International Air Services Commission Policy Statement 2018 I, Michael McCormack, Deputy Prime Minister and Minister for Infrastructure and Transport, make the following policy statement. Dated 20 March 2018 Michael McCormack Deputy Prime Minister and Minister for Infrastructure and Transport Contents Part 1—Preliminary 1 Name 2 Commencement 3 Authority 4 Definitions 5 Schedules 6 Object Part 2—Criteria for assessing benefit to the public 7 Explanatory outline of this Part 8 Reasonable capability criterion 9 Additional criteria Part 3—How the Commission is to assess benefit to the public Division 1—Outline 10 Explanatory outline of this Part Division 2—Determinations allocating capacity 11 Available capacity not limited 12 One or more applicants and sufficient available capacity 13 All other cases (including two or more applicants and insufficient capacity) Division 3—Renewal of determinations 14 Presumption in favour of making the same allocation of capacity 15 Making a different allocation of capacity Division 4—Review of determinations 16 Variations on review for cause 17 Variations on application 18 Transfer applications Part 4—Duration and types of determinations 19 Explanatory outline of this part 20 Fixing periods during which determinations to be in force 21 Interim determinations to be made only in exceptional circumstances Part 5—Inclusion, variation and revocation of conditions in determinations 22 Explanatory outline of this part 23 Conditions relating to joint international air services 24 Conditions relating to the full use of capacity Part 6—Application and Transitional provisions 25 Explanatory outline of this part 26 Application and transitional provisions Schedule 1—Repeals International Air Services Policy Statement No.5 Part 1—Preliminary 1 Name This instrument is the International Air Services Commission Policy Statement 2018. 2 Commencement (1) Each provision of this instrument specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provisions Commencement Date/Details 1. The whole of this instrument The day after this instrument is registered. Note: This table relates only to the provisions of this instrument as originally made. It will not be amended to deal with any later amendments of this instrument. (2) Any information in column 3 of the table is not part of this instrument. Information may be inserted in this column, or information in it may be edited, in any published version of this instrument. 3 Authority This instrument is made under section 11 of the International Air Services Commission Act 1992. 4 Definitions Note: A number of expressions used in this instrument are defined in section 4 of the Act, including the following: (a) Australian carrier; (b) available capacity; (c) bilateral arrangement; (d) capacity; (e) code sharing; (f) Commission; (g) determination; (h) interim determination; (i) joint international air services; (j) transfer application. In this instrument: ACCC means the Australian Competition and Consumer Commission. Act means the International Air Services Commission Act 1992. additional criteria: see section 9. applicant means an Australian carrier that has applied to the Commission for a determination allocating capacity, or for the renewal or review of such a determination. reasonable capability criterion: see section 8. route relates 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. 5 Schedules Each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms. 6 Object (1) This instrument is a policy statement intended to provide guidance about the way in which the Commission is to perform its functions. (2) The Commission is to perform its functions in a way that will achieve the object of the Act (that is, to promote economic efficiency through competition in the provision of international air services) by fostering, encouraging and supporting competition in the provision of international air services by Australian carriers. Part 2—Criteria for assessing benefit to the public 7 Explanatory outline of this Part The Act requires the Commission to assess the benefit to the public of allocations of capacity when deciding whether to make, renew or vary a determination. This Part sets out criteria that the Commission is to have regard to in assessing the benefit to the public of allocations of capacity in particular circumstances. There are two main sets of criteria that the Commission is to have regard to in assessing the benefit to the public: the 'reasonable capability criterion' and the 'additional criteria'. When and how the Commission is to have regard to the criteria is set out in Part 3. In certain circumstances specified in Part 3, the Commission is to have regard to other criteria which are not set out in this Part. These include, for example, the matters referred to in paragraph 18(2)(b) or subsection 16(2) of this instrument. The criteria set out in this Part apply equally in assessing the benefit to the public of allocations to be exercised through own aircraft operations, code share arrangements and other joint international air services. 8 Reasonable capability criterion Reasonable capability criterion means 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. Note: To avoid doubt, this criterion relates to all carriers that are, or would be, permitted to use the capacity allocated under a determination, including all carriers that would be entitled to use the capacity because of a condition imposed by the Commission pursuant to paragraph 15(2)(ea) of the Act. 9 Additional criteria Additional criteria means the following criteria: Competition criteria (a) the desirability of fostering an environment in which Australian carriers can effectively compete with each other and with foreign carriers on the route in question; (b) the number of carriers operating on the route in question and the existing distribution of capacity among Australian carriers (including through code sharing and other joint international air services); (c) the likely impact on consumers of the proposed allocation, including on costs of airfares, customer choice, product differentiation, stimulation of innovation by incumbent carriers, and frequency of service; (d) the desirability of fostering own aircraft operations by Australian carriers over code share or other joint international air services involving the marketing, by an Australian carrier, of seats on flights operated by foreign carriers; (e) the benefits presented by allocating the capacity to a given applicant over other competing applicants, having regard to any commercial arrangements that may be in place with other carriers; (f) any determinations, decisions or notifications made by the ACCC, or any determinations made by the Australian Competition Tribunal, in relation to an Australian carrier using capacity in all or part of the route; (g) any determinations, decisions or notifications made by a foreign agency that performs a comparable function to the ACCC or the Australian Competition Tribunal, or by a foreign aeronautical authority, in relation to a carrier using entitlements under a bilateral arrangement on all or part of the route; Tourism and trade criteria (h) the level of promotion, market development and investment proposed by each of the applicants; (i) route service possibilities to and from points beyond Australian or foreign gateways; (j) the availability of frequent, low cost, reliable air freight movements for Australian importers and exporters; Relevant information obtained from Government agencies (k) any information that the Commission has obtained from Australian Government agencies or statutory authorities that the Commission considers to be relevant; Any other relevant consideration (l) any other matter or consideration that the Commission considers to be relevant. Part 3—How the Commission is to assess benefit to the public Division 1—Outline 10 Explanatory outline of this Part This Part sets out how the Commission is to assess the benefit to the public of allocations of capacity in particular circumstances. There are broadly 3 types of decision that the Commission can make under the Act: • Making a determination allocating available capacity (see section 7 and Division 1 of Part 3 of the Act); • Renewing a determination by making a fresh determination (see section 8 and Division 2 of Part 3 of the Act); • Varying a determination (see section 10 and Division 3 of Part 3 of the Act). Depending on which type of decision is being made, and the circumstances of the decision, the Commission is to apply the criteria set out in Part 2, and certain criteria specified in this Part, differently. Division 2 sets out the criteria applicable where the Commission is proposing to make a determination that allocates available capacity under section 7 of the Act: • Where there is unlimited available capacity, the Commission is to have regard to the reasonable capability criterion and need not have regard to any other matter (section 11); • Where there is sufficient available capacity for all applications and the Commission does not receive any adverse submissions, the Commission is to have regard to the reasonable capability criterion and need not have regard to any other matter (subsection 12(2)); • However, where the Commission receives one or more adverse submissions, the Commission is to have regard to the reasonable capability criterion and may have regard to relevant additional criteria (subsection 12(3)); • In all other cases, the Commission is to have regard to the reasonable capability criterion and to relevant additional criteria (section 13). Division 3 sets out the criteria applicable where the Commission is considering renewing a determination that allocates capacity under section 8 of the Act: • Paragraph 8(2)(a) of the Act provides a presumption in favour of renewing a determination. However, the Commission may decline to do so if it is satisfied that the determination is no longer of benefit to the public. In deciding this, the Commission is to have regard to the matters set out in section 14 of this instrument; • If the Commission declines to renew a determination, it may make a different determination. In doing so, it is to have regard to the reasonable capability criterion and to relevant additional criteria (section 15). Division 4 sets out the criteria applicable where the Commission is considering whether to vary a determination in a way that varies, or has the effect of varying, an allocation of capacity: • If the Commission has initiated the review, and the reason for variation relates to the condition that allocated capacity be fully used, the Commission is to have regard to the criteria set out in paragraphs 24(3)(a)-(d) and need not have regard to any other matter (subsection 16(2)); • If the Commission has initiated the review for any other reason, and the Commission does not receive any adverse submissions, the Commission is to have regard to the reasonable capability criterion and need not have regard to any other matter (subsection 16(3)); • In all other cases where the Commission has initiated the review, the Commission is to have regard to the reasonable capability criterion and may have regard to relevant additional criteria (subsection 16(4)); • If the carrier has applied for a variation, and the Commission does not receive any adverse submissions, the Commission is to have regard to the reasonable capability criterion and need not have regard to any other matter (subsection 17(2)); • In all other cases where the carrier has applied for a variation, the Commission is to have regard to the reasonable capability criterion and may have regard to relevant additional criteria (subsection 17(3)); • Where a carrier has submitted a transfer application, the Commission is to have regard to the reasonable capability criterion and to the matters set out in paragraph 18(2)(b) (as relevant), and may have regard to relevant additional criteria (section 18). The provisions in this Part apply equally in assessing the benefit to the public of allocations to be exercised through own aircraft operations, code share arrangements and other joint international air services. Division 2—Determinations allocating capacity 11 Available capacity not limited (1) This section applies where the Commission proposes to make a determination allocating available capacity on a route under section 7 of the Act, and available capacity on the route is not limited under the relevant bilateral arrangement. (2) In assessing the benefit to the public of the allocation of available capacity under the proposed determination, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) need not have regard to any other matter. 12 One or more applicants and sufficient available capacity (1) This section applies where: (a) the Commission has received one or more applications for determinations allocating available capacity on a route under section 7 of the Act; and (b) there is sufficient available capacity on the route for the Commission to make the determinations sought in all of the applications; and (c) section 11 of this instrument does not apply. (2) If the Commission does not receive any submissions: (a) opposing the allocation of the capacity under any of the determinations sought in the applications; or (b) requesting or opposing the inclusion of a specified condition in any of the determinations; then, in assessing the benefit to the public of an allocation of available capacity under the determinations, the Commission: (c) is to have regard to the reasonable capability criterion; and (d) need not have regard to any other matter. (3) In all other cases, in assessing the benefit to the public of an allocation of available capacity under a proposed determination, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) may have regard to any of the additional criteria that it considers to be relevant. 13 All other cases (including two or more applicants and insufficient capacity) (1) This section applies where: (a) the Commission proposes to make a determination allocating available capacity on a route under section 7 of the Act; and (b) sections 11 and 12 of this instrument do not apply. Note: For example, this section will apply where the Commission has received two or more applications for determinations allocating available capacity under section 7 of the Act, and there is insufficient available capacity for the Commission to make the determinations sought in all of the applications. (2) In assessing the benefit to the public of an allocation of capacity under a proposed determination, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) is to have regard to any of the additional criteria that it considers to be relevant. Division 3—Renewal of determinations 14 Presumption in favour of making the same allocation of capacity (1) This section applies where: (a) the Commission is proposing, while a determination is in force, to make a fresh determination allocating the capacity to which the original determination relates under section 8 of the Act; and (b) the Commission is considering whether the allocation of capacity in the original determination is no longer of benefit to the public for the purpose of subparagraph 8(2)(a)(i) of the Act. (2) Without limiting the matters to which the Commission may have regard, an allocation is generally no longer of benefit to the public if: (a) the carrier seeking renewal has failed to service the route effectively; and (b) there are other applications for some or all of the capacity; and (c) 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 public. Note: In accordance with paragraph 8(2)(a) of the Act, the Commission must make the same allocation of capacity as the original determination unless it is satisfied that the allocation is no longer of benefit to the public. This operates as a presumption in favour of the incumbent carrier. 15 Making a different allocation of capacity (1) This section applies where, in the course of considering the renewal of a determination, the Commission is satisfied, for the purposes of subparagraph 8(2)(a)(i) of the Act, that the allocation of capacity in the original determination is no longer of benefit to the public. (2) In assessing whether an allocation of capacity made by a fresh determination is of benefit to the public for the purpose of subsection 8(3) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) is to have regard to any of the additional criteria that it considers to be relevant. Division 4—Review of determinations 16 Variations on review for cause (1) This section applies where: (a) the Commission has conducted a review for cause in relation to a determination pursuant to section 10 of the Act; and (b) the Commission is considering making a decision to vary the determination under paragraph 23(1)(b) of the Act in a way that varies, or has the effect of varying, an allocation of capacity. (2) If the grounds on which the review was initiated relate to a condition imposed under paragraph 15(2)(c) of the Act, in assessing whether the allocation, as so varied, would be of benefit to the public for the purpose of subsection 23(3) of the Act, the Commission: (a) may have regard to the criteria set out in paragraphs 24(3)(a) to (d) of this instrument; and (b) need not have regard to any other matter. Note: Paragraph 15(2)(c) of the Act allows for the imposition of a condition that capacity be fully used. (3) If the review was initiated on any other grounds, and the Commission does not receive submissions opposing the variation being considered by the Commission, then in assessing whether the allocation, as so varied, would be of benefit to the public for the purpose of subsection 23(3) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) need not have regard to any other matter. (4) In all other cases, in assessing whether the allocation, as so varied, would be of benefit to the public for the purpose of subsection 23(3) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) may have regard to any of the additional criteria that it considers to be relevant. 17 Variations on application (1) This section applies where: (a) the Commission has conducted a review to decide an application (other than a transfer application) for a determination to be varied; and (b) the Commission is considering making a decision to vary the determination under paragraph 24(1)(b) of the Act in a way that varies, or has the effect of varying, an allocation of capacity. (2) If the Commission does not receive submissions opposing the variation requested in the application then, in assessing whether the allocation, as so varied, would be of benefit to the public for the purpose of subsection 24(2) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) need not have regard to any other matter. (3) In all other cases, in assessing whether the allocation, as so varied, would be of benefit to the public for the purpose of subsection 24(2) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) may have regard to any of the additional criteria that it considers to be relevant. 18 Transfer applications (1) This section applies where: (a) the Commission has conducted a review to decide a transfer application; and (b) the Commission is considering making a decision to vary the determination concerned in a way that gives effect to the variation requested in the transfer application; and (c) the Commission's decision to vary the determination would vary, or have the effect of varying, an allocation of capacity. (2) In assessing whether the allocation, as so varied, would not be of benefit to the public for the purpose of subsection 25(2) of the Act, the Commission: (a) is to have regard to the reasonable capability criterion; and (b) is to have regard to the following matters to the extent that they are relevant to the variation under consideration: (i) 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; (ii) the undesirability, other than in exceptional cases, of approving a transfer application made by a carrier that has never exercised an allocation, or has only exercised an allocation for a period of less than six months; and (c) may have regard to any of the additional criteria that it considers to be relevant. Part 4—Duration and types of determinations 19 Explanatory outline of this part This Part sets out how the Commission is to fix the periods during which determinations are to be in force, and in what circumstances the Commission should make interim determinations. 20 Fixing periods during which determinations to be in force (1) This section sets out how the Commission is to fix the period during which a determination is to be in force. (2) If a determination would allocate capacity on a route where capacity is not limited under the relevant bilateral arrangement, the period during which the determination is to be in force should be fixed at 99 years. (3) If a determination relates to an application in which a carrier has requested that the period during which the determination is to be in force be fixed at: (a) if the determination is an interim determination­—less than 3 years; or (b) if the determination is not an interim determination—less than 5 years; the period during which the determination is to be in force should be fixed at the period requested in the carrier's application. (4) In all other cases, the period during which a determination is to be in force should be fixed at: (a) if the determination is an interim determination—3 years; or (b) if the determination is not an interim determination—5 years. 21 Interim determinations to be made only in exceptional circumstances The Commission should make interim determinations only in exceptional circumstances. Part 5—Inclusion, variation and revocation of conditions in determinations 22 Explanatory outline of this part This Part sets out matters relating to the inclusion of conditions in determinations, and the variation or revocation of such conditions. Section 23 deals with additional conditions the Commission should include in a determination if it intends to include a condition that allows joint international air services. Section 24 deals with how the Commission should impose conditions relating to the full use of capacity, and how the Commission should proceed if it has undertaken a review of a determination on the grounds that an Australian carrier has not complied with such a condition. 23 Conditions relating to joint international air services If the Commission intends to include a condition in a determination that allows joint international air services pursuant to paragraph 15(2)(e) of the Act, the Commission should also include a condition requiring the Australian carrier to take reasonable steps to ensure that passengers are informed at the time of booking that one or more other carriers may operate the flight. 24 Conditions relating to the full use of capacity (1) For the purpose of specifying a period during which capacity need not be fully used pursuant to subparagraph 15(2)(c)(i) of the Act, the Commission: (a) should specify as short a period as is reasonably possible, having regard to the full range of things necessary to be done by the Australian carrier in order to commence operating under the determination; and (b) should not specify a period of more than two years other than in exceptional circumstances. (2) Where the Commission has commenced a review process under sections 10 and 23 of the Act because an Australian carrier has not complied with a condition that capacity be fully used, the Commission may have regard to the criteria set out in subsection (3) for the following purposes: (a) deciding whether to confirm, vary, suspend or revoke the determination under subsection 23(1) of the Act; (b) assessing whether the allocation, as varied, is of benefit to the public under subsection 23(3) of the Act, in accordance with subsection 16(2) of this instrument. (3) The criteria which the Commission may have regard to for the purposes specified in subsection (2) are: (a) whether, at the time of the review, there exists an application from another Australian carrier for an allocation of capacity on the route, and the unused portion of the capacity allocated under the reviewed determination prevents the making of a determination in favour of the competing applicant; and (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 relevant. Part 6—Application and Transitional provisions 25 Explanatory outline of this part This Part sets out application and transitional provisions. Section 26 deals with the application of this instrument and sets out transitional provisions relating to applications received by the Commission prior to the commencement of this instrument. 26 Application and transitional provisions (1) The Commission is to apply this instrument in deciding: (a) an application for a determination allocating capacity; or (b) an application for renewal of a determination; or (c) an application for variation of a determination; that is received by the Commission on or after the commencement of this instrument. (2) Despite the repeal of the International Air Services Policy Statement No.5 by Schedule 1, the Commission is to apply that Policy Statement in deciding (a) an application for a determination allocating capacity; or (b) an application for renewal of a determination; or (c) an application for variation of a determination; that is received by the Commission before the commencement of this instrument as if that repeal had not happened. Schedule 1—Repeals International Air Services Policy Statement No.5 1 The whole of the instrument Repeal the instrument