Chapter 2 - Key issues

Chapter 2Key issues

Introduction

2.1Most submitters and witnesses supported the intent of the bill, with some concerns raised about specific provisions, including:

the definition of a 'disruption' to trigger the recovery period;

the definitions of 'slot misuse' and 'slot misuse exemptions'; and

the potential administrative burden of increased reporting requirements.

2.2This chapter outlines these concerns and concludes with the committee's view and recommendation.

Recovery period

2.3The majority of submissions to the inquiry supported the introduction of a recovery period as a mechanism to 'reduce delays and cancellations'.[1]

2.4Mr Marty Hawley, Chief Executive Officer of regional airline FlyPelican, expressed support for the recovery period, explaining the impact a disruption at Sydney Airport can have on the entire regional network:

Weather or other events into Sydney airport can have a really detrimental effect on regional operations, especially when you're only operating to some regional destinations a few times a week or once or twice a day… it could end up affecting our network for the next couple of days.[2]

2.5The Freight & Trade Alliance also expressed its support for the recovery period, explaining that:

This [the recovery period] will not only benefit passengers by reducing cancellations but will also enable freight services to recover quickly, ensuring continuity in global supply chains and preventing costly delays for Australian businesses and our members.[3]

Definition of 'disruption'

2.6While there was overall support for the introduction of a recovery period, there were varying opinions on how a 'disruption' should be defined in subordinate legislation. Many stakeholders advocated for a flexible definition, while others argued for stricter requirements around what constitutes a 'disruption'.

2.7For example, Sydney Airport submitted that the mechanism for implementing the recovery period within the re-drafted Slot Management Scheme must be drafted in a way that 'is flexible and adaptive' otherwise 'the recovery period may not eventuate as often as anticipated'.[4] Australian Airports Association echoed this view stating, 'it is crucial that the parameters governing the trigger for recovery periods are not too conservative'.[5]

2.8In contrast, submissions from members of the Sydney Airport Community Forum (SACF), argued the recovery period declaration should be guided by 'a closely defined set of criteria'. Mr John Clarke, Acting SACF Community Member for the North, said a definition for disruption should be included in the bill, and this definition:

… must fall within a closely defined set of criteria, be themselves exceptional and significant, and have substantial impact on operations for there to be a declaration of a recovery period.[6]

2.9At the public hearing, the department clarified the government's decision to leave the definition of a 'disruption' to subsequent regulations. Departmental officials explained that the government had decided to incorporate the definition into the regulations to allow for 'flexibility in case we do not get the settings quite right', noting that it is a 'quicker process' to change regulations, and regulations are disallowable instruments, so they are still subject to parliamentary scrutiny.[7]

85 movements

2.10Stakeholder perspectives also differed on the number of additional movements which would be sufficient to aid recovery after a significant disruption.

2.11Several stakeholders were supportive of increasing the recovery period cap to a greater number of movements and hours.[8] The International Air Transport Association (IATA) suggested that 'referring to the capability of the operation in that hour', instead of a dictated 85 movements would be a more appropriate way of aiding the return of normal flight movements. IATA submitted:

… 90 [movements] might be possible at the time of recovery, thereby preventing the need for an extended recovery hour, and helping the recovery to take place quicker.[9]

2.12IATA also recommended an amendment to remove the restriction in the bill which states that the recovery period declaration must occur on the same day as the disruption:

Restricting the recovery period declaration to the same day may be too limited under circumstances where ongoing disruption is expected to roll into the next day, or if disruption occurs early in the day prior to the morning peak.[10]

2.13Members of SACF were not as supportive of the additional aircraft movements that would be permitted during the proposed recovery period. Mr Kevin Hill, SACF representative for the South, questioned whether there was any precedent to introduce a recovery period, or raise the movement cap at all, saying:

No evidence has been provided that the need for the proposed increase in the cap from 80 to 85 movements per hour, in particular circumstances, has ever existed or is ever likely to exist.[11]

2.14Mr Clarke also expressed concern with the additional aircraft movements, stating that:

Until now the 80 movements per regulated hour cap has been a sacrosanct protection for the noise impacted community, and a recovery period provides for the first 'chink in the armour'.[12]

2.15The creation of a 'recovery mode', where an additional 5–7 movements are permitted was a recommendation of the Harris Review.[13] At the committee's public hearing, Mr Peter Harris AO reaffirmed his support for the additional five movements during a designated recovery period, describing it as a 'marginal shift' which allows Airservices Australia to 'move a couple of hundred people home after an incident when they wouldn't otherwise have been able to move because of the nature of operating caps'.[14]

2.16Mr Harris also communicated the importance of keeping the community 'on side' and emphasised the importance of not changing 'the 80 cap other than in that very explicit set of circumstances called recovery mode'. He also suggested that the reasoning for the recovery period should be 'published as in close to real time so communities know that we did exceed 80'.[15]

Safety

2.17While supporting the intent of a 'recovery period', other submitters put forward additional recommendations about the recovery period's eventual execution. The Australian Airline Pilots' Association supported the introduction of a recovery period but argued that:

Operational efficiency must never come at the expense of safety. Any proposed changes, particularly with the increase of the number of hourly movements, should continue to prioritise safety over throughput (movements).[16]

2.18Representatives of Airservices Australia emphasised that, after a recovery period is triggered, 'safety will remain our prime consideration', explaining to the committee that Airservices has already commenced the process of running the changes 'through the safety management system'.[17]

Timely decision making

2.19Virgin Australia emphasised that a recovery period 'declaration' must be done in a 'timely manner'.[18] In its submission, Virgin Australia noted that 'the decision to implement a recovery period may require input from multiple government agencies'. To avoid any unnecessary delays, Virgin Australia recommended that airlines are actively involved in the early stages of a decision, 'rather than waiting for advice from government agencies at the conclusion of the deliberations'.[19]

Strengthening compliance

2.20Submissions supported the bill's strengthening of compliance mechanisms, especially as a preventative action against slot hoarding.

2.21Slot hoarding by major airlines was a common theme in several submissions. The Australian Chamber of Commerce and Industry shared its concerns with the current slot management system and the need for greater compliance:

The slot regime currently entrenches inefficiency as it is open to manipulation by airlines and permits misuse. Addressing inefficient slot allocation and slot misuse is critical to ensuring competition amongst airlines, efficient use of critical infrastructure, and value for consumers and the Australian economy.[20]

2.22Sydney Airport's submission also spoke to slot misuse, explaining that:

The current slot system incentivises incumbent airlines to hold more slots than they need, which reduces the opportunity for competition. Currently, the incumbent major airlines hold almost 70% of all slots at Sydney Airport, and their slot holdings have continued to increase on the busiest domestic routes despite these markets not growing in line with the corresponding slot filings from a passenger perspective.[21]

2.23A similar view was expressed by the Australian Airports Association:

The existing slot allocation system, in place since 1997, has become a barrier to competition, allowing a duopoly that stifles the entry of new carriers and ultimately limits consumer choice. This has led to inflated prices, and restricted access for regional airlines and consumers alike.[22]

2.24Canberra Airport outlined the high cancellation rate of Qantas and Virgin flights on the Canberra to Sydney route (Table 2.1) and expressed support for the bill, saying:

… the introduction of civil penalties will contribute to a reduction in cancellation rates. In particular, the creation of the offence of applying for slots with no reasonable prospects of use will disincentivise airlines from engaging in slot hoarding.[23]

Table 2.1Cancellation rates on the Canberra to Sydney route between June and September 2024, in comparison to the national average.

Month

Qantas

Virgin

National

June 2024

7.5%

3.8%

2.5%

July 2024

7.7%

6.1%

3.0%

August 2024

7.2%

3.9%

2.9%

September 2024

8.0%

5.3%

2.0%

Source: Canberra Airport, Submission 1, p. 3 amended to include September data from Bureau of Infrastructure and Transport Research Economics (BITRE), Domestic airline on time performance - September 2024, Statistical Report, October 2024, pp. 1 and 13.

2.25Notwithstanding this support, some submitters raised concerns with, and requested greater clarity on, what would be considered 'slot misuse' under the legislation.

2.26For example, the Board of Airline Representatives Australia (BARA) argued that it is:

… not clear from the Bill how the penalty system will be applied… and BARA members are concerned that they could beinappropriately non-compliant and subject to civil penalties.[24]

2.27IATA recommended that exemptions to slot misuse must be flexible and diverse, suggesting that the legislation include exemptions that align better to IATA's 'Justified Non-Utilization of Slots Eligibility'.[25] Virgin Australia echoed this sentiment, saying the 'proposed exemptions for slot misuse may not cover all realistic factors that are outside of the airline's reasonable control', and if penalties for slot misuse were not designed effectively, they could 'unintentionally penalise legitimate long term planning'.[26]

2.28However, Sydney Airport welcomed the additional civil penalties proposed in the bill, explaining that under the existing legislation 'there has never been a fine issued for misuse of slots … because it has been very difficult to prove the use of slots and how they're utilised'.[27] Sydney Airport representatives explained that this lack of compliance action was exacerbated by the limitations of the Compliance Committee:

… the compliance committee's terms of reference were so narrow that they effectively weren't really able to look at misuse of slots and whether airlines were holding onto too many slots.[28]

2.29Representatives from Australian Airports Association echoed Sydney Airport's support for strengthening the compliance regime, stating their opinion that the additional 'civil penalties really will help maintain a more efficient slot allocation system'.[29]

2.30The department maintained that the introduction of a suite of new civil penalties 'will provide additional tools for the Government to manage slot misuse at Sydney Airport'. The regulations will not only address the civil penalty regime but also 'feature new powers regarding the Compliance Committee'.[30]

Improved transparency

2.31The bill 'contains a range of enhanced transparency requirements' to ensure 'the travelling public has better information about airline performance'.[31]

2.32The majority of stakeholders were supportive of the bill's intent to improve transparency around slot use.[32]

2.33The Australian Travel Industry Association said the additional powers that allow the Minister to compel airlines to produce information on slot usage, 'will help to bridge the information gap consumers have on changes and cancellations compared with other countries, such as the United Kingdom'.[33]

2.34Sydney Airport was also supportive of the new transparency mechanisms included in the bill, stating:

The collection and sharing of appropriate, accurate, and timely data is critical to the efficient operations of airports, for building public confidence in the aviation system, and improving aviation competition outcomes.[34]

Increased reporting requirements

2.35While 'committed to transparency', Virgin Australia raised concerns around the potential administrative burden that can come with increased reporting requirements. Virgin noted in its submission that the airline already provides operational data to the Bureau of Infrastructure and Transport Research Economics, and thus requested that any 'additional data being collected needs to be fit for purpose, appropriate to the intent of the bill and not become an administrative cost burden for airlines'.[35]

2.36The Regional Aviation Association of Australia sought reassurances from the government that'there is no onerous requirement put on those operators in terms of the reporting', explaining that:

… in terms of the legislation, it's going to enshrine requirements for greater reporting. That is a good thing.

The only caveat on that from the association's perspective is that our operators aren't large airlines. We don't have the capacity to build complicated or involved IT systems. We would strongly advocate for reporting that is fit for purpose for the nature of the operation.[36]

2.37Under the amended legislation, the scope of information that airlines will be expected to publish would be further detailed in the regulations.[37] In developing these regulations, the Explanatory Memorandum stated that the government would continue to work with stakeholders to ensure the reporting requirements are fit-for-purpose:

These regulations are likely to be technical in nature and will require a detailed consultation with industry in relation to best way to publish information while ensuring that the publication of records is useful and aligns to the goal of enhancing transparency. Given this, it is considered appropriate for these provisions to be provided in the regulations rather than contained in the Act to provide for flexibility noting that it is likely that future amendments may be required in relation to these processes.[38]

80:20 rule

2.38Several stakeholders, including Canberra Airport, raised concerns around the lack of change to the current 80:20 rule. Under the current arrangements, airlines can maintain a slot if they use it 80 per cent of the time. Canberra Airport submitted, 'allowing an airline to retain a slot even if it does not use it 20 per cent of the time has demonstrable impact on passengers and on the efficient utilisation of slots under the scheme'.[39]

2.39The Harris Review also suggested that consideration should be given to imposing a 'stronger test on domestic interstate flights than the present 80:20 rule—for example, a 90:10 rule'. However, the Harris Review concluded that 'the evidence is not there to justify this'.[40]

2.40When the department was asked about the current 80:20 'use it or lose it' rule, officials from the department confirmed that, while the current bill does not make changes to the 80:20 rule, it is the government's intention that the 80:20 rule will be considered in the next Productivity Commission report into the economic regulation of airports. Officials at the hearing explained:

… there are varying opinions about what that number should be, which is why we've foreshadowed that the Productivity Commission will be considering that in their next regular review of the economic regulation of airports.[41]

Committee view

2.41The Sydney Airport Demand Management Act 1997, enacted by the Howard Government, has played an essential role in balancing operational capacity at Sydney Airport with community concerns around aircraft noise, as well as ensuring critical access to regional NSW cities and towns. However, evidence received during the inquiry makes it clear that, over time, this framework has become too restrictive – after over 25 years this is to be expected.

2.42This amendment bill proposes a suite of reforms which will deliver operational efficiencies, improve market competition, and better consumer outcomes, whilst maintaining the original commitments made to the community around limiting and sharing aircraft noise.

2.43The introduction of a recovery period is overwhelmingly supported by the sector and stands to benefit the travelling public. The efficient functioning of Sydney Airport is essential to the operation of the entire domestic network. Being able to clear an additional ten flights after a major disruption at Sydney Airport will have positive flow-on effects that go beyond just those ten aircraft movements at Sydney Airport. The committee is also reassured that safety will remain the overarching consideration when determining if, and when, these additional flights are authorised.

2.44The committee understands that a definition for 'disruption' and thresholds that trigger the recovery period are still being determined and will be outlined in subordinate legislation. The committee recommends that the department continues to engage with all interested stakeholders on the drafting of the regulations.

2.45The committee supports the bill's strengthening of the compliance regime. The additional civil penalty provisions introduced in the bill will better enable the Government to manage slot misuse at Sydney Airport.

2.46The committee also welcomes the additional transparency powers introduced in the bill. These powers and airline reporting requirements will help ensure that the public has better access to information about airline performance.

2.47The committee notes that the full details of these additional reporting requirements will be laid out in the regulations. The committee recommends that the department continues to engage with stakeholders, particularly smaller regional airlines, to ensure these additional reporting requirements are fit-for-purpose and do not impose an unnecessary burden on these businesses.

2.48The committee is satisfied that the Sydney Airport Demand Management Amendment Bill 2024 will support the government's commitment to enhancing competition and productivity in Australia's aviation sector.

Recommendation 1

2.49The committee recommends that the Senate passes the bill.

Senator Glenn Sterle

Chair

Footnotes

[1]Canberra Airport, Submission 1, p. 2.

[2]Mr Marty Hawley, Chief Executive Officer, FlyPelican, ProofCommittee Hansard, 12 November 2024, p. 10.

[3]Freight & Trade Alliance, Submission 8, p. 1.

[4]Sydney Airport, Submission 2, pp. 1−2.

[5]Australian Airports Association, Submission 4, p. 2.

[6]Mr John Clark, Submission 9, pp. 1–2.

[7]Ms Belinda Sachse, Acting Assistant Secretary, Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA), ProofCommittee Hansard, 12 November 2024, p. 57.

[8]See, for example: Canberra Airport, Submission 1, p. 2; Regional Aviation Association of Australia, Submission 13, p. 2.

[9]International Air Transport Association, Submission 14, p. 2.

[10]International Air Transport Association, Submission 14, p. 2.

[11]Mr Kevin Hill, Submission 10, p. 1.

[12]Mr John Clark, Submission 9, p. 1.

[13]Peter Harris AO, Review of the Sydney Airport Demand Management Scheme, February 2021, p. 45.

[14]Mr Peter Harris AO, Private Capacity, ProofCommittee Hansard, 12 November 2024, p. 46.

[15]Mr Peter Harris AO, Private Capacity, ProofCommittee Hansard, 12 November 2024, p. 45.

[16]Australian Airline Pilots' Association, Submission 11, p. 2.

[17]Mr Peter Curran, Deputy Chief Executive Officer, Airservices Australia, ProofCommittee Hansard, 12 November 2024, p. 50.

[18]Virgin Australia, Submission 17, p. 1.

[19]Virgin Australia, Submission 17, p. 1.

[20]Australian Chamber of Commerce and Industry, Submission 3, p. 2.

[21]Sydney Airport, Submission 2, p. 2.

[22]Australian Airports Association, Submission 4, p. 2.

[23]Canberra Airport, Submission 1, p. 3.

[24]Board of Airline Representatives Australia, Submission 15, p. 2.

[25]International Air Transport Association, Submission 14, p. 2.

[26]Virgin Australia, Submission 17, p. 2.

[27]Mr Scott Charlton, Chief Executive Officer, Sydney Airport Corporation Ltd, ProofCommittee Hansard, 12 November 2024, p. 18.

[28]Mr Joe Dennis, Head of Public Affairs, Sydney Airport Corporation Ltd, ProofCommittee Hansard, 12 November 2024, p. 23.

[29]Mr Simon Westaway, Chief Executive Officer, Australian Airports Association, ProofCommittee Hansard, 12 November 2024, p. 23.

[30]DITRDCA, Submission 5, p. 3.

[31]DITRDCA Arts, Submission 5, p. 3.

[32]See, for example: Australian Airports Association, Submission 4, p. 2; Australian Business Aviation Association Inc., Submission 6, p. 2; Australian Travel Industry Association, Submission 7, p. 2; Freight and Trade Alliance, Submission 8, p. 2.

[33]Australian Travel Industry Association, Submission 7, p. 2.

[34]Sydney Airport, Submission 2, p. 2.

[35]Virgin Australia, Submission 17, p. 3.

[36]Mr Rob Walker, Chief Executive Officer, Regional Aviation Association of Australia, ProofCommittee Hansard, 12 November 2024, p. 10.

[37]Rodney Bogaards and Tim Brennan, Sydney Airport Demand Management Amendment Bill 2024, Bills Digest No. 26, 2024-25, Parliamentary Library, Canberra, 2024, p. 14.

[38]Sydney Airport Demand Management Amendment Bill 2024, Explanatory Memorandum (EM), p. 32.

[39]Canberra Airport, Submission 1, p. 4. See also: Mr Scott Charlton, Chief Executive Officer, Sydney Airport Corporation Ltd, ProofCommittee Hansard, 12 November 2024, p. 16.

[40]Peter Harris AO, Review of the Sydney Airport Demand Management Scheme, February 2021, p. 36.

[41]Ms Belinda Sachse, Acting Assistant Secretary, Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA), ProofCommittee Hansard, 12 November 2024, p. 58.