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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Aviation Legislation Amendment Bill (No 1)
2000
Date Introduced: 8 March 2000
House: House of
Representatives
Portfolio: Transport and Regional Services
Commencement: The proposed amendments to the Air Navigation
Act 1920 (Cth) commence on Royal Assent. The proposed
amendments to the Sydney Airport Curfew Act 1995 (Cth)
commence 28 days after Royal Assent.
The Bill is the
first piece of legislation introduced to implement the Government's
new international aviation policy announced on 3 June 1999. The
amendments contained in the Bill have two main purposes:
-
- to liberalise the restrictions on ownership of Australian
airlines other than Qantas by foreign airlines; and
-
- to increase the maximum penalties payable for breaching the
Sydney Airport curfew.
The Bill also makes a number of minor amendments
of a technical nature to the Air Navigation Act 1920
(Cth).
Liberalising
Foreign Ownership Restrictions
The most important amendments to the Air
Navigation Act 1920 (Cth) seek to implement part of the
Government's international aviation policy by removing some of the
restrictions on ownership and control of Australian international
airlines other than Qantas by foreign airlines. On 11 September
1998, the Productivity Commission provided the Government with its
Final Report on its inquiry into International Air Services and the
International Air Services Commission.(1) The
Government's response was to announce wide-ranging changes to
Australia's international aviation policy(2) which
(although not as far-reaching as the Productivity Commission
recommended) would liberalise the bilateral air services
arrangements which govern airline ownership and control, capacity,
frequency and destination of flights. The then Shadow Minister for
Regional Development, Infrastructure, Transport and Regional
Services, Ms Cheryl Kernot, MP, described the policy of incremental
liberalisation as a 'reasonable outcome'.(3)
A central tenet of the Government's
international aviation policy is the negotiation of reciprocal
bilateral 'open skies' arrangements with other countries. These
arrangements would permit unrestricted access to all airports
except Sydney, Melbourne, Brisbane and Perth, and give foreign
international airlines operating in regional Australia unlimited
capacity, codeshare and own stopover rights,(4) in
exchange for Australian international airlines receiving reciprocal
rights in the foreign country. The Government has already
negotiated the liberalisation of air services with a number of
countries, including Fiji,(5) Dubai,(6) and
the United States in relation to air freight.(7) It is
currently re-negotiating other bilateral air services arrangements.
The Government is also committed to negotiating further
liberalisation of aviation at the next round of the General
Agreement on Trade in Services (GATS) this year.
However, the current cabotage system, whereby
the right to fly domestic routes is restricted to Australian
domestic carriers, will be retained. Foreign international airlines
will still not be permitted to operate domestically within
Australia. This is for two principal reasons. Firstly, other
countries do not generally grant Australian international airlines
the right to fly domestic routes. Secondly, there is a possibility
that permitting foreign airlines to carry domestic passengers would
mean cuts to regional domestic services or even Australian domestic
carriers withdrawing from some regional routes.(8)
Another key feature of the Government's new
airline policy is the reform of restrictions on foreign ownership
of Australian airlines. This requires amendment of the Air
Navigation Act 1920 (Cth). Currently, the Act limits ownership
of shares in an Australian international airline (other than
Qantas) to no more than 25% for an individual foreign airline, and
no more than 35% in total for all foreign airlines. The Bill
proposes to remove these restrictions, replacing them with a simple
requirement that no more than 49% of an Australian international
airline be owned by foreign persons.
The current limit of 49% on total foreign
ownership and control will be retained, as this is essential under
the bilateral air services agreements with other countries. A
number of foreign countries refuse to allow airlines to enter their
market if they are not substantially owned and controlled by
nationals of the airline's country of origin.
While the liberalisation of foreign ownership
restrictions will increase the freedom of Australian international
airlines to access global equity capital and thus expand globally
and compete in the international market, it also has a potential
for greater control of Australian airlines by foreign airlines.
This is because removing the restrictions would enable a single
foreign airline or a number of foreign airlines to own up to 49% of
an Australian international airline. The proposals come at a time
when Air New Zealand is proposing to acquire News Corp's 50%
shareholding in Ansett Holdings, giving it 100% ownership of
Ansett's domestic operations and 49% of Ansett's international
operations.(9)
Importantly, the proposed liberalisation of
ownership and control laws will not apply to Qantas. The existing
ownership restrictions in relation to Qantas will be retained.
Ownership of Qantas is governed by the Qantas Sale Act
1992 (Cth), which limits foreign airlines to a maximum of 35%
ownership of Qantas shares in aggregate, with a maximum of 25% to
be owned by any foreign person. The statute also caps total foreign
ownership of Qantas at 49%.
It is important to note that the Government's
foreign investment sectoral guidelines, administered by the Foreign
Investment Review Board, presently only permit approval, provided
the proposal is not contrary to the national interest, of
acquisition of up to:
-
- 25% of an Australian domestic or international airline by an
individual foreign airline flying to Australia;
-
- 40% in aggregate of an Australian domestic airline by foreign
airlines;
-
- 35% in aggregate of an Australian international airline by
foreign airlines.(10)
Other foreign investors, including foreign
airlines who do not fly to Australia, can acquire up to 100% of an
Australian domestic airline.(11) Although the Government
is prepared to consider proposals in excess of the above
requirements in respect of domestic airlines if there are 'special
circumstances', there does not appear to be a similar exception in
respect of international airlines. To permit foreign airlines to
take advantage of the new simplified restriction on ownership and
control of Australian international airlines, the Government will
have to amend its foreign investment sectoral guidelines.
Increased Penalties for Breaching Sydney
Airport Curfew
The Bill also proposes amendments to the
Sydney Airport Curfew Act 1995 (Cth) to increase by a
factor of five the maximum penalties payable for breaching some of
the Sydney Airport curfew requirements, although not all of
them.
The Sydney Airport Curfew Act 1995
(Cth) prohibits taking off from or landing at Sydney Airport during
the curfew period of 11pm to 6am, with certain exceptions. In 1999,
the first prosecution for breaching the curfew since the Act came
into effect on 24 December 1995 was conducted.(12) There
was evidence tendered to the court that the fines currently imposed
by the Act did not have a sufficient deterrent
effect.(13)
The proposed amendments will increase the
maximum fines by a factor of five. The maximum fine for operating
an aircraft during the curfew period will now be $110,000 for an
individual, or $550,000 for a company. The maximum penalties in
section 10 for taking off between 10.45pm and 11pm using a runway
which is not permitted by the statute are also increased
five-fold.
It is worth noting that the Sydney Airport
Curfew Act 1995 (Cth) also contains other provisions which
impose penalties, and these penalties have not been increased.
There are penalties for taking off or landing, using a runway which
is not permitted by the statute, between 6am and 7am or between
10pm and 11pm on a Saturday or Sunday (section 11). Although this
offence is very similar in nature to section 10, and carries the
same maximum penalty, the penalties for breaching section 11 have
not been increased. The policy behind the selective increase in
penalties is unclear.
The Act also contains penalties for failing to
lodge certain notices for noisy aircraft movements when landing
during a curfew period;(14) and for providing false or
misleading information.(15) These penalties are of a
lesser magnitude and have not been increased.
Schedule 1 contains a number of amendments to
the Air Navigation Act 1920 (Cth). None of the amendments
apply to Qantas, which is governed by the Qantas Sale Act
1992 (Cth), not the Air Navigation Act 1920
(Cth).(16)
Liberalising Foreign Ownership
Restrictions
Foreign Persons, not Foreign
Airlines
Item 2 removes the distinction
between foreign airlines and foreign persons. Paragraph 11A(1)(a)
of the Act currently allows the Minister to obtain information on
the extent of share ownership by foreign airlines of an
Australian international airline. Item 2 replaces that with a
ministerial power to requisition information on the extent of share
ownership of an Australian international airline by any foreign
persons, whether airlines or not.
Similarly, item 6 removes the
requirement that the constitution of an Australian international
airline contain a provision restricting foreign airlines from
owning more than 35% in total of the equity in an Australian
international airline. The section now imposes a restriction on the
ownership of shares by foreign persons.
Blanket 49%
Limit
Item 3 repeals the present
ownership restrictions applicable to foreign airlines, of no more
than 25% for an individual foreign airline and no more than 35% in
aggregate for all foreign airlines. It replaces them with a simpler
requirement that no more than 49% of an Australian international
airline be owned by foreign persons (including foreign
airlines).
Item 7 omits the requirement
that an Australian international airline's constitution contain a
provision prohibiting foreign airlines owning more than 35% of the
equity in an Australian international airline. Instead, it
introduces a new requirement that no more than 49% of the equity in
an Australian international airline be owned by foreign
persons.
The restriction on individual foreign airlines
owning more than 25% of the shares in an Australian international
airline is repealed by item 8, and item
9 merely deletes a reference to this repealed
restriction.
However, the powers of the directors of an
Australian international airline to enforce the restriction on
foreign ownership, contained in paragraph 11A(2)(c), are
preserved.
Definition of 'foreign
person'
The Bill does not repeal any of the definitional
provisions of the Air Navigation Act 1920
(Cth),(17) including the definition of a 'foreign
airline'. It does introduce a new defined term, 'foreign person',
which in turn requires definitions of 'Australian person' and
'Australian citizen'.
'Foreign person' is defined to mean a 'foreign
airline' or a person who is not an 'Australian person'
(item 12). The definition of an 'Australian
person' (item 11) includes an Australian citizen
or resident, Commonwealth, State, Territory and local government
bodies, and corporations incorporated within Australia and
substantially owned by any of these persons.(18)
'Australian citizen' is also defined, as having the same meaning as
in the Australian Citizenship Act 1948 (Cth) (item
10).
Minor Amendments
Company
'constitution'
A number of minor amendments to sections 11A and
11B of the Air Navigation Act 1920 (Cth) remove references
to articles of association and replace them with references to
'constitution', the current terminology used in the
Corporations Law (items 4, 5, 13, 14).
The definition of 'mandatory articles' in sub-section 11B(11) is
repealed by item 15 and replaced with a definition
of 'mandatory provisions', item 16. The definition
makes no substantive change to the meaning of section 11B.
Technical
amendments
Item 1 corrects an error in the
definition of 'state aircraft' in section 3 of the Air
Navigation Act 1920 (Cth). 'State aircraft' is defined to
exclude aircraft registered 'under the regulations'. This is a
reference to the regulations made under the Air Navigation
Act 1920 (Cth). However, since 1988, aircraft have been
registered under the Civil Aviation Regulations made under the
Civil Aviation Act 1988 (Cth). Item 1 rectifies this error
by inserting a reference to the regulations made under the
Civil Aviation Act 1988 (Cth).
Section 26(2)(k) currently provides that
regulations can be made under the Act imposing as a penalty a fine
of up to $5000. Item 17 replaces '$5000' with '50
penalty units'. This makes the provision consistent with current
Commonwealth drafting practice, which is to express penalties in
penalty units rather than monetary amounts. Since the current value
of a penalty unit is $110,(19) this amendment will
permit regulations to impose a fine of up to $5500, a slight
increase.
Increased Penalties for Breaching Sydney
Airport Curfew
Schedule 2 deals with
amendments to the Sydney Airport Curfew Act 1995 (Cth).
Items 1 and 2 increase the maximum penalties
payable for taking off or landing at Sydney Airport in breach of
the Sydney Airport curfew. The maximum penalty for an individual
operator will be increased from 200 penalty units to 1000 penalty
units; and the maximum penalty for a corporation will be increased
from 1000 penalty units to 5000 penalty units. Accordingly, the
proposed maximum penalties for operating an aircraft during the
curfew period will be $110,000 for an individual, or $550,000 for a
company.
Items 3 and 4 increase the
maximum penalties payable for taking off from Sydney Airport
between 10.45pm and 11pm from a runway not permitted by the Act.
The maximum penalty for an individual operator will be increased
from 100 penalty units to 500 penalty units; and the maximum
penalty for a corporation will be increased from 500 penalty units
to 2,500 penalty units. Thus, the proposed maximum penalties for
using the wrong runway on take-off will be $55,000 for an
individual, or $275,000 for a company.
The Bill contains amendments concerning three
distinct subject areas. Of greatest significance are the amendments
to restrictions on ownership by foreign airlines of shareholdings
in Australian international airlines other than Qantas. These
amendments implement Government policy of liberalising ownership
and control of Australian international airlines. Conceptually
separate from these amendments are a number of non-controversial,
technical amendments to the Air Navigation Act 1920
(Cth).
The Bill also proposes substantial increases in
the maximum penalty which can be imposed for breaching some,
although not all, of the restrictions imposed under the Sydney
Airport Curfew Act 1995 (Cth).
-
- Productivity Commission, Report No 2, International Air
Services: Inquiry Report, 11 September 1998.
- The Hon John Anderson, MP and The Hon Peter Costello, MP
'International Air Services' Press release, 3 June 1999,
A79/99.
- Ms Cheryl Kernot, MP ''Open Skies' a Reasonable Outcome',
Press release, 3 June 1999, 26/99.
- Capacity refers to flight numbers and space or seats available.
These rights are allocated in advance of demand. Codeshare refers
to a practice of commercial co-operation whereby one airline
carries passengers under its own flight number, as well as a flight
number belonging to another airline. This is particularly the case
on domestic routes, which international airlines are often
prohibited from flying. Own stopover rights allow an airline to
carry passengers to and from Australia and third countries, via a
brief stop in the journey in the country to which the airline
belongs.
- The Hon John Anderson, MP 'Australia-Fiji Air Services Talks'
Press release, 9 November 1999, A171/99.
- The Hon Jackie Kelly, MP 'Tourism to benefit from expanded air
services by Emirates', Press release, 13 July 1999.
- The Hon John Anderson, MP 'Australia-United States Air Freight
Agreement' Press release, 15 December 1999, A203/99.
- The Hon John Anderson, MP and The Hon Peter Costello, MP
'International Air Services' Press release, 3 June 1999,
A79/99.
- Stephen Bartolomeusz 'Virgin adversary forces parties to the
table on Ansett', The Age, 17 February 2000; Stephen
Creedy 'Ansett merger takes off', The Australian, 17
February 2000; Mark Todd and Geoff Senescall 'Air NZ on verge of
securing Ansett', The Sydney Morning Herald, 17 February
2000; Damon Kitney, 'Ansett deal launches Air NZ in big league',
Australian Financial Review, 19 February 2000.
- Australia's Foreign Investment Policy - A Guide for
Investors, Australian Government Publishing Service, Canberra,
1992, reproduced in Roger Hamilton, Foreign Investment
Regulation in Australia (2nd ed) Prospect, Sydney,
1999 from [A50:10], together with Foreign Investment Policy
Summary, September 1999, reproduced in Roger Hamilton,
Foreign Investment Regulation in Australia (2nd
ed) Prospect, Sydney, 1999 from [A47:20].
- Australia's Foreign Investment Policy - A Guide for
Investors, Australian Government Publishing Service, Canberra,
1992, reproduced in Roger Hamilton, Foreign Investment
Regulation in Australia (2nd ed) Prospect, Sydney,
1999 at [A50:140].
- R v Thai Airways International Ltd (unreported,
Magistrate Beveridge, St James Local Court, Sydney, 8 February
2000).
- The Hon John Anderson, MP, Second Reading Speech, House of
Representatives, Debates, 8 March 2000, p. 13918.
- Sections 8 and 9.
- Section 22.
- The definition of 'Australian international airline' in
sub-section 11A(4) of the Air Navigation Act 1920
(Cth) does not include Qantas.
- Contained in sub-section 11A(4).
- The definition is identical to that contained in sub-section
7(7) of the Qantas Sale Act 1992 (Cth).
- Section 4AA(1) of the Crimes Act 1914
(Cth).
Katrine Del Villar
14 March 2000
Bills Digest Service
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