Ansett Transport Industries Ltd v Commonwealth of Australia

Re: ANSETT TRANSPORT INDUSTRIES LIMITED; AUSTRALIAN NATIONAL AIRLINES
COMMISSION and EAST-WEST AIRLINES (OPERATIONS) LIMITED
And: PETER FREDERICK MORRIS (who is sued in his capacity as Minister of State
for Aviation); EAST-WEST AIRLINES (OPERATIONS) LIMITED; THE COMMONWEALTH OF
AUSTRALIA; RAE MARTIN TAYLOR; THE STATE OF QUEENSLAND; AUSTRALIAN NATIONAL
AIRLINES COMMISSION and ANSETT TRANSPORT INDUSTRIES LIMITED
Nos. VG61; VG65; VG94; VG101; VG195 and VG 204 of 1986
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.

CATCHWORDS

Administrative law - Federal government regulation of domestic air transport - Duty of Minister to make capacity determinations under Airlines Equipment Act 1958 - Obligations imposed upon Minister by two airlines agreement - Issue of licences under Air Navigation Regulations - Whether Minister and Secretary bound to take into account matters beyond safety and operational considerations - Whether two airlines agreement imposes an obligation upon Commonwealth to amend Air Navigation Act or Regulations - Discussion of two airlines policy.

Airlines Agreement Act 1981

Airlines Equipment Act 1958

Air Navigation Act 1920

Air Navigation Regulations

1. Airlines of New South Wales Pty. Limited v. New South Wales (1964) 113 CLR 1

2. Airlines of New South Wales Pty. Limited v. New South Wales (1965) 113 CLR 54

3. The Queen v. Anderson; ex parte Ipec Air Pty. Limited (1965) 113 CLR 117

HEARING

SYDNEY

#DATE 15:9:1986

JUDGE1

Introduction

This is a dispute between Australian National Airlines Commission ("TAA"), Ansett Transport Industries Limited ("Ansett"), East-West Airlines (Operations) Limited ("East-West") and the Federal and Queensland Governments. Ansett and TAA seek to prevent East-West importing three Boeing 737-300 twin jet aircraft which East-West plans to use for services to North Queensland. They also seek to prevent East-West competing with Ansett and TAA on certain successive routes within Australia which link trunk route centres. A trunk route centre is each of the capital cities of the States and Territories, also Alice Springs, Cairns, Coolangatta, Gove, Launceston, Mackay, Mount Isa, Proserpine, Rockhampton, Townsville and such other centres as the Commonwealth, Ansett and TAA shall agree from time to time.

East-West obtained Queensland and Federal Government licences in January and February 1986 respectively to operate new services over Queensland trunk routes. A trunk route is a route linking any two trunk route centres. In July 1986 East-West commenced flights between Brisbane and Cairns using its existing aircraft.
In February 1986 East-West sought the approval of the Federal Government to purchase the three new Boeing aircraft. Ansett and TAA commenced these proceedings to restrain the Commonwealth from granting East-West's request for approval and to challenge the validity of the licences granted to it by the Federal Government to operate the new services over Queensland trunk routes. On 1 April 1986 this Court granted an ex parte injunction, which was in substance continued on 4 April as an interlocutory injunction and which subsists until the final hearing or further order restraining the Minister for Aviation from making the requisite determinations which would allow East-West to purchase the three new aircraft.
In June 1985 Ansett and TAA were given permission by the Federal Government for each of them to purchase twelve Boeing 737-300 aircraft for operations within Australia. Ansett and TAA entered into agreements to purchase a total of twenty-four aircraft, delivery of which is to be spread over a period of about twelve months. The first of the aircraft purchased by TAA has already arrived. Ansett and TAA assert that the Federal Government's permission was given and the purchases were made on the assumption that East-West would not be entitled to operate aircraft over trunk routes, especially those connecting Australian capital cities with any of the Queensland trunk route centres, and that the grant of the licence to East-West to fly the Queensland trunk routes and the proposed grant of the requisite authorities to purchase the three new aircraft are contrary to the agreement generally known as the "two airlines agreement" and are otherwise contrary to law and void.
East-West responded to the Ansett-TAA challenge by bringing proceedings against Ansett, TAA, the Minister and the Secretary of the Department of Aviation asserting in essence that the Federal Government's authorities to Ansett and TAA to purchase the twenty-four aircraft are invalid.
There are six proceedings which are being heard together by consent. I shall discuss each proceeding later.
That in brief is what this case is about. The two airlines agreement is at the heart of the litigation so I shall say something about its history. The two airlines policy which has existed for more than forty years is the name given to the arrangements by which the Federal Government regulates the Australian domestic air transport industry. It is embodied in various Acts of Parliament and agreements ratified by Parliament including the two airlines agreement itself.

The Two Airlines Agreement
TAA was established in 1945 under the name of the Australian National Airlines Commission by the Australian National Airlines Act 1945 ("the 1945 Act"). Until recently the Commission conducted its business as Trans Australian Airlines. It now does so as Australian Airlines. The 1945 Act sought, by ss. 46 and 47 in particular, to establish TAA with a monopoly over interstate airline services. Those sections purported to invalidate licences held by operators competing with TAA on interstate and Territorial services so long as TAA provided an adequate service. Also, licences to other operators were not to be issued for services over any of TAA's routes unless they were required to meet the needs of the public with respect to interstate or Territorial airline services. In Australian National Airways Pty. Limited v. The Commonwealth (1945) 71 CLR 29 the High Court held that ss. 46 and 47 infringed s. 92 of the Constitution and were therefore to that extent invalid. The High Court found that the creation of a government monopoly was inconsistent with the freedom of interstate trade and commerce but it upheld the right of the Commonwealth to participate in interstate trade and commerce. Following that case the Federal Parliament passed the Australian National Airlines Act 1947 ("the 1947 Act") which amended the 1945 Act by, amongst other things, repealing those provisions which were declared invalid by the High Court including the relevant parts of ss. 46 and 47.
TAA commenced operations in 1946 in competition with several other operators including Australian National Airways Pty. Limited (ANA) and Ansett Airways. Following the election of the Menzies Government in 1949 a review was undertaken of the then aviation policies with a view to establishing a method securing fair competition. Consequent upon the review the Federal Government decided to retain the two major airlines, TAA and ANA, in order to provide competition for the benefit of the Australian public. On 24 October 1952 an agreement was entered into between the Commonwealth and ANA which was ratified by Federal Parliament by the Civil Aviation Agreement Act 1952. As the recitals to the agreement showed, its purpose was to restore the balance between TAA and ANA so that competition could occur and efficient and economic operation of air services within Australia could be maintained. The Civil Aviation Agreement Act 1952 was one of four Acts of Parliament designed to achieve the objectives of the Government of the day, namely, the maintenance of TAA and ANA in existence to provide internal air services under conditions of active competition. The other legislation was the Air Navigation (Charges) Act 1952, the Australian National Airlines Act 1952 and the Income Tax and Social Services Contribution Act (No. 4) 1952. Air navigation charges had been imposed in 1947 by regulation pursuant to the Air Navigation Act 1920 but the majority of airline operators challenged the validity of the charges in the High Court. The case was settled in 1952 as part of an arrangement associated with the 1952 agreement. The Commonwealth accepted in full discharge one-third of the amount already debited to the airlines; and for future periods the charges were to be reduced to one-half of the previous level. This arrangement was given statutory force by the passing of the Air Navigation (Charges) Act 1952. The Australian National Airlines Act 1952 provided, amongst other things, that TAA was required to do those things which the agreement required it to do. Income tax was imposed upon TAA by the Income Tax and Social Services Contribution Act (No. 4) 1952 so as to place it on a more level footing with ANA.
In 1957 another review of the civil aviation policy of the Federal Government was undertaken by the Director-General of Civil Aviation. The two principal matters which led to this review were the deteriorating financial position of the private airlines and the policy of the Federal Government concerning the ownership and operation of airport facilities. ANA was in a precarious financial position and Ansett purchased all the issued shares; thereafter Ansett-ANA became an operating division of Ansett. An agreement was entered into in 1957 between the Commonwealth, TAA, ANA and two Ansett companies which was ratified by the Civil Aviation Agreement Act 1957. The 1957 agreement was complimentary to the 1952 agreement and both were to subsist for the same period, that is until October 1967. The fourth recital to the 1957 agreement provided:

"AND WHEREAS one of the objects of the parties to this agreement is to secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services, one being the Commission, each capable of effective competition with the other, and the parties intend that this agreement shall be construed having regard to that object."

At that time TAA was plainly the major domestic operator of aircraft within Australia. Poor equipment was one of the reasons which led to ANA's precarious position. One of the first tasks of Ansett following the execution of the agreement was to equip the airline with suitable aircraft to enable it to compete with TAA's aircraft. The Government sought to ensure that a "re-equipment race" causing surplus capacity did not occur; hence there arose the policy of comparable equipment which became a cornerstone of the two airlines policy. The Federal Parliament passed the Airlines Equipment Act 1958 which contained detailed provisions for rationalisation of aircraft fleets designed to ensure that neither airline had excess capacity and that the acquisition of additional aircraft would be governed by principles which ensured that neither airline had a qualitative advantage over the other in relation to equipment. The Act made provision for a process of "capacity determination" which was intended to match the level of capacity to the perceived market demand for services and to divide the capacity evenly between the two airlines to eliminate wasteful excess capacity. Further, neither airline was permitted to purchase or otherwise obtain the use of additional aircraft unless the responsible Minister had issued a certificate under s. 13 of the Act certifying that the obtaining of the aircraft would not result in the airline having excess capacity or, having regard to the type of aircraft operated by the other airline, would not be detrimental to the stability of the domestic air transport industry.

In 1961 the Federal Government undertook a review of matters affecting the civil aviation agreements and as a result the Airlines Agreements Act 1961 and the Australian National Airlines Act 1961 were passed by the Federal Parliament in October 1961.
The Airlines Agreement Act 1961 approved an agreement made in 1961 which continued the 1952 agreement in force for a further period of ten years (ie. until 1977).
The Australian National Airlines Act 1961 was passed by the Federal Parliament amending the 1945 Act in certain respects. The amending Act placed on a statutory basis arrangements already in force which permitted TAA to elect to insure aircraft risks on the commercial market or to act as a self insurer. The Act also required TAA to meet a "dividend target" set by the Minister.
In The Queen v. Anderson; ex parte Ipec-Air Pty. Limited (1965) 113 CLR 177 the High Court upheld the power of the Commonwealth to refuse aircraft import permits, but held that the Director-General of Aviation's limits of discretion were confined to examining safety and operational matters only, when considering licence applications.
In 1972 the Commonwealth Parliament passed the Airlines Agreement Act 1972 which approved an agreement between the Commonwealth, TAA and the Ansett companies executed on 21 October 1972. The agreement contained obligations on the part of each of the airlines concerning the level of service it was to provide in consideration of the retention of the two airlines policy. For example, the Minister was entitled to, in effect, refer certain aspects of parallel scheduling to "the Co-ordinator" and, if appropriate, to "the Arbitrator" (clause 5). Both airlines were to maintain existing rural air services so long as revenue from the particular service exceeded direct operating costs of the service (clause 6). Clause 10 provided:

"10. The parties acknowledge that nothing in the 1952-1972 Airlines Agreement shall preclude the Commonwealth, the Minister or the Director-General from permitting the holder of an airline or charter licence to develop -

(a) air services on routes other than trunk routes; or

(b) specialist freight and passenger services (including low-cost inclusive tours) of a nature which in the opinion of the Minister are not adequately provided for either by the Commission or by the Operating Company,

consistently with the object of the parties to the 1952-1972 Airlines Agreement to secure and maintain a position where there are two and not more than two operators of trunk route airline services, one being the Commission, each capable of effective competition with the other."

The agreement of 1972 extended the life of the 1952 and 1961 agreements which were due to expire on 18 November 1977 by providing that the 1952-1972 agreement shall continue in force after 18 November 1977 unless and until determined in accordance with clause 4. Under clause 4 the Commonwealth or Ansett could terminate the 1952-1972 agreement by giving at least five years notice of termination at any time after 31 December 1977.
The Australian National Airlines Act 1972 was passed by the Federal Parliament in essence to facilitate changes to TAA's accounting arrangements relevant to the operation of its superannuation schemes.
In 1973 further legislation was passed, namely, the Australian National Airlines Act 1973 and the Airlines Agreements Act 1973. The former Act enabled TAA to broaden the scope of its activities and to compete more effectively with Ansett. The latter Act approved an agreement between the Commonwealth, Ansett and TAA executed on 26 October 1973. The agreement was expressed to be supplemental to the 1952 agreement (clause 3) and it contained provisions enabling the Commonwealth to increase annual air navigation charges by fifteen per cent rather than the ten per cent allowed under the 1961 agreement. Provision was made for increases in fares and freight rates to compensate for any loss of profits due to higher annual air navigation charges (clauses 6 and 7).
In the mid 1970's Ansett unsuccessfully challenged the validity of part of the 1945 Act. The High Court held in Attorney-General of Western Australia (at the relation of Ansett Transport Industries-Operations Pty. Limited) v. Australian National Airlines Commission (1976) 138 CLR 492 that TAA had power to transport passengers and cargo on an intra-state sector of a state-territorial route.
In 1977 Ansett sought an injunction to prevent the Commonwealth issuing aircraft import permits to Interstate Parcel Express Co. (Australia) Pty. Limited ("Ipec") and Air Express Limited. Ansett's case was conducted on the basis that the Commonwealth was said to be breaching the two airlines agreements by allowing an independent airline to operate on a trunk route contrary to an alleged implied term in the agreements that the Commonwealth should act within its power to maintain the agreement. In Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia (1977) 139 CLR 54 the High Court held that there was no term implied or otherwise in the agreements which bound the Commonwealth to do or not to do any particular act of the kind contended for by Ansett. Following that decision the Airlines Agreement Act 1981 amended Regulation 4N of the Customs (Prohibited Imports) Regulations so that the Secretary of the Department of Aviation was required to take into account the provisions of the two airlines agreement when considering applications for permission to import aircraft or aircraft engines.
In 1977 a review of Australia's domestic air transport policy was carried out by a Committee on behalf of the Federal Government. That Committee reported in March 1978. In 1980 a committee was established by the Federal Government to conduct a public inquiry (the Holcroft Inquiry) to examine air fares on the trunk routes and regional routes operated by TAA and Ansett and to examine the way in which fares are set on individual routes in the national network by use of an air fare formula. Concurrently with the conduct of the Holcroft Inquiry, negotiations proceeded between the parties to the two airlines agreement concerning the implementation of the recommendations of the committee established in 1977. In the result a new agreement was signed on 19 September 1980 but it was never ratified by Parliament. Subsequently another agreement was negotiated, which was executed on 28 May 1981 and approved by the Airlines Agreement Act 1981. This is the current two airlines agreement.
To give effect to the renegotiated agreement and the Government's commitment to establish an independent fares tribunal and establish TAA as a public company, legislation was introduced into Parliament in May 1981 consisting of the Airlines Agreement Act 1981, the Independent Air Fares Committee Act 1981, the Airlines Equipment Amendment Act 1981 and the Australian National Airlines Repeal Act 1981. This last mentioned Act was never proclaimed and was itself repealed by the Australian National Airlines Retention Act 1984.
Most of the provisions of the 1981 agreement came into force on 26 January 1982 and are to remain in force for not less than eight years. The agreement may be terminated at any time after five years, but three years notice of termination must be given.
The first three of the above Acts together with the power of the Commonwealth to control the import of aircraft into Australia under the Customs (Prohibited Imports) Regulations (see Regulation 4N) constitute the current arrangements by which the Federal Government regulates domestic airlines. In his Second Reading Speech on the Airlines Agreement Bill 1981 the Minister for Transport said that TAA and Ansett were to be the only two operators of scheduled domestic passenger services over trunk routes "but with most important exceptions":

"The first exception is that other operators can provide services over prescribed routes, which includes successive prescribed routes combined to provide a service between two trunk route centres. A number of prescribed routes are trunk routes.

. . .

Provision is also made that should TAA and Ansett decline to provide a satisfactory passenger service over a trunk route not currently operated by them other operators will be able to serve that route as a prescribed route

. . .

Finally, specialist scheduled passenger services of a type not adequately catered for by TAA and Ansett may be provided over trunk routes by other operators if TAA and Ansett decline to do so when requested by the Minister."

The 1981 agreement, to which I shall refer henceforth as "the two airlines agreement" or sometimes as "the agreement" contained recitals including the following:

"AND WHEREAS in order to facilitate trade and commerce among the States and assist the defence of the Commonwealth it is expedient in the opinion of the Commonwealth to make provision for the purpose of ensuring -

(a) the efficient and economic operation of air passenger services within Australia;

(b) the continued existence in competition with each other of only two operators of air passenger services over the entire trunk route network within Australia:"

This recital may be compared with the fifth recital to the 1961 agreement which stated:

"AND WHEREAS one of the objects of the parties to this agreement is to secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services, one being the Commission, each capable of effective competition with the other, and the parties intend that this agreement shall be construed having regard to that object."

Clause 6 of the agreement is a critical clause for the purposes of this case and it provides as follows:

"6(1)(a) The parties shall take all reasonable action within their powers to ensure that the Commission and the Company are the only two operators which provide scheduled domestic passenger air services over trunk routes within Australia.

(b) Subject to paragraph (c) of this sub-clause nothing in sub-clause (1)(a) shall prevent other operators from providing scheduled passenger air services over a prescribed route or successive prescribed routes.

(c) Where any successive prescribed routes have the effect of linking two trunk route centres that are for the time being trunk route centres for the purposes of sub-clause

(1)(e), sub-clause (1)(b) applies unless the Secretary is satisfied that such scheduled passenger air services are not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes and are to a significant extent used or to be used for the purpose of carriage of passengers between two centres that are for the time being trunk route centres for the purposes of sub-clause (1)(e).

(d) Without derogating from the objectives of sub-clause (1)(a), the parties acknowledge that nothing in this agreement shall preclude the Commonwealth, the Minister or the Secretary from permitting a passenger operator to develop specialised scheduled passenger air services over trunk routes of a nature which in the opinion of the Minister are not adequately provided for either by the Commission or the Company and for which after receiving a request in writing from the Minister neither the Commission nor the Company has, within a reasonable time, provided a service to the satisfaction of the Minister.

(e) For the purposes of this agreement a trunk route is a route linking any two trunk route centres. A trunk route centre shall be any one of the following: Adelaide, Alice Springs, Brisbane, Cairns, Canberra, Coolangatta, Darwin, Gove, Hobart, Launceston, Mackay, Melbourne, Mount Isa, Perth, Proserpine, Rockhampton, Sydney, Townsville and such other centres as the parties hereto shall agree from time to time.

(2) (a) For the purposes of this agreement a prescribed route is -

(i) a route:

(a) between a place in a State and another place in that State;

(b) between a place in a Territory and another place in that Territory;

(c) between a regional centre and another place in Australia; or

(d) over which the Minister has requested in writing the Commission and the Company to provide a passenger air service and neither the Commission nor the Company has within a reasonable time after the making of that request provided that service to the satisfaction of the Minister; or

(ii) a route, other than a route referred to in sub-clause (2)(a)(i) over which an operator, other than the Commission or the Company, operated a scheduled passenger air service on 1 July 1980, regardless of whether it was the sole operator of scheduled air passenger services over that route.

(b) For the purpose of this agreement a regional centre is a place within Australia which is not for the time being a trunk route centre for the purposes of sub-clause

(1)(e)."

It is important to note that freight was removed from the ambit of the two airlines agreement. The agreement provides for consultation between TAA and Ansett relating to the operation of competitive scheduled passenger air services within Australia (clause 7).
Clause 8 requires the Commonwealth to take all requisite steps to secure the amendment of the Customs (Prohibited Imports) Regulations to include a provision that, in considering applications for the import of aircraft and aircraft engines, the Secretary of the Department of Aviation shall have regard to the provisions of the agreement. The Commonwealth also undertook in clause 8 to do everything in its power to ensure that a provision to that effect would be retained in the regulations during the currency of the agreement and it was pursuant to that undertaking that s. 8 of the Airlines Agreement Act 1981 was enacted inserting Regulation 4N in the Customs (Prohibited Imports) Regulations.
Clause 9 of the two airlines agreement provides, so far as presently relevant:-

"9(1) The Commonwealth, through the Minister, will introduce in the Parliament of the Commonwealth an amendment to the Airlines Equipment Act 1958 to impose and will thereafter take all appropriate action within its power to maintain during the currency of this agreement, an obligation on any operator (other than the Commission and the Company) of civil domestic air services who seeks to import a turbo jet aircraft having a capacity in excess of 30 passengers or a maximum payload in excess of 3,500 kilograms in order to operate domestic air services to enter into an undertaking to comply with the said Act if approval to import such an aircraft is to be given to the operator. The Commonwealth will take all reasonable action within its powers to ensure that an aircraft, the subject of any such undertaking, is not used in a manner contrary to such undertaking."

The Airlines Agreement Act 1981 contained many provisions including those relating to obligations of reporting to Parliament and criteria for withdrawal of rural air services. Other provisions of the agreement provided for equal access to government business by both airlines, the application of the agreement to subsidiaries of Ansett and TAA, compliance with curfew requirements and the Air Navigation Act, consultation on departmental programmes, the use of Ansett's and TAA's facilities in an emergency and non-discrimination against Ansett or TAA.
In his Second Reading Speech, when commenting on the eight year term of the two airlines agreement the Minister said:

"In deciding such arrangements I was concerned to allow a reasonable period of operations under these new arrangements before contemplating further amendments particularly bearing in mind the massive investment of some $800m made by TAA and Ansett to acquire new fuel efficient aircraft to maintain their high standards of service. I believe every minute of the 8 year period of agreement will be needed."

The Independent Airfares Committee Act 1981 provided for:

the determination and approval of airfares over trunk routes through a series of reviews which provide that fares are based on the proper allocation of costs to the flagfall and distance components of a nationally consistent airfare formula;

public hearings and submissions at cost allocation reviews when the principles of fare setting are examined; and

specific criteria whereby discount fare proposals are assessed. If the proposal, which can only be initiated by an airline, satisfied the criteria, the discount proposal must be approved.

Part IV of the lastmentioned Act contains provisions empowering the Minister to direct the withdrawal from use by any operator whilst advertising, charging or collecting air fares not determined and approved by the Committee, any aerodrome or any air route facility maintained and operated by the Minister pursuant to Air Navigation Regulation 82 (s. 26). Penalties are provided for contravention of the Minister's directions.
The Airlines Equipment Amendment Act 1981 is an important statute for present purposes. It provides for the exclusion of air cargo from the capacity determination process following the removal of air cargo from the ambit of the two airlines agreement. Operators, other than TAA, Ansett and Qantas, may acquire jet aircraft subject to the operators undertaking to comply with the obligations set out in the Act. The obligations of regional operators include obligations not to provide aircraft capacity in excess of that determined under the Act by the Minister and to provide passenger air services capable of performing the determined capacity. If a regional operator is deemed to have excess capacity it is under an obligation to dispose of sufficient capacity so as to comply with the Minister's determination. Sub-section 11(2) of the Act states:

"(2) For the purposes of this Act, the functions of regional operators are to provide passenger air services over prescribed routes."

The expression "aircraft capacity" is defined by sub-s. 11(1) in relation to an aircraft in respect of a period as meaning the number of revenue passenger kilometres capable of being performed by the aircraft in the period. "Competitive route" is defined as meaning a route over which passenger air services are operated both by TAA and Ansett. Definitions of the expressions "passenger revenue load factor" and "prescribed route" are contained in sub-s. 11(1). "Prescribed route" is defined as meaning:

"(a) a route -

(i) between a place in a State and another place in that State;

(ii) between a place in a Territory and another place in that Territory;

(iii) between a regional centre and another place in Australia; or

(iv) over which the Minister has requested the Commission and the company to provide a passenger air service and over which neither the Commission nor the company has, within a reasonable time after the making of that request, provided a service that, in the opinion of the Minister, is satisfactory;

and

(b) a route, other than a route referred to in para. (a), over which a person, other than the Commission or the Company, operated a scheduled passenger air service on 1 July 1980 (whether or not any other person operated such a service over that route on that date)."

The expression "regional centre" is defined as meaning a city or town in Australia other than Adelaide, Alice Springs, Brisbane, Cairns, Canberra, Coolangatta, Darwin, Gove, Hobart, Launceston, Mackay, Melbourne, Mount Isa, Perth, Proserpine, Rockhampton, Sydney, Townsville or any other city or town in Australia that is for the purposes of para. 6(1)(e) of the two airlines agreement agreed by the parties to that agreement to be a trunk route centre for the purposes of the agreement.
Section 12 provides as follows:-

"12.(1) The Minister shall, from time to time, in relation to a specified future period -

(a) estimate the total traffic on -

(i) each of the competitive routes;

(ii) the non-competitive routes of the Commission; and

(iii) the non-competitive routes of the Company; and

(b) determine the maximum aircraft capacity of the aircraft required by the Commission and the Company, respectively, for the purposes of -

(i) carrying one-half of so much of the total traffic estimated by the Minister in respect of the competitive routes as will not, in the opinion of the Minister, be carried by regional operators or commuter operators; and

(ii) operating its services on non-competitive routes.

(2) For the purposes of this section, the Minister shall have regard to -

(a) rates of traffic increase;

(b) the types, speeds and reasonable extent of utilization of the aircraft proposed to be used;

(c) the passenger revenue load factor that would be the optimum passenger revenue load factor for the operation of aircraft on each route during the period concerned, due consideration being given to the interests of the public and the maintenance of a proper relation between revenue and costs;

(d) the necessity for the overhaul and maintenance of aircraft;

(e) the necessity for having aircraft available to meet emergency situations;

(f) aircrew training requirements;

(g) any services operated otherwise than by the Commission or the Company; and

(h) any other factors affecting the stability of the domestic air transport industry.

(3) Where the Minister makes an estimate and a determination under sub-section (1) of this section, he shall, not less than 90 days before the commencement of the relevant period, give notice of the terms of the estimate and of the determination to the Commission and to Ansett Transport Industries Limited and shall, in the notice, specify the portion of the determined aircraft capacity that is related to traffic on the competitive routes."

Section 13, so far as relevant, provides:-

"13. The obligations to which the Commission and the Company are, in accordance with the agreement referred to in section 5 of the Airlines Agreement Act 1981 or, if that agreement does not have force and effect, the agreements referred to in section 3 of the Airlines Agreements Act 1952, to be subject are the following:-

. . .

(c) an obligation not to purchase, lease or otherwise obtain the use of any aircraft unless the Minister has certified in writing that, in his opinion, the obtaining of the aircraft will not result in the Commission or the Company, as the case may be, having the use of any aircraft in excess of the aircraft required to provide the aircraft capacity determined from time to time under the last preceding section, and that, in his opinion, the obtaining of an aircraft of the type proposed to be obtained will not, having regard to the types of aircraft operated by the Commission and the Company or in respect of which any other certificate under this paragraph has been or is proposed to be issued, be detrimental to the stability of the domestic air transport industry;

. . ."

Section 18 provides:-

"18.(1) Subject to sub-section (7), this section applies to a regional operator -

(a) who has given an undertaking in accordance with sub-section 16(1); or

(b) who has given an undertaking, in connection with the acquisition of an aircraft, to comply with the obligations applicable in relation to a regional operator to which this section applies.

(2) The Minister shall, in accordance with sub-sections (4) and (5), in relation to a specified future period in relation to each regional operator to which this section applies -

(a) estimate the total traffic that will be carried by that regional operator in operating passenger air services on prescribed routes; and

(b) determine the maximum aircraft capacity of the aircraft required by that regional operator for the purposes of operating passenger air services on prescribed routes.

(3) A reference in sub-section (2) to prescribed routes, in relation to a regional operator to which this section applies, shall be read as including a reference to any trunk routes over which that regional operator is permitted to operate scheduled passenger services in accordance with paragraph 6(1)(d) of the agreement referred to in section 5 of the Airlines Agreement Act 1981.

(4) In making an estimate and a determination under sub-section (2) in relation to a regional operator, the Minister shall have regard to -

(a) the functions of regional operators;

(b) the traffic carried by the regional operator before the making of the estimate and determination;

(c) the rates of traffic increase in the regional operator's services;

(d) the types, speeds and reasonable extent of utilization of the aircraft proposed to be used by the regional operator;

(e) the passenger revenue load factor that would be the optimum passenger revenue load factor for the operation of aircraft on each prescribed route on which the regional operator will carry traffic during the period concerned, due consideration being given to the interests of the public and the maintenance of a proper relation between revenue and costs;

(f) the necessity for the overhaul and maintenance of aircraft;

(g) the necessity for having aircraft available to meet emergency situations;

(h) the operation of paragraph 6(1)(c) of the agreement referred to in section 5 of the Airlines Agreement Act 1981;

(j) aircrew training requirements; and

(k) any other factors affecting the stability of the domestic air transport industry.

5. The Minister may make an estimate and determination under sub-section (2) in relation to a regional operator to which this section applies at any time, but shall make such an estimate and determination in relation to a regional operator to which this section applies before the expiration of 60 days after -

(a) the importation by or on behalf of that regional operator of any aircraft, airframes or engines in relation to the importation of which an undertaking has been given by that regional operator under sub-section 16(1); or

(b) the acquisition by that regional operator of an aircraft in connection with the acquisition of which an undertaking has been given by that regional operator to comply with the obligations applicable in relation to a regional operator to which this section applies.

6. Where the Minister makes an estimate and determination under sub-section (2) in relation to a regional operator to which this section applies, the Minister shall make another estimate and determination under that sub-section in relation to that regional operator within each succeeding period of 12 months after the making of that first-mentioned estimate and determination.

7. Where the Minister makes an estimate and a determination under sub-section (2) in relation to a regional operator, the Minister shall, not less than 90 days before the commencement of the period in relation to which that estimate and determination were made, give notice of the terms of the estimate and determination to the regional operator.

8. This section does not apply to a regional operator during any period during which neither that regional operator nor any body (whether corporate or unincorporate) in which that regional operator has a controlling interest owns, leases or has the use of turbo jet aircraft having a capacity exceeding 30 passengers or a maximum payload exceeding 3,500 kilograms."

The Air Navigation Act 1920 and the Air Navigation Regulations

The Air Navigation Act 1920 confers wide powers upon the Governor-General to make regulations in relation to air navigation. Those regulations are the Air Navigation REgulations and they confer powers upon the Secretary to the Department of Aviation. Under Regulation 320A an aircraft is prohibited from landing or taking off at certain airports "except under the authority of, and in accordance with, a permit issued under this regulation by the Secretary". Under regulation 320B an aircraft is prohibited from flying in controlled air space "except under the authority of, and in accordance with, a permit issued under this regulation by the Secretary". An aircraft is not allowed to land or take off from certain airports without flying in controlled air space.
On 11 December 1983 the Secretary by his delegate gave a permit under Regulation 320A "for any aircraft engaged in operations that are authorised by and are in accordance with Airline Licence No. 3 . . . issued to East-West Airlines (Operations) Limited to land at or take off" at the places referred to in Regulation 320A and a permit under Regulation 320B "for any aircraft engaged in operations that are authorised by and are in accordance with the abovementioned Airline Licence No. 3 . . . to fly in controlled air space in which it is necessary for the aircraft to fly in the course of those operations".
The Minister is empowered by Regulation 82 to establish and operate aerodromes, air routes and airway facilities. Under Regulation 82(2) the Secretary is empowered to determine the conditions of use of aerodromes, air routes and airway facilities.
Division I of Part XIII of the Air Navigation Regulations provides for the licensing of air service operations and that division consists of Regulations 190A to 205. For the purpose of the regulations air transport is divided into a number of classes of operations. The relevant class for present purposes is "regular public transport operations" (Reg. 191(d)). This class includes the class described in the two airlines agreement as "scheduled domestic passenger air services".
Aircraft employed in regular public transport operations are classified as regular public transport aircraft. An aircraft shall not be used by a person in commercial operations except "under the authority of, and in accordance with, a licence issued to the person by the Secretary" (Reg. 198). Under Items 4, 5, 6 or 7 of Reg. 198A, an airline licence authorises the conduct of regular public transport operations.
Regulation 199 provides for the issuing of licences. Under Reg. 199(2), where the proposed air service is an interstate service, the Secretary is required to issue the licence sought unless the applicant has failed to comply or has not shown itself capable of complying with the requirements relating to the safety of the proposed air service operations. In that sub-regulation "interstate service" means a service by way of, or in the course of, trade and commerce among the states (Reg. 202). Where the proposed service is other than an interstate service the Secretary has a discretion to issue the licence (sub-reg. 199(3)) but under sub-reg. 199(4) in deciding whether to grant the licence or not the Secretary shall "have regard to matters concerned with the safety, regularity and efficiency of air navigation and to no other matters".
It is important to note that the existence and validity of the two airlines agreement is assumed for the purposes of this case and therefore it must be taken that the two airlines policy, which underlies that agreement, is accepted as an essential and valid part of the framework, both legislative and contractual, in which the rights of the parties fall to be determined. Throughout the whole of its existence, now more than forty years, the two airlines policy and the agreement which it has embodied from time to time has been a matter of high controversy and the mid 1980's are no exception; but the question of the validity or desirability of the two airlines agreement does not arise in this case.

Summary of the Six Proceedings
As there are six proceedings in this Court being heard together it is convenient to summarise them.

Proceeding No. VG 61 of 1986.
In this proceeding Ansett seeks to restrain the Minister from making a determination pursuant to sub-s. 18(2) of the Airlines Equipment Act ("the Equipment Act") whereby the Minister in:

(a) estimating the total traffic that will be carried by East-West in operating passenger air services on prescribed routes; and

(b) determining the maximum aircraft capacity of the aircraft required by East-West for the purposes of operating passenger air services on prescribed routes includes within the class of prescribed routes routes linking any two of the Queensland trunk route/centres other than Coolangatta. For convenience I shall refer to those routes as "the Queensland routes".

It was in this proceeding that the Court granted an ex parte injunction sought by Ansett on 1 April 1986 which was continued as an interlocutory injunction on 4 April and which subsists until the determination of this matter or further order. In this proceeding the Court is exercising jurisdiction conferred by s. 39B of the Judiciary Act 1901.

Proceeding VG 65 of 1986
This proceeding was brought by both Ansett and TAA against the Minister and East-West seeking a review under the Administrative Decisions (Judicial Review) Act 1977 (the "Judicial Review Act") in essence to restrain the Minister from making a determination pursuant to sub-s. 18(2) of the Equipment Act being the determination to which I referred when discussing proceeding VG 61 of 1986.
Both proceedings 61 and 65 of 1986 have now been largely subsumed in proceedings 94 and 101 of 1986.

Proceeding VG 94 of 1986
The Court is exercising jurisdiction conferred by s. 39B of the Judiciary Act and its accrued jurisdiction with respect to the respondents other than the Minister and the Secretary. TAA is the applicant and it seeks a large number of declarations and orders which are in substance as follows:-

1. A declaration that the Commonwealth, the Minister and the Secretary is each under a duty to take all reasonable action to ensure that TAA and Ansett are the only two operators which provide scheduled domestic passenger air services over trunk routes within Australia and to prevent and avoid the taking of any action the effect of which would be to permit any other operator to provide scheduled domestic passenger air services over trunk routes within Australia;

2. A declaration that the issue of the amended licence to East-West constituted a breach by the Commonwealth of the two airlines agreement and a breach by the Commonwealth, the Minister and the Secretary of their respective duties and obligations mentioned in 1;

3. A declaration that failure by the Commonwealth to take all reasonable action to amend Regulations 199, 82, 106C, 320A and 320B of the Air Navigation Regulations constitutes a breach by the Commonwealth of the two airlines agreement and a breach by the Commonwealth, the Minister and the Secretary of their respective duties mentioned in 1;

4. A declaration that the amended licence issued to East-West by the Secretary on 25 February 1986 and further amended on 25 March 1986 whereby East-West was licenced to conduct regular public transport operations over the Queensland routes is void;

5. A writ of mandamus compelling the Minister to act according to law in making the East-West determination;

6. Declarations as follows:

(a) That the Minister is obliged in making a capacity determination under s. 18 of the Equipment Act for East-West in respect of which East-West has requested the inclusion of the Queensland routes to consider whether the inclusion of capacity for the Queensland routes in such capacity determination would constitute East-West an operator which provides scheduled passenger air services over trunk routes within Australia so as to render the Commonwealth in breach of its obligations under clause 6(1)(a) of the two airlines agreement;

(b) That clause 6(1)(c) requires the Secretary to make a determination prospectively in respect of services proposed to be but not currently provided by East-West;

(c) That in making an estimate and determination under sub-s. 18(2) the Minister is obliged to have regard to the provisions of clause 6 of the two airlines agreement;

(d) That the Minister is obliged, in making a capacity determination for East-West under s. 18 in respect of which East-West has requested the inclusion of the Queensland routes, in having regard to the matters set out in para. 18(4)(h) of the Equipment Act to consider whether any of the proposed operations by East-West on the Queensland routes are or form part of scheduled passenger air services over successive prescribed routes which have the effect of linking two trunk route centres and, if so, whether such scheduled passenger air services are not or are likely not to be predominantly for use for the purpose of the carriage of passengers over separate prescribed routes and are or are likely to a significant extent to be used for the purpose of the carriage of the passengers between trunk route centres;

(e) That the Minister is obliged in making a capacity determination under s. 18 for East-West in respect of which East-West has requested the inclusion of the Queensland routes to consider whether the Secretary is likely to be or will be satisfied that any of the proposed operations by East-West on the Queensland routes are or form part of scheduled passenger air services over successive prescribed routes which have the effect of linking two trunk route centres and, if so, whether the Secretary is likely to be or will be satisfied that such scheduled passenger air services are not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes and are or are likely to a significant extent to be used for the purpose of the carriage of passengers between trunk route centres;

(f) That the Minister is obliged in making a capacity determination under s. 18 for East-West in respect of which East-West has requested the inclusion of the Queensland routes and in having regard to the matters set forth in para. 18(4)(h) of the Equipment Act to consult the Secretary and to require or request the Secretary to form a view whether the Secretary is satisfied that any of the proposed operations by East-West on the Queensland routes are or form part of scheduled passenger air services over successive prescribed routes which have the effect of linking two trunk route centres and, if so, whether the Secretary is satisfied that such scheduled passenger air services are not predominantly for use for the purpose of the carriage of passengers over separate prescribed routes and are to be significant extent used or to be used for the purpose of carriage of passengers between trunk route centres;

(g) That the Minister is obliged in making a capacity determination under s. 18 for East-West in respect of which East-West has requested the inclusion of the Queensland routes -

(i) to have regard to the existing maximum aircraft capacity of TAA and Ansett in respect of the routes the subject of the determination;

(ii) to determine the appropriate maximum level of capacity required to service the estimated total traffic on those routes;

(iii) to determine the share of such total capacity as he considers desirable to be allocated to East-West having regard to -

(a) East-West's position as a regional operator;

(b) clauses 6 and 9 of the two airlines agreement;

(c) the existing capacity of TAA and Ansett;

(d) the need to avoid excess total capacity on the routes the subject of the determination; and

(e) the need to maintain the stability of the domestic air transport industry.

(h) That the Minister is obliged in making a capacity determination under s. 18 of the Equipment Act for East-West in respect of which East-West has requested the inclusion of the Queensland routes -

(i) to have regard to the existing maximum aircraft capacity of TAA and Ansett in respect of the routes the subject of the determination;

(ii) to determine the appropriate maximum level of capacity required to service the estimated total traffic on those routes;

(iii) to determine the share of such total capacity to be allocated to East-West so as to ensure that TAA and Ansett are the only two operators which provide scheduled domestic passenger air services over trunk routes within Australia;

(i) That the Minister is obliged in making a capacity determination under s. 18 for East-West in respect of which East-West has requested the inclusion of the Queensland routes and in having regard to the matters set forth in para. 18(4)(k) of the Equipment Act -

(a) to ensure that East-West is not allocated such maximum aircraft capacity as will result in either TAA or Ansett having excess capacity during the period of such capacity determination for East-West;

(b) to take account of certain other matters;

(j) That the Minister is obliged in making a capacity determination under s. 18 for East-West in respect of which East-West has requested the inclusion of the Queensland routes to ensure that as far as possible each of the airlines servicing the Queensland routes maintains a passenger revenue load factor for that route, due consideration being given to the interests of the public and the maintenance of a proper relation, for all airlines, between revenue and costs;

(k) That the Minister is not entitled to allow capacity for positioning flights required for maintenance reasons;

(l) That the failure or refusal of the Minister to make a capacity determination for East-West in relation to any period commencing on or after the expiry of the period of operation of capacity determination No. 5 is a breach -

(i) of the Minister's duty under sub-s. 18(2) of the Equipment Act;

(ii) of clause 6 of the two airlines agreement.

7. A declaration that the Secretary -

(a) when issuing any licence pursuant to Regulation 199(4) of the Air Navigation Regulations;

(b) when issuing any permit pursuant to Regulation 320A or Regulation 320B of the Air Navigation Regulations;

(c) when giving approval pursuant to Regulation 106C of the Air Navigation Regulations for any timetable or part of a timetable in respect of passenger air services -

shall have regard to the provisions of the two airlines agreement.

8. A declaration that the Secretary may revoke -

(a) any licence issued pursuant to Regulation 199(4) of the Air Navigation Regulations;

(b) any permit issued pursuant to Regulation 320A or Regulation 320B of the Air Navigation Regulations;

(c) any approval given pursuant to Regulation 106C of the Air Navigation Regulations for any timetable, or part of a timetable in respect of passenger air services to be provided by East-West over any of the Queensland routes;

to give effect to the obligations imposed upon the Commonwealth by the two airlines agreement.

9. A declaration that the Secretary may impose such conditions and/or make such variations to existing conditions imposed pursuant to Regulation 82(2) of the Air Navigation Regulations on the use of Brisbane, Mackay, Proserpine, Townsville, Rockhampton and Mount Isa aerodromes as are necessary or desirable in order to give effect to obligations of the Commonwealth pursuant to the two airlines agreement.

The Commonwealth of Australia, the Minister and the Secretary cross-claimed in this proceeding seeking in essence the following declarations:

1. That upon the true construction of the two airlines agreement, in particular clause 6 thereof, a route over which scheduled domestic passenger air services are provided may be both a "trunk route" as defined by clause 6(1)(e) and a "prescribed route" as defined by clause 6(2)(a).

2. That upon the true construction of the two airlines agreement, in particular clause 6 thereof, where an operator other than Ansett and TAA provides scheduled passenger air services over successive prescribed routes within the meaning of clause 6(1)(b) and the Secretary is not satisfied of the matters set forth in clause 6(1)(c), the Commonwealth is not bound by clause 6(1)(a) to take any action pursuant to that clause.

3. That upon the true construction of the Equipment Act and in particular s. 18 thereof, the Minister is entitled when making an estimate and determination pursuant to sub-s. 18(2) to take into account the capacity of the aircraft required by East-West for the purposes of operating passenger air services on the Queensland routes and the Minister is presently so entitled notwithstanding the provisions of clause 6(1)(a) of the two airlines agreement.

Proceeding VG 101 of 1986

In this proceeding Ansett seeks in substance the same relief as is sought by TAA in proceeding VG 94 of 1986.

Proceeding VG 195 of 1986
In this proceeding East-West responds to the proceedings brought by Ansett and TAA by challenging the validity of Capacity Determination No. 53 made by the Minister on 14 February 1986 pursuant to s. 12 of the Equipment Act in respect of Ansett and TAA for the period from 16 May to 31 December 1986 and seeks:

declarations that the determination is void;

an order quashing the determination;

an injunction restraining the Minister from issuing a certificate to either Ansett or TAA permitting the importation of any jet aircraft into Australia until such time as the Minister has made a further capacity determination in respect of Ansett and TAA; and

an order directing the Minister to make a determination under s. 13 of the Equipment Act as to whether each of Ansett and TAA is required to dispose of any aircraft capacity in excess of the aircraft capacity as may be subsequently determined by him under s. 12 of the Equipment Act.

In this proceeding the Court is exercising jurisdiction conferred by s. 39B of the Judiciary Act and its accrued jurisdiction with respect to the respondents other than the Minister and the Secretary.

Proceeding No. VG 204 of 1986
This is an application by East-West pursuant to the Judicial Review Act to review the decision of the Minister made on 14 February 1986 to issue Capacity Determination No. 53 in respect of Ansett and TAA for the period from 16 May to 31 December 1986 and to review conduct of the Secretary in relation to any issue to TAA or Ansett of a permit pursuant to Regulation 4N of the Customs (Prohibited Imports) Regulations in respect of the twelve Boeing 737 aircraft which each of TAA and Ansett proposes to import into Australia.
East-West also seeks a review of what is said to be the failure of the Minister to decide that Ansett and TAA shall be directed to dispose of aircraft to the extent necessary to eliminate the excessive aircraft which they are said to have over and above the aircraft required to provide the capacity determined by the Minister. East-West seeks in substance the same relief as it seeks in proceeding VG 195 of 1986.

Facts
Regional airlines operate over routes which generally do not link trunk route centres as defined by clause 6(1)(e) of the two airlines agreement. Regional airlines use aircraft in the large turbo-propeller to small jet class (44-75 seats). Most of these airlines are operating divisions of Ansett Transport Industries (Operations) Pty. Limited which is a subsidiary of Ansett. East-West is the only operator independent of TAA and Ansett currently operating in Australia as a regional airline. Ansett W.A., Airlines of South Australia, Airlines of Northern Australia and Air New South Wales are operating divisions of Ansett Transport Industries (Operations) Pty. Limited. Air Queensland is a subsidiary of TAA.
Regional airlines serve markets similar to those of commuter airlines. Commuter airlines generally operate small, fairly unsophisticated aircraft (5-38 seats) and cover low-density, short haul routes. Regional airlines generally operate higher-density and longer haul routes with F27, F28 and BAe 146 aircraft. Significant rationalisation between regional and commuter airlines has occurred in Australia in recent years. For example, East-West withdrew its services from the central-west region of New South Wales following increased competition from commuter operators with smaller aircraft offering more frequent services. Regional airlines introduced some larger aircraft for example F28-4000's and BAe 146-200's.
The trunk routes are flown by Ansett and TAA and they operate medium to large jet aircraft (92-230 seats) over high density routes including all capital cities plus a number of the larger cities particularly in Queensland. East-West also operate services linking trunk route centres, either directly, such as Sydney/Coolangatta and Sydney/Hobart (pursuant to clause 6(2)(a)(ii) - the "Grandfather" clause of the two airlines agreement) or via other ports, such as Sydney/Albury/Melbourne (successive prescribed routes: see clauses 6(1)(b) and 6(1)(c) of the Agreement).
Pursuant to clause 6(1)(c) East-West has, by linking various trunk route centres via intermediate ports (that is successive prescribed routes), developed an extensive network of F28 and F27 services between the major population centres of five of the six states. Successive prescribed routes currently operated by East-West include - Sydney/Albury/Melbourne; Sydney/Grafton/Brisbane; Sydney/Yulara/Perth and Melbourne/Devonport/Hobart.
East-West adopts a marketing strategy of promoting itself as Australia's third airline and providing a "no frills" service operated with smaller aircraft. These matters combined with other considerations such as its ground handling and terminal facilities and the availability of discount fares appear to have generated public interest in more basic or lower class services. There is some material before the Court suggesting that East-West's services may have generated demand from members of the public who have previously not travelled by air and may appeal to members of the public who wish to avail themselves of cheaper fares.
The significant events in this case may now be briefly described. On 31 May 1985 TAA sought approval from the Minister to acquire twelve 737-300 aircraft. On 7 June 1985 TAA entered into a conditional contract (conditional, that is, in the sense of its being subject to government approval of the purchase) for the acquisition of those aircraft at a total cost of $500m. On 17 June 1985 TAA received Federal Government approval for the purchase of the twelve aircraft and on that date the purchase contract became unconditional.
On 19 June 1985 the Minister certified pursuant to s. 13 of the Equipment Act that in his opinion the obtaining by TAA of the twelve aircraft for gradual introduction into its service from July 1986 to June 1987 would not result in TAA having the use of any aircraft in excess of the aircraft required to provide the capacity determined by the Minister under s. 12 of the Act and would not be detrimental to the stability of the domestic air transport industry provided that on or before the date on which the aircraft are introduced into the service, TAA has disposed of aircraft capacity, if any, in excess of the capacity specified in the determination made under s. 12 in relation to the period during which the aircraft commenced public transport services.
On 28 June 1985 Ansett entered into a conditional contract to purchase twelve 737-300 aircraft. A certificate pursuant to s. 13 of the Equipment Act had been issued by the Minister on 19 June 1985 approving the purchase by Ansett of its twelve aircraft.
On 13 August 1985 the Secretary made a determination pursuant to clause 6(1)(c) of the two airlines agreement, as to the East-West services Sydney/Albury/Melbourne and Melbourne/Devonport/Hobart that he was not satisfied that those services were not predominantly for use for the purpose of carriage of passengers over the separate prescribed routes.
On 13 August 1985 the Secretary determined, as to the East-West services Sydney/Newcastle/Brisbane and Sydney/Yulara/Perth that he was satisfied that those services were not predominantly for use for the purpose of carriage of passengers over the separate prescribed routes and that he was satisfied that those services were to a significant extent used for the purpose of carriage of passengers between the trunk route centres of Sydney and Brisbane and Sydney and Perth.
The Secretary's determination was therefore adverse to East-West with respect to the services Sydney/Yulara/Perth and Sydney/Newcastle/Brisbane. East-West subsequently cancelled its Sydney/Newcastle/Brisbane service but replaced it with a Sydney/Grafton/Brisbane service and it continues to operate the Sydney/Yulara/Perth service.
On 5 November 1985 the Minister made a capacity determination with respect to East-West covering the first part of 1986 and it was granted on the basis that it did not include any of the Queensland routes.
On 31 December 1985 East-West was granted a licence under Reg. 198A, namely, Airline Licence No. 3, to use aircraft "in regular public transport operations" between certain terminals; but the licence did not include the route Brisbane/Cairns or Brisbane/Mackay.
On 30 January 1986 the Commissioner for Transport of the State of Queensland granted a licence to East-West authorising it to provide scheduled passenger and freight air services between certain routes in Queensland.
On 31 January 1986 East-West applied to the Department of Aviation for an amendment to East-West's Commonwealth Airline Licence No. 3 to incorporate certain additional Queensland routes. On 25 February 1986 East-West was granted an amended licence No. 3 which licensed East-West to use aircraft of specified types "in regular public transport operations" between specified places including Brisbane-Cairns (aircraft F28-400) and Brisbane-Mackay (aircraft F28-400). The licence was subject to a number of conditions including a condition that the use of an aircraft on any route other than that specified in the licence required the prior written approval of the Secretary, that the services listed in the licence were to be carried out in accordance with the Air Navigation Act 1920 and the Air Navigation Regulations and, subject to those regulations the licence was to remain in force until 30 September 1986. Under Reg. 200 a licence remains in force for a specified period not exceeding one year but it may be renewed.
On 14 February 1986 the Minister made Capacity Determination No. 53 for Ansett and TAA for the period 16 May to 31 December 1986 pursuant to s. 12 of the Equipment Act. That determination was made without taking into account any operations by East-West on the Queensland routes.
On 26 February 1986 East-West applied to the Minister for Capacity Determination No. 6 on a basis which would include its operation over the Queensland routes.
On 18 March 1986 the Minister informed Ansett and TAA that a capacity determination for East-West pursuant to s. 18 of the Equipment Act was under consideration to cover the period 1 July to 31 December 1986. Ansett and TAA fear that that determination which has not yet been made will, when it is made, include East-West's proposed operations over the Queensland routes and they seek to prevent any capacity determination for East-West taking into account those routes. East-West asserts that, as a result of the permits and licences which it holds it is entitled to commence scheduled passenger air services between the Queensland ports and it commenced to operate the Brisbane-Cairns route in July 1986 with existing aircraft.

Summary of Ansett's and TAA's Case
Ansett and TAA challenge, first, the grant to East-West of the Air Transport Licences in relation to the Queensland air routes; second, the making of a capacity determination for East-West which includes the Queensland air routes; and third, the possibility of the grant of approval to East-West for the importation of the three Boeing 737-300 aircraft in connection with those licences. They maintain that the making of a capacity determination to include the Queensland routes and the granting of import approval strikes at the heart of the spirit and letter of the two airlines agreement and associated legislation. Ansett and TAA assert that, in the event that the Minister makes a determination under s. 18 of the Equipment Act in relation to East-West on a basis that includes within the class of prescribed routes serviced by East-West all or any of the Queensland routes, that determination will have very serious consequences for the two airlines and for the stability of the domestic air transport industry in Australia.
Capacity determinations were made on 14 February 1986 in relation to Ansett and TAA for the period from 1 May 1986 to 31 December 1986 on the basis that during that period none of the Queensland routes would be serviced by East-West. It is said that excess aircraft capacity would arise if the Minister made a determination in favour of East-West for that period as it would proceed on a directly inconsistent basis, namely, that East-West would be operating air passenger services on some or all of the Queensland routes during that period. The result would be a substantial excess capacity in Australia. If East-West then commenced services upon any of the Queensland routes it would presumably take a portion of the traffic on those routes away from TAA and Ansett and, if that occurred, they would be left with excess capacity. If East-West was unable to attract traffic away from the two airlines it would be left with excess aircraft capacity.
Excess aircraft capacity can manifest itself in a number of ways. It can result in surplus or unused aircraft. Alternatively, it can result in each aircraft carrying fewer passengers on each flight; that is, the aircraft suffer a reduced "load factor". If the load factor on particular routes falls to the point where flights are no longer economically viable the operator will either have to reduce the frequency of flights on that route or, in order to protect its market, continue to operate flights on an uneconomic basis. The general level of airfares payable throughout Australia may also be significantly affected by excess aircraft capacity. If East-West is given the capacity to operate on the Queensland routes it would attempt to attract passengers away from Ansett and TAA by charging heavily discounted fares. Any loss of revenue by Ansett or TAA in relation to the Queensland routes would necessitate a review of domestic airfares throughout the domestic trunk route system in Australia. This would occur because the fares charged by Ansett and TAA are fixed on a national network basis by the Independent Air Fares Committee. Excess aircraft capacity would also have adverse industrial ramifications for Ansett and TAA. If they are forced to cut back their services on the Queensland routes it may result in surplus staff and retrenchments or early retirements. Such additional costs would ultimately have an effect on tariffs charged by Ansett and TAA, as would the burden of carrying or disposing of excess equipment.

Import Control
The importation of all aircraft into Australia is prohibited by Reg. 4N of the Customs (Prohibited Imports) Regulations unless a permit is issued by the Secretary to the Department of Aviation. One source of the Commonwealth's power over imports arises under the External Affairs power: The Queen v. Anderson; Ex parte Ipec-Air Pty. Limited (1965) 113 CLR 177, where the High Court upheld the power of the Commonwealth to refuse to issue an import permit and held that such action did not infringe s. 92 of the Constitution. This power enables the Commonwealth to regulate the importation of aircraft on safety and operational grounds and also provides the basis for the control of capacity under the two airlines agreement.

The Equipment Act
In order to exercise control over capacity for Ansett and TAA the Minister is required, by para. 12(1)(a) of the Equipment Act, to estimate in relation to a specified future period the total traffic on competitive and non-competitive routes. Competitive routes are those on which both Ansett and TAA operate passenger air services and are almost exclusively trunk routes. Non-competitive routes are those over which only one of these operators provides passenger services: s. 12 and the definition section, sub-s. 11(1).
The Minister is also required to determine the maximum aircraft capacity needed by each of Ansett and TAA to carry one-half of the estimated total traffic on competitive routes which would not be carried by regional or commuter operators as well as the maximum aircraft capacity required by each of Ansett and TAA for services on non-competitive routes (para. 12(1)(b)).
Ansett and TAA each has the following obligations

to provide no more than the determined capacity (para. 13(a))

to dispose of excess aircraft if the Minister has notified it that he is satisfied that the aircraft owned or used by the airline exceed that which is necessary to provide the determined capacity (para. 13(b))

not to purchase, lease or otherwise obtain the use of aircraft without a certificate from the Minister (para. 13(c))

to furnish to the Minister information requested in respect of traffic (13(d)).

With respect to regional operators the Minister is required to estimate for a specified future period the total traffic to be carried by a regional operator on prescribed routes and determine the maximum aircraft capacity of the aircraft required by the operator for the purposes of operating passenger air services on prescribed routes. The capacity determination process laid down by s. 18 applies to regional operators who acquire or have the use of any turbo jet aircraft having a capacity exceeding 30 passengers or a maximum payload exceeding 3,500 kilograms.
Regional operators have the following obligations:

to provide no more than the determined capacity and to provide passenger services on prescribed routes capable of performing as near as is practicable to the determined capacity (para. 19(1)(a))

to dispose of excess aircraft if the Minister has notified it that he is satisfied that the aircraft owned or operated by the operator exceeds that which is necessary to provide the capacity (para. 19(1)(b))

not to purchase, lease or otherwise obtain the use of any aircraft without a certificate of the Minister (para. 19(1)(c))

not to dispose of aircraft to a person other than Ansett, TAA or Qantas or another acceptable regional or cargo operator (para. 19(1)(d))

to furnish to the Minister information requested in respect of traffic (para. 19(1)(e)).

The Minister is required to make determinations in relation to regional operators within each succeeding period of twelve months after the first such determination (s. 18(6)). The Minister may make an estimate and determination under sub-s. 18(2) in relation to regional operators at any time, but he is required to make an estimate or determination in relation to a regional operator before the expiration of 60 days after (a) the importation by or on behalf of that operator of any aircraft in relation to the importation of which an undertaking has been given by it under sub-s. 16(1) or (b) the acquisition by that regional operator of an aircraft in connection with the acquisition of which an undertaking has been given by it to comply with the obligations applicable in relation to a regional operator to which s. 18 applies: sub-s. 18(5).
The Capacity Determination Process Under the Equipment Act
The principal objectives of capacity control are to match the supply of aircraft capacity with forecast demand for passenger travel, thus avoiding excess capacity the cost of which would ultimately be borne by the travelling public; and to ensure that regional airlines do not have excess capacity available which could be used on trunk routes.
When making a capacity determination in respect of the trunk route operators Ansett and TAA under sub-s. 12(1) of the Equipment Act the Minister is required by sub-s. 12(2) to have regard to the following:

The exercise which the Minister must undertake under para. 12(1)(b) is a practical exercise involving the determination by him of the total traffic in respect of the competitive routes as will not in his opinion be carried over those routes by regional operators or commuter operators.
I now turn to the question what the Minister must consider in making his estimate and determination pursuant to sub-s. 18(2) with respect to para. 18(4)(f), namely, "the necessity for the overhaul and maintenance of aircraft".
The purpose of para. 18(4)(f) is to ensure that in making the estimate and determination under sub-s. 18(2) allowance should be made by the Minister for the necessity for the overhaul and maintenance of aircraft where this is reflected in time spent either on the ground when the aircraft is being overhauled and maintained or in time spent in the air when the aircraft is moving from its place of operations to its maintenance depot.
The problem that arises in this case concerns the Perth/Yulara/Sydney services operated by East-West. East-West asserts that it does not have access to overhaul and maintenance facilities in Western Australia and that it is necessary for its aircraft which have flown to Western Australia on scheduled passenger air services from the east coast to return to East-West's base in New South Wales for overhaul and maintenance. East-West argues that the fact that its aircraft returning from Western Australia to the base in New South Wales operate a passenger service or passenger services over the Perth/Yulara/Sydney run is not to the point. Ansett and TAA maintain, however, that they should be treated as ordinary scheduled passenger air services. As this question arises with reference to prospective estimates and determinations for East-West by the Minister pursuant to sub-s. 18(2) I shall say little about it especially as I was asked by all parties to make no finding as to whether East-West's passenger air services over the Perth/Yulara/Sydney routes are necessary for the purpose of returning the aircraft to their base in New South Wales for maintenance purposes. As at present advised, however, I have a prima facie view that, if the facts are as Ansett and TAA assert them to be, such services would not fall within the paragraph. I make no finding more positive than this because I do not think it right to do so when the Minister has not yet made his estimate and determination and there may be other considerations that will be relevant for him to consider when making this estimate and determination that will bear on this question to which my attention has not been directed. Also, whether the Perth/Yulara/Sydney flights are properly the subject of the Minister's consideration under para. 18(4)(f) or not, they may be within the ambit of para. 18(4)(h) in view of the Secretary's previous determinations under clause 6(1)(c) of the agreement.
The Minister is required by para. 18(4)(h) of the Equipment Act to have regard to the operation of clause 6(1)(c) of the two airlines agreement when he makes his estimate of traffic and his determination of capacity. This requirement involves the Minister having regard to decisions that have been made by the Secretary pursuant to clause 6(1)(c) of the two airlines agreement and still have relevant operation for the purposes of the estimate and determination under sub-s. 18(2). I said earlier that clause 6(1)(c) is concerned with services being provided over successive prescribed routes and not future services that may be provided. The Minister is not required by para. 18(4)(h) either to forecast or predict whether the Secretary will in the future be satisfied about the matters mentioned in clause 6(1)(c); nor is he required to direct the Secretary to make such a forecast or prediction. To hold otherwise would be to strain unduly the language of para. 18(4)(h) and would not be consonant with what I discern as the true construction of the agreement whereby the parties thereto, including the Commonwealth, delegated to the Secretary the task of making the requisite findings under clause 6(1)(c). To ascertain the operation of clause 6(1)(c) for the purposes of para. 18(4)(h) it is necessary that the Minister enquire whether the Secretary (and no one else) has been satisfied of the two elements to which the clause is directed. I reject the argument that the Minister is under a duty to have regard to the matters which clause 6(1)(c) specifically assigns to the Secretary, each time the Minister is called upon to make an estimate or determination under sub-s. 18(2). If this argument were correct it would mean that the Minister would be required to undertake a far reaching, lengthy and exhaustive inquiry into the operation of regional operators over successive prescribed routes throughout Australia each time he is required to make an estimate and determination under sub-s. 18(2). I would be reluctant to reach such an obviously impractical conclusion unless required to do so by the language of s. 18, in particular para. 18(4)(h). In truth, the words of that paragraph point in the opposite direction. Also, the Minister is not required by para. 18(4)(h) to have regard generally to the obligations imposed by clause 6(1)(a) of the Agreement upon the Commonwealth. In my view the proper way for the Minister to have regard to para. 18(4)(h) is to exclude from his estimate of total traffic the total traffic to be carried by the regional operator operating passenger air services on prescribed routes in respect of which the Secretary has been satisfied of the matters referred to in clause 6(1)(c) and to exclude from his determination of capacity the capacity required to carry that traffic over those routes.
Paragraph 18(4)(k) was the subject of considerable debate before me. Under that paragraph the Minister is required to have regard to:

"(k) any other factors affecting the stability of the domestic air transport industry."

I note that the expression "the stability of the domestic air transport industry" appears in both paras. 13(c) and 19(1)(c) of the Equipment Act. The stability of the domestic air transport industry is not an undivided or indivisible whole. It is but the sum of its integral parts. More than merely matters of safety are within the ambit of the paragraph, though they would, of course, be included within it. The paragraph has a wide application and is intended to encompass any matters other than those specified in paras. (a) to (j) of sub-s. 18(4) that affect the stability of the domestic air transport industry and include, for example, matters which may affect the economic stability of that industry. A precarious financial position may affect not only the regional operator itself in its relations with its shareholders and creditors, but have direct relevance to the efficiency and safety with which it conducts its operations and thus affect the travelling public and, therefore, the stability of the domestic air transport industry. That is not to say that the financial instability of any one operator may necessarily require consideration under the paragraph. The position may differ according to the degree of instability, the size of the operator concerned and many other considerations. It is impossible to define with any particularity the matters that may properly fall within the scope of para. 18(4)(k); the circumstances may differ from time to time and cover a very wide spectrum indeed. However, the Minister should not give any narrow interpretation to the paragraph. For instance, if there is material before the Minister to the effect that Ansett or TAA would suffer serious financial hardship if his powers of estimation and determination under sub-s. 18(2) were to be exercised one way rather than another then prima facie as at present advised it seems to me that those considerations would fall within the compass of the paragraph and therefore be matters which the Minister should consider. Constitutional limitations inherent in the Commonwealth's power in the field of civil aviation do not affect in my opinion the wide construction which I place upon para. 18(4)(k) so as to limit or restrict the interpretation to be placed upon it.
The final matter to which I shall refer before leaving s. 18 is whether the obligations of the Minister under that section are to maintain an unbroken sequence of estimates and determinations in force at all times. The making of an estimate and determination pursuant to sub-s. 18(2) establishes a base to which the obligations imposed upon regional operators by s. 19 attach. Some of the obligations applicable to regional operators pursuant to s. 19 depend upon the Minister having made estimates and determinations in relation to a particular period under sub-s. 18(2) and the giving of the requisite notice to the operators under s. 18; but nothing in the Equipment Act calls for any necessary continuity in the operation of estimates and determinations so that there must be one in force at all times with respect to a particular regional operator.
I also reject the argument that clause 9(1) of the two airlines agreement requires the Minister to make a series of unbroken capacity determinations under sub-s. 18(2) with respect to regional operators. I set out earlier the terms of that clause which do not support the argument. Indeed, they do not oblige the Commonwealth to make capacity determinations at all; in essence, they require the Commonwealth through the Minister, to introduce an amendment to the Equipment Act to oblige airlines other than Ansett and TAA which seek to import certain aircraft to enter into an undertaking to comply with that Act before approval to import is given. The provisions of s. 16 of the Equipment Act (inserted by the Airlines Equipment Amendment Act 1981) deal with the undertakings to be given by regional operators in that situation. The concluding words of clause 9(1) of the agreement oblige the Commonwealth to "take all reasonable action within its powers to ensure that an aircraft, the subject of any such undertaking, is not used in a manner contrary to such undertaking".
Under s. 16 the regional operator must undertake to operate its passenger air services "in accordance with the obligations from time to time applicable in relation to the regional operator under section 19". An undertaking under s. 16 does not lapse if there is no capacity determination referable to it. Paragraphs 19(1)(c), (d) and (e) impose obligations which do not require a capacity determination to be in existence for their operation. Hence, one cannot glean from clause 9(1) of the agreement an obligation on the part of the Commonwealth or the Minister to always keep a capacity determination in existence or to make a series of unbroken capacity determinations.

Licences
The arguments of counsel for Ansett and TAA with respect to the licencing issues may be summarised as follows:-
In issuing licences under Regs. 199(3) and (4) of the Air Navigation Regulations the Secretary is required to have regard to matters concerned with the safety, regularity and efficiency of air navigation. The ambit of "matters concerned with the safety, regularity and efficiency of air navigation" is much wider than safety or operational considerations and includes economic considerations bearing upon the safety, regularity and efficiency of air navigation including the stability of the air transport industry. In granting Commonwealth Licence No. 3 to East-West the Minister did not have regard to those matters. The powers conferred upon the Secretary by Regs. 82, 106C, 320A and 320B are discretionary. In exercising any of those discretions it would be erroneous for the Secretary to confine himself to "safety/operational" considerations; he is bound to also have regard to considerations of economic efficiency and to the stability of the domestic air transport industry. The Secretary has not had regard and has failed and refused to have regard to those additional considerations in exercising or in refusing to exercise the powers conferred upon him by the regulations. If the only matters to which the Secretary may have regard under Regs. 199, 82, 106C, 320A and 320B are "safety/operational" matters the Commonwealth was at all relevant times under a duty or obligation to amend the regulations by reason of the provisions of the agreement so as to require the Secretary to have regard to the wider range of matters. Also, the Commonwealth has power under s. 26 of the Air Navigation Act to amend the regulations in so far as they apply to the grant of licences over the Queensland routes and to the operation of passenger air services within Queensland so as to require the Secretary to have regard to all relevant matters including the provisions of the agreement and the purposes and objects of the legislative scheme, and not merely matters concerned with the safety, regularity and efficiency of air navigation. The power of the Commonwealth to exercise those powers with respect to Queensland is plenary because Queensland has referred its powers with respect to intra-state aviation to the Commonwealth Parliament under s. 51(xxxvii) of the Constitution: The Commonwealth Powers (Air Transport) Act 1950 (Qld.). This sufficiently paraphrases the arguments of counsel.
The expression "safety, regularity and efficiency of air navigation" has its genesis in the Convention on International Civil Aviation concluded at Chicago in December 1944 and ratified by the Commonwealth Parliament in 1947 ("the Chicago Convention"). The expression "safety, regularity and efficiency of air navigation" was inserted into the Air Navigation regulations in 1964. The expression has been considered by the High Court on more than one occasion but particularly in Airlines of New South Wales Pty. Limited v. New South Wales (1964) 113 CLR 1 (Airlines Case No 1) and Airlines of New South Wales Pty. Limited v. New South Wales (1965) 113 CLR 54 (Airlines Case No. 2). The language of the regulations, in particular Reg. 199, reflects the constitutional limitations upon the power of the Commonwealth Parliament to legislate in this field. The Constitution includes no reference to aviation, so the Commonwealth's powers in relation to civil aviation are derived from its powers to make laws with respect to other matters including the defence power (s. 51(vi)), the external affairs power (s. 51(xxix)), the trade and commerce power (s. 51(i)), the corporations power (s. 51(xx)), the post and telegraphs power (s. 51(v)), the territories power (s. 122), the power to legislate with respect to places acquired by the Commonwealth for public purposes (s. 52(i)), and the power of the Commonwealth to make laws with respect to matters referred to the Commonwealth by any State (s. 51(xxxvii)). The enactment of federal legislation in the field of civil aviation has occurred, of course, within a constitutional framework that includes s. 92, thus placing significant constraints upon the power of the Commonwealth to apply controls, especially economic regulatory controls, over interstate aviation. Constitutional restraints upon the exercise of Commonwealth power with respect to civil aviation are reflected in the construction which the High Court has given to the words "safety, regularity and efficiency of air navigation" in Reg. 199(4). Those words in that regulation refer

"not to the efficiency and regularity with which an airline operator conducts the commercial aspects of his business generally . . . But the manner in which the applicant carries out these business operations will in some respects closely affect the efficiency and regularity of air navigation, a word which is not defined but clearly includes commercial air transport. The word "regularity" has, it seems to me, in this context the sense of "propriety" - conforming to standards, regular because conforming: such standards including punctuality of operation and the meeting of schedules, an aspect of its meaning which is clearly significant in relation to the safety of air navigation . . ." per Barwick C.J. in the Airlines Case No. 2 at p. 90.

Although the judgments of the High Court, in particular in the Airlines Case No. 2, give a wide meaning to the expression "safety, regularity and efficiency of air navigation" the power is nevertheless circumscribed in that it must fall within the concept of air navigation and not, for example, the air transport industry generally in all its aspects and with its many ramifications. It is important to remember that the Secretary's powers under Reg. 199 require him to have regard to matters concerned with the safety, regularity and efficiency of air navigation and to no other matters. Air navigation is central to and is the subject matter of the exercise of the Secretary's powers.
In so far as the challenge of Ansett and TAA to the grant of the Queensland licences by the Secretary under Reg. 199 is based upon the proposition that he took too narrow a view of the subject matter to which Reg. 199 is directed, it fails. It is true that the Secretary did not have regard to questions concerning the balancing of supply and demand within the airline industry or questions of economic efficiency of the industry generally; but nothing has emerged in this case which satisfies me that the Secretary failed to have regard to matters falling within the scope of the words "safety, regularity and efficiency of air navigation and to no other matters" within the meaning of Reg. 199(4) in the sense in which those words have been construed by the High Court in the cases including the two Airlines Cases.
The submissions with respect to Regs. 82, 106C, 320A and 320B may be briefly dealt with. Those regulations provide as follows:

"82.(1) The Minister may -

(a) establish, provide, maintain and operate aerodromes and air route and airway facilities;

(b) alter, abolish, remove or add to any aerodrome, air route or airway facilities so established or provided; and

(c) vary the character of any air route or airway facilities so established or provided, or of the signals or assistance given thereby.

(2) Aerodromes and air route and airway facilities established or provided in pursuance of this regulation shall be under the control and management of the Secretary who may, subject to these Regulations, determine the conditions of the use thereof.

(3) The Minister may determine whether any aerodrome established in pursuance of this regulation shall be open to public use.

. . .

106C.(1) An airline shall not operate, or advertise that it will operate, a regular public transport service except in accordance with an approved timetable setting out, in relation to that service, the time of departure from, and arrival at, each terminal and each intermediate stopping place (if any) on the route of the service.

(2) An airline shall not commence a new regular public transport service or alter the time-table of, or the intermediate stopping places on the route of, a regular public transport service, unless it has submitted the proposed time-table for the service to the Secretary, in a form approved by him, at least one month before the date on which it intends to operate the new or altered service or within such shorter period as the Secretary allows.

(3) A time-table shall be deemed to be an approved time-table for the purposes of this regulation if the time-table has been submitted to the Secretary in accordance with the last preceding sub-regulation and the Secretary has not notified the airline that he disapproves the time-table within one month after the date on which the time-table was submitted to the Secretary.

(4) The Secretary shall not notify an airline that he disapproves a proposed time-table for an interstate regular public transport service unless he considers that the proposed time-table should not be approved in the interests of safety.

(5) In sub-regulation (4), a reference to an interstate regular public transport service includes a reference to a regular public transport service between a State and the Norther Territory.

. . .

320A. (1) On and after such date as is fixed by the Minister for the purposes of this regulation by notice in the Gazette, an aircraft shall not land at or take-off from any place, being a place acquired by the Commonwealth for public purposes, except under the authority of, and in accordance with, a permit issued under this regulation by the Secretary.

(2) The application of the last preceding sub-regulation is not limited by the operation of sub-regulation (1) of regulation 6 of these Regulations.

320B. On and after such date as is fixed by the Minister for the purposes of this regulation by notice in the Gazette, an aircraft shall not be flown in controlled airspace in the course of air navigation of a kind specified in paragraph (e) of sub-regulation (1) of regulation 6 of these Regulations except under the authority of, and in accordance with, a permit issued under this regulation by the Secretary.

In my opinion those regulations do not permit the Secretary or the Minister, as the case may be, to have regard, for example, to considerations as broad as the policy embodied in the two airlines agreement or questions generally affecting the economic efficiency of the civil aviation industry. They are concerned with air navigation and not the regulation of the domestic air transport industry generally.
The foundation of the submission that the Commonwealth or its officers are bound to take action to amend the Air Navigation Act or the Air Navigation Regulations or bound to take action pursuant to the regulations in relation to operations on particular prescribed routes so as to ensure that there are only two operators which provide services over trunk routes within Australia must be that at the time it is said that the action should be taken the obligation imposed by clause 6(1)(a) of the agreement has not been qualified by clause 6(1)(b) in respect of those routes. There is nothing on the material before me which would lead me to conclude, based on the construction which I have placed upon clause 6 that, if there be any such obligation imposed upon the Commonwealth by clause 6 of the Agreement, the occasion has arisen for its exercise. I need not say anything about the contention of counsel for the Commonwealth that the actions which Ansett and TAA assert should be taken by the Commonwealth or its officers pursuant to the regulations would be invalid as being in furtherance of an improper or impermissible purpose and outside the powers conferred by the regulations.
Finally, on this aspect of the case I shall say something about the submissions that were directed to the scope of the regulation making power conferred upon the Governor-General by s. 26 of the Air Navigation Act. It was said that the power to make regulations would include power to make regulations with respect to matters going beyond air navigation and would encompass regulations with respect to the economic efficiency of the commercial airline industry generally and to its stability and to questions of the balancing of supply and demand within the airline industry. The views which I am about to express are prima facie only. I have not reached any firm conclusion about these questions, but I should in all the circumstances say something about the submission. The regulation making power must be read in the light of the constitutional constraints imposed upon the Commonwealth to which I have already made brief reference. The power to make regulations conferred by the five paragraphs of sub-section 26(1) is limited by the language of those paragraphs and in three of the five cases (paras. (c), (d) and (e)) is specifically limited to matters in relation to air navigation. In para. (b) the power is to make regulations to carry out and give effect to the Chicago Convention which again is concerned with air navigation. The power conferred by para. (a), which empowers regulations to be made prescribing all matters which by the Act are required or permitted to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Air Navigation Act, takes the matter no further than to confine the power to matters concerned with air navigation. As at present advised it is my view that none of those powers would enable regulations to be made of the kind contended for by Ansett and TAA. It was contended that sub-s. 26(2) of the Air Navigation Act would widen the regulation making powers conferred by sub-s. 26(1), in particular paras. 26(2)(d) and (e) which relate to regulations for or in relation to:

"(d) controlling the provision for reward of air transport within a Territory or to or from a Territory; and

(e) the establishment, maintenance operation and use of aerodromes and air route and airway facilities and the licencing of aerodromes other than aerodromes maintained by the Commonwealth."

As at present advised, in my view, these powers do not enlarge the regulation making powers granted by sub-s. 26(1); they simply identify particular subjects in respect of which those powers may be exercised. The introductory words of sub-s. 26(2) are critical: "without limiting the generality of the preceding powers of this section, the regulations that may be made under the powers conferred by those provisions include regulations for or in relation to . . ."
Even if the Commonwealth's powers with respect to air navigation in the State of Queensland are plenary, as was submitted by counsel for Ansett and TAA, it does not advance their case because that circumstance would make no difference to the construction of the language of the relevant regulations, in particular Reg. 199(4). It may be relevant to the question of the nature and scope of the duty of the Commonwealth, if there be one, to enact legislation or make regulations to give effect to what was described as the primary operation of clause 6(1)(a) of the agreement, but that is a question about which it is not necessary for me to say anything as the occasion for the exercise of any such power, if the power exists at all, has not arisen.
I pass then to East-West's challenge to the validity of Capacity Determination No. 53 made with respect to Ansett and TAA in February 1986. That challenge is based on the assumption that the following facts have been established:

(a) the Queensland routes are competitive routes as both Ansett and TAA provide services over them;

(b) the Minister was aware from late January 1986 that East-West proposed to provide services over the routes commencing during 1986 and that a Commonwealth licence was likely to be granted subject to safety and operational considerations;

(c) East-West made application for the Commonwealth licences by letter dated 31 January 1986;

(d) when making Capacity Determination No. 53 on 14 February 1986 the Minister made no allowance or deduction in respect of possible traffic carried by East-West from the traffic which he estimated Ansett and TAA would carry on the Queensland routes;

(e) Capacity Determination No. 53 applies to a period (May - December 1986) in which it was likely that East-West would carry traffic over the Queensland routes and this has in fact occurred.

It was submitted that in those circumstances, by failing to form an opinion as to the traffic which would be carried by East-West over the Queensland routes, the Minister failed to discharge the statutory duty imposed by sub-para. 12(1)(b)(i) of the Equipment Act and his decision was either void as being beyond power or should be quashed by the Court.
It was conceded by East-West that at the time of making the determination the Minister did not have details of the level of services to be offered by East-West over the Queensland routes; but it was submitted that he was under no time constraints to make the determination and that a relatively long period had elapsed since the expiration of Capacity Determination No. 52 on 30 June 1985, namely, a gap of some ten months. It was submitted that in these circumstances the Minister was at least obliged to cause enquiries to be made of East-West before making Capacity Determination No. 53 for the purpose of forming the opinion required by sub-para. 12(1)(b)(i) of the Equipment Act. It was submitted that in fact all necessary details were furnished to him by East-West on 26 February 1986 shortly after the capacity determination was made. It was submitted that there is no reason why the Court should exercise its discretion to refuse relief to East-West. The consequence of the granting of declaratory relief would simply be to enable the Minister to make a fresh determination for the two major airlines simultaneously with the determination which he will make for East-West in the light of the principles enunciated by this Court. It was submitted that this is manifestly convenient as it will produce consistency. The importation of aircraft by the two major airlines is most unlikely to be affected as the only aircraft likely to be affected by the slight reduction in capacity is the last of the new B737-300 aircraft for each of the two major airlines not due for introduction until 1987. It was submitted that in any event there is no reason why the purchase of new aircraft should be affected; the two major airlines could comply with the condition imposed by the acquisition certificate by disposing of one old aircraft earlier than anticipated or, in the case of Ansett, deploying it off-shore. The two major airlines have always been aware of the prospect of having to dispose of aircraft as a condition of the acquisition. They must accept the consequences of having pressed for an acquisition certificate in advance of a capacity determination in order to secure the requisite investment allowance. This sufficiently summarises East-West's submissions.
It is true that there was a gap of some ten months between the making of Capacity Determinations No. 52 and 53 and that Ansett and TAA appeared to press for their acquisition certificates in advance of capacity determinations in order to secure the investment allowance which was then available under the Income Tax Assessment Act 1936 and they recognised that this had to be done before the end of the financial year ended 30 June 1985.
In my opinion the Minister did not fail to discharge any of the obligations imposed upon him by para. 12(1)(b) when making Capacity Determination No. 53. In particular, it has not been established that the Minister failed to establish the requisite opinion which he is required to form by sub-para. 12(1)(b)(i) of the Equipment Act. When Capacity Determination No. 53 was made on 14 February 1986 the Minister had no clear or firm details of East-West's proposals with respect to its Queensland air services available to him including details of frequencies, timetables etc.. He had no knowledge of the details of services proposed by East-West pursuant to the Commonwealth licences because East-West's submission to him did not come before the Department until 26 February 1986. The Minister would not have known on 14 February whether East-West would be granted additional capacity to provide services over the Queensland routes. The Minister recognised that any proposed operations by East-West on the Queensland routes would be likely to have a material effect on capacity determinations for the period after 31 December 1986 and he recognised also that there was insufficient information available to him at that stage (i.e. when making Capacity Determination No. 53) to predict fleet requirements. He could not form an opinion on 14 February in relation to traffic to be carried by East-West during the currency of Capacity Determination No. 53 because he did not know whether East-West would obtain additional aircraft from importation as that would have required a decision by the Secretary pursuant to Reg. 4N. The Minister was not called upon to form and could not form an opinion in respect of any proposed East-West additional services during the currency of Capacity Determination No. 53; so in forming an opinion for the purposes of sub-para. 12(1)(b)(i) the Minister excluded those services and in my opinion, correctly so. I reject the submission that the Minister, when making Capacity Determination No. 53, failed to discharge the duty imposed upon him by sub-para. 12(1)(b)(i) of the Equipment Act so the attack on Capacity Determination No. 53 fails.
In the result Ansett and TAA's challenge to the Commonwealth licence granted to East-West on 25 February 1986 in respect of the Queensland routes fails. The challenge by East-West to Capacity Determination No. 53 also fails. I have in the course of my reasons at the request of the parties, mentioned certain matters which I hope may guide the Minister when considering in future any capacity determination in relation to East-West.
I shall make no orders today, but shall stand the matter over to 23 September 1986 in Melbourne so that the parties may bring in short minutes to give effect to my reasons for judgment. I shall then hear argument on any remaining questions including costs.

[1986] FCA 399

15 SEPTEMBER 1986