August 1996

© Commonwealth of Australia 1996

ISSN 1038 - 2755  



Senator Winston Crane, Western Australia (Chairman)
Senator Paul Calvert, Tasmania
Senator the Hon. Bob Collins, Northern Territory
Senator Stephen Conroy, Victoria (Deputy Chairman)
Senator Julian McGauran, Victoria
Senator John Woodley, Queensland

Participating Members

Senator Eric Abetz, Tasmania
Senator Ron Boswell, Queensland
Senator Bob Brown, Tasmania
Senator David Brownhill, New South Wales
Senator Grant Chapman, South Australia
Senator the Hon. Peter Cook, Western Australia
Senator Alan Eggleston, Western Australia
Senator Brian Harradine, Tasmania
Senator Ian Macdonald, Queensland
Senator Sandy Macdonald, New South Wales
Senator Dee Margetts, Western Australia
Senator the Hon. Chris Schacht, South Australia
Senator the Hon. Grant Tambling, Northern Territory
Senator John Tierney, New South Wales
Senator Sue West, New South Wales

Committee Secretariat

Mr Andrew Snedden (Secretary to the Committee)
Mr Peter Hallahan (Principal Research Officer)
Mr John O'Keefe (Senior Research Officer)
Mr Maurice Chalmers (Research Assistant)
Ms Judith Wuest (Executive Assistant)



Referral of the Bills
Conduct of the Inquiry
Proposed Government Amendments to the Airports Bill 1996
Consideration of the Bills


Background to the Bills
Purposes of the Airports Bill 1996
Restriction on Ownership
Airport Land Use and Planning
Environmental management Other Provisions
Provisions of the Airports (Transitional) Bill 1996


Critical national issues
Domestic terminal leases
Economic regulation
Charging principles
Dispute resolution
National Invoicing code
Impact on users
Building control
Transparency of airport operating accounts
Definition of aeronautical services
Monitoring powers


Airport ownership and control
Consultation Control of activity at airports


Ownership and control
Land Use Planning and Building Control
Economic Regulation Dispute Resolution

Dissenting Report: by Senator John Woodley



Appendix 1: List of submissions received by the Committee

Appendix 2: List of witnesses appearing before the Committee

Appendix 3: Correspondence received by the Committee from the Minister for Transport and Regional Development, Hon John Sharp, MP, dated 1 August 1996

Appendix 4: Paper from Department of Transport and Regional Development, Pricing Oversight at Leased Federal Airports


Referral of the Bills

On 30 May 1996, the Selection of Bills Committee recommended, and the Senate agreed, that the Airports Bill 1996 and the Airports (Transitional) Bill 1996 be referred to the Rural and Regional Affairs and Transport Legislation Committee for consideration and report by 20 August 1996.

The Bills were passed unamended by the House of Representatives on 29 May 1996.

The Bills were referred to the Committee for examination of their provisions relating to

The Committee sought the views of State Government ministers and others with a direct interest in the Bills. The Committee also considered the views of local government, airlines and other organisations.

A list of submissions considered by the Committee appears at Appendix 1.

Conduct of the Inquiry

The Committee held public hearings on 24 June and 6 August 1996 in Parliament House, Canberra. The Committee received evidence from the following individuals and organisations:

A list of the witnesses who gave evidence to the inquiry appears at Appendix 2.

The Committee thanks all who provided submissions, evidence and assistance to it during the examination of the bills. The Committee also notes that it has drawn on the excellent explanation of the bills' provisions prepared by the Parliamentary Library.

Proposed Government Amendments to the Airports Bill 1996

During the course of the Committee's inquiry, the Minister responsible for the bills, the Hon John Sharp, MP, wrote to the Chairman of the Committee, Senator Crane, on 1 August advising him that it was the Government's intention to move amendment of the Bill during its consideration by the Senate.

The Minister advised Senator Crane that the Government proposed amending the Bill as follows:

The Minister's letter, which annexed detailed advice of the proposed amendments, is annexed as Appendix 3.

Consideration of the Bills

The Committee met in private session on 19 August to consider and to finalise its report.


The Committee draws to the attention of the Minister that representations to the Commitee on the Bills have stressed several concerns with the Bills. A major concern is the need to ensure that a number of matters which the Airports Bill 1996 proposes be dealt with by regulation should properly be dealt with in the statute itself.


The Bills

The Committee

recommends that the Airports Bill 1996 and the Airports (Transitional) Bill 1996 be agreed to subject to amendments notified to the Committee by the Minister for Transport and Regional Development.

Other matters

The Committee draws the Minister's attention to comments by State, Territory and local Governments, described in Chapter 3 of the Report, expressing concern about the selection of the future airport lessees.

The Committee recommends that the Minister raise with the Minister for Finance the need to ensure selection processes take into account the broader development and economic concerns of the States, Territories and Local Government.

Further, the Committee recommends that the Government establish clear consultative processes with the States, Territories and Local Government.

The Committee also recommends that the Minister regulate to ensure that non-aeronautical business activities are consistent with State, Territory and local Government planning and trading laws.

Finally, the Committee draws the Minister's attention to the concerns raised by the airlines, described in Chapter 2 of the report and the submissions received by the Committee:

Senator Winston Crane

Chairman, Legislation Committee

August 1996



Background to the Bills

1.1 Possible sale of Federal airports was announced in the 1994-95 Budget. The proposed sale was on the basis that competition in the management of airports would lead to efficiency gains.

1.2 Following consideration of the proposal to sell airports, the government's proposal altered to long term leases of major airports, with 99 year leases being suggested as the most likely option.

1.3 It was announced in the 199596 Budget that 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 199697. The remaining airports were planned to be leased in 199798.

1.4 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.

1.5 Government policy, announced prior to the 1996 General Election, was that 22 Federal airports controlled by the FAC would be leased on the following conditions:

Purposes of the Airports Bill 1996

1.6 The principal purposes of the Airports Bill 1996 are set out in clause 3 of the Bill, and include the following :

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

Leasing of Airports

1.8 Division 3 of the Bill provides for the grant of leases to airports, and the conditions that can attach to such leases.

1.9 Power to grant an airport lease is given to the Commonwealth, provided the conditions contained in subclause 14(5) of the Bill are complied with. (Subclause 14(4) provides that if a lease breaches the clause, including the conditions, it will be of no effect.) The conditions are:

Restrictions on leases

1.10 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).

1.11 Leases for Sydney (KingsfordSmith) 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 KingsfordSmith Airport lease (clause 18).

1.12 Subclause 18(6) provides that a lease for KingsfordSmith 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.)

1.13 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).

1.14 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).

Restriction on Ownership

Foreign ownership of a lease

1.15 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 of a lease

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

Airport Land Use and Planning

1.17 Part 5 of the Bill governs the manner in which land use, planning, building controls will apply to core airports, or airports specified in regulations.

1.18 A simplified outline of the part of the Bill dealing with land use is as follows:

1.19 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:

1.20 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.

1.21 Plans will continue in force when a lease is transferred (clause 64) and airport lessees 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).

1.22 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).

Building control

1.23 '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.

1.24 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).

1.25 Regulations relating to building activities may deal with:

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

1.26 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).

Environmental management

1.27 Part 6 of the bill deals with environmental management of airports. A simplified outline of the Part is as follows:

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

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

1.30 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).

1.31 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 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).

1.32 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).

1.33 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 consensual 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).

Other Provisions

1.34 Other provisions of the Bill which were subject of discussion during the Committee's hearings related to:

Control of activities at Airports

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

1.36 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).

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

Demand Management

1.38 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).

1.39 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:

1.40 A demand management scheme may be:

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

1.42 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).

Provisions of the Airports (Transitional) Bill 1996

Main Provisions

1.43 'Sale time' for a Commonwealth owned company is defined as the particular time, in the opinion of the Minister for Finance, on which a majority of the voting shares in the company are acquired by a person or persons other than the Commonwealth or a nominee of the Commonwealth. The Minister of Finance must then declare the time to be sale time by a notice in the Gazette (clause 6)

1.44 Sydney West Airport is defined as an airport even if it is still a development site (clause 5).

Transfers from the Federal Airport Corporation to the Commonwealth (Part 2)

1.45 Airport land and certain FAC assets and liabilities are to be transferred from the FAC to the Commonwealth. The mechanism for the transfer of land is statutory vesting and clause 11 provides that specified land in which the FAC has any right, title or interest will vest in the Commonwealth upon the publication in the Gazette by the Minister for Finance of a notice to that effect, without any conveyance, transfer or assignment.

1.46 Other FAC assets can be vested in the Commonwealth by the same procedure (clause 12), as can the liabilities of the FAC, other than contractual liabilities. The transfer of contractual rights and obligations is dealt with in clause 13, which provides that in relation to contracts, other than contracts of employment, the Minister for Finance may declare that the rights and obligations entered into by the FAC become rights and obligations applying to the Commonwealth.

1.47 Clause 14 provides that rights and obligations of the FAC, other than contract rights and obligations, may be transferred to the Commonwealth by the Minister for Finance.

1.48 Once the FAC's interest in airport land vests in the Commonwealth, the airport ceases to be a Federal airport for the purposes of the FAC Act (clause 15).

Original grants of airport leases to companies (Part 3)

1.49 This Part applies to Kingsford Smith, Sydney West, Tullamarine, Brisbane, Perth and other airports specified in the regulations where the site is owned by the Commonwealth (clause 20).

1.50 Clauses 21 and 22 permit the Commonwealth to grant an airport lease to a company if all of the company shares are beneficially owned by the Commonwealth (clause 21) or if none of the company shares are beneficially owned by the Commonwealth (clause 22). The Commonwealth cannot grant an airport lease to a company if some of the company shares are beneficially owned by the Commonwealth.

1.51 Where land or other assets has been transferred to the Commonwealth from the FAC under clauses 11 or 12, the Minister for Finance may declare that those assets vest in the relevant company granted a lease under clauses 21 or 22 (clause 23).

1.52 Similarly, clause 24 provides for any contractual rights or obligations transferred to the Commonwealth under clause 13 to be transferred by the Minister for Finance to a company granted an airport lease, and clause 25 provides that any relevant liabilities undertaken by the Commonwealth under clause 14 may be transferred to the company granted an airport lease.

1.53 Under clause 26, an airport lease granted under clause 21 or 22 is subject to all existing leases in relation to the land and subject to all other existing interests in the land.

Transfer of the FAC's assets or contracts to airport lessee companies; Transfer of the FAC's liabilities to airport lessee companies (Parts 4 & 5)

1.54 Those assets and contractual rights and obligations of the FAC which are not vested in the Commonwealth under the above provisions may be transferred from the FAC to airport lessee companies pursuant to clauses 30 to 33.

1.55 Other important provisions of the Airports (Transitional) Bill deal with the position of the FAC.

Transfer of Staff from the FAC to Airport Lessee Companies (Part 9)

1.56 When an airport lease is granted to a company, those employees of the FAC that are specified by notice in the Gazette, cease to be employed by the FAC and are engaged as employees of the company (clause 58). The terms and conditions of employees are safeguarded (clause 59) but can later be varied by law, award, determination or agreement (clause 60).

FAC's debts (Part 10)

1.57 Division 2 applies to loans to the FAC by the Commonwealth and Division 3 applies to non Commonwealth loans to the FAC. In Division 2, clause 68, the Treasurer may declare the principal and interest of a loan due and payable at a specified time. If an amount becomes due and payable, the Minister for Finance can determine that the Commonwealth is liable to pay the FAC an amount equal to that amount.

1.58 Clause 70 contains a standing appropriation power without statutory cap.

In relation to non Commonwealth loans, the Treasurer can declare, by notice in the Gazette, that a FAC obligation becomes a Commonwealth obligation, and authorise the payment of money by the Commonwealth to discharge the loan (clause 73). Alternatively, the Treasurer may enter into an agreement with the FAC for the Commonwealth to take over FAC's obligations under a loan and authorise payment to discharge the obligation (clause 74). Finally, the Minister for Finance may determine that there is payable to FAC an amount that the FAC is to use to discharge a loan obligation (clause 77). Clause 78 contains a standing appropriation power without statutory cap.




2.1 The Committee received evidence concerning the provisions of the Bills that falls two distinct and largely discrete categories:

2.2 QANTAS and Ansett both made submissions to the Committee and gave evidence at a public hearing. The Committee subsequently received correspondence from the Australian Air Transport Association (AATA) and the Board of Airline Representatives of Australia Inc (BARA) endorsing the views put forward by Ansett and QANTAS.

2.3 The airlines indicated that they do not oppose privatisation and welcome a number of aspects of privatisation, in particular, the abandonment of cross subsidisation between profitable and unprofitable airports. However, the airlines raised a number of concerns about the Bills. Many of these concerns were in respect of provisions not included in the Bills but which were included in the current legislation and in equivalent United Kingdom legislation. The airlines raised the following areas of concern:


2.4 QANTAS, Ansett and the AATA expressed concerns about the absence of provisions relating to consultation with the airlines. The AATA noted that the airlines are the major users and tenants of airports and submitted that accordingly, the airlines must be adequately consulted and their interests taken into account if privatisation is to work effectively. Representing QANTAS, Mr Richard Davis, Partner, Middletons, Moore and Bevins, told the Committee that "consultation is remarkable by its absence from this legislation".

2.5 Areas that the airlines identified as requiring specific consultation include master plans, major development plans, environmental plans and demand management plans.

2.6 Mr Davis drew the Committee's attention to both the current legislation, the FAC Act, and to the United Kingdom legislation, which he said had been used as a basic model for the Australian legislation. Mr Davis noted that both these examples provided for consultation. However, "the new legislation fails to address it altogether". Mr Davis said that the airlines saw this as "an omission in the legislation - and a serious omission".

2.7 Mr Davis acknowledged that there are sections in the legislation that refer to consultation. However, he considered these to be "illusory", and that essentially, there was no obligation to consult.

2.8 The airlines also submitted that the legislation should require the Minister to consult more extensively with the industry about proposed regulations, such consultation to take place before the Minister circulated the draft regulations. Mr Davis contended that the airlines were generally not consulted about regulations until it was too late:

2.9 The airlines sought a change of approach to ensure that the industry had adequate opportunity to comment on proposals and decisions:

2.10 Mr James Kimpton, Manager, Aviation Policy, Ansett Australia, indicated his support for this view. He told the Committee:

Critical national issues

2.11 QANTAS argued that there should be national standards for:

2.12 QANTAS told the Committee that if the airport operating companies adopted differing approaches to these issues, chaos would result.

Domestic terminal leases

2.13 The airlines expressed concerns about the future of their domestic terminal leases under the provisions of the legislation. The airlines major concerns about this aspect of the legislation apparently centre on the unknown financial status of the new airport lessees and the consequences of a lessee becoming insolvent. Accordingly, QANTAS sought a Government guarantee protecting their investment.

2.14 Mr Davis told the Committee that under the current leases, the Commonwealth has an obligation to buy back facilities from the major domestic operators. However, Mr Davis implied that the Commonwealth sought to rescind its responsibilities to the airlines:

2.15 Mr Davis described this possibility as "a serious matter of concern for the major domestic operators."

Economic regulation

2.16 The airlines expressed surprise at the absence of economic regulation in the legislation. Mr Davis told the Committee that the airlines did not know what constraints would be placed on the charges levied by the new airport operators or what mechanisms would be put in place to protect the airport users.

2.17 Mr Davis again compared the Australian legislation with the equivalent U.K. legislation, noting that the UK Act does enshrine the source of power for economic regulation.

Charging principles

2.18 QANTAS argued that there was a need for consistent charging principles at each airport. Mr Davis argued that the new legislation provided "an opportunity to enshrine these principles at the very outset". He considered that if consistent principles were not applied, this could act as a disincentive to international airline operators coming to Australia:

Dispute resolution

2.19 QANTAS argued that the legislation should include an obligation for the Minister or a regulatory authority to establish a "code of dispute resolution", together with an obligation for airport operator companies and major users to comply with that code in relation to specified areas of dispute.

National Invoicing code

2.20 QANTAS representatives contended that dealing with several different airport operators with different invoicing systems would significantly increase internal operating costs for themselves and other airlines, resulting in increases elsewhere.

Impact on users

2.21 QANTAS argued that the Bill should be amended to require the airport operating companies and the Minister to take account of the effect that plans, strategies, declarations and schemes will have on the operations of users or increases in user costs.

Building control

2.22 Airlines identified a lack of certainty in the legislation concerning procedures for processing building approvals in their terminals. Mr Davis told the Committee that the new legislation establishes a procedure for the Minister to approve an application for building works lodged by an airport operating company but does not address the approvals process for airlines operating within the leased airports.

Transparency of airport operating accounts

2.23 The airlines submitted that the airline operating company accounts should be "transparent" to the airport users. They maintained that this was necessary so that airport users could assess whether the charges levied by the operating companies were fair and reasonable. Further, they contended that "it is recognised in international conventions that there should be transparency to users".

2.24 Mr Davis indicated that he was aware that the operating companies were required to submit accounts to the regulatory authority, the Australian Competition and Consumer Commission (ACCC). However, the airlines apparently do not accept that this safeguard is adequate. Mr Davis told the Committee:

Definition of aeronautical services

2.25 QANTAS argued that the legislation should include a definition of aeronautical services. Mr Davis contended that this was necessary because the quality of service monitoring provisions in part 8 of the legislation deal with quality of service monitoring and reporting in relation to aeronautical services and facilities.

2.26 Mr Davis acknowledged that the Government may choose to deal with this issue by regulation and indicated that this would be satisfactory. However he stressed that the airlines considered this to be an issue that required resolution:

Monitoring powers

2.27 QANTAS expressed concern about the extent of monitoring powers, stating that these are unreasonably wide. They contended that there are no measures built into part 18 of the Bill to ensure the protection of confidential or commercially sensitive information. QANTAS also described the powers of authorised officers under Section 229 to require persons to answer questions as "draconian". Mr Davis told the Committee that the monitoring powers are extensive and that there is the possibility of them being "open to abuse".


2.28 QANTAS submitted that the Bill should contain a requirement for the Minister to consult with major users prior to ar while drafting regulations. This issue is covered more fully in Paragraphs 2.18 - 2.10.




3.1 The Committee received submissions from three State Governments, the ACT government and three local government organisations. The submissions and evidence received supported the Government's proposals to lease the airports in principle. For example, the Victorian Government described the leasing proposals as "an extremely positive step".

3.2 However, the State and local Government submissions and evidence raised a number of significant concerns about aspects of the legislation. These concerns may be broadly categorised as follows:

Airport ownership and control

3.3 All of the State and Local Government organisations that gave evidence to the Committee emphasised the importance of airports in their local economies and the potential adverse impact that common ownership of various national airports might have.

3.4 For example, the Victorian Government advised the Committee that:

3.5 The Victorian Government argued that there should be separate leasing of airports and minimum cross ownership of airports by Australian and foreign equity holders to ensure true independent competition between airports. The Government considered that failure to prevent grouped ownership would have several undesirable consequences and identified these in its submission. Accordingly, it sought Committee support for the previous 15 per cent cross ownership limitation.

3.6 The Commonwealth Government's decision to re-instate the cross ownership provisions in the same form as the 1995 Bills goes some way towards alleviating the concerns of some state governments. However, the South Australian and Western Australian Governments also expressed concerns about the potential effects of cross ownership. As the Government's announcement addresses the ownership of Sydney, Melbourne and Brisbane airports only, the concerns of the South Australian and Western Australian governments are still current.

3.7 The Western Australian Government advised the Committee that the cross ownership provisions "are a major concern". The Western Australian views were based on similar concerns as to those identified by the Victorian Government:

3.8 The Western Australian Government was also concerned about regional development issues and advanced similar arguments to those put forward by the other states. Mr Gary Hodge, Manager, Aviation Policy, Department of Transport, told the Committee:

3.9 Mr Hodge emphasised that aviation technologies were changing and Perth competed directly with airports in the eastern States. He said that if the same operator owned Sydney and Perth, the airport operator could favour one over the other.

3.10 Mr Hodge submitted that common ownership was potentially anti-competitive:

3.11 The South Australian Government also indicated that it was concerned about the impact of airport ownership on regional development, advising that it considered the common ownership of airports to be undesirable.

3.12 The South Australian Government did not seek to have Adelaide airport included in the cross ownership rules. Rather, it argued that there should be a specific inclusion within the legislation that allows for "proper" consultation with the states prior to the final selection of lessees of the airport. The Government argued that as part of the process of assessing the various bids for the airports, the States should have the opportunity to ensure sufficient weighting is assigned to regional economic development issues.

3.13 In the South Australian Government's submission, the Minister for Industry, Manufacturing, Small Business and Regional Development and Minister for Infrastructure, the Hon. John Olsen, FNIA, MP, expressed concern that price was apparently the only matter being taken into consideration by the Airports Sales Task Force in the process of selecting lessees for the airports. Mr Olsen stated that the South Australian Government "is concerned that this is contrary to what has been discussed with the Commonwealth to date". He said that such a strategy "seems to be inconsistent with the Commonwealth's policy aimed at ensuring that the airports effectively support the development of the regions they serve."

3.14 The Hobart Metropolitan Councils Association (HMCA) also emphasised the importance of airports to the Tasmanian economy, for example the tourism industry, which it characterised as "extremely price sensitive".

3.15 The HMCA expressed concern about the introduction of full cost recovery when Hobart airport is leased. The Association advised the Committee that a study conducted for the FAC in 1993 for the Institute of Industry and Economic Research showed that with full cost recovery, Hobart landing charges would rise by 194 per cent, cutting tourist numbers by between 11 200 and 21 200. The loss of tourism revenue to the State would be $11-22 million.

3.16 The Association advised the Committee that it was "vital that the Hobart airport is operated in the best interests of all users of the airport and the community".

3.17 The Association informed the Committee that HMCA had proposed to its member councils that it form a joint authority of councils to submit a proposal to the Commonwealth asking that the joint authority be granted the lease over Hobart airport.

3.18 The ACT Government's position was similar to that of other witnesses. Ms Annabelle Pegrum, Executive Director, Cabinet and Policy Coordination Office, Chief Minister's Department, advised the Committee that:


3.19 In common with the airlines, the State and Local Government submissions criticised the lack of consultation provisions in the legislation.

3.20 In the South Australian Government's submission, the Hon John Olsen, FNIA, MP, drew the Committee's attention to the second reading speech of the Bill which states:

3.21 Mr Olsen noted that it was "somewhat disappointing that the Airports Bill as it stands does not clearly reflect these considerations." He contended that objectives in the second reading speech could be more readily achieved if the States were more closely involved in the planning and development decisions about the airport. Mr Olsen said that as an example, a requirement for State consultation on the airport master plans "would ensure that the airport is better integrated in the state's economic strategy".

3.22 Similarly, the Victorian Government noted that the legislation only provides for consultation with the states in respect of master plans and major development plans after the plans have been prepared. The Government considered that consultation with the States should be part of the preparation of the master plan.

3.33 The Victorian Government raised similar concerns about a lack of consultation in respect of draft environmental plans, the making of regulations concerning on-airport activities, category exclusion or demand management schemes and variation or closure of airport sites.

3.34 The Western Australian Government was also concerned about consultation issues. The Government advised that its principal concern is that the Bills do not provide for adequate State input into future airport operations, planning and development as well as the selection of operators. The Government said that this deficiency was likely to lead to conflicts between commercial developments at the airports and State land use planning objectives as well as the conflicts with the State's transport and tourism objectives.

3.25 The Bankstown City Council considered that there were insufficient provisions in the Bill to require the airport operating companies to consult with interested parties such as local government and community organisations with an interest in the operation of the airports.

Control of activity at airports

3.26 All State and local governments that gave evidence to the committee expressed concern about regulation of non-aeronautical activity and the lack of State and local jurisdiction over organisations operating at airports.

3.27 A common theme in the evidence was that the Bill effectively exempts private industry from:

3.28 For example, the Mayor of Bankstown City Council, Counsellor Grant Lee, told the Committee that:

3.29 The Bankstown Council distinguished between exemption of Commonwealth Government agencies and private companies, arguing that it was inappropriate for private companies operating at airports to be exempt from local planning restrictions. The council submitted that:

3.30 Several submissions contended that companies operating within airport boundaries that were not subject to state laws and charges could enjoy an unfair advantage over similar companies not on crown land. For example, the Western Australian Government noted that:

3.31 The South Australian government raised similar concerns. Mr Michael Milln, Senior Adviser, Aviation, South Australian Department of Transport, told the Committee that the State recognised the need for the Commonwealth to continue to control aeronautic activities on an airport. However, the state considered that non aeronautical commercial activities should be controlled under state planning statutes. Mr Milln advanced two reasons for this view:

3.32 Representing the Government of Western Australia, Mr Gary Hodge, reiterated the position put by the Bankstown Council and by the South Australian Government. Mr Hodge said that the State's position is that the Government must be able to have some say and influence over the land plan issues, issues related to gambling and so on. He acknowledged that the legislation does address these issues but considered it does not go far enough.

3.33 Mr Hodge informed the committee of a situation which had arisen in the recent past in Western Australia that illustrated the State Government's concerns. This was a proposed development of a "Toys R Us" complex on Federal Airport Commission land in Perth. Mr Hodge said that such a development would have decimated every small business within a radius of five kilometres that was in the same business as the development would have been exempt from restrictions on other local businesses, such as constraints on trading hours. Mr Hodge told the Committee that the FAC withdrew that development "because they were good neighbours". He said, however, that he could foresee a situation where a totally private operator would say "we are a Commonwealth place, we will do what we like".

3.34 Similar concerns were expressed by the ACT Government. Mr Gary Prattley, Chief Planner, Executive Director, Planning and Land Management, Department of Urban Services told the Committee:

...we certainly would not want to suggest that there should not be the capacity to develop related uses on airports. That can be an extremely important site for areas of economic activity. The point would be that that should not be capable of being determined solely by the lessee of the airport, but it must be able to be addressed within a state or local government strategic planning framework to make sure it does not compromise the whole future of the town or city.

3.35 Similarly, the Victorian government advised the committee that: would be viewed as intolerable by the state and local governments, the business community and surrounding residents for a private company leasing the airport to carry out a range of airport and non airport related business and not subject to land use and environmental assessment and building control regulations applicable elsewhere in the state.



4.1 At the conclusion of the public hearing conducted on Tuesday, 6 August, Senator the Hon Grant Tambling, Parliamentary Secretary to the Minister for Transport and Regional Development and officers of the Department of Transport and Regional Development addressed a number of the issues that were raised during the hearing and in submissions.

Ownership and control

4.2 Several of the State governments that gave evidence to the Committee sought further dilution of the cross ownership rules beyond those proposed by the government in its amendment. Mr Ivon Hardham, Deputy Chairman, Airport Sales Task Force, indicated that this proposal raised a number of considerations. He said that there is a reasonably limited market for airports given the size of financial institutions who would have to bid for them and tightening the cross ownership rules further could dilute the market for the airports:

4.3 Senator Tambling also responded to the Hobart Metropolitan Council Association proposal that sought control of the Hobart Airport outside of the tendering process. Senator Tambling indicated that the government would welcome local ownership of airports, however, this was only the case as long as an open tender process applied.


4.4 Both the airlines and the state and local government representatives made strong representations to the Committee concerning the lack of consultation provisions in the legislation.

4.5 The Parliamentary Secretary, Senator Tambling, told the Committee that this issue had been raised repeatedly over a number of years. He said that a "creative tension" existed because the airports were Commonwealth places and therefore outside the States' jurisdictions. There was an "apprehension and fear" that the Commonwealth would "flex the legislative muscle that is often required".

4.6 However, Senator Tambling expressed the view that the apparent concerns were unfounded. He said that any critical issues had been properly resolved by negotiation:

4.7 Mr Peter Harris, First Assistant Secretary, Aviation Policy, also cast doubt on the effectiveness of adding any further consultative provisions to the bills. Mr Harris told the Committtee that:

4.8 Mr Harris indicated that the department intended raising with the Minister, Mr Sharp, that the states may be consulted in advance of plans being released by the Minister under statutory requirements in this legislation. However, Mr Harris qualified this statement by indicating that the Minister had not endorsed this proposal.

4.9 Mr Harris indicated that the statutory requirements to consult could in themselves cause problems to arise. He stated that:

Land Use Planning and Building Control

4.10 Senator Tambling advised the Committee that the Government recognised the importance of state and local government views on proposed airport developments, particularly those developments of a non aeronautical nature. Senator Tambling indicated that the Commonwealth was unwilling to concede control of land use planning and building developments on its land to the state and local government authorities. However, Commonwealth regulatory control of planning and building would allow a consistent regulatory regime to be applied at the major airports.

4.11 Mr Peter Harris added to Senator Tambling's answer. Mr Harris indicated that the basic intention of the Bill was that State law would apply unless extinguished by Commonwealth law. He said that State law in regard to issues such as liquor licensing and operating hours of retail outlets would be covered under such an arrangement.

4.12 Committee members questioned the departmental officials regarding some of the examples that had been given about possible unfair advantage that would be given to developments on airports outside of state or local government control. For example, Senator Calvert raised the issue of what would happen if a developer sought to build a casino on airport land and whether such a casino would be subject to the rules of a state government.

4.13 Mr Joc White, Assistant Secretary, Airport Regulation, advised the Committee that part 11 of the Airports Bill 1996 contains provisions which allowed the Commonwealth to control certain on-airport activities such as liquor, commercial trading, vehicle movements, gambling and smoking. Mr White indicated that the Commonwealth had the power to displace straight law if it chose to issue regulations. However, if the Commonwealth did not issue regulations in this area, state law would apply.

4.14 Mr White advised that final decisions have not yet been taken about whether the Commonwealth would issue regulations in this area. Mr White indicated that the Government intended to consult with the States and given them the opportunity to put their views as to whether state law should apply or not. With respect to the issue of gambling and casinos, he emphasised that if no regulations are issued under this part of the Bill, then State laws in relation to gambling would apply.

4.15 Mr White also addressed the question of liability of private companies operating at airports for local rates and charges. He advised the Committee that for legal reasons, it is not open to the Commonwealth to require any direct payment of rates by airport lessees. However, there has been a long standing government policy based on equity grounds.

4.16 Mr White tabled a letter dated 20 November 1987 from the then Minister, Senator the Hon Gareth Evans to the Chairman of the Federal Airports Corporation which set out the Commonwealth's policy in this area. The letter stated that:

4.17 Mr Harris concluded by advising the Committee that although the Commonwealth was unable to compel airport operators to make direct payment of rates to local government and state government authorities in the legislation, it was possible to insert requirements in the individual airport leases to require airport operators to meet the government's requirements in this area.

Economic Regulation

4.18 Senator Grant Tambling clarified the price control arrangements that will apply after the airport leases have been granted to private operators. He stated that a price cap will apply to all charges for aeronautical services as covered by definition in the Federal Airport's Corporation Act. He said that the Australian Competition and Consumer Commission (ACCC) would administer the price cap at major leased federal airports.

4.19 Senator Tambling advised the Committee that the department has sent out a consultation paper outlining the proposed arrangements. This paper was tabled in the Committee and is attached at Appendix IV. Mr Tambling concluded that the price control arrangements are designed to protect users from potential abuse of market power by airport operators and their customers. Comments on the intended arrangements are being sought by 30 August.

Dispute Resolution

4.20 During the hearing the airlines had sought to have provisions inserted in the legislation which would deal with matters such as dispute resolution.

4.21 Mr Peter Harris indicated that the government did not intend to mediate in disputes. He advised that:

4.22 Mr Harris indicated that other suggestions put forth by the airlines concerning matters such as consultation and obligations which enshrine principles would be resolved in a similar fashion through negotiation between the airport operators and the airlines themselves.

4.23 Mr Harris indicated that there was an obvious and clear exception to the government's position on dispute resolutions. This was in a situation where a lessee was able to deal in a anti-competitive manner with an airline. He said there are specific provisions in the legislation and the pricing paper to allow the ACCC to play a role in resolving disputes where it is clear that either the price cap arrangements have been breached or where otherwise there is an exercise of market power by an airport operator.

Minority Report

Senator John Woodley

The Australian Democrats believe the Report of the Committee and its recommendations reflect the evidence given to the Committee at the special hearings. However, the Democrats believe that the privatisation of Australian airports is against the national interest for the following reasons:

Senator John Woodley

Australian Democrat Senator for Queensland





Department of Transport and Regional Development

Department of Finance

ACT Government

Government of South Australia

Government of Western Australia

Bankstown City Council

Hobart Metropolitan Councils Association

Ansett Australia

QANTAS Airways Ltd.