Interim report Rural and Regional Affairs and Transport References Committee - The Senate - APO
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The Senate Rural and Regional Affairs and Transport References Committee Future of Australia’s aviation sector, in the context of COVID-19 and conditions post pandemic Interim report March 2021
© Commonwealth of Australia ISBN 978-1-76093-209-1 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. The details of this licence are available on the Creative Commons website: https://creativecommons.org/licenses/by-nc-nd/4.0/. Printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra.
Members Chair Senator Glenn Sterle ALP, WA Deputy Chair Senator Susan McDonald NATS, QLD Members Senator Nita Green ALP, QLD Senator Alex Gallacher ALP, SA Senator Peter Whish-Wilson AG, TAS Senator Gerard Rennick LP, QLD Participating Members Senator Tony Sheldon ALP, NSW Secretariat Gerry McInally, Committee Secretary Paula Waring, Principal Research Officer Joshua Wrest, Senior Research Officer Kaitlin Murphy, Senior Research Officer Michael Fisher, Research Officer Jason See, Administrative Officer PO Box 6100 Telephone: (02) 6277 3511 Parliament House Fax: (02) 6277 5811 CANBERRA ACT 2600 Email: rrat.sen@aph.gov.au iii
Contents Members ............................................................................................................................................. iii List of Recommendations ............................................................................................................... vii Chapter 1—Background ..................................................................................................................... 1 Chapter 2—Government support for aviation during COVID-19............................................. 9 Chapter 3—The impact of the COVID-19 pandemic on the aviation workforce .................. 27 Chapter 4—Initial committee view on the aviation support package .................................... 61 Government members - additional comments ............................................................................ 65 v
List of Recommendations Recommendation 1 3.156 The committee recommends that JobKeeper, or wage subsidies modelled off JobKeeper, be continued by the Australian Government to support aviation workers and organisations at the cessation of the JobKeeper scheme in March 2021. This support should be tailored to the economic conditions and government restrictions, including international border restrictions. Recommendation 2 3.157 The committee recommends that Australian workers who pay tax and are employed by companies wholly owned by foreign sovereign entities, and Australian local government-owned entities should be eligible to apply for any wage subsidies or other Australian Government support programs for the aviation industry after the cessation of JobKeeper. Recommendation 3 3.158 The committee recommends that the Australian Government consider making any further support to the aviation sector conditional on companies agreeing to: not further weaken the job security of employees; maintain existing regional services; and implement moratoriums on the payment of dividends, executive bonuses and executive pay increases. vii
Chapter 1 Background Referral of inquiry 1.1 On 9 November 2020, the following matters were referred to the Senate Rural and Regional Affairs and Transport References Committee (the committee) for inquiry and report by 31 March 2021: The future of Australia’s aviation sector, in the context of COVID-19 and conditions post-pandemic, having particular regard to: (a) the importance of Australia’s aviation sector in supporting the economic and social wellbeing of all Australians; (b) the immediate and long-term impacts of the COVID-19 pandemic response on all aspects of the Australian aviation sector; (c) the immediate and long-term impacts of the COVID-19 pandemic response on all sectors that rely on aviation (e.g. tourism); (d) the adequacy of government industry support and procurement and programs for the social and economic well-being of workers for all sections of the aviation industry to survive the downturn caused by the pandemic; (e) the immediate and long-term employment landscape within Australia’s aviation sector; (f) what policy and practical measures would be required to assist the industry to recover in the medium term; and (g) any related matters. 1.2 Following a resolution of the committee on 3 February 2021, and in accordance with the motion agreed by the Senate on 18 February 2021,1 the reporting date for the inquiry was extended to 13 May 2021. Conduct of the inquiry 1.3 The committee advertised the inquiry on its website and invited submissions from a range of relevant stakeholders, including government agencies, industry, community groups and individuals. Details regarding the inquiry and associated documents are available on the committee's webpage. 1.4 To date, the committee has received 32 submissions. This included 31 public and name withheld submissions which are published on the committee's website. 1.5 In addition, the committee held public hearings on: 28 and 29 January 2021 in Brisbane; 10 February 2021 in Sydney; and 1 Journals of the Senate, No. 88, 18 February 2021, p. 3112. 1
2 3 and 4 March 2021 in Canberra. Purpose of this report 1.6 It should be noted that this interim report is focussed on the immediate impact of COVID-19 on the aviation workforce. It sets out the committee's early findings on the adequacy of government support for aviation workers responsible for maintaining the viability of the aviation sector through the pandemic. 1.7 While this report outlines some of the major issues faced by the aviation sector as a result of COVID-19, it is not intended to provide an exhaustive examination of the many issues raised with the committee in written submissions, correspondence and hearings. The committee will report on these issues in greater detail in its final report. Acknowledgments 1.8 The committee thanks all organisations and individuals who contributed to the inquiry by preparing written submissions and appearing before the committee at public hearings to give evidence. References to Hansard 1.9 In this report, references to Committee Hansard are to proof transcripts. Page numbers may vary between proof and official transcripts. Structure of the report 1.10 This interim report is divided into three chapters. Chapter 1 provides an overview of the committee's conduct as well as a brief background of Australia's aviation sector. 1.11 Chapter 2 outlines the Australian Government's support for aviation during COVID-19. In particular, it examines JobKeeper and relevant issues, such as eligibility criteria and the impact these have had on the aviation workforce. 1.12 Chapter 3 discusses the impact of the COVID-19 pandemic on the aviation and tourism sectors, in terms of job losses, stand downs and the resultant loss of skills. It also outlines the need for ongoing support to sustain Australia's aviation sector and ensure it is ready to lead economic recovery once travel restrictions are lifted. An overview of Australian aviation 1.13 The following section2 provides an overview of Australia's aviation sector, including the importance of Australian aviation as well as discussing the impacts of COVID-19. 2 The following section is based on information contained in Department of Infrastructure, Transport, Regional Development and Communications, Submission 20; Department of
3 Importance of Australian aviation 1.14 The aviation sector makes a major contribution to Australia's economy, as well directly and indirectly supporting the employment of thousands of Australians. Submitters emphasised the role of aviation as 'a vital linchpin to the health of the Australian economy'.3 For example, in 2018 the aviation sector directly contributed around $20 billion to the economy, or 1 per cent of gross domestic product (GDP).4 1.15 In particular, the aviation sector is integral to freight supply chains. Air freight comprises a small proportion of Australia’s international freight task by mass (0.1 per cent) but represents around 20 per cent of trade by value. In 2019, the air and space transport industry directly contributed around $10 billion to the economy, or 0.5 per cent of GDP.5 Furthermore, total Australian international air freight recently surpassed 1 million tonnes annually.6 1.16 In its Skills Forecast published in 2019, the Aviation Industry Reference Committee, of the overarching Australian Industry and Skills Committee, revealed prior to COVID-19 Australia's aviation industry employed more than 93 000 people across five main subsectors.7 These are domestic commercial aviation, international commercial aviation, general aviation, air-freight transport and aviation support infrastructure.8 1.17 In addition, Mr James Goodwin, Chief Executive, Australian Airports Association, estimated that Australia's airports maintained the jobs of more than 200 000 Australians. 1.18 Furthermore, EY analysis for the Business Council of Australia estimated that international aviation supports around 515 000 jobs: 248 000 jobs associated with education services for international students; Infrastructure, Transport, Regional Development and Communications, The Future of Australia's Aviation Sector: Flying to Recovery, Issues Paper 2020, August 2020; Australian Competition and Consumer Commission, Airline competition in Australia, September 2020. 3 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 2. 4 Department of Infrastructure, Transport, Regional Development and Communications, The Future of Australia's Aviation Sector: Flying to Recovery, Issues Paper 2020, August 2020, p. 4. 5 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 2. 6 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 2. 7 Mr James Goodwin, Chief Executive, Australian Airports Association, Proof Committee Hansard, 29 January 2021, p. 15. 8 Australian Industry and Skills Committee, Aviation, 30 October 2020, https://nationalindustry insights.aisc.net.au/industries/transport/aviation (accessed 9 February 2021).
4 129 000 jobs associated with freight transport; 75 000 jobs associated with international holiday makers; 32 000 jobs associated domestic leisure travel; and 31 000 jobs associated with business travel.9 1.19 In addition to aviation's contribution to the economy in terms of employment and contribution to GDP, it also acts as a multiplicative factor in the productivity of many other Australian sectors, facilitating business, employment, education, tourism and connectivity. For example, Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, informed the committee that '[w]e rely on aviation to support our valuable education and tourism industries, and to support primary producer products'.10 1.20 Similarly, Ms Teri O'Toole, Federal Secretary, Flight Attendants Association of Australia, stated that: Obviously we're a pretty broad country and we need to be able to get around it and we do need the infrastructure of aviation. It's not just tourism; absolutely everything relies on it, whether it's freight, whether it's cargo, whether it's getting from the western states to the east coast.11 1.21 Submitters highlighted the following benefits delivered by the aviation sector: access to global markets; exploitation of geographical comparative advantages; promoting economies of scale; and increased investment opportunities.12 1.22 The Australian Council of Trade Unions (ACTU) submitted that these benefits 'would likely add up to tens of billions of dollars per year'.13 1.23 Aviation also provides a critical connection between Australian communities and the world, with international aviation being vital to Australia’s tourism sector. In 2019-20, tourism directly contributed around $50 billion to Australia’s GDP (2.5 per cent of GDP) and around 620 000 jobs (4.8 per cent of the workforce).14 9 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, pp. 3-4. 10 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 1. 11 Ms Teri O'Toole, Federal Secretary, Flight Attendants Association of Australia, Proof Committee Hansard, 3 March 2021, p. 55. 12 Australian Council of Trade Unions, Submission 13, pp. 3-5. 13 Australian Council of Trade Unions, Submission 13, p. 4. 14 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 2.
5 1.24 Moreover, the aviation sector serves as a crucial enabler and provides vital support to the agriculture, manufacturing and mining sectors: some agricultural exports are highly dependent on aviation, with almost 80 per cent of seafood (by value) exported by air; revenue from goods manufactured in Australia and exported by air is approximately $42 billion, or 11.7 per cent of manufacturing exports; and Australians regularly fly from major population centres to remote mine sites for work, and thousands more fly-in fly-out workers serve the oil and gas industry.15 1.25 Some remote communities are long distances from major regional centres or capital cities, making regular road transport time consuming and expensive. A number of submitters noted as a result of the vast size of the continent that Australians are heavily reliant on aviation to travel domestically. 16 1.26 Domestic aviation plays an important role servicing the needs of regional and remote communities across Australia by providing access to key services, including transport and freight, search and rescue operations, law enforcement and business and recreational travel. By way of example, the total number of passenger movements through regional airports increased from around 9 million in 1985 to around 26 million in 2019.17 In addition, Mrs Peta Rutherford, Chief Executive Officer, Rural Doctors Association of Australia, emphasised that the continued viability of regional and rural airports is essential to the provision of, and access to, healthcare.18 1.27 Without these services the social and economic existence of regional and remote communities and many regional industries are at risk. 1.28 The ACTU also highlighted a number of 'immensely valuable economic benefits' provided to regional areas as a result of aviation.19 These included: reducing the tyranny of distance; lowering the costs of doing business; increasing competition in regional markets due to greater access to alternative suppliers; enhanced innovation due to access to a wider range of skilled workers; 15 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 2. 16 See, for example, Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 1. 17 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 2. 18 Mrs Peta Rutherford, Chief Executive Officer, Rural Doctors Association of Australia, Proof Committee Hansard, 4 March 2021, p. 45. 19 Australian Council of Trade Unions, Submission 13, p. 5.
6 improved ability to deal with temporary shortages of workers or of goods; increased investment opportunities catalysed by familiarity with the potential place of investment, potential clients and collaborators; and allowing for more efficient interaction between different levels of government.20 1.29 In addition to noting the critical importance of the aviation sector generally, Mr Andrew Jaggers, Deputy Secretary, Commercial and Government Services, Department of Finance, argued that '[i]t will also play a significant role in the economic recovery from COVID'.21 Impacts of COVID-19 on Australia's aviation sector 1.30 COVID-19 and associated travel restrictions have had a significant impact on the aviation sector. In response to the pandemic, Australian governments implemented health measures including quarantines, interstate and international border closures, limits on non-essential travel and stay at home orders. These measures, along with uncertainty for consumers, saw an unprecedented decline in air travel.22 1.31 Reduced demand saw domestic flights in April 2020 fall by around 97 per cent from pre-COVID levels, while international flights into Australia largely ceased due to a ban on arrivals of non-Australian citizens.23 The Department of Infrastructure, Transport, Regional Development and Communications informed the committee that: the number of domestic passengers carried on regular public transport (RPT) flights declined by around 84 per cent between October 2019 and October 2020; total domestic RPT load factors declined from almost 85 per cent in October 2019 to below 70 per cent in October 2020; and passenger movements at regional airports declined by around 66 per cent between October 2019 and October 2020.24 1.32 In a report commissioned by the International Transport Workers' Federation, the McKell Institute found that, worldwide, by mid-April 2020 an estimated 12 400 aircraft had been placed into storage and passenger revenues for 2020 20 Australian Council of Trade Unions, Submission 13, p. 5. 21 Mr Andrew Jaggers, Deputy Secretary, Commercial and Government Services, Department of Finance, Proof Committee Hansard, 4 March 2021, p. 12. 22 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 5. 23 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 5. 24 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 5.
7 were forecast to be down $314 billion on the previous year, a drop of 48 per cent compared to around 16 per cent during the Global Financial Crisis.25 1.33 In addition, COVID-19 has had a significant impact on the operations of major airlines, which are the aviation sector's key employers. This includes the following: The Qantas Group (Qantas) announced in March 2020 a 90 per cent reduction to international capacity and 60 per cent to domestic capacity, with around 150 aircraft being grounded.26 It also announced that 20 000 employees would be stood down until at least May 2020. Qantas reduced domestic operations to 5 per cent of capacity during April and had only recovered to 15 per cent of capacity through June 2020. In August 2020, Qantas announced a $2.7 billion statutory loss for financial year 2020, following a 91 per cent drop in underlying profit before tax, $1.4 billion in write-downs and $642 million in restructuring and redundancy costs.27 It explained that the stand down of 20 000 employees would continue, and that 4 000 of at least 6 000 redundancies were expected to be finalised by end-September 2020. Qantas also announced it would outsource its ground handling operations, resulting in 2500 employees across 10 airports, some of whom has worked for Qantas for over a decade, losing their livelihoods. Virgin Australia (Virgin) announced in March 2020 a 90 per cent reduction to domestic capacity, with 125 aircraft grounded. It announced that 80 per cent of its workforce would be temporarily stood down.28 Virgin also entered voluntary administration in April 2020, with an aim to restructure and refinance the airline. It announced in June 2020 that Bain Capital had entered into an agreement with the administrator, Deloitte, to become the new owner of the airline. Rex Airlines made announcements in March 2020 that it would reduce its capacity by 45 per cent and subsequently suspend services entirely.29 However, after the federal and state governments provided assistance 25 McKell Institute, Australian Aviation and COVID-19: Analysis of support and impact, January 2021, p. 4. 26 Qantas Group, Qantas group update on coronavirus response, 17 March 2020. 27 Qantas Group, Qantas Group FY20 financial results—navigating exceptional conditions, 20 August 2020. 28 Virgin Australia, Virgin Australia Group makes further capacity reductions in response to COVID-19, 25 March 2020. 29 Rex Airlines, 'Rex announces reductions to network', Media Release, 19 March 2020; Rex Airlines, 'Rex to cease all passenger air services with the exception of Queensland', Media Release, 23 March 2020.
8 measures, Rex Airlines announced in April 2020 that it would run two to three return flights per week to all destinations on its network.30 1.34 It is expected that the aviation industry’s recovery will be much slower than the downturn, due to the ongoing risk of domestic border closures, the staggered reopening of international travel routes and the impacts of a broader economic downturn. Even once restrictions are fully lifted, overall demand for air travel is expected to be depressed by low consumer and business confidence.31 1.35 Notably, in January 2021, Professor Brendan Murphy, Secretary of the Department of Health, predicted international travel won't resume until 2022. 32 Meanwhile, the latest International Air Transport Association forecast expects global passenger traffic to return to 2019 levels in 2024 at the earliest, with domestic markets recovering faster than international services.33 30 Australian Competition and Consumer Commission, Airline competition in Australia, September 2020, p. 4. 31 McKell Institute Victoria, Australian Aviation after COVID-19. The urgent need for an Australian aviation plan, June 2020, pp. 11-12. 32 Mr Tom McIlroy, 'Travel restart unlikely in 2021: Health boss', Australian Financial Review, 18 January 2021, https://www.afr.com/politics/federal/travel-restart-unlikely-in-2021-health-boss- 20210118-p56uyu (accessed 15 February 2021). 33 International Air Transport Association, Outlook for Air Transport and the Airline Industry, 24 November 2020, p. 11; International Air Transport Association, 2020 End-year report, 24 November 2020, pp. 3-4.
Chapter 2 Government support for aviation during COVID-19 Overview 2.1 Particular industries have borne the brunt of the public health measures implemented to contain COVID-19, with aviation amongst the first to feel the full economic impact of the lockdown. As noted in Chapter 1, border closures, limits on non-essential travel and stay at home orders have caused an unprecedented decline in air travel. In response, the Australian Government implemented a range of measures to assist the aviation sector, including temporary programs to subsidise the cost of operating a minimum domestic aviation network. 2.2 This chapter explores measures put in place by the Australian Government to support the aviation sector in response to COVID-19. In particular, it concentrates on evidence received by the committee in relation to JobKeeper, including eligibility criteria and the impact of these on the aviation workforce. Overview of financial support for aviation in response to COVID-19 2.3 The Australian Government's COVID-19 economic response encompassed a number of measures to support sectors particularly impacted by COVID-19 and associated travel restrictions. 2.4 On 28 March 2020, two new grant programs were announced as part of the Australian Government's $1 billion COVID-19 Relief and Recovery Fund: the Regional Airlines Funding Assistance program and the Regional Airline Networks Support (RANS) program:1 Between April and December 2020, $100 million was made available to deliver last-resort cash flow assistance to regional airlines that provide essential services to regional and remote locations through the Regional Airlines Funding Assistance program.2 The committee understands that of the $70.6 million that has been paid out through the Regional Airlines Funding Assistance program, $53.9 million 1 The Hon Michael McCormack MP, Deputy Prime Minister, 'Additional new support for critical regional aviation services through COVID-19', Media Release, 28 March 2020. 2 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 14. 9
10 was paid to Rex Airlines,3 despite its offering a relatively small share of daily seats to regional ports pre-COVID-19, compared to the Qantas Group (Qantas) and Virgin Australia (Virgin), both of whom were ineligible for the program. The committee heard that Rex Airlines received more than 76 per cent of the total funding allocated under the Regional Airlines Funding Assistance program, which provided last-resort cash flow assistance, despite Rex Airlines recording in its 2020 Annual Report an increase in revenue, and an underlying profit, excluding the $53.9 million received through the program.4 The RANS program is providing support to ensure minimum air connectivity to over 110 airports in regional and remote Australia from March 2020 to 28 March 2021.5 2.5 On 17 March 2020, the Australian Government announced relief measures for the Qantas, Virgin and regional airlines affected by COVID-19 (the Australian Airline Financial Relief Package). Overall, the Australian Airline Financial Relief Package provided $715 million in direct and indirect support to airlines, through fee-waivers, changes to operations charges and some limited direct financial assistance to 31 December 2020.6 The Department of Infrastructure, Transport, Regional Development and Communications (Department of Infrastructure) informed the committee that, as at 30 November 2020, the total benefit to industry in direct rebates for fuel excise and domestic security costs was $126.3 million. Additionally, the total charges waived for 1300 domestic flight operators came to $145.8 million.7 2.6 The following month, the Australian Government announced the $165 million Domestic Aviation Network Support (DANS) program to subsidise the cost of 3 Mr Richard Wood, First Assistant Secretary, International Aviation, Technology and Services, Department of Infrastructure, Transport, Regional Development and Communications Proof Committee Hansard, 4 March 2021, pp. 8-9. 4 Mr John Sharp, Deputy Chairman, Rex Airlines, Proof Committee Hansard, 3 March 2021, pp. 26-27; Patrick Hatch, 'Rex's airline miracle: revenue grows thanks to government handouts', The Sydney Morning Herald, 1 September 2020, https://www.smh.com.au/business/companies/rex-s-airline- miracle-revenue-grows-thanks-to-government-handouts-20200831-p55r29.html (accessed 17 March 2021) 5 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 12. As at the end of November 2020, more than 16 600 flights had been supported by RANS, enabling more than 245 000 passengers to travel and maintaining critical air freight links around Australia. 6 The Hon Michael McCormack MP, Deputy Prime Minister, 'Relief package for Australian aviation industry', Media Release, 18 March 2020, https://minister.infrastructure.gov.au/mccormack/media- release/relief-package-australian-aviation-industry (accessed 3 March 2021). 7 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, p. 14.
11 operating a minimum domestic aviation network.8 The DANS program provided shortfall subsidies to four domestic commercial airlines to operate flights along the top 50 domestic routes from 16 April 2020 to 31 January 2021.9 2.7 Further measures put in place by the Australian Government to support the aviation sector are outlined below: The $66 million Regional Airports Screening Infrastructure program was introduced to provide a funding contribution towards the minimum necessary capital and initial operational costs of enhanced security screening at eligible regional airports.10 Under the International Freight Assistance Mechanism (IFAM), $669 million has been committed to 30 June 2021 to maintain established supply-chains that support industries delivering high-value, time-sensitive, perishable and vital imports and exports. According to the Department of Infrastructure, IFAM funding supported transport of over 252 000 tonnes of air freight and reconnected supply chains to around 67 international destinations between April and 9 December 2020.11 Federally-leased airports were provided temporary relief and deferrals from land tax-equivalent payments if they provided rent relief to commercial tenants during the crisis.12 International comparison 2.8 Many jurisdictions introduced support measures for aviation in response to COVID-19. The Organisation for Economic Co-operation and Development (OECD) reported that two-thirds of that support consisted of direct aid (subsidies, loans, equity and cash injection).13 In addition, countries such as 8 The Hon Michael McCormack MP, Deputy Prime Minister, 'Federal Government guarantees domestic aviation network', Media Release, 16 April 2020, https://minister.infrastructure.gov.au/mcc ormack/media-release/federal-government-guarantees-domestic-aviation-network (accessed 3 March 2021). 9 Department of Infrastructure, Transport, Regional Development and Communications, Aviation, last updated 5 November 2020, https://www.infrastructure.gov.au/aviation/ #:~:text=Domestic%20Aviation%20Network%20Support%20(DANS)&text=DANS%20provides%20 shortfall%20subsidies%20to,(BITRE%202018%2D19) (accessed 18 February 2021). 10 The Hon Michael McCormack MP, Deputy Prime Minister, 'Regional airports land $66 million in grant funding', Media Release, 18 December 2020, https://minister.infrastructure. gov.au/mccormack/media-release/regional-airports-land-66-million-grant-funding (accessed 3 March 2021). 11 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, pp. 12-17. 12 Department of Infrastructure, Transport, Regional Development and Communications, Submission 20, pp. 12-17. 13 Organisation for Economic Co-operation and Development, COVID-19 and the aviation industry: Impact and policy responses, 15 October 2020, p. 4.
12 Australia, Singapore and the United Kingdom (UK) adopted wage subsidies to help employers maintain a connection with their workers. 2.9 Submitters raised concern regarding the level of support provided by the Australian Government to the aviation sector, compared to that of other nations. In a report commissioned by the International Transport Workers' Federation, the McKell Institute indicated that aviation support from the Australian Government totals $2.7 billion, or approximately 0.136 per cent of gross domestic product (GDP), compared to a mean of 0.24 per cent of GDP in support provided by countries analysed by the McKell Institute.14 According to the OECD, the Australian Government's support for the aviation industry ranks 18 out of the 28 countries it analysed.15 2.10 Additionally, the McKell Institute cited analysis undertaken by the World Bank regarding the size of support for the aviation industry, relative to the overall size of the relevant governments' support by way of economic stimulus in the context of COVID-19. This study found that Australia ranks poorly on this comparison, with only 0.33 per cent of our stimulus package being spent on aviation, compared to 2.4 per cent of the stimulus provided by both the United States of America (US) and New Zealand.16 2.11 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, argued that the Australian Government should exceed the support packages of other governments for Australia's aviation industry, including airlines.17 In particular, he noted that the Singaporean government had provided the highest tier of support to aviation, aerospace and tourism workers under its Jobs Support Scheme (JSS), in recognition of the importance of aviation. This originally amounted to 75 per cent of average take-home weekly wages and has since been reduced to 50 per cent.18 2.12 Mr McDine contended that this higher rate of wage subsidy had significantly reduced the number of aviation job losses. He observed that Australian airlines have experienced job losses at 31.1 per cent, compared with 19.5 per cent in the US and 15.6 per cent in Singapore.19 14 International Transport Workers' Federation, Submission 18, p. 9. 15 Organisation for Economic Co-operation and Development, COVID-19 and the aviation industry: Impact and policy responses, 15 October 2020, p. 5. 16 International Transport Workers' Federation, Submission 18, p. 10. 17 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 2. 18 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 2. 19 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 2.
13 2.13 The committee inquired whether there was a correlation between the level of financial support provided to the Australian aviation sector, relative to most OECD countries, and the proportion of job losses, relative to other countries. Mr Brine, First Assistant Secretary, Environment, Industry and Infrastructure Division, Department of the Treasury, accepted the existence of the correlation.20 2.14 The Australian and International Pilots Association (AIPA) also praised the responses of other governments. Specifically, Captain Murray Butt, President, AIPA, stated that: We have seen Singapore invest over A$20 billion into its airline. The US has been supporting the aviation industry such that all airline staff have been on 75 per cent of their salary. In the UK, staff have been on 80 per cent of their salary, and New Zealand is paying its airline staff 50 per cent of their salary until 2022. They recognise the importance of the sector and the retention of skills crucial for their infrastructure.21 2.15 The committee notes that the US' COVID-19 relief bill which passed on 10 March 2021 included an additional $23 billion in support for the aviation sector. The measures to date have reportedly saved 27 000 jobs at American Airlines and United Airlines alone.22 JobKeeper 2.16 The Australian Government responded to the first phase of the pandemic with three economic support packages.23 The third economic support package, announced on 30 March 2020, established a new wage subsidy in the form of JobKeeper, which initially provided a $1500 fortnightly wage subsidy to eligible employees of businesses that could demonstrate a sufficient decline in 20 Mr Matthew Brine, First Assistant Secretary, Environment, Industry and Infrastructure Division, Department of the Treasury, Proof Committee Hansard, 4 March 2021, p. 15. 21 Captain Murray Butt, President, Australian and International Pilots Association, Proof Committee Hansard, 3 March 2021, p. 57. 22 Niraj Chokshi, 'Relief Bill Gives Airline and Airport Workers a Reprieve, for Now', New York Times, 11 March 2021, https://www.nytimes.com/2021/03/11/business/stimulus-bill-airline- jobs.html (accessed 16 March 2021). 23 See, for example, the Hon Scott Morrison MP, Prime Minister, and the Hon Josh Frydenberg MP, Treasurer, 'Economic stimulus package', Media Release, 12 March 2020, www.pm.gov.au/media/economic-stimulus-package (accessed 4 February 2021); the Hon Scott Morrison MP, Prime Minister, and the Hon Josh Frydenberg MP, Treasurer, 'Supporting Australian workers and business', Media Release, 22 March 2021, www.pm.gov.au/media/supporting-australian-workers-and-business (accessed 4 February 2021); the Hon Scott Morrison MP, Prime Minister, and the Hon Josh Frydenberg MP, Treasurer, '130 billion JobKeeper payment to keep Australians in a job', Media Release, 30 March 2020, www.pm.gov.au/media/130-billion-jobkeeper-payment-keep-australians-job (accessed 4 February 2021).
14 revenue during the pandemic.24 JobKeeper was designed to help keep Australians employed as large parts of the economy went into 'hibernation'. It provided payments that enabled businesses to retain their employees where COVID-19 restrictions on movement reduced revenues. 2.17 For many Australian businesses and workers, the fallout from public health measures was immediate. By April 2020, the number of employed Australians had fallen by a total of 594 300—including 220 500 from full-time employment and 373 800 from part-time employment.25 828 300 people were unemployed and the underemployment rate had increased to 13.7 per cent.26 2.18 From April 2020, JobKeeper was supporting 850 000 organisations to pay 3.3 million working Australians a wage to live on in the absence of normal business operating conditions.27 According to Mr Brine this included: …over 300 unique entities in the air and space transport… covering on average around 31 000 employees per month and delivering assistance of around $250 million to the sector [during the first quarter of the extension phase of JobKeeper].28 2.19 On 21 July 2020, the Australian Government announced that due to the ongoing COVID-19 crisis, JobKeeper would be extended by six months until 28 March 2021, from the original end date of 27 September 2020. From 28 September 2020, the payment rate was reduced and a lower payment rate introduced for those who worked fewer hours.29 The JobKeeper payment is currently due to finish on 28 March 2021. 2.20 The majority of submitters voiced support for JobKeeper. For example, Mr Scott Connolly, Assistant Secretary, Australian Council of Trade Unions (ACTU), stated that '[t]here's no question that JobKeeper has played a 24 The Hon Scott Morrison MP, Prime Minister, and the Hon Josh Frydenberg MP, Treasurer, '130 billion JobKeeper payment to keep Australians in a job', Media Release, 30 March 2020, www.pm.gov.au/media/130-billion-jobkeeper-payment-keep-australians-job (accessed 4 February 2021). 25 Select Committee on COVID-19, First interim report, December 2020, p. 70. 26 Australian Bureau of Statistics, Labour Force, Australia, 14 May 2020, www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/apr- 2020#:~:text=Seasonally%20adjusted%20estimates%20for%20April,Employment%20decreased%20t o%2012%2C418%2C700 (accessed 10 February 2021). 27 Department of the Treasury, The Jobkeeper Payment: Three-month review, June 2020, p. 17. 28 Mr Matthew Brine, First Assistant Secretary, Environment, Industry and Infrastructure Division, Department of the Treasury, Proof Committee Hansard, 4 March 2021, p. 16. 29 For further information see The Treasury, Economic Response to the Coronavirus - JobKeeper Extension, https://treasury.gov.au/coronavirus/jobkeeper/extension (accessed 4 February 2021).
15 significant role in enabling the industry to survive and get to where it is today'.30 2.21 Ms Jayne Hrdlicka, Chief Executive Officer and Managing Director of Virgin, stated that JobKeeper had been essential for Virgin and the thousands of employees it had stood down throughout the pandemic: JobKeeper has meant that we have been able to keep the family together and retain thousands and thousands of skilled jobs that would otherwise not have been possible and to protect the integrity and resilience of our operations in an environment where the pandemic and border closures have caused demand to be highly variable, with no ability to plan and predict what tomorrow will bring.31 2.22 Similarly, Mr John Sharp, Deputy Chairman, Rex Airlines, commented that JobKeeper has 'enabled us to keep people stood down, but paid, and it enables us to bring people back into the workforce when things are picking up'.32 2.23 Mr Alistair Reid, Member, Australian Aviation Ground Handling Industry Alliance, stated that the $66 million received by Menzies Aviation through JobKeeper 'has enabled us to keep the staff attached to the business'.33 2.24 Captain Louise Pole, President, Australian Federation of Air Pilots, argued that JobKeeper has allowed a number of employees to maintain a connection with their employer, albeit with a reduced income in many cases. She called for the Australian Government to extend JobKeeper and argued that without it 'you will find more and more pilots considering leaving the industry permanently…'.34 2.25 Mr Daniel Gschwind, Chief Executive, Queensland Tourism Industry Council, told the committee that 'some businesses will not be able to survive without some additional support'. He recommended that Australian businesses severely impacted by international border closures and domestic disruption be given access to a wage subsidy program beyond 28 March 2021.35 30 Mr Scott Connolly, Assistant Secretary, Australian Council of Trade Unions, Virgin Australia, Proof Committee Hansard, 29 January 2021, p. 24. 31 Ms Jayne Hrdlicka, Chief Executive Officer and Managing Director, Virgin Australia, Proof Committee Hansard, 29 January 2021, p. 2. 32 Mr John Sharp, Deputy Chairman, Rex Airlines, Proof Committee Hansard, 3 March 2021, p. 23. 33 Mr Alistair Reid, Member, Australian Aviation Ground Handling Industry Alliance, Proof Committee Hansard, 3 March 2021, p. 38. 34 Captain Louise Pole, President, Australian Federation of Air Pilots, Proof Committee Hansard, 28 January 2021, p. 3. 35 Mr Daniel Gschwind, Chief Executive, Queensland Tourism Industry Council, Proof Committee Hansard, 29 January 2021, p. 29.
16 2.26 The Flight Attendants' Association of Australia (FAAA) agreed that JobKeeper had saved jobs and helped employees maintain their connection with their employer. In particular, it shared the results of surveys undertaken in relation to the impact of JobKeeper on cabin crew in 2020 and 2021 which found that JobKeeper had positively impacted 96.9 per cent of survey respondents.36 2.27 Aviation workers also emphasised the vital role that JobKeeper has played in keeping them connected with employment. Ms Anna-Maria Saglimbeni told the committee that '[t]he support the government has provided through the JobKeeper has kept my family afloat, financially, and has been a lifeline for me'.37 2.28 Ms Teri O'Toole, Federal Secretary, FAAA, relayed the following statements from the FAAA's members: 'My wife and I are both flight attendants. The shutdown has had huge financial ramifications for us. We have both managed to find some casual work. However, this is on a week-by-week basis. Without JobKeeper we would not have survived'. 'We're struggling to put food on the table and pay bills and our mortgage as my husband is also a pilot and he is stood down. Without JobKeeper we would not have been able to make our financial commitments. JobKeeper has also had a positive impact on our mental health'. 'I've been able to remain in employment at Qantas and keep food on the table. Without this support, I would have to have moved back to South Australia and possibly be split from my husband whilst I am pregnant with our first child'.38 2.29 Meanwhile, Ms Tanana asserted that '[s]hould JobKeeper be discontinued, our employer will have to discontinue the employment of thousands more staff'. She argued that '[JobKeeper] is an investment in the families and livelihoods of people in the industry and in this country. We need the funding to help us through'.39 Eligible employees 2.30 While the majority of submitters supported a large-scale wage subsidy, a number of submitters highlighted problems with JobKeeper: namely, the exclusion of many aviation workers from the scheme. 40 For example, Mr James 36 Flight Attendants' Association of Australia, Submission 22, p. 9. 37 Ms Anna-Maria Saglimbeni, Private capacity, Proof Committee Hansard, 10 February 2021, p. 7. 38 Ms Teri O'Toole, Federal Secretary, Flight Attendants Association of Australia, Proof Committee Hansard, 3 March 2021, p. 54. 39 Ms Claudine Tenana, Delegate, United Services Union, Proof Committee Hansard, 10 February 2021, p. 7. 40 See, for example, Flight Attendants' Association of Australia, Submission 22, p. 7.
17 Goodwin, Chief Executive, Australian Airports Association (AAA), noted that while eligible airports are thankful for JobKeeper: …there are many organisations in the value chain of aviation that go unseen: ground handlers, people working behind the scenes in baggage handling, people in refuelling, people making sure that the airfield is safe and secure. Many of that workforce are going unseen by those who are on an aircraft, but they are vital. They are essential workers and, regardless of the company structure, they are workers in Australia and paying taxes in Australia. It's important that they are supported during this period.41 2.31 In its first interim report, the Select Committee on COVID-19 noted that in the initial design of the program the Australian Government made some deliberate exclusions primarily on the basis that, at a projected imposition of $130 billion on public finances, they needed to impose limits on the cost of the package.42 It received evidence that many of these exclusions severely impacted workers and industries who had been hardest hit by the pandemic. 43 2.32 These exclusions cost thousands of Australian aviation workers access to a crucial lifeline during an unprecedented jobs crisis, including: casual employees who could not demonstrate 12 months of continuous employment with the same employer; all employees of local government (194 000 people)—including workers in council-operated airports; and all employees of companies owned by foreign governments—including several thousand dnata workers. Casual employees 2.33 Some submitters questioned the Australian Government's decision to exclude casuals who had not been with their employer for at least 12 months.44 2.34 The committee heard evidence that the vast majority of aviation workers are employed on a permanent part time or casual basis. For example, the Transport Workers' Union (TWU) submitted that Swissport, a ground and cargo handling services provider, employs all of its workers, save for senior managers, on a permanent part-time or casual basis.45 It also noted that '[p]art- time work has also become the dominant form of employment at all companies 41 Mr James Goodwin, Chief Executive, Australian Airports Association, Proof Committee Hansard, 29 January 2021, p. 16. 42 Select Committee on COVID-19, First interim report, December 2020, p. 75. 43 Select Committee on COVID-19, First interim report, December 2020, p. 76. 44 See, for example, Australian Council of Trade Unions, Submission 13, p. 11; International Transport Workers' Federation, Submission 18, p. 19. 45 Australian Services Union, Submission 19, p. 9; Transport Workers' Union, Submission 23, p. 6.
18 across ground handling operations'.46 For example, approximately 90 per cent of the Qantas Ground Services workforce is either part-time or casual.47 2.35 Ms Marian Harris, a cabin cleaner employed by Cabin Services Australia, told the committee that this exclusion disproportionately impacted the aviation sector, where '95 per cent of [dnata's] workers are casual'.48 2.36 The ACTU observed that '[m]any [aviation workers] were casuals who did not meet the tenure requirement the government put in place'. 49 In addition, Mr Connolly drew the committee's attention to what he termed 'fundamental failings' with the package: In this sector, in particular, there are some challenges with the transitory nature of some of the workers—not by their choice, but by the design of their employment relationships being casual and insecure. They've been disadvantaged in terms of their capacity to receive the benefits.50 2.37 Furthermore, in its report Australian Aviation and COVID-19, the McKell Institute noted that some elements of the JobKeeper design were severely deficient: 'namely, its lack of application to companies owned by a sovereign entity, such as dnata, and the exclusion of recently hired casuals'. 51 2.38 The Treasurer had previously justified excluding more than one million casual workers from JobKeeper using the rationale that 'at $130 billion… we had to draw the line somewhere. This is a massive call on the public purse and it is a debt that the country will pay for years to come…'.52 Local government 2.39 Local governments employ approximately 194 000 people, all of whom were excluded under JobKeeper eligibility rules.53 The committee heard evidence that the exclusion of local governments from JobKeeper disproportionately affected council-operated airports and the communities they serve in regional and remote Australia.54 46 Transport Workers' Union, Submission 23, p. 8. 47 Transport Workers' Union, Submission 23, p. 8. 48 Ms Marian Harris, Private capacity, Proof Committee Hansard, 10 February 2021, p. 7. 49 Australian Council of Trade Unions, Submission 13, p. 11. 50 Mr Scott Connolly, Assistant Secretary, Australian Council of Trade Unions, Proof Committee Hansard, 29 January 2021, p. 24. 51 International Transport Workers' Federation, Submission 18, p. 19. 52 The Hon Josh Frydenburg MP, Treasurer, 'Interview with David Speers, Insiders, ABC', Transcript, 12 April 2020, https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/transcripts/inter view-david-speers-insiders-abc-0 (accessed 10 February 2021). 53 Select Committee on COVID-19, First interim report, December 2020, p. 77. 54 Australian Local Government Association, Submission 15, [p. 2].
19 2.40 The majority of registered airports in Australia are owned and operated by local government.55 Indeed, more than 200 regional, rural and remote council-owned airports provide aviation services to their populations, as well as providing vital services to local health, education and other providers and local businesses.56 2.41 The Australian Local Government Association (ALGA) submitted that '[t]hese airports are needed for everything from passenger transport to [] tourism, postal services, air ambulances, emergency services operations, crop dusting, surveying and flight training'.57 It further noted that the impact of COVID-19 has severely impacted the revenue that local governments draw from their airports and, in some cases, this has put their ongoing operation at risk.58 2.42 Mr Adrian Beresford-Wylie, Chief Executive, ALGA, argued that it was a 'bitter disappointment' that local government employees were excluded from JobKeeper.59 He pointed out that councils are not motivated by profit, but instead 'undertake a lot of activities in thin markets where there aren't private sector suppliers' to provide benefit to their communities.60 2.43 The AAA contended that the exclusion of employees of local governments from JobKeeper eligibility has resulted in skilled workers leaving the aviation industry. It argued that this represents a significant loss of competency, skills and experience in airport operations and will slow the restart of the aviation industry through the need to re-certify, re-qualify and re-accredit staff returning to the sector.61 2.44 In addition, Mr Goodwin called for JobKeeper to be extended to cover local government staff employed in the aviation sector.62 He argued that if JobKeeper were not extended there is a 'very real threat that many airport 55 Australian Airports Association, Australia's regional airports: facts, myths and challenges, November 2021, p. 56; Australian Local Government Association, Submission 15, [p. 1]. 56 Australian Local Government Association, Submission 15, [p. 2]. 57 Australian Local Government Association, Submission 15, [p. 2]. 58 Australian Local Government Association, Submission 15, [p. 2]. 59 Mr Adrian Beresford-Wylie, Chief Executive, Australian Local Government Association, Proof Committee Hansard, 4 March 2021, p. 34. 60 Mr Adrian Beresford-Wylie, Chief Executive, Australian Local Government Association, Proof Committee Hansard, 4 March 2021, pp. 36-38. 61 Australian Airports Association, Submission 16, Attachment 1, p. 8. 62 Mr James Goodwin, Chief Executive, Australian Airports Association, Proof Committee Hansard, 29 January 2021, p. 15.
20 operations would become unsustainable' and 'it would be a devastating blow to many regional areas if it were to occur'.63 2.45 Mr Trevor Willcock, Chief Executive Officer, Mildura Airport, provided insight into the experience of council-owned regional airports. He explained that Mildura Airport was corporatised in 2008, but remains owned by Mildura Rural City Council. As a result, it did not qualify for JobKeeper. Mr Willcock revealed that Mildura Airport can only absorb further operational losses for a further 6 to 12 months before all cash reserves have been depleted.64 He contended that an extension to JobKeeper for a further 12 months to all airport employees, regardless of ownership structures, is '[v]ery essential' and 'would go a long way in keeping us compliant, safe and open'.65 2.46 The AAA estimated that more than 70 per cent of staff at regional airports have been placed on reduced hours, been re-deployed or made redundant.66 2.47 Similarly, the ACTU noted that most regional airports are council-owned and are not well-capitalised or self-sustaining in terms of direct fees received for use. It submitted that '[w]hat this means is that ultimately shortfalls are met through general council revenue, meaning that regional airports are predominantly supported by ratepayers'.67 Australian companies owned by foreign sovereign entities 2.48 Employees of companies owned by sovereign entities were also excluded from JobKeeper due to a 'deliberate decision to refine the policy'.68 As a direct result of this exclusion, thousands of Australian aviation workers faced job losses, including over 5500 staff in aviation catering and ground handling business dnata.69 2.49 Mr Hiranjan Aloysius, Chief Executive Officer, dnata Catering Australia, explained that prior to COVID-19, dnata employed approximately 6800 people in Australia. Since April 2020, some 2500 dnata workers have been made 63 Mr James Goodwin, Chief Executive, Australian Airports Association, Proof Committee Hansard, 29 January 2021, p. 16. 64 Mr Trevor Willcock, Chief Executive Officer, Mildura Airport, Proof Committee Hansard, 4 March 2021, p. 40. 65 Mr Trevor Willcock, Chief Executive Officer, Mildura Airport, Proof Committee Hansard, 4 March 2021, p. 42. 66 Australian Airports Association, Submission 16, Attachment 1, p. 5. 67 Australian Council of Trade Unions, Submission 13, p. 13. 68 Mr Matthew Brine, First Assistant Secretary, Environment, Industry and Infrastructure Division, Department of the Treasury, Proof Committee Hansard, 4 March 2021, p. 19. 69 See, for example, Kate Burgess, 'JobKeeper: Aviation workers rally for support', The Canberra Times, 10 June 2020, www.canberratimes.com.au/story/6788036/thousands-excluded-from- jobkeeperafter-company-was-sold-to-a-foreign-government/ (accessed 4 February 2021).
21 redundant. Mr Aloysius told the committee that hundreds of these jobs could have been saved if JobKeeper had been extended to dnata.70 2.50 A number of submitters criticised this exclusion, with some going so far as to describe the treatment of these workers as 'gobsmacking' and an 'absolute disgrace'.71 In particular, these submitters highlighted the sale of Qantas' catering business to dnata in 2018. Following completion of the sale, 1200 Qantas employees become part of the dnata operation.72 The committee heard evidence that despite having no say in this decision these workers were, as a direct result, excluded from JobKeeper.73 2.51 The TWU noted that '[t]hese workers are paid in Australia and pay taxes in Australia'.74 Mr Michael Kaine, National Secretary, TWU, argued that 'it was Australian workers [the Australian Government] were depriving of money'. 75 The TWU submitted: Over a thousand of the workers were originally employed by Qantas, until the airline sold its Q Catering arm to Emirates-owned Dnata in 2018. The Federal Government did not intervene in the sale of an Australian business to a foreign-owned business, yet used this distinction to exclude thousands of tax-paying workers from wage subsidy support.76 2.52 The TWU further noted that '[a]lthough the changes impacted aviation workers at Dnata and SNP, Swissport, which is owned by Chinese controlled HNA, continued to receive the subsidy'.77 2.53 The AAA expressed concern that the 'exclusion of foreign-owned firms from JobKeeper eligibility also cut out many links in the aviation value chain from income support, including ground handling and security screening firms'.78 70 Mr Hiranjan Aloysius, Chief Executive Officer, dnata Catering Australia, Proof Committee Hansard, 3 March 2021, p. 34. 71 Mr Scott McDine, Head of ITF Sydney, International Transport Workers' Federation, Proof Committee Hansard, 3 March 2021, p. 2. 72 Qantas Group, 'Sale of Qantas catering business', Media Release, 11 April 2018, https://www.qantasnewsroom.com.au/media-releases/sale-of-qantas-catering-business/ (accessed 3 March 2021). 73 See, for example, Transport Workers' Union, Submission 23, p. 36; Ms Darlene Bailey, Submission 26, [p. 2]. 74 Transport Workers' Union, Submission 23, p. 36. 75 Mr Michael Kaine, National Secretary, Transport Workers' Union, Proof Committee Hansard, 3 March 2021, p. 44. 76 Transport Workers' Union, Submission 23, p. 36. 77 Transport Workers' Union, Submission 23, p. 35. 78 Australian Airports Association, Submission 16, p. 4.
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