International Air Services

The Howard-Fischer Government will liberalise air travel between Australia and the rest of the world, the Treasurer, Peter Costello, and the Minister for Transport and Regional Services, John Anderson, said today.

The Ministers were announcing the Government’s response to the Productivity Commission report on international air services.

Mr Anderson said: "International air travel is Australia’s link to the world, and underpins our immensely valuable inbound tourism industry. The Coalition’s liberal approach to international air services has been highly successful. Since March 1996, we have increased capacity to and from Australia by the equivalent of 276 Boeing 747s per week. We will now free up international air services even further, within the constraints of the existing bilateral aviation system.

"Australia will, in future, offer foreign international airlines unrestricted access to all of our international airports except Sydney, Melbourne, Brisbane, and Perth. Foreign international airlines operating to regional Australia will have unlimited capacity, codeshare, and own stopover rights.

"Our decision is great news for cities such as Adelaide, Cairns, and Darwin, because airlines will have greater freedom to develop their Australian routes."

"The Government will not allow foreign international airlines to fly domestically within Australia. None of our major trading partners, other than New Zealand, allow Qantas or Ansett to operate domestically within their countries, and the Productivity Commission has concluded that the benefits of removing cabotage would be small."

Mr Costello said: "International air travel is governed by a complex system of bilateral aviation agreements. The Productivity Commission pointed out that the bilateral system has stifled the growth of efficient airlines, as well as hurting consumers and the industries that depend on air travel.

"Australia cannot end the bilateral system by itself. We will, however, seek to negotiate reciprocal open skies arrangements with like minded countries where this is in the national interest.

"Under bilateral open skies, international airlines from Australia and a second country would be free to operate whatever services they wished from one to the other. Australia’s competition laws will be part of any open skies arrangements.

"Bilateral open skies will not affect our ban on foreign international airlines flying domestically.

"In addition, Australia will be proposing that international aviation be liberalised on a multilateral basis through the General Agreement on Trade in Services (GATS) round that begins next year."

Mr Anderson said: "Our new policy will not compromise air safety, which is our paramount consideration. Foreign airlines cannot operate in Australia without an Air Operators Certificate issued by the Civil Aviation Safety Authority (CASA)."

The Government will reform the foreign ownership rules for Australian airlines, to make sure they have the resources to compete effectively in a world of airline alliances.

Mr Costello said: "Foreign persons (including foreign airlines) will be allowed to acquire up to 49 percent of the equity of an Australian international airline, and up to 100 percent of the equity in an Australian domestic airline, unless this is contrary to the national interest.

"The Government will retain the existing ownership restrictions on Qantas, which limit foreign ownership of Qantas to 49 percent, ownership by foreign airlines in aggregate to 35 percent, and ownership by an individual (including a foreign carrier) to 25 percent."

The other features of the Government’s response are:

• Australia will offer unrestricted access to all international airports for dedicated freighters.
•   Australia will, in all cases, aim to achieve a more liberal regime for designating international airlines.
• the Government will establish a formal consultation process to help develop its position in international air services negotiations.
• the Government will reform the roles and responsibilities of the International Air Services Commission (IASC) to simplify the processes for allocating capacity to Australian airlines.