Part 2 Overview of the International Air Services Commission
The role and functions of the Commission
The Commission is an independent statutory authority established under the International Air Services Act 1992 (the Act). The object of the Act is to enhance the welfare of Australians by promoting economic efficiency through competition in the provision of international air services, resulting in:
- increased responsiveness by airlines to the needs of consumers, including an increased range of choices and benefits;
- growth in Australian tourism and trade; and
- the maintenance of Australian carriers capable of competing effectively with airlines of foreign countries.
The Commission’s primary responsibility is to serve the object of the Act by allocating capacity entitlements to Australian airlines for the operation of international airline services. The capacity allocated by the Commission comes from entitlements available to Australia’s international carriers under air services arrangements between Australia and other economies. In particular, the functions of the Commission are to:
- make determinations allocating capacity to Australian carriers in both contested and uncontested situations;
- renew determinations on application by carriers;
- conduct reviews of determinations; and
- provide advice to the Minister about any matter referred to the Commission by the Minister concerning international air operations.
The Act is complemented by a policy statement from the Minister. The Minister’s policy statement sets out criteria to be applied by the Commission in various circumstances. More complex public benefit criteria may be applied in cases where there are two carriers seeking the same limited amount of capacity or there is an opposing submission, in contrast to an uncontested application from a well-established airline. The Minister’s policy statement is a legislative instrument under section 11 of the Act. It is reproduced at Appendix 6.
Determinations allocating capacity are usually made for a period of five years for routes where capacity entitlements or route rights are restricted. In cases where capacity entitlements and route rights are unrestricted, the determinations are valid for 99 years under the new policy statement which came into effect on 28 March 2018. In exceptional circumstances, the Commission may issue interim determinations, which are valid for a period of three years. Interim determinations are normally made when capacity is being allocated to a new Australian operator. For routes that have restricted capacity, if an applicant carrier requests that a determination be made for a shorter period, the Commission will fix the period of validity as requested, except that an interim determination should not be valid for more than 3 years and a regular determination where capacity is restricted should not be valid for more than 5 years7.
The Commission is required to start reviews of existing determinations at least one year before they expire. The Commission initiates such a review by formally asking the carrier concerned whether they wish to seek a renewal of the determination. Except for interim determinations, there is a presumption in favour of the carrier seeking renewal that the determination will be renewed as sought, unless the Commission is satisfied that the (same) allocation is no longer of benefit to the public8. The allocation is generally no longer of benefit to the public if:
- the carrier seeking renewal has failed to service the route effectively; and
- if there are other applications for some or all of the capacity; and
- the Commission having regard to the reasonable capability criterion and any of the additional criteria that it considers relevant, is satisfied that a different allocation of the capacity would be of greater benefit to the public9.
From time to time, airlines apply to the Commission to vary determinations held by them. There can be a number of reasons for an airline to seek a variation – for example, the airline may be seeking authorisation to use its allocated capacity to code share with another airline. The Commission conducts a review of the determination and as required by the Act, it invites submissions about the application10. In relation to an application for variation other than a transfer application11 (as discussed in the paragraph below), if the Commission does not receive any submission opposing the variation requested, then in assessing the application, the Commission is to have regard to the reasonable capability criterion and need not have regard to any other matter. If the Commission receives a submission opposing the application for variation, the Commission is to have regard to the reasonable capability criterion, and may have regard to any of the additional criteria it considers to be relevant12.
Most of the applications for variation of existing determinations relate to code sharing with another airline or airlines. This type of variation application is a transfer application as so defined in section 4 of the Act. In assessing whether a transfer application would not be of benefit to the public, the Commission is to have regard to: (a) the reasonable capability criterion; (b) the undesirability of approving a transfer where doing so will, or is reasonably likely to, permit or encourage any form of speculative activity, including trading in capacity allocations for commercial benefit; (c) the undesirability, other than in exceptional cases, of approving a transfer application by a carrier that has never used an allocation, or has only used an allocation for less than six months. The Commission may also have regard to any of the additional criteria it considers relevant, as set out in section 9 of the Policy Statement13. If the Commission finds that a transfer application would not be of benefit to the public the Commission must not vary the determination as requested14.
The Commission may itself initiate a review of a determination if it is concerned that a carrier might be in breach of a condition of the determination15. This can occur, for example, where a carrier has been allocated capacity, but had not used that capacity by the time it was required to do so by the Commission. Where the Commission has commenced a review because an Australian carrier has not complied with a condition that capacity be fully used, the Commission may have regard to the following matters:
a) whether at the time of the review, there is an application from another Australian carrier for an allocation of capacity on the route, and the unused capacity prevents a competing applicant to be allocated capacity entitlements;
b) whether there is seasonal variation in demand on the route in question; and
c) whether the carrier was prevented from fully using the capacity by circumstances that could not reasonably have been foreseen; and
d) any other matter that the Commission considers to be relevant16.
Having conducted such a review, the Commission may confirm, vary, suspend or revoke the determination17.
Reasonable capability criterion and the additional criteria
There are two sets of criteria that the Commission is to have regard to in assessing whether an application is of benefit to the public: the ‘reasonable capability criterion’ under section 8 of the 2018 Policy Statement and the ‘additional criteria’ in section 9. When and how the Commission is to have regard to the criteria is set out in part 3 of the 2018 Policy Statement.
Under the ‘reasonable capability criterion’, the Commission is to assess the extent to which all Australian carriers that are, or would be, permitted to use the capacity allocated under a determination are reasonably capable of:
a) obtaining any licences, permits or other approvals required to operate on and service the route to which the determination relates; and
b) using the capacity allocated under the determination.
Section 9 of the Policy Statement lists the ‘additional criteria’ which the Commission may have regard to in assessing an application. The additional criteria include competition, tourism and trade, relevant information obtained from other government agencies and authorities. The list is not exhaustive. Subsection 9(1) explicitly provides that the Commission may consider ‘any other matter or consideration that the Commission considers to be relevant’.
The Commission has published administrative guidelines to assist applicants in submitting their applications and interested persons in making submissions about applications to the Commission. A summary of these procedures is at Appendix 5. The aim of the procedures is to ensure that applicants and other interested parties understand the requirements for making applications or submissions, are familiar with the Commission’s decision-making processes, and are aware of their rights and obligations.
The Act provides for a Chairperson and two Commission members. Currently, the Commission is comprised of a Chairperson, Dr Ian Douglas, and two Members, Ms Jan Harris and Ms Karen Gosling. All were appointed by the Governor-General on a part-time basis for a term of three years.
The membership of the Commission as at 30 June 2018 is as follows:
Dr Ian Douglas
Dr Ian Douglas was appointed by the Governor-General as part-time Chairperson of the Commission for a three-year term commencing on 5 May 2016. He has been a Member of the Commission since November 2012. He was Acting Chairperson from October 2015 to May 2016.
Dr Douglas is a Senior Lecturer in Aviation Management in the School of Aviation at the University of New South Wales (UNSW). He holds a Doctor of Business Administration and a post graduate qualification in Higher Education. His doctoral research addressed the impacts of state ownership and economic freedom on airline financial performance. His ongoing research interests encompass the areas of air transport economics and airline business model convergence. Prior to academia, Dr Douglas had a long career with Qantas Airways, with senior roles in pricing, business development, route management, strategic planning and the Joint Services Agreement with British Airways. Since leaving Qantas, he has consulted to a range of companies including Malaysia Airlines, Thai Airways International, Bain & Co Singapore, Icebox Advertising, Asian Wings Airways and Tourism Queensland. His teaching areas at UNSW Aviation include feet and network planning, marketing and distribution strategy and air transport economics.
Ms Jan Harris
Ms Jan Harris was appointed by the Governor-General as a part-time Member of the Commission for a three-year term commencing on 24 November 2016.
In addition to her role in the Commission, Ms Harris is currently a Non-Executive Director of the Bendigo and Adelaide Bank and an External Member of the Audit and Risk Committee of the Australian Security Intelligence Organisation. Ms Harris is also an external member of the Australian Office of Financial Management Audit Committee. In 2015–16, she was a member of the Independent Panel for Eliminating Duplication across NSW Government Agencies.
Ms Harris has had a distinguished career in the Australian Public Service culminating in being the first female appointed as Deputy Secretary of the Department of Treasury, a position she held from 2013 to 2015. She spent most of her working career in Treasury working on budget policy issues, international financial and economic issues, Commonwealth-State financial issues, competition policy, monetary policy, financial markets and taxation policy. She also worked in the Department of the Prime Minister and Cabinet from 2003 to 2007, and was the Economic Counsellor to the Organisation for Economic Co-operation and Development (OECD) in Paris from 1997 to 1999.
Ms Harris graduated in 1981 from the Australian National University with a degree in Bachelor of Economics (Hons).
Ms Karen Gosling
Ms Karen Gosling was appointed by the Governor-General as a part-time Commission Member for a three-year-term commencing on 1 November 2017.
Ms Gosling’s Australian Public Service career included leadership roles in the cultural, regional development and transport portfolios. From 2005 to 2012 Ms Gosling was in the Infrastructure, Transport and Regional Development department/s. Her senior executive focus in transport was industry consultation, administering legislation and regulatory reform. In the aviation group, Ms Gosling administered legislation governing leased federal airports and chaired the Sydney Airport Slot Management Committee. As Executive Director of the Surface Transport Policy Division, Ms Gosling advised on maritime, coastal shipping, road transport, vehicle and road safety standards and national transport regulatory reforms. Prior to 2005, Ms Gosling was in the arts portfolio working with the boards of Australia’s national cultural institutions on funding, governance and risk.
Ms Gosling graduated from the Australian National University with a degree in Arts/Law in 1984 and with a Graduate Diploma in Public Law in 1990. In 2001 Ms Gosling received the Centenary of Federation Medal in recognition of her outstanding contribution to the Centenary of Federation program.
Commissioners' attendance at meetings in 2017–2018
|Dr Ian Douglas||19||19|
|Ms Jan Harris||19||1818.|
|Ms Karen Gosling||13||13|
From left: Marlene Tucker (Executive Director), Karen Gosling (Commission Member), Ian Douglas (Chairperson),
Jan Harris (Commission Member), Anita Robinson (Administrative Offcer)
The Commission is assisted in its work by a small Secretariat. The Secretariat is comprised of officers of the Department of Infrastructure, Regional Development and Cities (the Department). The Secretariat is headed by an Executive Director, supported on a part-time basis by an Administrative Officer. The Secretariat provides advice and assistance to the Commissioners on all aspects of the Commission’s operations.
Communications with interested parties
There are many stakeholders with a direct or indirect interest in what the Commission does. They include:
- the Minister;
- current and prospective Australian international airlines;
- the broader aviation industry, including airport owners, providers of services to airlines and employee associations;
- the international tourism and freight industries, including Australian exporters;
- Australian and State Government departments and agencies;
- aviation industry investors, analysts and journalists; and
- the travelling public.
The Commission places great importance on maintaining effective relationships with those stakeholders. The Commission takes into account the views of stakeholders in its decision-making processes, as appropriate to particular cases. Interested members of the public and aviation stakeholders (who have requested to be included in the Commission’s notification list) are regularly notified, by email, of applications received and the Commission’s determinations and decisions. The Commission’s website is likewise updated to inform the public of ongoing applications and determinations and decisions made by the Commission. At the conclusion of each financial year, the Commission invites stakeholders to provide feedback about the Commission’s performance throughout the year. The aggregated results of responses to the survey this year are presented in this annual report at pages 21–22.
The role of the Department of Infrastructure and Regional Development
The Commission works closely with the Department. The Department is responsible for the negotiation and administration of air services arrangements between Australia and other economies. An important part of the negotiating process is to provide opportunities for Australian and foreign airlines to expand their services between Australia and other economies.
The capacity and route entitlements for Australian carriers under each set of air services arrangements are recorded by the Department in a Register of Available Capacity. This is maintained by the Department, in accordance with the requirements of the Act and is available on the Department’s website: https://infrastructure.gov.au/aviation/ international/capacity.aspx>.
An Australian carrier may apply to the Commission for allocation of capacity recorded on the register as available for immediate allocation. The entitlements on the Register of Available Capacity are adjusted as determinations allocating capacity are made by the Commission, as airlines hand back unused capacity and when the Department negotiates new or revised capacity entitlements on behalf of the Australian Government. There is regular communication between the Department and the Commission on these matters.
Another area where the roles of the Commission and the Department intersect is in relation to applications from prospective new Australian airlines wishing to operate scheduled international services. Before allocating capacity to an applicant airline, the Commission must be satisfied that the airline is both reasonably capable of obtaining any licences, permits and other regulatory approvals necessary to operate on and service the route to which the determination relates and of using the capacity allocated under the determination. The Department is responsible for designating and licensing Australian airlines to operate regular scheduled international services. The Commission consults the Department as to whether an Australian airline is reasonably capable of obtaining the regulatory approvals necessary to operate on the relevant route. Furthermore, an airline must hold an allocation of capacity from the Commission before the Department can make operational decisions in relation to the capacity on the route, including the issue of licenses and scheduled international timetable approvals. The Commission and the Department therefore consult closely in cases involving proposed international air service operations by Australian carriers.
7 Section 20, International Air Services Commission Policy Statement
8 Subparagraph 8(2)(a)(i), International Air Services Commission Act 1992
9 Section 14, International Air Services Commission Policy Statement 2018
10 Section 22, International Air Services Commission Act 1992
11 As defined in section 4 of the International Air Services Commission Act 1992
12 Section 17, International Air Services Commission Policy Statement 2018
13 Section 18, International Air Services Commission Policy Statement 2018
14 Section 25, International Air Services Commission ACT 1992
15 See subsection 10(1) and section 23, International Air Services Commission Act 1992
16 Section 24, International Air Services Commission Policy Statement 2018
17 Subsection 23(1), International Air Services Commission Act 1992
18 Ms Harris was on official leave of absence at a meeting in May 2018