Thought leadership from our experts

Australia “Gearing Up” for Future Growth

Matthew Brooks, HWL Ebsworth, Australia

With a 5.6% increase in international scheduled passenger traffic to 31.145 million people in 2014, and 54 international scheduled airlines operating services to and from Australia in 2014, the Australian aviation industry is "gearing up" to cater for the increase in demand. This is particularly reflected in the physical developments to infrastructure alongside Government policy. At the forefront of Australian aviation recent developments is a strong focus on the growth of international traffic, particularly emanating from the China and Asia regions.

This was most poignantly seen in Prime Minister Tony Abbott's announcement of a second airport to be built in Sydney, following years of debate. Aiming to commence construction in 2016, the site of the new airport is Badgery's Creek, 51 kilometres west of Sydney's central business district. Plans have been kept relatively confidential however it has been revealed that the facility could eventually double the size and passenger capacity of Sydney's present Kingsford Smith Airport. The first stage aims to be completed within ten years and take 10 million passengers a year, with the total cost estimated to be around $4 billion. The final configuration proposed is 3.7km twin parallel runways by 2050, aiming to take 80 million passengers per year. Sydney Airport has a right of first refusal on the project, being a condition of Kingsford Smith Airport's sale by the Federal Government, giving Sydney Airport the first option to develop and operate the second Sydney airport. Sydney Airport is now engaging in discussions with the Federal Government over the project.

This decision complements the new Air Services Agreement between Australia and China, announced in January 2015. The new bilateral agreement immediately increases the current weekly seat capacity by 136 %, adding 4,000 seats for airlines flying from the main gateway cities of Beijing, Shanghai or Guangzhou and 26,500 seats a week for airlines flying from a second or third tier city. Total capacity between Australia and China will almost triple from the current limit of 22,500 seats to 67,000 seats a week by 2016. The decision aligns with China now being Australia's most lucrative, largest and fastest growing inbound tourism market, with 800,000 visitors spending $5 billion in 2014 and accounting for half of the international passenger growth.

Airports and airlines are now seeking to take advantage of this increase in capacity from China. Qantas and China Eastern have sought approval from the Australian Competition and Consumer Commission (ACCC) for a deeper alliance between them for five years, allowing them to co-ordinate prices and flight schedules. The ACCC signalled in March 2015 that it will block the alliance because of concerns it will give the two airlines more than 80 per cent of the direct capacity between Sydney and Shanghai, which has prompted China's Ambassador to Australia, Ma Zhaoxu, to write to the regulator to express his "concern about the ongoing review". The ACCC has extended the deadline for a decision on the Qantas-China Eastern alliance until 31 August 2015 with lobbying continuing from all major stakeholders.

The Federal Government is considering an "open skies policy" for international carriers to operate domestic routes between Broome, Darwin, Townsville and Cairns to help stimulate economic development. Whilst this policy has been hailed as having positive tourism and economic advantages, there are fears that it will threaten the viability of Australian domestic carriers including Qantas and Virgin Australia. Strong opposition is building from industry stakeholders and unions, and this policy proposal appears to be a long way from approval.

In October 2014, Virgin Australia announced that it would completely acquire the low cost carrier, Tigerair Australia, of which it previously owned 60%. Virgin Australia acquired the remaining 40% for just $1. This acquisition sees Virgin Australia operating Tigerair to a number of short-haul destinations, in competition with Jetstar Airways, a low cost airline owned by the Qantas Group.

With respect to aviation liability, in the recent decision of Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd [2015] NSWSC 566, the NSW Supreme Court held that post-traumatic stress disorder (PTSD) can be a form of "bodily injury" under Article 17 of the Montreal Convention. This concerned a passenger's claim for physical and psychological injury following an aircraft ditching near Norfolk Island in November 2009. The Court found that the medical evidence is consistent with the passenger having suffered organic damage to her brain, and concluded the PTSD suffered by the passenger is a "bodily injury" and therefore compensable under Article 17. If the decision is not overturned on Appeal, claims once considered purely psychiatric injury may be compensable in Australia if supported on the medical evidence.

In Stephenson v Parkes Shire Council & Ors [2014] NSWSC 1758, the Council engaged South West Helicopters to conduct an aerial weed survey in February 2006. The flight was piloted by an employee of South West with two Council employees on board, and struck an overhead wire owned by Essential Energy, killing all three on board. Whilst the Council, South West, and Essential Energy were found to have contributed to the crash, the definition of a "passenger" was considered. The Court found Mr Stephenson, the Council employee on board who assisted in the flight as an observer, his presence was essential to the conduct of the operations, and therefore a "crew member" rather than a "passenger". The Court also found that the Civil Aviation (Carriers' Liability) Act (CACL Act) which provides the exclusive right for a passenger to claim against a carrier has no application to the proceedings brought by the members of Mr Stephenson's family, and the non-passenger family members are not precluded from claiming nervous shock in common law against South West.

It is certainly an active time for the aviation industry and Government in Australia, striving to find the fine balance of additional capacity to meet forecast demand, and infrastructure developments to cater for increased demand, creating many opportunities for the industry as a whole.