REGIONAL AIRPORT INFRASTRUCTURE FUNDING ACTION PLAN

Transcription

1 REGIONAL AIRPORT INFRASTRUCTURE FUNDING ACTION PLAN 1

2 AUSTRALIA S REGIONAL AIRPORTS The network of over 400 regional airports and aerodromes across Australia constitutes an integral part of our economic infrastructure. It is critical to connecting communities and enhancing broader economic performance. Regional airports play a vital role in sustaining regional economies and communities both through their direct expenditures, as well as through the flow-on effects of these expenditures. These airports enable access to specialist health, education, commercial and recreational facilities and facilitate social connections. They also have the ability to save lives by facilitating medical evacuations, collection and delivery of organ donations and search and rescue, as well as supporting firefighting in areas where road transport is impossible or too slow. Research conducted by ACIL Allen estimates that the total expenditure by the operators of all regional airports with fewer than 500,000 passenger movements per annum was approximately $185.4 million in , resulting in an additional $33.4 million in spending in the rest of the Australian economy. These airports also employ approximately 1,720 full time staff (2014/15), creating an additional 2,750 full time roles in the rest of the economy. As well as providing significant employment opportunities in local and regional economies, regional airports also generate catalytic economic impacts by facilitating increased competition because of readier access to alternative suppliers, enhancing innovation through access to a wider range of skills and human resources, enabling a more flexible labour market and facilitating more efficient interaction between different levels of government. Despite their significant contribution, Australia s regional airports face significant challenges in maintaining the services they provide to their local communities. Photo: Mount Gambier Airport Cover Photo: Wagga Wagga Airport 2

3 REGIONAL AIRPORT FACTS» There are over 400 regional airports and aerodromes across Australia.» Regional airports play a vital role in sustaining regional economies and facilitate critical emergency and medical services.» In Australia s regional airports invested $185 million in infrastructure and resources to maintain safe airport operations. This also induced another $83.4 million in spending in the rest of the Australian economy.» These same regional airports also directly employed 1,720 full time workers and created an additional 2,750 jobs in the broader Australian economy.» Australia s regional communities rely heavily on their local airport for fast and efficient access to the rest of the country.» Regional airports operate with very limited staffing resources, with an average of less than 5 direct employees.» The majority of regional airports (approximately 70%) are served by a single airline.» Airports of all sizes are cost intensive businesses, however this issue is exacerbated at regional airports where revenues are limited.» The number of regional airports operating at a financial loss each year has increased from approximately 50% in 2011 to over 60% in 2015.» Many regional airport owners face financial stress from the costs of maintaining and operating these critical community assets. Photo: Tennant Creek Airport Source: ACIL ALLEN: Regional Airport Infrastructure Study (2016), AAA Australia s Regional Airports: Facts, Myths and Challenges (2012), Deloitte Access Economics Connecting Australia: The Economic and Social Contribution of Australia s Airports (2012) 3

4 THE ISSUE One of the greatest challenges facing many regional airports across the country is access to adequate funding to maintain and develop essential aeronautical infrastructure. The vast majority of regional airports across the country are owned and operated by local government councils. These councils often find it difficult to supplement the funding shortfall that exists at many regional airports, due to limited budgets and the variety of other infrastructure and community services that compete for local government funding. While this challenge has been widely acknowledged anecdotally for many years, there has not been a quantitative assessment to determine the likely extent of the funding shortfall for regional airports until now. The Australian Airports Association (AAA) commissioned ACIL Allen to conduct a study on the economic contribution of regional airports across Australia and analyse the economic challenges they face in operating and maintaining these airports. The findings of the report confirmed what the industry has known for many years on average, many regional airports across Australia do not have adequate funding to maintain or improve their existing airport infrastructure, with the problem only growing worse as time goes on. ACIL ALLEN REPORT KEY FINDINGS:» Nearly 40% of Australia s regional airports expect persistent budget deficits over the next 10 years.» Due to the typically high cost/low revenue nature of regional airports, simply maintaining the airport to a satisfactory and safe condition often creates significant financial stress. This is further compounded by upgrades to meet future aviation needs.» On average 61% of regional airports had budget deficits in , with non-regular public transport (RPT) airports costs exceeding revenues by an average 45.6%.» Regional airport expenditure is expected to rise by 38% over the next decade, adding to the already difficult financial environment.» Australia s regional airports expect an annual budget deficit of $17 million per year, equating to a $170 million shortfall in essential infrastructure and maintenance funding at regional airports over the next decade. 4

5 FIGURE 1: PROJECTED INCREASE IN ANNUAL EXPENDITURE OF REGIONAL AIRPORTS ( TO ) Percentage increase in average annual expenditure Figure 1 shows that the annual average expenditure at regional airports is expected to increase considerably over time, from $1.35 million in to $1.86 million in , a rise of 37.8 per cent over the decade / / / / / / / / / /25 FIGURE 2: PROJECTED TOTAL REGIONAL AIRPORT FUNDING SHORTFALL ( TO ) $ Millions Figure 2 shows that the total projected budget deficit for regional airports will be $17 million per year, for the next 10 years. Without Government intervention, this deficit will grow to at least $170 million by 2025 and will significantly compromise the industry s ability to undertake essential infrastructure and maintenance work / / / / / / / / / /25 FIGURE 3: REGIONAL AIRPORT INDICATIVE COSTS Minor Maintenance / Small project Significant Infrastructure Works Runway, taxiway and apron $50,000 $5 million + Airfield Lighting $30,000 $1 million + Airfield fencing $40,000 $500K + Line marking, windsocks, other $25,000 $400K + indicators Figures 3 provides an indication of the approximate range and scale of maintenance and infrastructure costs at regional airports. These costs are associated with ensuring airports remain safe and operational, and in compliance with the Civil Aviation Safety Regulations Part

6 CASE STUDY EXAMPLE: FLINDERS ISLAND AIRPORT In 2015 the Flinders Island Airport was in urgent need of Government funding in order to ensure the continued serviceability of its main runway. In such an isolated community the airport is a vital piece of infrastructure that helps to support and sustain the entire population by enabling access to essential aeromedical air services, such as the Royal Flying Doctor Service, as well as regular passenger transport and freight services to the rest of Australia and Tasmania. The airport also plays an important social role in connecting individuals, families and communities with the rest of the country by providing critical infrastructure links. The AAA supported Flinders Island s application for funding to the Commonwealth s Regional Aviation Access Programme and fortunately some funding was provided to assist the airport with priority runway repairs. Due to the airport s very limited access to funding, without this critical Government financial assistance the airport would have become unserviceable and at risk of closure. This example demonstrates how critical Government funding assistance for airports can be to support regional Australian communities. CASE STUDY EXAMPLE: SCONE REGIONAL AIRPORT Scone Regional Airport is owned and operated by the Upper Hunter Shire Council. It currently services charter and general aviation (GA) flights only, most of which are related to large corporate jets involved in the local thoroughbred industry. It is also a base for aerial firefighting services and hosts around eight of these planes. The Airport is used by the RFDS, angel care flights, Westpac helicopter and vet services to the region. Over the next three to four years, the Airport anticipates it will require around eight capital works projects to upgrade airside and terminal facilities. This includes improving the apron and taxiways to make them compliant with legislation, ensuring that the Airport can continue to service the local charter industry. Other works include replacing the terminal, installing parking and security fencing. While the Upper Hunter Shire Council will rely on grants to cover some of the costs of these projects, it will need to partially fund some of the works. An issue with existing State and Federal grant processes is that many grants cater for RPT and tourism-related airports, which excludes some airports from applying. Scone Airport services large corporate jets which require airport compliance to be able to land. Without capital works, these jets will be unable to land, and without grant funding the works will not be able to proceed. The Airport currently operates at a significant deficit, which is borne by Council. There are limited opportunities to increase revenue, with all revenue currently received from aeronautical activities. If the identified capital works were to proceed, it is expected that this deficit could be reduced by as much as 15 per cent with savings realised from reduced maintenance costs. Photo: Flinders Island Airport 6

7 THE SOLUTION The AAA believes it is critical for the Federal Government to continue to provide, and increase, financial assistance for regional airports. This assistance is vital for regional airports to ensure they can continue facilitating essential air transport services for their local communities. There is also an opportunity for State Governments to support this effort through additional complimentary funding programs. Without this assistance, the consequences for regional airports of continual financial deficits over the coming decade will be severe. The impacts could range from substantial reductions in aviation services through to closures of airports, which for a regional community would be a devastating loss, from both an economic and social connectivity perspective. The AAA proposes that the following actions be undertaken to address the funding shortfall facing many essential regional airports across Australia. ACTION REQUIRED: 1. The Federal Government amend the scope and funding allocated to the existing Regional Aviation Access Programme (RAAP) and Remote Airstrip Upgrade (RAU) programme to: a. be accessible to a wider range of regional airports, including those with RPT services up to 400,000 annual passengers; b. be used for critical maintenance works, as well as essential aeronautical infrastructure projects; c. review the requirement for Federal funding being contingent on equal funding contributions from the applicant; and d. increase the funding from $33.7 million over the next three years, to $70 million over the next four years in the Budget. 2. The Commonwealth Government consider the development of a National Regional Airport Infrastructure Loan Facility (open to all regional airports) that provides concessional loans and affordable financing for essential aeronautical infrastructure and maintenance works. This facility could operate in a similar manner to the Northern Australia Infrastructure Facility but on a smaller scale and administered by the Department of Infrastructure and Regional Development. 3. State and Territory Governments to review current financial assistance, with a focus on creating or expanding existing airport funding and financing programmes. 7

8 Australian Airports Association Unit 2/4 Brindabella Circuit Canberra Airport ACT 2609 P: F: E: 8