Thought leadership from our experts

It’s Easier Than Ever to Fly in Australia

Matthew Brooks, HWL Ebsworth, Australia

Recent developments in Australia's aviation space are making it easier to fly, both for potential passengers and for the airlines that service them. With Open Skies within the Association of Southeast Asian Nations (ASEAN) finally being realised and the Cape Town Convention coming into force in Australia, the framework is in place for potential growth in Australian aviation. With aviation growth on the horizon, progress is underway by the Civil Aviation Safety Authority in implementing the Government's response to each recommendation of the Aviation Safety Regulation Review.

According to Tourism Australia, Asia is expected to contribute more than 50% of the projected growth in international visitation in the current period leading up to 2020. The potential of China is undisputed, with over 1 million visitors in 2015 from 21 current city pairs but not to be dismissed is the potential in Southeast Asia, particularly the ASEAN region. Asia is the key market in terms of the development for Australian aviation.

The initial development of the ASEAN Single Aviation Market, more commonly known as ASEAN Open Skies, was a result of air travel being highlighted as a priority sector for economic growth within the region. As the region's major aviation policy, the aim is to develop a unified aviation market amongst the member states of ASEAN. The intention is to encourage aviation growth in the region by increasing competition through the elimination of trade barriers. With the full ratification of the relevant agreements on 15 April 2016, airlines from ASEAN member states are now able to fly freely throughout the region. This is anticipated to enhance cross border competition and benefit the tourism industry of the region.

Open Skies also presents clear advantages to Australia. As a close western developed country with strong destination appeal, it offers an opportunity for Australia to engage more closely with our Southeast Asian neighbours. The increase in discretionary income has made air travel more affordable to the regions 600 million people, making Southeast Asia one of the world's fastest growing emerging markets. As one of ASEAN's Dialogue Partners, Australia is well placed to take advantage of the current aviation environment and create a productive tourism alliance by promoting an expansion of passenger and freight linkages.

Open Skies has made it easier for potential passengers to fly but airlines aren't missing out either in Australia with the Cape Town Convention coming into force on 1 September 2015. The Cape Town Convention signed on 16 November 2001, consists of the Convention on International Interests in Mobile Equipment and its related Protocol on Matters Specific to Aircraft Equipment. Aircraft financing is facilitated since creditors are protected in the event of a debtor's default or insolvency by an internationally recognised set of rights. Under the Cape Town Convention, creditors are able to register their interests in airframes, helicopters and aircraft engines over a specific capacity in an international register which guarantees the priority of their claim over subsequent or unrecorded interests. As of May 2016 there are 70 Contracting States.

However, the domestic operation of the Cape Town Convention will be subject to certain declarations Australia has made under a number of Articles in the Convention and its related Protocol. With regards to priority, certain non-consensual rights or interests will still have priority over registered international interests. Additionally while interim relief remedies do not apply, all other remedies that are available, and do not expressly require application to the court, may be exercised without leave of the court. As for declarations made under the related Protocol it has meant that in the event of default, the debtor will give possession of the aircraft to the creditor no later than 60 calendar days.

Previously in Australia the Personal Property Securities Act 2009 (Cth) governed the regulation of security interests in aircraft. However with the accession to the Cape Town Convention, the latter will now prevail over the Personal Property Securities Act but only to the extent of any inconsistencies. This provides international businesses with confidence that the Cape Town Convention and Protocol have their full effect in Australia. For all interests in aircraft objects not covered by the Cape Town Convention, the Personal Property Securities Act is still applicable, including those interests created in aircraft objects before 1 September 2015.

The Cape Town Convention has clear benefits for the aviation industry, the most notable being the increased protection available to creditors. The introduction of an international register regulates the priorities of international interests on the basis of first-to-file, meaning that the earliest registered interest will have priority over all other subsequent or unrecorded interests in the same object. Creditor risk is reduced thus enabling Australian airlines to access cheaper financing when purchasing aircraft, helicopters and jet engines. Smaller regional airlines also get a boost with discounted financing available for the purchase of second hand aircraft, enabling them to upgrade and maintain their fleets in an increasingly competitive market.

With the current environment making it easier than ever to fly it is more important than ever to ensure that aviation safety regulations remain relevant to any new areas of risk which arise. The Aviation Safety Regulation Review was released on 3 June 2014, which was subsequently followed up with the Government response released on 3 December 2014. It has been nearly a year and a half on and while the Civil Aviation Safety Authority, also known as CASA, have implemented a number of the agreed recommendations in the Government response, there are still a number of recommendations being considered or reviewed. Also in response to the Review, CASA has developed a new regulatory philosophy containing 10 key principles which is to be reflected in regulatory policies and practices and in the way CASA engages with the aviation community. These principles include building trust and respect, taking a risk-based approach, being consultative and collaborative, balancing consistency with flexibility, embracing a just culture, taking actions that are appropriate and in proportion to the circumstances, exercising discretion fairly and limiting CASA's role in support of punitive action where it may be necessary. With the long term strategic intent for CASA, Flight Plan 2030, due to be published in July 2016, it will be interesting to see what direction Australia's aviation safety regulations is headed.