OPENING OF THE 46TH AIA ANNUAL CONFERENCE

  • Maurice Williamson
Transport

President
Delegates
Thank you for your welcome, Mayor Woollaston

I am delighted to be here to open the Aviation Industry Conference. Occasions like this provide the opportunity to share informaiton on issues that are important to us all. It is vital that communication occurs between the different sectors of the transport industry, especially between the public and private.

The media is buzzing with reports on the progress of the single aviation market. The Conference is timely to report on this issue and on recent aviation safety initiatives, and an update on where we are at with the Airport Authorities Amendment Bill.

SAFETY INITIATIVES AND ISSUES

AIA/CIA Memorandum of Understanding

· The process for developing Government policy and safety initiatives in the aviation industry now and under MMP relies heavily on consultation with industry and industry representatives.

· I am pleased with the relationship that has developed between the CAA and the AIA. The Memorandum of Understanding signed between CAA and the AIA is evidence of the commitment to this working relationship. I am glad to see that the memorandum hasn't been left on the shelf to gather dust. I understand that both parties have held summit meetings since last years' Conference and I am glad to see that the first joint report required as a result of the memorandum will be tabled at this Conference.

Rules rewrite

· The CAA is currently making good progress with the rules rewriting program. The Government is also committed, through recent estimates meetings, to maintain funding for the major rules rewrite project. I am pleased to report that virtually all the rules should be completed by 28 November this year when the regulations expire.

· The CAA rules team will be making presentations on the new rules to flight operations and engineering divisions at this Conference.

· Members of the rules team are also available to answer members' specific questions on other rules.

Safety and Human Factors - Report on the ACIO Conference

· Earlier this year, March 1996, I gave the opening address to the Third International ICOA Symposium on Human Factors. New Zealand hosted the Conference, which was by far the best attended and by all reports a great success.

The human factor has become the target of the aviation industry world wide in efforts to reduce aircraft accidents.

Statistics show that some 85% of aviation accidents are due to human error.

Aviation, in common with other high technology industries, is a complex system involving the interaction of people, technology and organisations.

· The focus of the Conference and the whole human factors debate was on ways and means of improving this interaction in order to minimise the possibility of error.

Professor James Reason a pioneer of work in the area spoke at the Conference and presented some strong messages to industry on the current focus of research.

He made the point that over the years the focus of safety concerns has switched from developing technology to engineer human error out of aviation, to looking at technology and its interface with the operating crew. Now the focus is on organisations and managerial failures.

· We are now in the age of the "organisational accident".

Professor Reason made the point that it is one thing to trace the origins of an accident back to an organisation or system deficiency. The real difficulty is in developing solutions at the organisational level that reduce the risk of the same or similar accident occurring again.

There is a challenge there that can best be met by you the managers of the industry. The responsibility for safety rests as much with the chief executives and members of a board of a company as it does with pilots, engineers and air traffic controllers.

· It is the senior management of the company that establishes the climate for safety, whether for example it is one which fosters and promotes a free and open dialogue on safety issues or represses debate and encourages employees to constantly turn a blind eye and use safety practices that nibble at the margins of safety that have been built in to the system.

· The message that was stressed time and time again at the Conference and I want to leave you with today is that it is your responsibility as managers to create the safety culture in your organisation/company by developing the policies, practices, values and attitudes which foster a free and open safety culture.

More money to CAA

· Based on recommendations from the Chairman of the CAA, I have approved an increased budget to ensure CAA can continue to perform its functions at a high level.

· The CAA budget has increased from 12.8 million dollars last year to 14.6 million this year. This will be achieved without increasing the rates of the current passenger and participation levies; nor will the basic CAA hourly charge increase.

· Most of the increased activity supported by this increased budget is technical work to meet industry demands in sectors such as rapid development of trans-tasman airline operators and to ensure that appropriate levels of auditing and monitoring are maintained. Additional technical positions are already being filled by the Director of Civil Aviation to meet these demands.

INTERNATIONAL AVIATION DEVELOPMENTS

N.B. The time sensitivity of the SAM material means that some amendment may be necessary before delivery

Turning now to international aviation developments.

Unlike in the case of domestic air services, the government retains an active role in the economic regulation of international air services.

And, as there are few signs of multilateral agreement to liberalise in this area, this role is likely to remain for the foreseeable future.

After all, this is an area where the governments at both ends of an international air route must agree before economic liberalisation can happen.

To use a cliche - it takes two to tango.

And, although New Zealand officials take every opportunity when negotiating air rights with our bilateral partners to press for more market driven arrangements, most countries are not noted for their liberality in this area despite some public protestations to the contrary.

So governments will continue to be involved in the business of negotiating the exchange of air rights on a bilateral basis - determining what routes may be flown, with what aircraft capacity and frequency, and even what tariffs may be charged, although in New Zealand the Ministry of Transport has almost completely got out of the tariffs approval business.

Then, when the air rights are limited, governments that permit more than one international airline to be owned and controlled in their territory are faced with the task of allocating those rights out to individual airlines.

In New Zealand's case, I do this in my role as International Air Service Licensing Authority.

The work of the Authority is still governed by a 1947 Act - something out of the flying boat era - but I am confident that this will soon be replaced by new provisions in the Civil Aviation Bill currently before Parliament.

My portfolio will continue to have the role of being the Authority under the proposed new law and, with a second New Zealand international passenger carrier, Kiwi International, now operating, it may not be too long before the Authority is having to decide on conflicting applications for the same set of air rights.

The days of Air New Zealand being able to automatically assume that any international air rights negotiated by the New Zealand Government with the governments of other countries are available to it are now over.

When it comes to the bilateral negotiation of air rights, the essence of our policy is to take into account more that just aviation interests when deciding air rights matters.

Tourism and trade are particularly important.

The last year has seen a new Air Services Agreement signed with Brazil, and negotiations on new Agreements were recently concluded with India and started with the Netherlands.

More significantly we are now back on track with our aviation relationship with Australia.

At the beginning of this month I had the pleasure of hosting my new Australian ministerial counterpart, John Sharp.

Although the primary purpose of his visit to New Zealand was to learn about seaport reforms in New Zealand, we also took the opportunity to meet with the Civil Aviation Authority and with the Airways Corporation. More notably we restarted the process of establishing a Single Aviation Market.

I also had the pleasure of taking him to see the Wallabies get a lesson in how rugby should be played!

The Single Aviation Market or SAM, which should be in place by 1 November this year, a little over three months away, is one of the most significant international aviation developments in this part of the world in decades.

The Australians have insisted that all the regulatory approvals for the Air New Zealand/Ansett Australia deal should be in place first before the SAM Arrangements are signed but I am confident that this will not take long.

We have agreed that we will then focus on the negotiation of beyond rights - the exchange that permits New Zealand's international airlines to carry passengers and freight between Australia and third countries and similarly gives Australian carriers rights beyond New Zealand.

What was encouraging from my perspective is that the new Australian Government is adopting an international aviation policy similar to that of New Zealand - the interests of Qantas will not be permitted to dominate those of Australia as a whole.

Already we have made excellent progress on finalising the text of the Arrangements that will cover the SAM and we have been engaged in a round of consultations with our respective airlines about the detail.

The SAM will extend to more than just what routes our airlines may fly and what capacity they may offer.

As drafted, it will touch on a wide range of issues such as foreign investment in airlines and working towards mutual recognition of aviation-related certification.

These will, however, be aviation-related Arrangements.

Border control matters were not in the 1992 Memorandum of Understanding, and they are not being dealt with in our negotiations.

Some of the media have got themselves confused on this point.

The Government has directed our border agencies to continue to work with Australia to improve processing. However these efforts are being progressed separately from the SAM.

And with the relationship now back on track, we are not expecting any strange fax messages to arrive out of the blue!

REGULATION - THE AIRPORT AUTHORITIES AMENDMENT BILL

Last December, I introduced a Bill into Parliament to strengthen the regulatory environment applying to airports.

I appreciate that the Airport Authorities Amendment Bill has not met with total support from both major domestic airlines, who believe it does not go far enough, and airports, who believe it goes too far.

The legislative process to date is that the Select Committee considering the Bill has not yet reported back to Parliament. Hopefully this will happen in November. However, I feel it would be useful to summarise to you what the amendments seek to achieve and the impact on the aviation industry the changes that I hope the Bill will achieve.

The Bill amends existing legislation applying to airport companies to enable the making of regulations to address concerns that current legislation does not sufficiently protect consumers' interests or prevent potential monopoly pricing.

Given the strategic role that airports play in new Zealand's economic development, the Government is concerned that they provide their services efficiently, and that investment in new airport facilities reflects the growing demands for air travel and air freight.

However, because competition between most airports is weak, airports could potentially use their market power to set prices without taking account of the costs this imposes on their customers.

The main regulatory protection offered to airport customers at present is the requirement that airports consult with airlines before setting charges.

This requirement is seen as inadequate by airport users and has been the subject of dispute in the courts.

Through the Bill, the Government proposes to strengthen existing consultation requirements by making airports not only consult with their customers before setting prices but at least once every five years, and by applying a detailed information disclosure regime on the larger airports. Passenger departure charges would be among airport charges on which consultation would be required.

The Bill followed a consultation process that began with a discussion document that was released in April last year.

The regulatory regime to be implemented, should the Bill be passed, takes into account some of the issues raised during the consultative process.

It was originally proposed that airports would be required to consult with all customers regarding charges for monopoly services.

Many of the airports, however, expressed concern about the compliance costs of consulting with a large number of small airport users, such as general aviation, or with passengers on departure charges.

In light of these concerns, the draft regulations only require consultation with airlines and users that represent more than 5% of the revenue from monopoly activities.

The smaller domestic airports argued strongly during consultations and in their submissions that the countervailing power of the airlines is sufficient to constrain pricing behaviour at these airports.

These airports are susceptible to changes in timetabling, frequency and aircraft size and rely on just one or two airlines for the majority of their revenue.

The Government therefore decided to subject domestic airports to a less stringent information disclosure regime than that proposed for international airport companies.

This will be achieved through introducing a revenue threshold of $10 million per annum.

Airports with revenue above $10 million would be required to provide detailed information on their monopoly activities, including revenue derived from departure charges since this revenue has monopoly characteristics.

Departure charges enable a departing passenger to gain access to the airside services of the terminal and, without paying the charge, the passenger can be denied access to these services.

At the international airports, departure charge revenue represents a significant share of forecast revenue growth.

It is therefore desirable that this charge be subject to the same regulation as other monopoly airport services.

While check-in facilities provided by airports were not initially included in the list of monopoly services set out in the 1995 consultative document, the consultation process has made it apparent that off-airport check-in is not feasible on a wide scale.

Consequently check-in is potentially subject to monopoly abuse by airports and has been included in the list of defined services to which regulation would apply.

A key concern raised by airlines during the consultation process was their inability to constrain airport capital expenditure.

In particular, airlines believe that airports are able to undertake capital expenditure without regard to the needs of their customers, and that the cost of this expansion is ultimately borne by the airlines through higher landing charges.

In response, during the consultation process, officials raised the possibility that consultation and information disclosure requirements could be extended to include large capital expenditures.

While not all those consulted were in favour, this capital expenditure proposal has been included as part of the proposed regulatory regime and would apply to airport companies over the $10 million per annum threshold.

I remain confident that the measures contained in the Airport Authorities Amendment Bill will address the concerns of airport users, while also retaining a viable commercial environment for airport companies.