operator companies for core regulated airports and airports specified in
the regulations. The practical effect of this would permit airlines or
associates of airlines to take a greater than 5% stake in an airport operator
company for any Federal GA airport.
Option (i)
While the recent amendment under Clause 9(1)(c) of
the Schedule to the Act to the Airports (Ownership – Interest in
Shares) Regulations technically enables the Tesna consortium bid to conclude
without a breach of the airline ownership provisions of the Act, by doing
nothing further, the Government’s reviewed policy on airline ownership
restrictions at Federal GA airports risks being perceived as artificial from a
policy perspective and may not provide legal certainty to GA ALCs on the
regulatory framework under which they must operate.
The ownership and
control provisions outlined in Part 3 of the Act do not currently contain
application provisions. Thus, unlike some other parts of the Act, it is not
possible to apply Part 3 of the Act to selected airports. In other words, once
an airport is subject to an airport lease under the Act, the ALC for that
airport is automatically subject to all of the ownership restrictions. This
general situation can only be addressed by amending the Act to include an
application provision.
In the absence of a parliamentary sitting period,
the Government announced that the regulation amendment was a temporary solution
for the Tesna consortium prior to an opportunity to amend the
Act.
Without the certainty afforded by an amendment to the Act, the GA
airports may be reluctant to seek investment from consortia which include
airlines or associates of airlines. Although this may not result in a nett loss
to the ALC it may inhibit potential business and economic growth opportunities
for both ALCs of GA airports and airlines in general.
Further, this
option may result in significant costs to the Federal Government. The Sydney
basin airports are yet to be privatised. The current regulatory framework
governs the privatisation of Sydney Airport and the other Sydney basin airports.
Bidders for Sydney Airport have focussed on regulatory uncertainty as one of the
key risks for the sale. Any change to the basic regulatory framework for
ownership and control needs to be explicit so that the bidders for the Sydney
basin airports are certain of the regulatory regime. Regulatory uncertainty may
undermine the Government’s objective of obtaining maximum proceeds from
privatisation whilst achieving all its specified policy
objectives.
Option (ii)
Although not fully explored, the impact
of the airport site declaration being repealed from the regulations would have a
considerable impact on the status of the airport lease including in particular
the cost to both the Government and the ALC of arranging a surrender of the
airport lease so as to regrant a lease pursuant to the Lands Acquisitions
Act. In practice it may be that such a move would need to be accompanied by
a decision, in the public interest, to hand regulatory control in relation to
the airport to the State Government.
Although this option would reduce
the Federal Government’s regulatory costs, these costs would be
transferred to State Government. It would be expected that this would take some
time to negotiate at a cost to all parties concerned. It is likely that the
site may become a liability for the Commonwealth in that, although it owns the
land, it would be unable to regulate the majority of activities undertaken on
site.
Option (iii)
The option of an Amendment to the Act to
apply the airline ownership provisions only to airport operator companies for
core regulated airports and airports specified in the regulations is the most
practical option for achieving the Government’s objectives.
This
option benefits the GA ALCs by enabling them to seek investments through avenues
previously denied them. Greater investment options have the potential to result
in GA airports being in stronger economic positions with flow on effects (eg
higher quality of service) for GA airport users. A stronger economic position
may result in greater prospects of ongoing successful operation and increased
asset value to the Commonwealth (as lessor).
Maintaining the Airports
Act’s regulatory controls under this option ensures the continued
protection of the public interest.
There is the potential under this
option for increased regular passenger transport services at the GA airports.
Where a party has both a controlling interest in a GA airport and a passenger
airline that could potentially operate from that airport there is a risk that
the party will be able to influence airline and/or airport policies and
decisions in such a way as to disadvantage competing airlines or other
non-Federal GA airports. The risk of such anti-competitive conduct is
considered to be very low, given the current nature and scale of aviation
operations at GA airports and constraints (for example noise regulations) on
future operations. However, the Government has also written to the airport
lessee companies for Federal GA airports to clarify its position on airline
ownership of Federal GA airports and stated that while it may be prepared to
allow some regional regular passenger transport (RPT) services such as that
previously operated by Impulse Airlines using Beech 1900 aircraft out of
Essendon Airport, the commencement of RPT services that might typically be
operated by larger jet aircraft will attract the reapplication of the airline
ownership restrictions.
Under this option the Government will still
reserve the right and ability to reapply the airline ownership restrictions at
any of the GA airports should that be deemed necessary, for example if these GA
airports commenced operating services more akin to the operations of larger core
regulated airports, or if their conduct was considered
anti-competitive.
5. CONSULTATION
Following Ansett’s
demise an Ansett Task Force was established to advise the Government on the most
appropriate way to respond to the crisis. This Task Force, consisting of a
number of Departmental Secretaries, reported to senior Ministers including the
Prime Minister, the Deputy Prime Minister, the Treasurer and the Minister for
Employment and Workplace Relations. All decisions on how to respond to the
crisis were taken by this group of senior Ministers.
Below this structure
and reporting to the Ansett Task Force was an Inter-Department Committee
consisting of senior officers from the Department of Prime Minister and Cabinet,
Treasury, the Department of Finance and Administration, the Department of
Employment and Workplace Relations and the Department of Transport and Regional
Services.
On 27 November 2001 the Government announced what measures it
would take to assist competition in the aviation industry and in that context
announced that it would make transitional regulations immediately before an
amendment to the Act to exempt GA airports from the airline ownership provisions
of the Act in an attempt to provide the Tesna consortium every opportunity for
success without adversely affecting its competitors.
Upon amending the
regulations, the Minister for Transport and Regional Services wrote to the
Airport Lessee Companies for the GA airports specified in the regulations to
advise them of the new regulatory arrangements.
Although the issues have
only been in the public domain since the Government’s media announcement,
no opposition to the proposal has been identified. However, given the tight
time frame under which the department was required to respond to the decisions
of the Ansett Task Force, complete consultation was not
undertaken.
6. CONCLUSION
The preferred option is Option
(iii), namely to amend the Airports Act so as to apply the airline
ownership provisions to airport operator companies for core regulated airports
and airport specified in the regulations. This will clarify the
Government’s reviewed policy position on airline ownership to a) provide
legal certainty to ALCs on the regulatory arrangements under which they are
required to operate, and b) strengthen the Government’s commitment to
enable the Tesna consortium to conclude its bid without a breach of the airline
ownership provisions of the Act.
7. IMPLEMENTATION AND
REVIEW
Consistent with the recent amendment to the Airports
(Ownership – Interest in Shares) Regulations, the Government will
formally advise the GA ALCs of the new regulatory arrangements.
The
Department of Transport and Regional Services is responsible for the regulatory
oversight of all the leased Federal airports. As part of their arrangements for
monitoring compliance with Government regulation, the Department undertakes
annual lease review meetings with ALCs. This forum would be an appropriate
avenue to monitor the ALCs understanding of and compliance with the amended
regulatory arrangements.
In addition, the Department is undertaking a
review of the Airports Act this year. In this context, all regulatory
arrangements in place at leased Federal airports will be reviewed. ALCs and
relevant stakeholders will be consulted during this process.
Should GA
ALCs not comply with the spirit as well as the letter of the legislation there
is sufficient scope within the Act to bring any or all of the GA airports back
under the airline ownership provisions. An example in which this may be deemed
necessary would be where a GA airport seeks to take on the characteristics of a
core regulated airports (eg operating regular passenger transport jet
services).
AIRPORTS AMENDMENT BILL 2002
1. Clause 1 is a formal provision specifying the title of the proposed
Act.
2. Sections 1-3 and items 2-4 of Schedule 1 of the proposed Act will
commence on the day on which it receives the Royal Assent. Item 1 of Schedule 1
will commence on a day to be fixed by proclamation.
3. Clause 3 is a formal clause indicating that each Act specified in a
Schedule to the Bill is amended as set out in the Schedule.
Item 1 inserts an application provision into Division 4 of Part 3 of the
Act. The ownership and control provisions outlined in Part 3 do not currently
contain application provisions unlike may other parts of the Act. The insertion
of the proposed application provision will have the effect of applying the
airline ownership restrictions only to airport-operator companies for core
regulated airports (defined in the Act) and airports specified in the
regulations if there is an airport lease for the airport.
Item 2 adds words to express a contrary intention for the purposes of
section 49A of the Acts Interpretation Act so as to enable the
specified documents to be referred to in regulations as in force or existing
from time to time.
Item 3 adds an additional subclause in clause 5 of the Schedule to the
Act. This subclause provides that regulations may be made to declare that a
person may be taken not to be an associate of another person for the purposes of
the ownership provisions or specified parts of the ownership provisions.
Item 4 adds a new paragraph 9(1)(ca) to subclause 9(1) to allow
prescribed direct control interests or stakes in companies held by such persons
as are prescribed to be disregarded for the purposes of the ownership
provisions. This amendment supplements the existing paragraph 9(1)(c) which
allows prescribed interests in shares to be disregarded and aligns terms used in
clause 9 with the major concepts used under the ownership provisions (ie stakes
and direct control interests).