Dick Smith considering legal action - Board members in breach of obligations

At the same time that Minister Warren Truss was advising constituents that NAS (the American airspace system) would be going ahead because it is a safer system, the Airservices Australia Chief Executive (who is responsible for introducing NAS) was deciding that it should be stopped.

At a meeting with eleven airline Chief Pilots on 31 March 2006 (just 3 weeks ago) all present (including Mr Russell) decided that all progress on the NAS implementation would be halted.  A letter was then sent out by Mr Russell confirming the agreement at the meeting, and not one mention was made that this decision was totally against Government policy. 

Then again, why would Mr Russell take any notice of Government policy? Airservices basically do what the airline pilots want.  After all, the airlines give Airservices all of its profits.  Airservices believes that the Minister won’t stand up for the Government policy as this may end up with a little flak in the media.

What is not mentioned is that Qantas runs their complete Jetstar operation out of Avalon Airport without the control tower being manned so they can save a few dollars.  They were also operating into Hamilton Island with their Airbus after the control tower had closed – on a ‘do it yourself’, ‘dirt road’ airspace system – all to save a few dollars while substantially increasing the risk to their passengers.  I know this was with Jetstar aircraft, but Jetstar is owned by Qantas.

Most, if not all, of the airline pilots at the meeting with Greg Russell are on bonuses from their companies depending on profits, and are therefore completely obsessed with reducing costs.  Could the reason for their lack of support of the safer US airspace system be that Airservices have claimed that it will cost more?

Below is a letter that has recently been sent to the Minister.  It should be noted that not only have Airservices made the decision to stop all NAS implementation, they are also further winding back NAS north of Melbourne because of requests from Qantas. 

There is no doubt that this situation is as wrong as we have seen from the Cole Inquiry into the Wheat Board.  When will the Government do something about it?

Here is the letter:

The Hon Warren Truss MP

Minister for Transport and Regional Services

House of Representatives
Parliament House
CANBERRA ACT 2600

Dear Minister

Re:  Ministerial responsibility - direction on governance to Airservices

I am writing to reiterate my concerns over certain operations of Airservices.

The operations of Airservices create a 'single desk' monopoly for that organisation.  With that monopoly comes risk.

Bias or self interest, disregard for government policy, lip service to appropriate governance arrangements, manipulation within the legal framework and a myopic view of an ex-government organisation on commercial outcomes all echo the allegations heard in the Cole Commission of Inquiry and the examination of the conduct of AWB limited.  Assertions of well being from AWB were accepted as honest and truthful and without further inquiry by over trusting officials and Ministers.  The government cannot afford a repeat of that debacle. 

However, there is a parallel developing in your own portfolio.  The parallel lies in what is currently happening in Airservices with regard to the National Airspace System (NAS). 

The NAS has cabinet approval and broad government endorsement including support from the Civil Aviation Safety Authority, which has stated that it is a safer system.  As part of that endorsement, I note the many statements that you have made in support of NAS, including the strong commentary set out in the Explanatory Statement to the recent Civil Aviation Amendment Regulations 2005 (No 3) that has been tabled in Parliament.

The conflict between regulator and commercial player has long been recognised by the Government and the proposal to transfer the current regulatory functions of Airservices into a new organisation is long overdue for implementation.  However, in the meantime Airservices are engaged in a spate of pre-emptive decision making prior to that separation of regulatory functions.  Further, the factual and legal basis for those decisions is flawed.

I am concerned that Airservices is making decisions on airspace with a complete disregard to the government policy on NAS and has sought to substantiate its position using a notably flawed safety study.  I have previously brought this issue to your attention.

You have been on notice of the irregularities in the administration of airspace by Airservices since becoming Minister for Transport and Regional Services.  The issues have also been in the public arena since at least September 2004.

I have other concerns.  I consider that the Board members of Airservices are in breach of their obligations under the Commonwealth Authorities and Companies Act as they are obviously not keeping you informed of the operations of the authority.  As recently as 10 April 2006, Mr Peter Marchi, Aviation Adviser wrote, on your behalf, to a constituent extolling the virtues of the National Airspace System and indicated its continued implementation.  Mr Marchi stated:

'The Australian Government’s airspace policy, the National Airspace System (NAS), is designed to introduce the benefits of the US airspace model in an appropriate and safe manner.  In May 2002, the Government decided to change the structure of Australian airspace in a manner consistent with the airspace architecture in the US, the world’s leading aviation nation.   The US airspace model is safe and proven, and handles air traffic levels that are 20 times higher than that in Australia.'

However, during the previous month the CEO of Airservices had made a decision, recorded in the outcomes of a closed meeting between the CEO and 11 pilots which concluded that:

'those present agree that further implementation of the remaining NAS reforms be halted.' (31 March 2006). 

A copy of this document is attached.

At the same time that your office is advising the public of the government's strong support for the US NAS system, Airservices (the regulator) is actually winding back the NAS system and implementing decisions to halt further progress.  As an example, the category of airspace north of Melbourne is being inexplicably reversed by Airservices without proper analysis and contrary to the government's policy on NAS.

These are examples of a complete breach of government policy and a failure of the Airservices executive to keep the responsible Minister aware which should be unacceptable to you as responsible Minister.  The failure of the Board of Airservices to keep you informed and aware of the operations of Airservices must also be unacceptable.

Both the ANAO Principles and Better Practices Guide on 'Corporate Governance in Commonwealth Authorities and Companies' and the Uhrig review - Review of the Corporate Governance of Statutory Authorities and Office Holders Report note the responsibilities and the accountability of the Minister.  As an example, Uhrig notes:

'Where statutory authorities fail to meet performance expectations, however, it can be Ministers and not boards or office holders of statutory authorities who are ultimately held accountable by the Parliament and the public.  As Ministers have a clear constitutional and legislative responsibility in the governance of statutory authorities it is vital they receive adequate support in the execution of their responsibilities.' (page 34)

Your predecessor, The Hon John Anderson MP also recognised these issues in his 1999 Ministerial Charter letter to Airservices which is set out in the 2004 - 05 Airservices Annual Report.

I note that you have powers under the Air Services Act 1995 to give directions to Airservices.  You may also formally notify Airservices under the Act on your views on the appropriate strategic direction of that organisation.  In my opinion, the divergence from sound governance practices by Airservices requires you, as the responsible Minister, to act.  It requires you to utilise your statutory powers and demonstrate that a government authority cannot continue to flaunt government policy. 

I request that you consider the conduct of Airservices and the exercise of your statutory powers to ensure that Airservices complies with government policies and appropriate governance practices.

If you find yourself unable to bring Airservices back within an appropriate governance framework then I will seek to do so myself.  The steps that I may consider include legal action under section 39B of the Judiciary Act against yourself as responsible Minister to oblige you to act and direct Airservices to conform to an appropriate governance and decision making regime.

If I have to initiate Court proceedings in order to have the government ensure that its own policies are complied with by its own statutory authorities then I shall do so.

Yours faithfully

Dick Smith