Bills Digest 98 1995-96 Airports Bill 1996


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WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 14 June 1996

CONTENTS

Passage History

Date Introduced: 23 May 1996
House: House of Representatives
Portfolio: Transport and Regional Development
Commencement: Royal Assent

Purpose

To provide a regime for the leasing of major Commonwealth airports.

Background

Federal airports are currently operated by the Federal Airports Corporation (FAC) which owns 22 primary, regional and general aviation airports. The FAC commenced operations in 1988 and in world-wide studies and studies commissioned by the FAC has been shown to be an efficient operator of airports. According to the FAC's 1994 Annual Report, a Travers Morgan study of the 40 major international airports showed that Sydney airports landing and associated charges were fourth lowest of the airports studied. Additionally, an FAC commissioned study by a UK Professor showed that ' compared to UK and European airports, the FAC's productivity is significantly higher while unit operating costs are proportionally lower.'(1) In terms of passengers per staff member, there was a 14% productivity increase in 1995, which followed a 15 % increase in 1994.(2)

The FAC is a fully owned government business enterprise that operates according to normal commercial practices and pays company tax and dividends to the owner. Total Commonwealth equity in FAC was $707.7 million as at 30 June 1995.(3) In 1994-95, $19 million in dividends were payable by the FAC.(4)

While the FAC is a profitable body, the majority of the airports it operates are, according to the FAC, loss making enterprises that receive cross subsidies from the profits made by the major airports. During 1994-95, in relation to the 19 major airports managed by the FAC, Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Launceston, Coolangatta, Canberra and Essendon airports made a profit, with profits being dominated by Sydney ($68.7 million), Melbourne ($52.3 million) and Brisbane ($43.5 million) airports. major loss making airports during this period were Darwin ($1.7 million), Townsville ($1.7 million) and Essendon ($1.5 million).(5) However, it has been reported that a private study by BZW found that the level of profitability largely depended on the accounting methods used, that only four FAC managed airports had negative cash flow and the profitability status of an airport largely depended on the debt serviced by the airport.(6) (Transitional) Bill 1996 debt can be removed before an airport is leased.)

The possible sale of Federal airports was announced in the 1994-95 Budget. The proposal was based on the premise that increased competition in the management of airports would lead to efficiency gains. The proposal met considerable opposition within the then government. Following a study of the proposed sale, the government's position changed to support long term leases of major airports, with 99 year leases being suggested as the most likely option. The policy to offer maximum 50 years leases with the possible option of 49 year renewal was agreed at the ALP National Conference held in September 1994. The Conference also agreed on restrictions on foreign and cross ownership of the airports. In the 1995-96 Budget it was announced that the airports would be leased in two stages, with Sydney (including Sydney West), Melbourne, Brisbane and Perth airports being leased in the first stage which was expected to be completed in 1996-97. The remaining airports were planned to be leased in 1997-98.

The measures were contained in the Airports Bill 1995 which was introduced in the House of Representatives on 27 September 1995 and lapsed on the dissolution of Parliament for the 1996 General Election.

The Coalition's Aviation Policy released before the 1996 General Election provided:

  • for the leasing of the 22 Federal airports controlled by the FAC;
  • that Adelaide airport would be leased in the first stage; and
  • that Sydney and Sydney West airports would not be leased until there was a satisfactory solution to the airport noise problem in Sydney and that before they were leased two conditions must be met: the reopening of the east-west runway (which has occurred) and the completion of a genuine environmental impact statement for Sydney West.

Main Provisions

The objects of the bill are dealt with in clause 3 and include:

  • to establish a system for the regulation of airports that has due regard to the interests of airport users and the general community;
  • to promote the efficient and economic development and operation of airports;
  • to ensure majority Australian ownership and control of airports; and
  • to limit the ownership and control of airports by airlines.

'Core regulated airport' refers to the airports listed in clause 7 of the Bill, which include all major airports, including Coolangatta, Launceston and Townsville airports. The list also includes Sydney West Airport and other Commonwealth airports specified in the regulations.

Leases

The Commonwealth will be given power to grant an airport lease if the conditions contained in sub-clause 14(5) are complied with. The conditions are of great importance as sub-clause 14(4) provides that if a lease breaches the clause, including the conditions, it will be of no effect. The conditions are:

  • there is to be single lessee which is to be a company over which the Commonwealth has Constitutional power;
  • leases are to be for a maximum of 50 years and may contain an option for renewal for a maximum of 49 years;
  • except for joint use airports (ie. those used for both civil and military purposes Canberra, Darwin and Townsville airports) and Sydney West Airport, the lease provides that the area is to be used as an airport;
  • for a joint use airport, the lease provides for the area leased to be used for prescribed purposes;
  • for Sydney West Airport, the lease provides that a condition of the lease is to develop the site as an airport or use the area as an airport; and
  • the lease provides for access to the airport for interstate and/or international traffic.

A company is to only hold an interest in one airport lease and any transfer or grant of lease in breach of this requirement will have no effect (clause 16). (However, with no restrictions on cross-ownership a company should be able to establish subsidiaries to operate various airports.)

Leases for Sydney (Kingsford-Smith) and Sydney West Airports are to be held by subsidiaries of the same company. If the lease for Sydney West is granted to a Commonwealth owned company, as provided for in the Airports (Transitional) Bill 1996, the Commonwealth is to ensure that if it disposes of the company the disposal is to be to a company that is a subsidiary of the same company as the holder of the Kingsford-Smith Airport lease (clause 18). Sub-clause 18(6) provides that a lease for Kingsford-Smith or Sydney West Airport is to terminate if an 'unacceptable leasing situation' exists. This will be where the lease holders for those airports are not subsidiaries of the same company. (The situation where the Sydney West Airport lease is held by a Commonwealth owned company is not addressed in this provision.)

There is to be only one lease in respect of an airport at any time, and any lease that breaches this requirement will be of no effect (clause 19).

A lease is not to be granted if it would breach foreign or airline ownership rules (see below) and a lease granted in breach of this condition will be of no effect (clause 21).

Leases are not to be transferred, otherwise than as enforcement of a security, without the written approval of the Minister and any transfer in breach of this will have no effect (clause 24). Such approval is not to be granted if the ownership restrictions would be breached as a result of the transfer (clause 25). Additionally, a transfer is not to separate the legal and beneficial interests in a lease (clause 27) and if a lease is acquired as a result of the enforcement of a security it is to be transferred to a qualifying company within 90 days of the acquisition (clause 29).

Lessee companies are to use the leased premises as an airport, or for joint use airports for prescribed purposes in connection with an airport, or for:

  • the development of an airport; or
  • activities incidental to the operation or development of the airport (regulations may be made to prescribe the activities that are also to be considered incidental to the operation/development of the airport) (clauses 31 and 32).

A lessee is not to enter into an agreement for another to manage an airport unless the contract is approved by the Minister (clause 33) and regulations may be made to prohibit the sub-leasing of an airport (clause 34).

Restrictions on Ownership and Control

Foreign ownership and control

Foreign ownership of an airport lease will be restricted to a maximum of 49% (clause 40). It will be an offence for a person or persons to acquire shares in a company if they knew, or were reckless to the effect of the acquisition, that it would result in foreign ownership exceeding this amount (clause 41). An airport operator is to take reasonable steps to assure that the 49% limit is not exceeded (clause 42). If the foreign ownership limit is exceeded, the Minister may apply to the Federal Court for an order to remedy the situation, including orders that shares be disposed of, that payments relating to shares held be deferred or prohibited, or that rights in relation to shares not be exercised (clause 43).

Airline ownership and control

An airline and its associates will be restricted to a maximum ownership of 5% of a company that holds an airport lease (clause 44). Clauses 45, 46 and 47 contain similar provisions as clauses 41, 42 and 43 (see above).

General

The head office of an airport operator company must be in Australia (clause 48), and the company is to ensure that the majority of its directors are Australian citizens or foreign citizens who are ordinarily resident in Australia (clause 49). If either of these provisions is breached, the Minister may apply for an injunction to enforce the requirement.

State and territory laws are to apply to the extent that they are capable of operating concurrently with the above provisions (clause 51).

Anti-avoidance

If one or more person enters into a scheme and it would be concluded that the person/s entered into the scheme with the sole or dominant purpose of avoiding the leasing or ownership and control provisions and as a result of the scheme they have acquired an airport lease, sub-lease or a licence relating to an airport lease, the Minister may direct the person/s to dispose of the asset acquired. If such a scheme is entered into and the result is the acquisition of an increased stake in an airport operator company, the Minister may direct that that interest be disposed of (clause 55). Finally, if such a scheme is entered into and results in a person/s entering into an agreement to manage the development or operation of an airport and the agreement is of a kind that will breach requirements of the lease, the Minister may give notice to the parties to the agreement to terminate it (clause 56).

Land use

The requirement dealing with land use, planning and building controls will apply to core regulated airports and other airports specified in the regulations where there is a lease in effect for the airport (clause 58).

Airport master plans

Draft and final airport master plans (a final plan will be one approved by the Minister) are to deal with matters relating to the development and operation of an airport. Plans are to deal with the matters specified in clause 61, which include:

  • matters prescribed by regulation;
  • the development objectives of the lessee;
  • the lessee's assessment of the future needs of the airport; and
  • forecast noise level exposure due to the operation of the airport.

In relation to joint use airports, the requirements are substantially the same but apply only to the area of the airport that has been leased to the airport operator.

Plans will continue in force when a lease is transferred (clause 64) and airport lessee's will be given 12 months, or such longer period as the Minister allows, from the granting or acquisition of a lease to prepare a draft plan (clause 65).

Plans will have effect for 5 years or until a new plan is prepared (clause 67), although an airport operator will be required to submit a new draft plan to the Minister before the expiration of the current plan (clause 66).

During the operation of a plan, the Minister may request the operator to prepare a new draft plan that may replace the plan in operation (clause 68).

Consultation: Before a draft plan is submitted to the Minister, the airport operator will be required to advertise that a plan has been prepared and allow 90 days for public comment on the plan. If public comment is made on the plan, the company is to certify to the Minister that it has considered the comments in preparing the draft plan submitted to the Minister. In addition, regulations may specify information regarding the public comments that is to be provided with the draft plan (clause 69). If an airport operator has had consultations with a State or Territory government, a State or Territory Authority, a local government body, an airline or other airport user, or any other person prior to the request for public comment under clause 69, the draft plan submitted to the Minister is to include a list of the people or organisations consulted and a summary of their views (clause 70).

Where a replacement plan is prepared under clause 68, the Minister may exempt the plan from the consultation requirements of clauses 69 and 70 (clause 71).

In deciding whether to approve a submitted draft plan, the Minister is to have regard to:

  • whether the plan, if implemented, would meet the requirements of civil aviation users of the airport;
  • the effect on land use in the airport and surrounding areas;
  • the consultations that occurred in preparing the plan;
  • the views of the Civil Aviation Safety Authority and Air Services Australia; and
  • other matters the Minister considers relevant.

If the Minister refuses to approve a plan, the Minister may require the airport operator to prepare a new draft plan within 180 days or such longer period as the Minister allows (clause 72).

Where a plan has been approved and becomes a final master plan, and the lease requests a variation of a 'minor nature' (the term minor nature is not defined) the Minister may approve the variation, or, if the variation is not approved, the Minister is to notify the lessee of the reasons for the refusal (clause 75).

Clause 78 allows FAC documents dealing with an airport to be included in the draft or final master plan for the airport. The FAC documents may be incorporated with or without modification.

Major Development Plans

Division 4 of Part 5 of the Bill deals with plans that must be prepared when it is proposed to:

  • construct or extend a runway;
  • construct a passenger terminal that exceeds 500 square metres or extend a passenger terminal by more than 10%;
  • construct a non-passenger building, taxiway or access route that will cost more than $10 million; or
  • proceed with a development of a kind specified in the regulations (clause 80).

Such developments are not to proceed unless they are in accordance with an approved major development plan (clause 81).

Major development plans are to deal with:

  • the objectives of the development;
  • the extent to which the needs of users of the airport will be met;
  • whether the development is consistent with the final master plan for the airport, if such a plan is in force;
  • if the development could affect noise levels, the effect on noise exposure levels;
  • the lessee's assessment of the environmental impact of the development; and
  • other matters as specified in the regulations (clause 82).

Public submissions, consultation and approval procedures are substantially in accordance with those regarding master plans (clauses 83 to 87).

Building control

'Building activities', which are to be controlled, is given a wide definition in clause 89 and includes work involving the construction and demolition of structures, earth works, engineering works, electrical works and hydraulic works.

A holder of an airport lease is not to conduct, or allow to be conducted, building activities unless they are carried out in accordance with approval granted under the regulations or the activity has been declared to be exempt by the regulations and is consistent with a final master plan or major development plan if such a plan is in force (clause 90).

Regulations relating to building activities may deal with:

  • the granting of approval for building activities;
  • conditions relating to an approval;
  • the variation or removal of approval;
  • fees in respect of approvals; and
  • the transfer of approvals to new lease holders (clause 91).

Approval is only to be given if consistent with any final master plan and major development plan in force (clause 92).

Where work is carried out without approval or a condition of approval is breached, the Minister may order that remedial work, including demolition, be carried out. This will not apply where the work is exempt under the regulations and, if there is a final master plan or major development plan in force, the work is consistent with the relevant plan (clause 94).

Clauses 95 to 100 deal with the requirement for a certificate of fitness to be issued before a building or other work can be occupied or used. Regulations may be made to exempt works from the requirement for a certificate of fitness and may also be made in relation to the issue of certificates, conditions of certificates, revocation of certificates and the fees that may be payable in relation to certificates.

Environmental management

The requirement for an environment strategy applies to the same airports as the requirement for a airport master plan.

A draft or final environment strategy is to relate to a five year period and must specify:

  • the objectives of the environmental management of the airport;
  • the source of environmental impacts;
  • the proposed studies, reviews and monitoring of environmental impacts from the operation of the airport;
  • the measures to be carried out to prevent, control or reduce environmental impacts;
  • details of the consultations involved in the preparation of the strategy; and
  • such other matters as specified in the regulations (clause 107).

In determining whether to approve a draft strategy, the Minister is to have regard to the effect the implementation of the strategy would have on air, water and soil quality; the effect on noise levels; and details of the consultations entered into in developing the strategy. If the Minister refuses to approve a strategy, the Minister may require the company holding the airport lease to submit a new draft plan within a minimum of 180 days of being notified of the requirement (clause 118).

Provisions relating to public comment, consultations and minor variations to the strategy are similar to those for airport master plans. As with replacement master plans, replacement strategies may be exempted from these requirements (clause 117).

Clause 124 allows regulations to be made establishing environmental standards relating to environmental pollution, noise generated at an airport (other than noise generated by aircraft in flight) or the disposal or storage of waste at an airport. It will be an offence to knowingly or recklessly breach the standards. Regulations may are be made for monitoring any breaches of the standards and for remedial action to be taken to rectify the breach (clause 125). If a person breaches the standards and an airport operator incurs cost in rectifying the breach, the costs incurred may be recovered from the person who breached the standards by the airport operator. A similar provision will apply if the Commonwealth incurs costs in rectifying a breach (clauses 126 and 127).

Where a person is alleged to have breached the environmental management rules contained in the Bill, or regulations made under clause 125, they may opt to pay a penalty, equal to one fifth of the maximum fine that could be imposed by a court if the person was convicted (clause 130).

Part 18 of the Bill (clauses 224 to 232) provides for the monitoring of land use, planning, building control and environmental requirements. Authorised officers will be able to search premises either with the occupier's consent (clause 227) or under a monitoring warrant, which is to be issued by a magistrate if satisfied that it is reasonably necessary for the officer to have access to the airport premises to ensure compliance with the requirements (clause 228). An officer may require a person in premises subject to a conscentual search or a monitoring warrant to answer questions and/or produce documents. It will be an offence, with a maximum penalty of 6 months imprisonment, to fail to comply with such a requirement without reasonable excuse (clause 229).

Accounts and reports

Accounts of airport operator companies are to be prepared in accordance with the regulations which will incorporate the accounting standards applicable to the Corporations Law (clause 133). Accounts are to be audited (clause 134).

Accounts and reports are to be lodged with Australian Competition and Consumer Commission (ACCC) (this body was established as part of the reforms resulting from the Hilmer report and replaces the Trade Practices Commission and the Prices Surveillance Authority) (clause 135). Regulations may be made to allow the ACCC to require airport operators to report to the ACCC (clause 137).

Service Monitoring

Clause 145 provides for the regulations to specify performance indicators for airport operators and those who provide services under an agreement with such a body. Examples of performance indicators are given in clause 146 and include indicators relating to passenger and aircraft congestion and standards for passenger services, runways, taxiways and aprons.

ACCC is to monitor and evaluate the quality of services against the performance indicators and other criteria that ACCC develops (clause 147).

Regulations may also be made regarding the records that must be kept regarding performance indicators and for the provision of such information to ACCC (clause 148).

Variation and closure

Part 9 of the Bill (clauses 152 to 155) provides that if a lease exists in respect of an airport, regulations are not to made that would vary the site, repeal the declaration of the site as an airport or result in an absolute prohibition on the use of the site as an airport without the written consent of the lease holder. The Part also provides that a lessee may surrender the lease to the Commonwealth either unconditionally or subject to such conditions as agreed between the parties.

International agreements

Where Australia is a party to an international agreement that deals with the carriage of international freight, passengers, or freight by air, and that agreement has come into force in Australia, clause 158 will allow regulations to be made to give effect to the agreement so far as it relates to the operation of airports that are accessed by international air transport.

Control of certain activities at airports

Part 11 of the Bill (clauses 160 to 170) provides for regulations to be made in relation to leased airports regarding:

  • the sale, supply and possession of liquor;
  • the control of the supply of goods and services;
  • the parking or use of vehicles within the airport site; and
  • the control of gambling and smoking.

At least 30 days before such regulations are made in respect of an airport, operators at the airport are to be given a notice inviting submissions on the proposed regulations (clause 170).

The Part also provides that it is not to exclude the operation of State or Territory laws that are capable of operating with these measures (clause 169).

Protected airspace

Clause 173 provides for the regulations to define 'prescribed airspace' where it is in the interests of safety, efficiency or regularity of air services that such airspace be protected. It will be an offence for a person to conduct a controlled activity in prescribed airspace without permission (controlled activity is defined to be construction, alteration or other activity that extends into prescribed airspace)(clauses 174 and 175).

Access to airports

Access to airport facilities and services is dealt with in clause 184 which will apply Part IIIA of the Trade Practices Act 1974 (those provisions allow a declaration to be made that a service is an essential service and then provides for person seeking access to the service to negotiate with the service provider on how those services are to be accessed. If no agreement is reached, arbitration will apply). In relation to a core regulated airport, the Minister must, as soon as possible after the end of the designated period (generally 12 months after the granting of the lease) declare each airport service to be a service to which Part IIIA applies except to the extent to which an access undertaking is in force. Airport service is defined to be a service:

  • necessary for the purposes of operating and/or maintaining civil aviation services at the airport; and
  • provided by means of significant facilities at the airport which cannot be economically duplicated.

Demand management

The Minister may declare the capacity of an airport, based on the maximum number of aircraft movements that the airport is capable of handling during a specified period of time (clause 187). Before making such a declaration, the Minister is to prepare a draft declaration and allow public comment on the draft (clause 188). Before calling for public comment on a draft, the Minister is to offer the airport operator, aircraft operators who use the airport, Air services Australia and the Civil Aviation Safety Authority an opportunity to make submissions on the capacity of the airport (clause 189).

If a declaration relating to the capacity of an airport is in force, the Minister may declare that the airport is subject to statutory demand management (clause 190). In determining whether to make such a declaration, the Minister is to have regard to the matters listed in clause 191, which include:

  • whether demand exceeds capacity;
  • the effectiveness of the self management and self regulation of the capacity;
  • the effect of pricing arrangements on demand;
  • the extent or likely extent of congestion at the airport;
  • existing or proposed laws or other controls relating to environmental matters, including noise; and
  • Australia's international obligations.
  • A demand management scheme may be:
  • a category exclusion scheme - ie a scheme that excludes certain categories of aircraft at certain times or all the time;
  • a slot allocation scheme - a scheme based on the allocation of take off and landing slots;
  • a movement limitation scheme - a scheme that limits the total movements or limits the number of movements for certain categories of aircraft movements during a period; or
  • a scheme not covered by one of the above categories.

A demand management scheme for an airport may be a combination of the above schemes (clauses 193 to 199).

The demand management plans will have effect in addition to the Sydney Airport Curfew Act 1995 and the air navigation regulations (clauses 202 and 203).

Air traffic services and fire and rescue

An airport lessee is not to provide air traffic, navigation, fire fighting or rescue services unless those services are provided by Airservices Australia or through an arrangement between Airservices Australia and a third person (clause 208).

Remarks

Major differences between the 1995 and 1996 Bills, as introduced, and other aspects of the leasing process are:

  • the 1995 Bill restricted cross ownership between various pairs of airports. Basically, the pairings were Tullamarine and Kingsford-Smith; Brisbane and Kingsford-Smith; Tullamarine and Sydney West; and Brisbane and Sydney West. The maximum proposed cross-ownership between companies operating either one of the paired airports was 15% of any type of stake in the other company operating at a paired airport. There are no such restrictions in this Bill;
  • the ability of the Minister to exempt replacement master plans and environment strategies from the consultation process was not contained in the 1995 Bill;
  • specific monitoring provision were not contained in the 1995 Bill;
  • provisions relating to the regulation of environmental standards at airports are significantly expanded in this Bill (the 1995 Bill contained a provision similar to clause 124, but with a lesser penalty for its breach, but contained no references to monitoring and rectifying of breaches of the standards);
  • access to airport facilities under Part IIIA of the Trade Practices Act 1974 was not dealt with in the 1995 Bill;
  • under the 1995 Bill, if remedial work was necessary due to breach of building controls the Minister needed to approach the Federal Court to seek an order requiring the work to be carried out. Under this Bill, the minister may order that such work be carried out; and
  • the 1995 leasing proposal was that Sydney and Sydney West airports be included in the first group of airports to be leased. It now appears that they may be last to be leased while potential difficulties with Sydney West are resolved.

Endnotes

(1) FAC, 1994 Annual Report, p. 10.

(2) FAC, 1995 Annual Report, p. 28.

(3) Ibid., p. 39.

(4) Ibid., p. 33

(5) Ibid., pp. 34 & 35.

(6) The Sydney Morning Herald, 27 August 1994.

Contact Officer and Copyright Details

Chris Field Ph. 06 277 2439
14 June 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

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Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 16 June 1996

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