Cabotage, sabotage and boosting northern Australian trade

As I have previously argued here, quite a bit of the Northern Territory News’ coverage of federal cuts to the Territory’s share of GST funding is tabloid silliness, creating fake cartoon villains out of politicians like Malcolm Turnbull, Scott Morrison and local Senator Nigel Scullion.

Presumably it’s because that sort of nonsense boosts newspaper sales. I can’t really blame them all that much. It’s a tough world out there for mainstream newspapers, competing for eyeballs and advertisers in the age of Google, Facebook and advertising revenue based on “page impressions”.  Clickbait and extreme silliness seem to be an effective way of surviving in the Brave New Media World, so it’s pointless fulminating against tactics they’re forced to adopt for their own survival. I’m not overly fussed by having to wade through croc and UFO stories and bulls**t characterisations of politicians as “bastards”, “robbers” or “Nigel No-Friends”.  More experienced MPs and their advisers accept it as one of the unavoidable facts of political life. You don’t survive long in politics if you can’t learn to cope with suffering an almost complete loss of personal privacy and being treated unfairly by the media.

However, one of the more positive aspects of the NT News’ populist coverage of the GST cuts issue has been a call for Territorians to come forward with ideas for helping the politicians cope with the situation and keep the Territory growing and prospering despite our GST misfortune. I have lots of ideas of that sort, some of them possibly impractical dreams, but some maybe not.  Here’s the first of my dreams and schemes (there will be more).

The Territory has long suffered from insufficient international airlinks to allow our tourist industry (and international trade generally) to realise its full potential, as well as insufficiently frequent and too expensive domestic airlinks. Previous attempts to entice Australian domestic airlines (e.g. Jetstar and before that Virgin) to schedule more flights to the Territory have been dubiously successful. History tells us that they happily trouser the government subsidy then cancel the extra services as soon as it cuts out.

However another idea that could make a significant difference would be to negotiate carefully defined “cabotage” rights for international airlines flying into northern Australia. Cabotage is one of nine “freedoms of the air”, but in the real world is somewhere between aspirational and mythical. In reality Australia prohibits international airlines flying into this country from carrying Australian domestic passengers on the domestic legs of their international flights into and out of Australia, and nearly all overseas countries do likewise.

During the earlier stages of the Abbott/Turnbull government’s exploration of its “Develop the North” policies in 2015, the federal government explored the feasibility of a partial relaxation of those prohibitions in relation to flights between northern Australian airports (effectively Broome, Darwin, Cairns, Townsville and Mackay):

In the next few weeks Federal Cabinet will decide whether to proceed with a controversial proposal to open up the domestic aviation industry to foreign competition.

The proposal, which is part of the Abbott government’s plan to develop the top end of Australia, would allow foreign carriers to fly domestic passengers between domestic airports above the Tropic of Capricorn.

It follows a move last week to radically reform the Australian shipping industry, which was referred to as “WorkChoices on water” by the shadow minister for infrastructure Anthony Albanese.

The Australian Financial Review can reveal some senior ministers will push hard in Cabinet in early June to remove the ban on cabotage in northern Australia, an area that covers one million people from Broome, to the Northern Territory, Darwin, Cairns and Mackay.

Qantas and Virgin immediately screamed blue murder, claiming that it might well make a lot of their domestic services to Northern Australia non-viable, forcing them to cancel a lot of them.

Not surprisingly, the Abbott government then dropped the idea like a hot potato. Moreover, as the AFR’s story noted:

There are very few examples where countries exchange cabotage rights and where they do, it is on a reciprocal, quid pro quo basis. The current proposals are unilateral. The existence of the regulation is to protect the domestic aviation locations that are barely profitable. …

TWU national secretary Tony Sheldon said if the government adopted the radical plan it would destroy hundreds, maybe thousands of jobs, and decimate the local domestic aviation industry, which has committed a fortune over the years to providing reliable and regular flights. “What are they thinking,” he said.

But what if we could negotiate arrangements with other nations that did actually involve reciprocal, quid pro quo access? For example, we could negotiate with Indonesia to allow Garuda and Merpati to carry domestic passengers between Darwin, Cairns and Broome as long as Indonesia allowed Qantas/Jetstar and Virgin to carry Indonesian domestic passengers between (say) Denpasar, Sumatra and Sulawesi.  Similar limited cabotage rights might be negotiated with China.

In all cases I imagine cabotage rights would also be limited by numbers, by allowing no more than (say) one-third of the seats on any domestic leg of an international airline service to be occupied by domestic passengers. A percentage could be chosen that would be enough to make it viable for more international airlines to schedule services into Darwin and Cairns, but without destroying the viability of Qantas/Jetstar and Virgin’s key north Australian routes.

For all I know, ideas along these lines may already have been explored, although that isn’t obvious to me from fairly detailed Google searches.

The problem it would face in the current political climate is that even if we could satisfy the commercial objections of Qantas and Virgin by gaining them access to lucrative routes in Indonesia and China as a trade-off for letting Garuda and Cathay Pacific carry passengers between north Australian ports, Australian trade unions and neo-protectionists on the Senate cross benches would predictably cry foul again.  The Gunner Territory Labor government would probably not embrace and genuinely explore the idea in those circumstances.  Still, it can’t hurt to run it up the flagpole and see if anyone salutes.

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