INTERNATIONAL AIR SERVICES COMMISSION REGULATIONS 2018 (F2018L01320) EXPLANATORY STATEMENT

Commonwealth Numbered Regulations - Explanatory Statements

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INTERNATIONAL AIR SERVICES COMMISSION REGULATIONS 2018 (F2018L01320)

EXPLANATORY STATEMENT

INTERNATIONAL AIR SERVICES COMMISSION REGULATIONS 2018

Issued by the authority of the Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development

The Hon Michael McCormack MP

Australia's bilateral air services arrangements with other countries govern the rights of carriers (airlines) to operate scheduled international passenger and freight services to those countries. The arrangements establish a system where capacity entitlements and the ports that may be served by carriers of each country are determined. Capacity entitlements usually take the form of limitations on the frequency of flights, number of passenger seats or amount of freight that can be operated.

Before carriers can commence international services to and from Australia, they need to be 'designated' under relevant bilateral air services arrangements. Many bilateral arrangements permit Australia to designate more than one carrier to operate to any given country. This provides an opportunity for competition between Australian carriers on international routes[1].

The International Air Services Commission Act 1992 (the Act) established the International Air Services Commission (the Commission). The primary function of the Commission is to make determinations allocating available capacity to Australian carriers. These determinations stipulate that an Australian carrier is permitted to operate on a route, and the number of frequencies, seats or amount of freight allocated to that carrier for that route. Each determination specifies a period for which it is in force, to be reviewed at the end of that period.

Section 11 of the Act confers on the Minister for Infrastructure, Transport and Regional Development (the Minister) the power to make policy statements about the way in which the Commission is to perform its functions. In accordance with subsection 6(3) of the Act, the Commission must comply with any policy statements made by the Minister. The Act also requires the Commission to apply criteria set out in any policy statement for assessing the benefit to the public of a particular allocation of capacity. The International Air Services Commission Policy Statement 2018 (the Policy Statement) sets out the criteria that the Commission is to apply in assessing the benefit to the public of allocations of capacity in various circumstances and provides other guidance to the Commission in performing its functions.

Operating alongside the Act are the Air Navigation Act 1920 and Air Navigation Regulation 2016, which implement the Convention on International Civil Aviation and the International Air Services Transit Agreement under Australian law, and create a framework for ensuring compliance with bilateral air services arrangements. This is achieved through a system of International Airline Licences (section 12 of the Air Navigation Act 1920) and approvals for timetables for international air services (section 30 of the Air Navigation Regulation 2016). The Secretary of the Department of Infrastructure, Regional Development and Cities (the Secretary) is responsible for making such operational decisions.

As a general rule, the Secretary must not make an operational decision in relation to capacity that is inconsistent with a determination relating to the allocation of that capacity. Further, the Secretary may only make operational decisions in relation to capacity where a determination of the Commission is in force relating to the allocation of that capacity, the capacity relates to a non-scheduled flight or as otherwise prescribed by regulation. This framework and these provisions act to uphold the integrity and independence of the Commission.

* describing circumstances when the Secretary may make operational decisions relating to usage of capacity under the Air Navigation Act 1920 and Air Navigation Regulation 2016;

* specifying the Commission's address to receive applications relating to available capacity and for variation of determinations, and requests to surrender allocated capacity, as well as for other purposes;

* imposing requirements as to the form and content of applications relating to available capacity, and variation and renewal of determinations;

* permitting the Commission to not include in a determination a condition that capacity be fully used, as otherwise required by paragraph 15(2)(c) of the Act;

* specifying circumstances in which the Commission may delegate certain powers or functions;

* prescribing allowances a person is entitled to be paid in compensation for travelling and other expenses, in relation to their attendance as a witness before a hearing of the Commission ; and

* detailing the way in which notices issued by the Commission concerning applications for allocation of capacity must be published.

Subsection 55(2) of the Act further provides that the Governor-General may make regulations providing for procedures to be followed by the Commission in performing its functions, including time limits within which such procedures must be completed.

The primary purpose of the International Air Services Commission Regulations 2018 (the Regulations) is to establish a supporting administrative framework for the Commission in relation to certain functions. The Regulations also provide procedures to be followed by the Commission in particular circumstances regarding the allocation of available capacity, and outline when the Secretary may make certain operational decisions.

These provisions are largely consistent with those of the International Air Services Commission Regulations 1992 (the 1992 Regulations), due to sunset on 1 October 2018 in accordance with the Legislation Act 2003, with two exceptions. A new provision has been included in line with subparagraph 15(2)(c)(ii) of the Act detailing the circumstance when capacity allocated to an Australian carrier is not required to be fully utilised. A provision concerning meal and motor vehicle allowances for Commission members was deemed redundant and has been removed, as subsection 43(2) of the Act already links Commission members' allowances to those prescribed by the Remuneration Tribunal.

In combination with the Act and Policy Statement, the Regulations help ensure the Commission is supported by a modern legislative framework that reflects the current aviation industry operating environment, streamlines the Commission's operations and improves transparency in the Commission's dealings. The Regulations clarify several provisions of the 1992 Regulations and avoid duplication through better alignment with the Act.

Australian carriers and the Commission were consulted in developing the Regulations. Stakeholders were initially consulted in April 2018 to seek their views on the 1992 Regulations. The Regulations were then drafted, incorporating feedback received during initial consultation. Stakeholders were then consulted in July 2018 on the draft Regulations, with minor amendments made in response to feedback. Consultation was undertaken by a combination of correspondence, face-to-face meetings and telephone calls.

The Regulations took effect on 1 October 2018 and replaced the 1992 Regulations. To provide assurance to the Commission and Australian carriers in transitioning to the Regulations, the Regulations include provisions on application and certain transitional matters.

Statement of Compatibility with Human Rights

A Statement of Compatibility with Human Rights has been completed in relation to the Regulations. The Statement of Compatibility concludes that the Regulations are compatible with Australia's human rights obligations. A copy of the Statement of Compatibility is attached.

Regulation Impact Statement

The Office of Best Practice Regulation has assessed that a Regulation Impact Statement is not required to remake the 1992 Regulations with amendment (as the International Air Services Commission Regulations 2018), as the regulatory impacts on business, individuals and/or community organisations are considered to be minor or machinery in nature (OBPR ID No. 23905).

Notes on Parts

Part 1--Preliminary

Part 1 of the Regulations cites the name and authority of the instrument. It provides that the Regulations commence on 1 October 2018, repealing the 1992 Regulations as advised in Schedule 1 to the Regulations. Application and transitional matters are set out in Part 4 of the Regulations. For the benefit of the reader and to ensure consistency with the Act, Part 1 notes several expressions and terms used throughout the instrument are defined in the Act.

Section 6 of Part 1 provides another circumstance in which the Secretary may make operational decisions relating to utilisation of capacity, consistent with paragraph 9(2)(c) of the Act. This provision has been retained from the 1992 Regulations, redrafted for clarity and to better align with the Act. Operational decisions include approval of an Australian carrier's proposed timetable for scheduled international air services or variation of an approved timetable, as per sections 30 and 31 respectively of the Air Navigation Regulation 2016.

The provision allows the Secretary to make temporary and minor operational decisions under the Air Navigation Act 1920 and the Air Navigation Regulation 2016 in relation to available capacity (i.e. capacity under a bilateral air services arrangement that is not otherwise allocated to an Australian carrier). It is an important provision that offers Australian carriers operational flexibility to meet seasonal, temporary or unusual demand they may not have foreseen when seeking an allocation of capacity from the Commission.

It is important to note that such operational decisions must only be temporary and minor, and relate only to utilisation of available capacity in the circumstance described above. Operational decisions must not be inconsistent with an existing determination made by the Commission and do not have the effect of altering an existing determination.

Example 1: Temporary operational decision to meet seasonal demand

The Secretary approves a carrier's proposed timetable to operate seven flights per week on a route, under section 30 of the Air Navigation Regulation 2016. The approved timetable is consistent with the Commission's determination allocating capacity of seven flights per week to that carrier.

The carrier later wishes to operate four additional flights during a busy two-week holiday period, in excess of its existing determination. It seeks an operational decision from the Secretary to vary its approved timetable under section 31 of the Air Navigation Regulation 2016. There is available capacity under the relevant bilateral air services arrangement to accommodate the request.

Consistent with section 6 of the Regulations, the Secretary may vary the approved timetable permitting use of available capacity. This is because the decision to vary the timetable relates to an existing operational decision (i.e. the original approved timetable), is temporary and minor in nature, and the relevant bilateral air services arrangement permits the use of the capacity by an Australian carrier.

Example 2: Operational decision to meet growing demand

The carrier later wishes to operate 14 flights per week on an ongoing basis to meet growing demand, in excess of its existing determination. It seeks an operational decision from the Secretary to vary its approved timetable under section 31 of the Air Navigation Regulation 2016. There is available capacity under the relevant bilateral air services arrangement to accommodate the request.

Consistent with section 6 of the Regulations, the Secretary may not vary the approved timetable permitting use of available capacity. While the decision to vary the timetable relates to an existing operational decision (i.e. the original approved timetable) and the relevant bilateral air services arrangement permits the use of the capacity by an Australian carrier, it is not temporary and minor in nature. In this case, the carrier should apply to the Commission to vary its determination to increase its allocation of capacity before seeking to vary its approved timetable.

Part 2--Allocation of available capacity

Part 2 of the Regulations provides certain procedures to be followed by the Commission regarding the allocation of available capacity.

Section 7 identifies the circumstances in which the Commission must invite submissions about an allocation of capacity, consistent with paragraph 12(1)(b) of the Act. This provision has been retained from the 1992 Regulations, with an additional clause to better align with the 'reasonable capability' assessment criteria in the Policy Statement. It requires the Commission to invite submissions from any person if:

* more than one application is made by carriers relating to the allocation of particular capacity; or

* if the Commission were to allocate capacity to a carrier, it considers:

o a restriction could be imposed on the carrier under the Competition and Consumer Act 2010 that would prevent it from using the capacity (for example the Australian Competition and Consumer Commission has a range of powers under that Act to take action in response to business practices that limit or prevent competition),

o the carrier may not be able to obtain necessary approvals or licences (for example an International Airline Licence as required under the section 12 of the Air Navigation Act 1920 to operate scheduled international air services), or

o the carrier may not be reasonably capable of using the capacity (for example the aircraft in a carrier's fleet, or to be acquired by the carrier, have insufficient range or carrying capacity to operate the proposed service).

It is important to note paragraph 12(1)(b) of the Act and section 7 of the Regulations are not intended to prejudge issues which may arise during the Commission's assessment of a particular application. Rather, the provisions help to ensure the Commission has access to all relevant information in making its assessment.

Example 3: Submissions invited about an allocation of capacity

A carrier applies to the Commission for an allocation of capacity to operate passenger services on a route comprising flight distances in excess of 5,000 kilometres. Prior to assessing the application against the assessment criteria in the Policy Statement, the Commission invites submissions about the proposed allocation of capacity. The Commission considers that should it allocate the capacity sought, the carrier may not be reasonably capable of using the capacity. This is because the carrier's current fleet of aircraft have a maximum range of 2,500 kilometres and no new aircraft are planned to be acquired. By using this provision to invite submissions, the Commission can be assured it has the full range of information it requires to make an informed assessment of the application.

Section 8 is a provision that has been retained from the 1992 Regulations, updated to reflect current administrative details. It specifies the Commission's address to receive applications from carriers relating to available capacity and for variation of determinations, and requests to surrender allocated capacity, as well as for other purposes. Applications and requests can be delivered to the Commission by post or email. As the Commission is no longer able to accept applications delivered by hand or fax, these details have been removed.

Section 9 is a new provision, intended to reduce the regulatory burden on carriers and streamline the Commission's operations. The number of Australia's bilateral air services arrangements that provide unlimited capacity that may be utilised by Australian carriers is growing. Under such bilateral air services arrangements, there would be no competition constraints should a carrier not fully use its allocated capacity (i.e. other carriers could freely enter the market).

In recognition that, in the modern aviation industry operating environment, a number of bilateral air services arrangements now provide for unlimited capacity, the Policy Statement allows for the Commission to fix determinations that allocate capacity under such arrangements for a 99-year period, up from 10 years previously. To better align the Regulations with the Policy Statement, section 9 provides that the Commission need not include in a determination a condition that capacity be fully used (as would otherwise be required by paragraph 15(2)(c) of the Act) in circumstances where available capacity under a bilateral air services arrangement is not restricted.

For the avoidance of doubt, section 13 of Part 4 of the Regulations applies section 9 to determinations made before, on or after commencement of the Regulations. It is important to note that section 9 does not automatically repeal conditions relating to full utilisation of capacity in existing determinations. However, a carrier may apply to the Commission to vary such determinations (i.e. to remove relevant conditions pertaining to full utilisation of capacity), provided available capacity under the relevant bilateral air services arrangement is not restricted.

The Regulations do not change the Commission's existing procedures in circumstances where available capacity under a bilateral air services arrangement is restricted. In such cases, the Commission must include a condition that capacity be fully utilised, as required by paragraph 15(2)(c) of the Act. Recognising the full range of things necessary to be done by a carrier to establish a new international service, the Commission may specify a period during which allocated capacity need not be fully used in line with subparagraph 15(2)(c)(i) of the Act. In specifying the period, the Commission should consider the matters set out at subsection 24(1) of the Policy Statement. This approach continues to help promote healthy competition among carriers in a market.

Example 4: A determination need not include a condition that capacity be fully used

A carrier applies to the Commission for an allocation of capacity to operate passenger services on a route. Available capacity under the relevant bilateral air services arrangement is not restricted.

Consistent with subparagraph 15(2)(c)(ii) of the Act and section 9 of the Regulations, the Commission need not include a condition requiring full utilisation of the capacity allocated in its determination. This is because there are no restrictions on available capacity under the relevant bilateral air services arrangement.

Example 5: A determination must include a condition that capacity be fully used

A carrier applies to the Commission for an allocation of capacity to operate passenger services on a route. Available capacity under the relevant bilateral air services arrangement is restricted.

Consistent with paragraph 15(2)(c) of the Act, the Commission must include a condition requiring full utilisation of the capacity allocated in its determination. This is because there are restrictions on available capacity under the relevant bilateral air services arrangement. In specifying the period during which allocated capacity need not be fully used in line with subparagraph 15(2)(c)(i) of the Act, the Commission considers the matters at subsection 24(1) of the Policy Statement.

Part 3--Other matters

Part 3 of the Regulations sets out other matters regarding the Commission's procedures in relation to the delegation of powers and functions, and payment of witness allowances.

Section 10 is a provision that has been retained from the 1992 Regulations, updated only to reflect current drafting practice. It specifies the powers and functions the Commission may delegate to an Australian Public Service employee in the Department of Infrastructure, Regional Development and Cities in line with subsection 27AB(3) of the Act. It also provides the relevant circumstances in which the powers and functions may be delegated. As such, the provision continues to provide a streamlined and expeditious process (in certain circumstances) for the Commission to make determinations allocating available capacity, and renew and vary existing determinations.

Section 11 is also a provision that has been retained from the 1992 Regulations, updated to reflect current drafting practice and modern administrative arrangements. It operates alongside sections 30 and 34 of the Act, which allow the Commission to hold hearings for the purposes of performing its functions and to summon a person to appear at a hearing to give evidence. Section 38 of the Act further provides that a witness is entitled to be paid travelling and other expenses incurred in connection with their attendance at a hearing.

As the relevant provision in the 1992 Regulations provided fixed rate allowances that did not adequately reflect current costs, section 11 now provides a flexible structure. A particular witness is entitled to be paid an amount of allowance considered reasonable by the Commission, to compensate that witness for loss of earnings, transport, accommodation and meal costs. Importantly, section 11 provides that witnesses may apply to the Administrative Appeals Tribunal for review of decisions by the Commission in relation to the payment of allowances.

A provision of the 1992 Regulations concerning meal and motor vehicle allowances for Commission members was deemed redundant and has been removed. Subsection 43(2) of the Act already links Commission members' allowances to those prescribed by the Remuneration Tribunal, as updated from time to time.

Part 4--Application and transitional matters

Part 4 of the Regulations provides guidance to the Commission in transitioning to the Regulations in relation to certain functions and procedures, including operational decisions and delegations. Section 13 applies section 9 of the Regulations to determinations made before, on or after the day the instrument commences. Similarly, section 14 applies section 11 of the Regulations to the attendance of a person as a witness at a hearing on or after the day the instrument commences.

Together, the provisions at Part 4 offer commercial certainty to carriers and reduce administrative burden during the transition.

Schedule 1--Repeals

Schedule 1 repeals the 1992 Regulations.

ATTACHMENT

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

International Air Services Commission Regulations 2018

This Disallowable Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Disallowable Legislative Instrument

Australia's bilateral air services arrangements with other countries govern the rights of international airlines to operate scheduled international passenger and freight services to those countries. They establish a system where capacity entitlements and the ports that may be served by international airlines of each country are determined.

The International Air Services Commission Act 1992 (the Act) established the International Air Services Commission (the Commission). The primary function of the Commission is to make determinations allocating available capacity to Australian international airlines. These determinations identify that an Australian international airline is permitted to operate on a route, and the number of frequencies, seats or amount of freight allocated to that carrier for that route.

Subsection 55(1) of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act. Subsection 55(2) of the Act further provides that the Governor-General may make regulations providing for procedures to be followed by the Commission in performing its functions, including time limits within which such procedures must be completed.

The purpose of this Disallowable Legislative Instrument is to establish a supporting administrative framework for the Commission in relation to certain functions. It provides procedures to be followed by the Commission in particular circumstances regarding the allocation of available capacity. It also outlines when the Secretary of the Department of Infrastructure, Regional Development and Cities (the Secretary) may make certain related decisions under the Air Navigation Act 1920 and Air Navigation Regulation 2016.

In combination with the Act and International Air Services Commission Policy Statement 2018, this Disallowable Legislative Instrument helps to facilitate the Commission's preeminent objective to foster, encourage and support an environment that is conducive to healthy competition among airlines, as well as to maximise the benefit to the public. It reflects current trends in many of Australia's bilateral air services arrangements and the aviation environment more broadly. It further streamlines the Commission's processes, and provides greater certainty and operational flexibility for Australian carriers.

Broadly speaking, this Disallowable Legislative Instrument:

* describes circumstances when the Secretary may make operational decisions relating to usage of capacity under the Air Navigation Act 1920 and the Air Navigation Regulation 2016, to provide operational flexibility for carriers;

* specifies the Commission's address to receive applications relating to available capacity and for variation of determinations, and requests to surrender allocated capacity, as well as for other purposes;

* identifies the circumstances when the Commission is required to invite submissions about an allocation of capacity, to allow some focus to be brought to the Commission's assessment process at an early stage;

* permits the Commission to not include in a determination a condition that capacity be fully used, as otherwise required by paragraph 15(2)(c) of the Act, to reduce the regulatory burden on carriers in circumstances where available capacity under a bilateral air services arrangement is not restricted;

* specifies circumstances in which the Commission may delegate certain powers or functions, to provide a streamlined and expeditious process (in certain circumstances) for the Commission to make determinations allocating available capacity, and renew and vary existing determinations; and

* prescribes allowances a person is entitled to be paid in compensation for travelling and other expenses, in relation to their attendance as a witness before a hearing of the Commission.

Australian carriers and the Commission were consulted in developing this Disallowable Legislative Instrument.

Human rights implications

This Disallowable Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Disallowable Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

[1] The term 'route' is defined in the International Air Services Commission Policy Statement 2018 as relating 'to the full set of entitlements available to Australian carriers under a particular bilateral arrangement. All combinations of origin, destination, intermediate and beyond points available to Australian carriers under the bilateral arrangement constitute a single route.' This definition also applies herein.