This chapter examines the Air Services Agreement between the Government of Australia and the Government of the State of Kuwait (the Agreement), which was signed on 22 October 2015 and tabled in the Parliament on 2 May 2016. The Committee’s inquiry into the treaty action lapsed at the dissolution of the 44th Parliament and the treaty was re-referred to the Committee by the Foreign Minister on 12 September 2016.
Under the Convention on International Civil Aviation of 1944 (the Chicago Convention) international airlines cannot operate between two countries without the countries having negotiated a bilateral air services agreement.
The proposed agreement will establish for the first time a treaty-level air services relationship between Australia and Kuwait, and will allow the airlines of Australia and Kuwait to develop international air services between the two countries.
As is standard practice with Australian air service agreements, the Agreement was settled in conjunction with arrangements in the form of a non-legally binding memorandum of understanding (MOU). The MOU applies the provisions of the Agreement and allows airlines to access the rights available to them prior to it being entered into force.
Overview and national interest summary
According to the National Interest Analysis (NIA), the Agreement:
provides a binding legal framework to support the operation of air services between Australia and Kuwait;
facilitates trade and tourism between the two countries; and
provides greater opportunities for airlines to develop expanded air travel options for consumers.
Reasons for Australia to take the proposed treaty action
The Agreement will grant Australian airlines access to the Kuwait aviation market, allowing air services between Australia and Kuwait. It will enable Australian and Kuwaiti carriers to provide services between any place in Australia and any place in Kuwait, based on capacity levels decided from time to time between the aeronautical authorities of the two countries.
The Department of Infrastructure and Regional Development (DIRD) explained that, although there are no direct flights between Australia and Kuwait, the Agreement allows Australian and Kuwaiti airlines to take advantage of codeshare arrangements and facilitate a seamless travel experience for clients:
This allows Australian airlines to sell a ticket to Kuwait themselves. If you wanted to travel on, say, a QF coded ticket, this would allow Qantas to sell a ticket from Australia through, which can open up their network and increase their reach.
Australian travellers and Australian businesses, particularly in the tourism and export industries, could benefit from the proposed agreement through the opening of increased commercial opportunities. DIRD advised that there were 5 410 visitor arrivals in Australia from Kuwait during the financial year 2015–16.
The obligations as set out in the NIA are provided below.
The Agreement was done in accordance with the Chicago Convention to which Australia and Kuwait are both Parties. The Agreement is based on Australia’s model air services agreement with adjustments settled during negotiations. The adjustments to the model agreement are in terms of structure and the exact wording of the standard obligations.
Australia and Kuwait are obliged to allow the ‘designated airlines’ of each country to operate scheduled air services carrying passengers, cargo and mail between the two countries on specified routes in accordance with the provisions of the proposed Agreement. To facilitate these services, the Agreement also includes reciprocal provisions on a range of aviation-related matters such as safety, security, competition laws, customs regulation and the commercial aspects of airline operations, including the ability to establish offices in the territory of each Party and to sell fares to the public.
UnderArticle 3 (Granting of Rights and Privileges) each Party grants the airlines of the other Party the right to fly across its territory without landing and to make stops in its territory for non-traffic purposes (such as refuelling). Article 3(2) provides the right for designated airlines to make stops for the purpose of taking on board and discharging passengers, cargo and mail. Article 3(4) precludes designated airlines from carrying passengers, baggage, cargo or mail for compensation within the territory of the other Party.
Article 4 (Designation and Authorisation) allows each Party to designate any number of airlines to operate the agreed services. On receipt of such a designation, and an application from a designated airline for operating authorisation, the other Party must grant the appropriate authorisations provided that the airline being designated complies with the conditions for incorporation and principal place of business set out in the Agreement, holds the necessary operating permits and meets the conditions the Party receiving the designation normally applies to the operation of international air transport (Article 4(2)). It is also a condition of granting an authorisation to a designated airline that the Party designating the airline has and maintains effective regulatory control over the airline and complies with the safety and security provisions of the Agreement.
Article 5 (Revocation, Limitation and Imposition of Conditions) sets out each Party’s rights to revoke, suspend or impose conditions on a designated airline’s operating authorisations in the event of any non-compliance with the terms of Article 4(1). Article 5(2) provides that any such action shall only be exercised after consultations between aeronautical authorities, unless compliance with safety or security provisions requires immediate action.
Article 6 (User Charges) requires each Party to use its best efforts to ensure that user charges imposed or permitted to be imposed on the designated airlines of the other Party for the use of airports, their facilities, technical and other installations and services, are reasonable, non-discriminatory and equitably apportioned (Article 6(1)). Reasonable charges reflect, but do not exceed, the full costs to the competent charging authorities of providing the facilities and services. For charges to be non-discriminatory, they should be levied on foreign airlines at a rate no higher than the rate imposed of a Party’s own airlines operating similar services (Article 6(2)). Article 6(3) contains provisions addressing consultation, notification and the exchange of information in relation to user charges imposed on airlines using affected services and facilities.
Article 7 (Exemptions from Custom Duties and Other Charges) provides that the aircraft operated by the airlines of each Party, and the listed equipment and stores used in the operation of the agreed services, shall be exempt from import restrictions, customs duties, excise taxes and similar fees and charges (Article 7(1), (2)). Article 7(3) provides that equipment and supplies (within its scope) may be required to be kept on board, or under the supervision or control of the appropriate authorities until they are either re-exported or disposed of in accordance with the customs laws of the Party.
Article 8 (Financial Provisions) provides for designated airlines to sell air transport services to the public and to freely convert and move currency.
Article 9 (Technical and Commercial Representation) provides a framework for airlines of one Party to conduct business in the territory of the other Party. The framework includes provisions allowing designated airlines to establish offices, bring in and employ staff, sell air transport services to the public and use the services and personnel of any organisation, company or airline operating in the territory of the other Party, to conduct its business.
Article 10 (Entry and Clearance Regulations) provides that each Party’s laws and regulations relating to entry and exit of passengers, crew, cargo and mail, and aircraft (for example immigration, advance passenger information, customs and quarantine) must be complied with in the territory of that Party (Article 10(1)). This Article requires each Party to apply such laws to the aircraft of the other Party without distinction as to nationality (Article 10(2)).
Under Article 11 (Capacity Provisions), both Parties are obliged to ensure that the designated airlines of each Party receive fair and equal opportunity to operate services in accordance with the Agreement and to take action to eliminate all forms of discrimination or unfair competition affecting the competitive position of a designated airline of the other Party (Article 11(1), (2)). The capacity which may be provided by the designated airlines of each Party must be determined by the aeronautical authorities of the Parties before the commencement of such services, and from time to time thereafter. That capacity was settled in the MOU between the aeronautical authorities of the two Parties. These capacity arrangements are intended to remain in effect once the Agreement enters into force.
Article 12 (Timetable Submission and Slots) sets out requirements for the submission of timetable information, in accordance with each Party’s domestic laws and regulations. It also confirms each Party will provide airlines fair and equal opportunity to secure slots and access to the airports in its territory (Article 12(2), (3)).
Article 13 (Information and Statistics) provides that the aeronautical authorities of one Party may require the relevant authorities and designated airlines of the other Party to provide statistics related to the traffic carried on services performed under the Agreement.
Article 14 (Establishment of Tariffs) provides that each Party shall allow each designated airline to determine its own air fares (tariffs) based on commercial considerations (Article 14(1)). Article 14 also establishes a process for limited intervention (Article 14(3)) and consultation in the event of unreasonable pricing practices, subject to each Party’s competition and consumer protection laws (Article 14(4), (5)).
Under Article 15 (Aviation Safety), each Party may also request consultations with the other Party at any time concerning the safety standards maintained by the other Party (Article 15(1)). If required, the other Party shall be informed of the corrective action required to be undertaken to conform to the standards pursuant to the Chicago Convention. The other Party shall then take appropriate corrective action (Article 15(2)). Article 15(2) provides that each Party may, in its territory, arrange inspections of aircraft of the other Party to verify the validity of the relevant aircraft documents and those of its crew and ensure that the aircraft equipment and the condition of the aircraft conform to the standards prescribed under the Chicago Convention. Each Party can take immediate action essential to ensure the safety of an airline, including varying or suspending operating authorisation, if it considers such action to be necessary (Article 15(6)). Article 15(8) requires each Party to recognise certificates of airworthiness, certificates of competency and licences issued or rendered valid by the other Party, provided the standards under which such documents were issued conform to the standards established by the International Civil Aviation Organization (ICAO). Each Party can, however, refuse to recognise certificates and licences held by its own operators that have been issued by the other Party.
Under Article 16 (Aviation Security), both Parties reaffirm their obligations to protect the security of civil aviation against acts of unlawful interference and, in particular, to act in conformity with multilateral conventions relating to aviation security (Article 16(1)). Each Party shall upon request provide the other Party all necessary assistance to prevent unlawful acts against civil aircraft and threats to the security of civil aviation (Article 16(2)). Each Party must act in conformity with the standards established by ICAO, advise the other Party of any differences between its national regulations and the standards established by ICAO, and either Party may request consultations at any time to discuss any differences (Article 16(3)). Parties shall ensure effective measures are applied to protect aircraft and to screen passengers, crew, carry-on items, baggage, cargo and aircraft stores, prior to and during boarding or loading. A Party may require the designated airlines of the other Party to observe the first Party’s aviation security provisions for entry into, departure from or while within the territory of that Party (Article 16(4)). The Parties shall assist each other in the event of an unlawful incident or threat of an incident (Article 16(5)). Each aeronautical authority may request to conduct a security assessment in the other Party’s territory. Such assessments are to be conducted in accordance with arrangements agreed between the aeronautical authorities without delay (Article 16(6)).
Under Article 17 (Consultations and Modifications), consultations between the aeronautical authorities in relation to the application of the Agreement shall take place as needed. Either Party may additionally request consultations with the other Party at any time for the purpose of amending the Agreement.
Article 18 (Settlement of Disputes) provides a process for dispute resolution on matters relating to the interpretation or application of the Agreement, other than those relating to the application of domestic competition laws. If the Parties cannot resolve a dispute by negotiation between themselves, Article 18(2) provides for compulsory settlement through submitting the dispute to arbitration. A three-person arbitral tribunal shall make a decision on the dispute, which is final and binding upon both Parties. Failure to comply with the award is grounds for one Party to limit, suspend or revoke any rights or privilege granted under the Agreement for the duration of the non-compliance.
Under Article 20 (Conformity with Multilateral Conventions), the provisions of any general multilateral air transport convention that enters into force for both Parties in the future will prevail over the provisions of the Agreement, to the extent of any inconsistencies.
Once the Agreement enters into force, it will be registered with ICAO, under Article 21 (Registration).
The Annex to the proposed Agreement contains a Route Schedule which specifies the routes that may be operated by designated airlines of each Party, as well as operational provisions. It also provides designated airlines with the right to enter into code share arrangements with any other appropriately authorised airline.
The Agreement will be implemented through existing legislation, including the Air Navigation Act 1920 and the Civil Aviation Act 1988. The International Air Services Commission Act 1992 provides for the allocation of capacity of Australian airlines. No amendments to this legislation or any other legislation is required for the implementation of the Agreement.
Costs of the treaty action
No direct financial costs to the Australian Government are anticipated in the implementation of the Agreement. There are no financial implications for State or Territory Governments.
The Committee supports the Agreement and recommends that binding treaty action be taken.
The Committee supports the Air Services Agreement between the Government of Australia and the Government of the State of Kuwait and recommends that binding treaty action be taken.