Bills Digest No. 137  1999-2000Aviation Legislation Amendment Bill (No. 1) 2000


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details

Passage History

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.

Purpose

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).

Background

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.

Main Provisions

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.

Concluding Comments

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).

Endnotes

  1. Productivity Commission, Report No 2, International Air Services: Inquiry Report, 11 September 1998.

  2. The Hon John Anderson, MP and The Hon Peter Costello, MP 'International Air Services' Press release, 3 June 1999, A79/99.

  3. Ms Cheryl Kernot, MP ''Open Skies' a Reasonable Outcome', Press release, 3 June 1999, 26/99.

  4. 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.

  5. The Hon John Anderson, MP 'Australia-Fiji Air Services Talks' Press release, 9 November 1999, A171/99.

  6. The Hon Jackie Kelly, MP 'Tourism to benefit from expanded air services by Emirates', Press release, 13 July 1999.

  7. The Hon John Anderson, MP 'Australia-United States Air Freight Agreement' Press release, 15 December 1999, A203/99.

  8. The Hon John Anderson, MP and The Hon Peter Costello, MP 'International Air Services' Press release, 3 June 1999, A79/99.

  9. 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.
  10. 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].

  11. 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].

  12. R v Thai Airways International Ltd (unreported, Magistrate Beveridge, St James Local Court, Sydney, 8 February 2000).

  13. The Hon John Anderson, MP, Second Reading Speech, House of Representatives, Debates, 8 March 2000, p. 13918.

  14. Sections 8 and 9.

  15. Section 22.

  16. The definition of 'Australian international airline' in sub-section 11A(4) of the Air Navigation Act 1920 (Cth) does not include Qantas.

  17. Contained in sub-section 11A(4).

  18. The definition is identical to that contained in sub-section 7(7) of the Qantas Sale Act 1992 (Cth).

  19. Section 4AA(1) of the Crimes Act 1914 (Cth).

Contact Officer and Copyright Details

Katrine Del Villar
14 March 2000
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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

ISSN 1328-8091
© Commonwealth of Australia 2000

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Published by the Department of the Parliamentary Library, 2000.

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