Federal Register of Legislation - Australian Government

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International Air Services Policy Statement No.5

Authoritative Version
Other as made
Policy statement about the way in which the International Air Services Commission is to perform its functions.
Administered by: Infrastructure and Regional Development
Made 19 May 2004
Registered 20 Feb 2007
Tabled HR 24 May 2004
Tabled Senate 15 Jun 2004
Gazetted 26 May 2004

 

 

 

 

 

 

 

INTERNATIONAL AIR SERVICES COMMISSION ACT 1992

POLICY STATEMENT

 

 

 

 

Pursuant to section 11 of the International Air Services Commission Act 1992, I JOHN DUNCAN ANDERSON, Minister of State for Transport and Regional Services, make the following policy statement about the way in which the International Air Services Commission is to perform its functions. 

 

 

 

 

 

Dated    19 May 2004

 

 

 

 

 

 

 

 

 

John Anderson

Minister for Transport and Regional Services

 

 

 

 

Background

 

The Aviation Legislation Amendment Act 2002 (AVLA) inserted Part 3A into the International Air Services Commission Act 1992.  It permits the International Air Services Commission to delegate some of the Commission’s powers and functions regarding the allocation of capacity in the operation of international air services to an Australian Public Service employee in the Department of Transport and Regional Services.  The International Air Services Commission Amendment Regulations 2003 specify the circumstances in which the Commission may delegate those powers and functions.

 

The effect of these amendments is to streamline the procedures for considering applications from Australian carriers for a determination granting capacity.

 

References to the Commission in this instrument include the delegate of the Commission unless expressly excluded.

 

1.                  CITATION

 

1.1              This instrument may be referred to as the International Air Services Policy Statement No.5.  This policy statement replaces the policy statement made under section 11 of the International Air Services Commission Act 1992 by the instrument dated 23 April 1997 (as amended on 9 March 1999).

 

2.                  DEFINITIONS

 

2.1              In this policy statement, unless the contrary intention appears:

 

“Act” means the International Air Services Commission Act 1992 (as amended)

 

“commercially sustainable level of capacity” means the minimum capacity necessary to permit the development of efficient commercially sustainable operations on a route.

 

“Commission” means the International Air Services Commission, unless otherwise specified.

 

“delegate” means a person exercising the powers and functions of the Commission pursuant to section 27AB of the Act.

 

“new entrant” means, in relation to a route, an Australian carrier that has not previously been allocated a commercially sustainable level of capacity in relation to that route.

 

“route” relates to the full set of entitlements available to Australian carriers under a particular bilateral arrangement. All the combinations of origin, destination, intermediate and beyond points available to Australian carriers under the bilateral arrangement constitute a single route.

 

“start-up phase” means, in relation to any route, the period from 1 July 1992, or from such later date as a particular bilateral arrangement becomes subject to the Act in order that available capacity under that arrangement may be allocated by the Commission, until the date on which a determination has been made under the section 7 or 8 of the Act allocating a commercially sustainable level of capacity on the route to a new entrant.

 

3.                  GENERAL

 

3.1       This policy statement sets out the criteria to be applied by the Commission in performing its functions in relation to allocations of capacity to Australian carriers:

 

-                     in particular types of circumstances where the Commission is not obliged to apply the full range of criteria set out in paragraphs 4 and 5 below;

-                     during the start up phase on a route;

-                     when considering the renewal of determinations including interim determinations; and

-                     when considering the review of determinations including variation and transfer applications.

 

3.2              The Commission should, in any adjudication of applications for capacity allocation, seek to maximise the benefits to the public to be gained from the operation of the capacity, assessed in accordance with the Act and against applicable criteria set out in this policy statement. When calling for applications, the Commission may set out matters it considers particularly important and the weighting that it is likely to give each of those matters. 

 

3.3               In general, where capacity is subject to competing applications, the Government considers that own aircraft operations deliver greater benefits per unit of capacity used than code share operations involving arrangements for marketing seats on international carriers operated by another carrier or carriers.

 

3.4              In allocating capacity between competing applicants, the Commission may specify points to be served on the route when the criteria in paragraph 5 below are being applied.  In other cases the Commission is to provide the carrier with flexibility to distribute capacity allowed to it among some or all of the combinations available on the route. However, in circumstances where, under a particular bilateral arrangement, limitations apply which prevent the same amount of capacity from being operated over the entire route, the Commission is to apply the provisions of paragraphs 4, 5 and 6 below as appropriate to the allocation of that limited capacity.

 

3.5               Subject to paragraphs 4, 5, 6 and 7 below, in allocating capacity on a route, the Commission will have regard to the objective of providing reasonable growth in entitlements to all Australian carriers operating on that route.

 

3.6              Where capacity that can be used for code share operations is available under air services arrangements, including where foreign airlines have rights to code share on services operated by Australian carriers, the Commission would generally be expected to authorise applications for use of capacity to code share. However, if the Commission has serious concerns that a code share application (or other joint service proposal) may not be of benefit to the public, it may subject the application to more detailed assessment using the additional criteria set out in paragraph 5 (whether the application is contested or not). Before doing so, the Commission will consult with the Australian Competition and Consumer Commission.

 

3.7              Where the Commission authorises a carrier to utilise allocated capacity to provide joint services with another carrier, the Commission will include a condition in all relevant determinations and decisions that the Australian carrier concerned should take all reasonable steps to ensure that passengers are informed, at the time of booking, that another carrier may operate the flight.

 

4.         GENERAL CRITERIA FOR ASSESSING BENEFIT TO THE PUBLIC

 

4.1              Subject to paragraph 6 below, the general criteria against which the benefit to the public is to be assessed by the Commission in considering an allocation of capacity or the renewal or review of a determination allocating capacity to an Australian carrier are set out below:

 

(a)                Subject to (b), the use of entitlements by Australian carriers under a bilateral arrangement is of benefit to the public.

 

(b)        It is not of benefit to the public for the Commission to allocate capacity to Australian carriers unless such carriers:

 

(i)                  are reasonably capable of obtaining the necessary approvals to operate on the route; and

(ii)                are reasonably capable of implementing their applications.

 

4.2       The delegate of the Commission must refer any applications back to the members of the Commission where the delegate has doubts that the applicant carrier satisfies the requirements of paragraph 4.1(b).


 

5.         ADDITIONAL CRITERIA FOR ASSESSING BENEFIT TO THE PUBLIC

 

5.1              The following additional criteria are applicable in assessing the benefit to the public in all circumstances other than is provided in relation to particular circumstances set out in paragraph 6 below.

 

Competition Benefits

 

(a)                In assessing the extent to which applications will contribute to the development of a competitive environment for the provision of international air services, the Commission should have regard to:

 

-                     the need for Australian carriers to be able to compete effectively with one another and the carriers of foreign countries;

 

-                     the number of carriers on a particular route and the existing distribution of capacity between Australian carriers;

 

-                     prospects for lower tariffs, increased choice and frequency of service and innovative product differentiation;

 

-                     the extent to which applicants are proposing to provide capacity on aircraft they will operate themselves;

 

-                     the provisions of any commercial agreements between an applicant and another carrier affecting services on the route but only to the extent of determining comparative benefits between competing applications;

 

-                     any determinations made by the Australian Competition and Consumer Commission or the Australian Competition Tribunal in relation to a carrier using Australian entitlements under a bilateral arrangement on all or part of the route; and

 

-                     any decisions or notifications made by the Australian Competition and Consumer Commission in relation to a carrier using Australian entitlements under a bilateral arrangement on all or part of the route.

 

Other Benefits 

 

            Tourism Benefits

           

(b)        In assessing the extent to which applications will promote tourism to and within Australia, the Commission should have regard to:

           

-                     the level of promotion, market development and investment proposed by each of the applicants; and

-                     route service possibilities to and from points beyond the Australian gateway(s) or beyond the foreign gateway(s).

 

Consumer Benefits     

 

(c)        In assessing the extent to which the applications will maximise benefits to Australian consumers, the Commission should have regard to:

           

-                     the degree of choice (including, for example, choice of airport(s), seat availability, range of product);

-                     efficiencies achieved as reflected in lower tariffs and improved standards of service;

-                     the stimulation of innovation on the part of incumbent carriers; and

-                     route service possibilities to and from points beyond the Australian gateway(s) or beyond the foreign gateway(s).

 

Trade Benefits 

 

(d)        In assessing the extent to which applications will promote international trade, the Commission should have regard to:

 

-                     the availability of frequent, low cost, reliable freight movement for Australian exporters and importers.

 

Industry Structure

 

(e)                The Commission should assess the extent to which applications will impact positively on the Australian aviation industry.

 

Other Criteria

 

(f)                 The Commission may also assess applications against such other criteria as it considers relevant.

 

5.2       The Commission is not obliged to apply all the criteria set out in paragraph 5.1, if it is satisfied that the criteria relevant to the application have been met. In applying all criteria, the Commission should take as the preeminent consideration, the competition benefits of each application. 


 

6.                  CRITERIA APPLICABLE IN PARTICULAR CIRCUMSTANCES

 

Where capacity is not limited

 

6.1              In circumstances where capacity is not limited under a bilateral agreement, only the criteria in paragraph 4 are applicable.

 

Where there is only one applicant or sufficient available capacity

 

6.2              In circumstances where:

 

(a)                there is only one applicant (or where more than one application is made but all except one are withdrawn) for allocation of capacity on a route; or

(b)               there is more than one applicant but the amount of available capacity is equal to or exceeds the total amount of capacity applied for:

 

only the criteria in paragraph 4 are applicable.

 

Variations of existing Determinations 

 

6.3              Subject to paragraph 6.4, when the Commission is required to assess the benefit to the public, in circumstances where:

 

(a)                a carrier requests a variation of a determination to allow it flexibility in operating its capacity, including to use Australian capacity in a code share arrangement with a foreign carrier; and

 

(b)               no submission is received about the application

 

only the criteria in paragraph 4 are applicable. 

 

6.4       The Commission may apply the additional criteria set out in paragraph 5 where submissions are received about the application for variation, provided those criteria were considered when the original application for allocation of capacity was made, or in the circumstances set out in paragraph 3.6 above including where no submissions are received.

 

6.5       In circumstances where a carrier requests a variation of a determination to allow it flexibility in operating capacity allocated to it to include a condition of the type referred to in section 15(2)(ea) of the Act, the criteria set out in paragraph 4 above are applicable to any persons of the description used in that section.


 

7.                  ALLOCATION CRITERIA – START UP PHASE

 

7.1              Where capacity is limited under a bilateral arrangement, during the start up phase in relation to any route on which an Australian carrier is already operating scheduled international services, the pre-eminent consideration is to introduce competition on the route through the allocation to an initial new entrant of sufficient capacity to develop an efficient and commercially sustainable operation.  The Commission should therefore allocate such capacity to an initial new entrant, providing it is satisfied that:

 

(a)                the level of capacity available and in prospect is sufficient to support efficient, commercially sustainable operations by both a new entrant and an incumbent Australian carrier;

 

(b)               the new entrant’s tariff and service proposals would enhance

competition on the route;

 

(c)                approval would not result in a decrease in inbound tourism to Australia or to Australian consumer benefits or trade; and

 

(d)               the new entrant is reasonably capable of obtaining the necessary approvals and commencing operations as proposed.

 

7.2              Where a bilateral arrangement provides for dedicated freight capacity in addition to other capacity (whether that other capacity is for passenger services alone or in combination with, or convertible to, freight services (however described), the start-up phase will be applied separately in relation to:

 

(a)                capacity involving the operation of passenger services (even if freight is also carried on those services); and

(b)               capacity for the operation of dedicated freight services, (irrespective of whether this would involve the use of dedicated freight capacity or the use of dedicated freight capacity in combination with other capacity under a bilateral arrangement):

 

and the application of the start up phase criteria in the case of either (a) or (b) above will not end the start up phase in the case of the other.

 

7.3              An Australian carrier seeking an allocation of capacity, or which may be permitted to use capacity allocated to an incumbent Australian carrier, will not be taken to be a new entrant if it is a subsidiary or a holding company of an incumbent Australian carrier operating on the route or if there is another substantial connection between the two carriers in relation to ownership and control.

 

7.4              Where there are applications for capacity on a route during the start up phase by two or more prospective new entrants, the criteria set out in paragraphs 4 and 5 are to be applied in selecting one of those applicants as the initial new entrant to be allocated the level of capacity referred to in paragraph 7.1.

 

7.5              Where the Commission invites applications for capacity on a route during the start up phase and none of the applications received are from new entrants, the criteria in paragraph 4 and, subject to paragraph 6.2, in paragraph 5 above are to be applied in considering an allocation.

 

7.6              In considering determinations during the start up phase, the Commission shall have particular regard to the possible use of interim determinations to facilitate the introduction of competition on the route without any unnecessary delay in the use of capacity.

 

8.                  RENEWAL OF DETERMINATIONS

 

8.1              Where capacity is limited under a bilateral arrangement, the criteria for assessing the benefit to the public for the purposes of the renewal of determinations, other than interim determinations, are set out below.  The criteria reflect a presumption in favour of the carrier seeking renewal which may be rebutted only by application of the criteria in the circumstances described:

 

(a)                During the start up phase on the route:

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-           the start up phase allocation criteria set out in

paragraph 7 apply in relation to that part of the capacity which is reasonably necessary for a level of scheduled international services necessary to permit the development of efficient commercially sustainable operations; and

 

-                     the criteria set out in paragraph 8.1(b) below apply to the balance of the capacity.

 

(b)               After the start up phase on the route:

 

-                     whether the carrier seeking renewal has failed to service the route effectively; and

 

-                     whether use of the capacity in whole or part by another Australian carrier that has applied for the capacity would better serve the public having regard to the criteria set out in paragraphs 4 and 5.

 

In relation to subparagraph (b), the Commission should issue a fresh determination allocating the capacity to the carrier seeking renewal unless both the criteria are met, in which case all or part of the capacity can be reallocated.


 

Renewal of Interim Determinations 

 

8.2              Where capacity is limited under a bilateral arrangement, the criteria for assessing the benefit to the public for the purposes of renewal of interim determinations are:

 

(a)                during the start up phase on the route

 

-           the criteria set out in paragraph 7 as applicable.

 

(b)               after the start up phase on the route

 

-                     the criteria set out in paragraphs 4 and 5.

 

9.         THE “USE IT OR LOSE IT” PRINCIPLE

 

9.1              For the purposes of specifying a period within which capacity allocated to an Australian carrier must be fully used, the Commission should specify as short a period as is reasonable having regard to the steps required to commence operations.  Except in exceptional circumstances, the Commission should not specify a period longer than 3 years.

 

9.2       When seasonal variations in demand are a feature of a route or code share arrangements between airlines and cause temporary minor variations in capacity usage, or unforseen conditions outside the control of operating international airlines cause temporary suspension of services, the Commission may take these circumstances into account when interpreting the term “fully used” in section 15(2)(c) of the Act.

 

10.       APPROVAL OF TRANSFER APPLICATIONS

 

10.1          For the purposes of considering transfer applications the Commission should take into account that approvals which encourage speculative activity would not be of benefit to the public.  Except in exceptional circumstances, approvals should not be given that would have the effect of allowing a carrier that has never exercised an allocation or has only exercised it for less than a reasonable period, to transfer that allocation.

 

10.2          A period of 6 months would usually represent a reasonable period for the purposes of subparagraph 10.1.

 

11        PERIOD FOR WHICH A DETERMINATION IS IN FORCE

 

11.1          The period for which a determination is to be in force is:

 

(a)                on routes where either capacity or route rights are restricted:

 

(i)                  if the determination is an interim determination – 3 years; or

(ii)                if the determination is not an interim determination – 5 years

 

unless a carrier applies in writing requesting that a determination be for a lesser period than stipulated in (a) or (b).  In these circumstances, the Commission may specify a lesser period in any determination relating to the application.  In considering the renewal of a determination made in these circumstances, paragraph 8 will not apply.

 

(b)               on routes where capacity and route rights are unrestricted:

 

(i)        if the determination is an interim determination – 3 years; or

(ii)        if the determination is not an interim determination – 10 years.