Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

I ask leave of the House to make a ministerial statement relating to the Australia-United States ‘Open Skies’ Agreement.

Leave granted.

Last week the Australian government successfully negotiated an open skies agreement with the United States. This development represents a watershed for trans-Pacific aviation. Under the new agreement, Australian and United States airlines will be able to fly an unlimited number of services between our two countries through any combination of other destinations. This agreement has been a priority for me and the government since our election last year. The agreement with the United States opens the way for increased competition, new services and the potential for lower fares on one of Australia’s most important air routes. The United States is Australia’s third largest aviation market, with 48 Australian and 17 US services weekly on the Australia-United States route. In 2007, nearly one million passengers travelled each way between Australia and the US—around 496,000 Australians departing for the US and 459,000 American arrivals in Australia.

Over the last 10 years, the Australia-US route has seen an average annual growth of 3.3 per cent, a figure with real hope of substantial improvement through this landmark open skies agreement. The Rudd Labor government is committed to opening further opportunities for Australian aviation, trade and tourism, resulting in the creation of jobs for Australians. Tourism is already responsible for around half a million jobs in Australia, and this agreement should help to further strengthen our tourism industry. The agreement allows airlines to determine how many flights they operate and the destinations they wish to serve in the United States and beyond, based on consumer demand and commercial decisions without interference from government. This enables a wider range of options for consumers and a more competitive market.

Previously, entrants were only guaranteed a start-up of four services a week, making it difficult for new airlines to commence operations on a commercial basis. The Australia-US agreement negotiated last week now opens the way for V Australia, the Virgin Blue subsidiary, to commence services from November this year. I am very pleased to advise the House that V Australia has confirmed that, with the signing of this agreement, it will now proceed to introduce 10 services a week to the US from the end of this year. V Australia is investing more than $2 billion in the purchase of six new long-range B777 aircraft. This is an investment in Australian jobs, Australian skills and opening up new markets for Australian companies. The agreement will provide certainty for Qantas and Jetstar to plan and grow into the future and widen the network of cities they can serve in the United States and beyond the US market. The Qantas Group currently operate 48 services a week on the Pacific route. They have indicated that this will increase to 51 services a week from March of this year. It also opens greater opportunities for dedicated air freight services and greater access for Australian carriers to destinations in the US and beyond. The agreement has been welcomed by Australian airlines and the tourism industry. In a statement on Friday, 15 February, the Tourism and Transport Forum said:

The new arrangements will result in more choice and improved access for U.S. visitors, enabling the industry to more effectively market Australia’s tourism experiences in the USA.

Liberalising Australian skies and opening markets for Australian carriers will drive growth through competition and remove unnecessary regulatory burden on businesses. Aviation is a major industry in Australia and growth can only mean more jobs for Australian workers in the aviation industry and more choice for Australian consumers. Australia has been a long-standing leader in the benefits of liberalisation, and the international aviation sector has been no small element of the picture. Australia has extensive experience of the benefits of liberalisation. Following deregulation by Labor, our domestic market has gone from strength to strength. We now have one of the most competitive domestic aviation markets in the world. In recent years, we have seen the global growth of new low-cost international carriers. Jetstar and Pacific Blue are now adding to the range of competitive services available to and from Australia. The new generation of low-cost international carriers—Jetstar, Pacific Blue and foreign operators such as Tiger Airways and AirAsia X—will continue to build competition in the Australian market, offering cheaper fares and new options for tourists travelling to and from countries such as Singapore, Malaysia, Japan and New Zealand. The agreement concluded with the US will now enable a second full-service, long-haul Australian international airline. With V Australia’s entry into the lucrative Australia-US market, we anticipate a new dimension in competition on the route.

As an island nation with a significant tourism industry, the airline industry is a major contributor to Australia’s economy. Our tourism industry and our high-value, time-sensitive export industries depend on these links, supporting a whole raft of downstream industries. We need to make sure that we are maximising the benefits that a strong Australian based aviation sector can offer our country. This does not mean opening our skies while other countries keep their own markets closed. This would do nothing but allow other airlines to exploit our markets without allowing the Australian airline industry to compete. Australia is by no means the end of the world, but we are in many ways the end of the line in global transport linkages. Our position as an end-point destination leaves us with few competitive traffic rights to trade in order to gain access to valuable markets overseas. Beyond the realm of air services agreements, broader commercial settings in other countries, such as government subsidies and support, bankruptcy protection and divergent tax regimes, create further market distortions. These accentuate the competitive advantages many foreign airlines enjoy, compounding their geographic advantages over end-point Australian carriers.

Unlike most sectors, the trade in air services is closed until governments act to open the market. The new Rudd Labor government will drive an active strategy to further liberalise the aviation sector, seeking cooperation with like-minded partners. In a system of unbalanced economic advantage, we must take a pragmatic approach to our liberalisation strategy, acting in the overall national interest. We will aim to reduce restrictions which limit growth while ensuring that the Australian industry can compete with international operators on a balanced playing field. We are committed to growing Australian based international airlines, as aviation is our critical link to the rest of the world. Importantly, as government removes unnecessary economic regulation and opens our skies, we must ensure that safety and security are not compromised. All new services must continue to meet the requirements of the Civil Aviation Safety Authority and security agencies to keep our skies safe and secure.

Since my appointment on 3 December last year, I have met with the CEO of Qantas, Geoff Dixon, and the CEO of Virgin Blue, Brett Godfrey, to consult on the details of the proposal. On 5 February, I welcomed the US ambassador, His Excellency Robert McCallum Jr, and economic counsellor Edgard Kagan to Parliament House for discussions on the proposal. I want to place on record the government’s thanks to the US ambassador for his active support of the deal. I am proud to commence my term as Minister for Infrastructure, Transport, Regional Development and Local Government with this success in the United States. I thank my colleagues the Minister for Tourism and the Minister for Trade for their support. I would like to congratulate the officials from my department and Australia’s embassy in Washington who worked so hard to negotiate this deal, in particular Mr Stephen Borthwick, Australia’s lead negotiator, and his team.

This agreement also demonstrates the strength of the Australia-US relationship. The United States is one of Australia’s most important economic partners, and the agreement will provide great opportunities for increasing trade and commercial links between our two countries. Just as important is the recognition that the strength of our relationship is based upon the personal interaction of our citizens. The increasing two-way travel between Australia and the United States which will derive from this agreement will have a long-term benefit in increasing understanding and friendship between our two great nations. More broadly, this agreement on one of Australia’s most important air routes signals the next step in growth not only for Australian aviation but also for our tourism and business sectors.

Anthony Byrne (Holt, Australian Labor Party, Parliamentary Secretary to the Prime Minister) Share this | Link to this | Hansard source

by leave—I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Truss speaking for a period not exceeding 9 minutes.

Question agreed to.

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

I thank the Minister for Infrastructure, Transport, Regional Development and Local Government for making a statement to the House today on the Australia-United States ‘Open Skies’ Agreement and, in particular, for choosing to make a ministerial statement rather than answer a dorothy dixer at length, as many of his colleagues did during question time today. I also congratulate him and the Department of Infrastructure, Transport, Regional Development and Local Government in good grace on the completion of this air services agreement.

The minister spoke about his pride in this achievement and complimented a number of people who were involved in the agreement. If he had been a trifle more gracious, he might have even acknowledged that this was a set of negotiations that was commenced by the previous government and was well advanced when he took office. In fact, I can recall that, when Virgin Blue came to me, as Minister for Transport and Regional Services, and expressed their interest in opening up services to the United States, the barriers that exist with the four-flights rule arose as an issue that would need to be addressed.

These discussions go back for something over two years. In July of last year, following detailed discussions at an official level in the United States, it was agreed that there should be a discussion about a more comprehensive new air transport agreement. Then, on 29 September 2007, Minister Vaile and the US Secretary of Transport, Mary Peters, formally confirmed each country’s commitment to further strengthening the aviation relationship through a more ‘open skies’ arrangement.

This new air services agreement is a significant advance and will provide more opportunities for air services between Australia and the US. However, we should avoid picking up too much of the US terminology of ‘open skies’ in relation to an agreement like this one. Whilst it is true that it will allow some more liberalisation of arrangements, it is a long way short of ‘open skies’. The minister used the word ‘landmark’, although this agreement goes little further than the agreement negotiated in 2006 with the UK; it is very similar in content. However, it is nowhere near as free and open as is our arrangement with New Zealand, which is perhaps the closest anywhere in the world to a genuine open skies arrangement. The Americans like to use the term ‘open skies’ but in reality there is still a host of restrictions in place which prevent competition with US airlines.

I do not think we should ever use the term ‘open skies’ in the context of an agreement with the US. Indeed, the minister in his statement made the comment, in looking at what our aviation policy should be, that we should ‘not open our skies while other countries keep their own markets closed: this would do nothing but allow other airlines to exploit our markets, without allowing the Australian airline industry to compete’. The reality is that this agreement actually does that, because the United States is not lifting the restrictions on Australian airlines operating in the US. It will still not be possible for an Australian airline to run domestic services in the United States, whereas a US airline is quite at liberty, and has been for a long time, to operate air services within Australia. The minister then went on to make the very valid point that many international airlines are supported by government subsidies, bankruptcy protection and divergent tax regimes, all of which create market distortions. Of course, again, that classically applies to the US market.

While this is a freer and more open agreement, the reality is there will still be substantial restrictions on the capacity of an Australian airline to operate within the US, and it is simply unlikely that the US Congress would agree to the lifting of those sorts of restrictions. It is perhaps a little unfair to characterise this as an ‘open skies’ agreement. Nonetheless, it will provide significant opportunities for Virgin Blue—or V Australia now—to undertake services to the US, as it has planned, and hopefully allow other airlines to enter the route.

As the minister rightly mentioned, tourism to and from the United States is particularly important. The shadow minister for tourism, the member for Moncrieff, is amongst those who have spoken very effectively on the importance of this agreement and the need to open up better transport links with the United States. We would like to have more visitors, more tourists, from the United States. It is a high-yield market and it is disappointing that more US tourists do not come to this country.

There are two significant airline initiatives which could boost tourism numbers from the United States to Australia. The first is to allow low-cost carriers on the route to encourage people to put competitive fares on to that market. With Jetstar and V Australia now committed to providing low-cost fares on the route, I think that we will see real competition for the first time and, as a result, more people will be encouraged to travel—although I suspect there may be more people encouraged to travel on cheap fares from Australia to the United States, rather than vice versa.

I therefore come to the second point, which would be even more important in encouraging US visitors to come to Australia, and that is having more US carriers operating on the route. The reality is that only United Airlines services Australia at the present time, apart from a service by Continental from Guam into Cairns. United Airlines provides fairly ordinary services, only going to Sydney and to Melbourne. If we could have more US carriers on the route, then more US tourists would come to Australia, because US passengers like to fly on American airlines. There is probably a stronger nationalistic tendency in the US than anywhere else.

There have been no restrictions on more US carriers coming to Australia—a number of airlines have tried it in the past but failed—but there has not really been the commitment that is necessary from US carriers to enter this route and to bring the number of Americans there should be to enjoy the tourism experiences of Australia. This agreement will not in fact make any advances in that regard, other than perhaps potentially opening up an option for on-carriage. The on-carriage options are welcome but they are always dependent on a third country also agreeing. For instance, the minister mentioned that airlines will be able to travel through various alternative countries between Australia and the United States. But some countries are unlikely to grant that approval—for instance, Japan, which would be a prime option for routes between Australia and the US. The Japanese are most unlikely, in their current mood, to allow that sort of traffic. So there will still be limitations from that perspective.

We do need to attract a wider range of US carriers to the Australian market. Hopefully, with V Australia and Jetstar entering the market and Hawaiian, Canadian and other airlines having an interest, we will have more North American carriers coming to Australia. I think it is also important that these carriers come not just to Sydney; the Sydney market is well serviced at the present time by United and Qantas. What I would like to see is more direct flights into Melbourne, Brisbane, the Gold Coast and indeed other tourist destinations in Australia, such as Cairns. Those are the places that could benefit from the advent of lower cost carriers bringing tourists from the US to Australia.

This needs to be a commitment from both sides of the Pacific. We want US carriers to take up these opportunities and Australian carriers to recognise the flexibility that this agreement provides so that the flights are there to bring people to Australia for a cost-effective holiday. I welcome this new air services agreement. It is somewhat short of being ‘open skies’, but it is a substantial advance and we need to recognise the opportunity and the example that this provides for other air services agreements between Australia and our aviation partners.