Ansett Transport Industries Ltd v Minister for Aviation

[1987] FCA 258

Re: ANSETT TRANSPORT INDUSTRIES and AUSTRALIAN NATIONAL AIRLINES COMMISSION
And: PETER FREDERICK MORRIS; EAST-WEST AIRLINES (OPERATIONS) LIMITED and
AUSTRALIAN NATIONAL AIRLINES COMMISSION
Nos. G584, G585 and VG429 of 1986
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.

CATCHWORDS

Administrative Law - Airlines Equipment Act 1958 - decisions of the Minister of State for Aviation regarding traffic estimates and capacity determinations thereunder - whether decisions vitiated on grounds under the Administrative Decisions (Judicial Review) Act 1977 - whether the decisions were an improper exercise of power - applicability and scope of rules of natural justice.

Administrative Decisions (Judicial Review) Act 1977

Airlines Agreement Act 1981: Schedule

Airlines Equipment Act 1958: ss. 11, 12, 13, 14, 18, 19 and 20.

HEARING

SYDNEY

#DATE 20:5:1987

Counsel and Solicitors for Ansett Transport Industries Ltd.: T.E.F. Hughes Q.C. and J.D. Merralls Q.C. with N.J. Young and J.G. Santamaria instructed by Messrs. Arthur Robinson & Hedderwicks.

Counsel and Solicitors for Australian National Airlines Commission: J.I. Fajgenbaum Q.C. with D. Beach instructed by Messrs. Phillips Fox.

Counsel and Solicitor for Peter Frederick Morris: D. Graham Q.C. with R. Robson instructed by the Australian Government Solicitor.

Counsel and Solicitors for East-West Airlines (Operations) Limited: R.A. Conti Q.C. with M. Martin instructed by Messrs. Sly & Russell.

ORDER

Applications No. G584/1986, G585/1986 and VG429/1986 be dismissed.

In application G584/1986 Ansett Transport Industries Limited pay the costs of the Minister, Peter Frederick Morris, and of East-West Airlines (Operations) Limited. Otherwise no order as to costs.

In application G585/1986 Ansett Transport Industries Limited and Australian National Airlines Commission pay the costs of the Minister, Peter Frederick Morris, and of East-West Airlines (Operations) Limited.

In application VG429/1986 Australian National Airlines Commission pay the costs of the Minister, Peter Frederick Morris, and of East-West Airlines (Operations) Limited.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

1. INTRODUCTION

Ansett Transport Industries Limited ("Ansett"), Australian National Airlines Commission ("Australian Airlines") and East-West Airlines (Operations) Limited ("East-West") are engaged in a battle for control of air routes in Australia. The present dispute is centred on estimates of air traffic and capacity determinations with respect to key routes made by the Minister for Aviation on 3 November 1986 and the issue of certificates for the acquisition of new jet aircraft. This is part of the machinery provided by Commonwealth legislation for controlling the total capacity of the two major airlines by ensuring that neither of them has available for deployment on competitive routes more aircraft capacity than the other; by controlling the capacity of regional operators and ensuring that no regional operator deploys more aircraft capacity than has been determined for it; and by giving effect to the provisions of the agreement authorised by The Airlines Agreement Act 1980 which is generally known as the Two Airlines Agreement.

1. Last year the battle revolved round what were then prospective decisions of the Minister or the Secretary of the Department of Aviation relating to estimates of traffic, capacity determinations and the grant of acquisition certificates with respect to the two major airlines and East-West. The battleground has now moved to two capacity determinations made on 3 November 1986. On that day the Minister determined, pursuant to s. 12 of the Airlines Equipment Act 1958 ("the Equipment Act"), his estimate of the total passenger traffic that would be carried by Ansett and Australian Airlines, excluding that which would in his opinion be carried by regional or commuter operators, between 1 February 1987 and 30 June 1987. On the same day the Minister also determined the maximum aircraft capacity of the aircraft required by Ansett and Australian Airlines for the purpose of carrying one-half each of the total estimated passenger traffic in respect of competitive routes as would not, in the Minister's opinion, be carried by regional operators or commuter operators. The estimate and capacity determination made with respect to Ansett and Australian Airlines is capacity determination No. 54.

2. Also on 3 November 1986 the Minister estimated the total traffic that would be carried by East-West between 1 February 1987 and 30 June 1987 on all prescribed routes and determined the maximum aircraft capacity of the aircraft required by East-West for the purpose of operating passenger air services on prescribed routes during the same period. The traffic estimate and capacity determination with respect to East-West made on 3 November 1986 is capacity determination No. 6.

3. On 1 December 1986 the Minister decided, pursuant to s. 19 of the Equipment Act, to certify that in his opinion the obtaining of one Boeing 737-200 aircraft to be introduced during March 1987 for use by East-West over prescribed routes would not result in East-West having excess aircraft capacity and would not be detrimental to the domestic air transport industry.

4. Ansett commenced proceeding G 584/1986 in this Court under the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act") for review of the decisions of the Minister made on 3 November 1986 under sub-s. 12(1) of the Equipment Act with respect to the estimate of traffic and capacity determination No. 54; the respondents to that proceeding initially being the Minister and East-West. Later, Australian Airlines was added as a respondent at the request of the Minister and by consent for the purpose of ensuring that it was bound by this Court's judgment.

5. Ansett and Australian Airlines commenced proceeding G585/1986 in this Court under the Judicial Review Act to review the decisions of the Minister made on 3 November 1986 under sub-s. 18(2) of the Equipment Act with respect to the estimate of traffic and capacity determination No. 6; the respondents to that proceeding also being the Minister and East-West. Application G585/1986 also seeks to review certain conduct said to have been engaged in by the Minister for the purposes of making the estimate and capacity determination No. 6.

6. VG 429/1986 is also an application under the Judicial Review Act by Australian Airlines to review the Minister's decision of 3 November 1986 relating to capacity determination No. 54. The respondents to that proceeding are the Minister and East-West.

7. All three proceedings were heard together by consent.
   
   2. HISTORY AND STATUTORY PROVISIONS
   
   

8. So that the issues may be understood it is necessary to say something about the legislative framework in which estimates of traffic and capacity determinations are made by the Minister and the place which those processes have in the Commonwealth scheme for the regulation of the air transport industry. I dealt with this fully in reasons for judgment given by me on 15 September 1986 in earlier litigation between the parties (proceedings VG 61, VG65, VG94, VG101, VG195 and VG 204, all of 1986). I need not refer to those matters to the same extent as I then did; but I shall state briefly the more important points which are relevant for present purposes.

9. The two airlines policy has existed for more than forty years in this country and 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 the Federal Parliament and agreements ratified by it including the Two Airlines Agreement itself.

10. Following a review in 1977 of Australia's domestic air transport policy an agreement was negotiated which was executed on 28 May 1981 and approved by the Airlines Agreement Act 1981. This contains the current Two Airlines Agreement. It was preceded by agreements made in 1952, 1957, 1961, 1972 and 1973. 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 by the Commonwealth pursuant to clause 22 of the agreement. The Two Airlines Agreement relates to air passenger services. Freight which had been included in prior agreements was removed in 1981 from the ambit of the Two Airlines Agreement.

11. The current arrangements by which the Federal Government regulates domestic airlines are constituted by the Airlines Agreement Act 1981, the Independent Airfares Committee Act 1981, the Equipment Act, the Customs (Prohibited Imports) Regulations and the Two Airlines Agreement itself. To these must be added, in a more general sense, the Air Navigation Act 1920 and the Air Navigation Regulations.

12. The Equipment Act 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 Australian Airlines, Ansett and Qantas, may acquire jet aircraft subject to the operators undertaking to comply with the obligations set out in the Equipment Act. The obligations of regional operators include obligations not to provide aircraft capacity in excess of that determined under the Equipment 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.

13. 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 Australian Airlines and Ansett. "Prescribed route" is defined by sub-s. 11(1) as:
    
    

"(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 paragraph (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);"

1. 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.

2. Sections 12, 13, 18 and 19 are important sections for present purposes. They provide 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 servies 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."

"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:-

(a) where the Minister has made a determination under the last preceding section in relation to a period - an obligation not to provide, on competitive routes, during that period, air services capable of performing a number of revenue passenger kilometres in excess of the aircraft capacity specified in respect of the competitive routes in the notice under sub-section (3) of the last preceding section;

(b) where, at any time during a period in relation to which the Minister has made a determination under the last preceding section, the Minister -

(i) notifies the Commission or Ansett Transport Industries Limited that he is satisfied that the aircraft owned, operated, or otherwise available for use, by the Commission or the Company, as the case may require, exceed the aircraft required to provide, in that period, the aircraft capacity determined in relation to the Commission or the Company, as the case may be;

(ii) directs the disposal of aircraft to a specified extent (being the extent which the Minister considers necessary to eliminate the excess),

an obligation to comply with the direction within the time specified by the Minister;

(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; and

(d) an obligation to furnish to the Minister, within such times as the Minister specifies, such information in respect of traffic as the Minister requires."

"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."

"19.(1) The obligations that are, from time to time, applicable in relation to each regional operator to which section 18 applies are the following:

(a) where the Minister has, under sub-section 18(7), given notice to that regional operator of the terms of an estimate and determination in relation to a period -

(i) an obligation not to provide, during that period, passenger air services capable of performing a number of revenue passenger kilometres in excess of the aircraft capacity specified in that determination; and

(ii) an obligation to provide, during that period, passenger air services on prescribed routes capable of performing a number of revenue passenger kilometres that is as near as is practicable to the aircraft capacity specified in that determination;

(b) where, at any time during a period in relation to which the Minister has made a determination under sub-section 18(2) in relation to that regional operator, the Minister - (i) notifies the regional operator that he

is satisfied that the aircraft owned, operated, or otherwise available for use, by the regional operator exceed the aircraft required to provide, in that period, the aircraft capacity determined in relation to the regional operator; and

(ii) directs the regional operator to dispose, within the time specified by the Minister, of aircraft to the extent that the Minister considers necessary to eliminate the excess,

an obligation to comply with the direction within the time specified by the Minister in a manner that does not involve a contravention by that regional operator of the obligation set out in paragraph (d);

(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 regional operator having the use of any aircraft in excess of the aircraft required to provide the aircraft capacity determined from time to time under sub-section 18(2) in relation to that regional operator, 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 regional operator or in respect of which a certificate under this paragraph has been or is proposed to be issued, be detrimental to the stability of the domestic air transport industry;

(d) an obligation not to dispose of an imported aircraft to a person other than -

(i) the Commission, the Company or Qantas Airways Limited;

(ii) a person who gives to the Minister, before the acquisition of the aircraft by that person, an undertaking in the form approved by the Minister not to use the aircraft in Australia;

(iii) a regional operator who gives to the Minister, before the acquisition of the aircraft by that regional operator, an undertaking in the form approved by the Minister to comply with the obligations applicable in relation to a regional operator to which section 18 applies; or

(iv) a cargo operator who gives to the Minister, before the acquisition of the aircraft by that cargo operator, an undertaking in the form approved by the Minister to comply with the obligations applicable in relation to a cargo operator to which section 21 applies; and

(e) an obligation to furnish to the Minister, within such times as the Minister specifies, such information in respect of traffic as the Minister requires.

(2) In this section, 'imported aircraft' means an aircraft in relation to the importation of which a person has given an undertaking in accordance with section 16 and 17.

(3) A reference in sub-section (1) to prescribed routes, in relation to a regional operator, 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."

1. The Two Airlines Agreement of 1981 contains clause 6 which is material for present purposes. 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)."

1. Before turning to the issues in the present case I sound a cautionary note. The decisions of the Minister are challenged by Ansett and Australian Airlines under the Judicial Review Act. This is a vehicle which Parliament has provided for litigants to challenge decisions of an administrative character made under Commonwealth enactments. It is important that this Court, when determining cases of this kind, namely, administrative decisions that are susceptible to review by error of law or any other defect under the Judicial Review Act, does not enter the field of administrative decision-making to the point where it reviews the exercise of discretions by administrators, and does not yield to the temptation, not infrequently offered by parties, of substituting its discretions for those of the decision-makers. What is essentially an administrative process entrusted by Parliament to Ministers, Secretaries and officers of Departments of State must not be rendered nugatory or unduly impeded or stultified by the very number and frequency of applications to this Court so that Ministers, Heads of Departments and other administrators do not know which way to turn for fear of curial challenge.

2. On the one hand there cannot be unfettered bureaucratic control of important decisions which vitally affect the rights of citizens which in this case are the rights of airline operators and the travelling public. On the other hand, the administrative process must not become a quagmire of judicial intervention. The oft repeated injunction that courts must not usurp the Executive's function of decision-making should be kept steadfastly in mind. This Court's task is to examine decisions of an administrative character and determine if they have been made according to law or are in contravention of the principles of natural justice; but not to enquire if some other decision is preferable on the merits.
   
   3. THE PROCEEDINGS
   
   

3. I turn now to the three matters before the Court. Applications G584/1986 and G585/1986 are lengthy documents and set out in considerable detail the grounds of challenge to the decisions of the Minister with respect to capacity determinations No. 54 (G584/1986) and No. 6 (G585/1986). It is convenient to defer mentioning the specific grounds of challenge to the Minister's decisions until I come to them later when considering the submissions of counsel.

4. Ansett and Australian Airlines seek orders quashing the decisions of the Minister to make the traffic estimate and capacity determination No. 54; quashing the decision of the Minister to make the traffic estimate and capacity determination No. 6; quashing the decision of the Minister to make what is described in application G585/1986 as the "certificate decision"; and an order directing East-West to refrain from obtaining or importing into Australia any Boeing 737-200 aircraft in reliance upon or pursuant to the "certificate decision".
   
   4. FACTS
   
   

5. The evidence in these matters was primarily documentary; but it also included evidence of witnesses by affidavit and oral evidence. There is some conflict of evidence, but most of the significant matters were not seriously in dispute. Much of the evidence is protected from public disclosure by confidentiality orders which I made during the course of the hearing.

6. On 3 November 1986 the Minister, pursuant to s. 12 of the Equipment Act, made and gave notice of an estimate of traffic and determination of capacity for the period from 1 February 1987 to 30 June 1987 in relation to Ansett, being capacity determination No. 54. In that capacity determination the Minister estimated the total passenger traffic (excluding that which would, in his opinion, be carried by regional or commuter operators) on:
   
   (i) all competitive routes to be 4,036.917 million passenger
   

kilometres;

(ii) the non-competitive routes of Australian Airlines to be

51.522 million passenger kilometres; and

(iii) the non-competitive routes of Ansett to be 330.974 million

passenger kilometres.

The Minister determined that the maximum aircraft capacity of the aircraft required by Australian Airlines:

(i) for the purpose of carrying one-half of the total estimated

passenger traffic in respect of competitive routes as would not in his opinion be carried by regional operators or commuter operators to be 2,703.767 million available seat kilometres of aircraft capacity provided by passenger service aircraft; and

(ii) for the purpose of operating its services on non-competitive

routes to be 92.046 million available passenger kilometres.

1. The Minister determined that the maximum capacity of the aircraft required by Ansett:
   
   (i) for the purpose of carrying one-half of the total estimated
   

passenger traffic in respect of competitive routes as would not in his opinion be carried by regional operators or commuter operators to be 2,703.767 million of available seat kilometres of aircraft capacity provided by passenger service aircraft; and

(ii) for the purpose of operating its services over

non-competitive routes to be 542.786 million available passenger seat kilometres.

1. On 1 December 1986 the Minister, pursuant to s. 13 of the Judicial Review Act, provided to Ansett a statement of his reasons for decision with respect to capacity determination No. 54.

2. The section 13 statement states that the evidence and other material on which the Minister's findings were based involved certain findings of fact which were in turn based on a submission titled "COMMERCIAL-IN-CONFIDENCE" prepared within the Department of Aviation for the Minister's consideration and signed by the First Assistant Secretary, Domestic Policy Division. The submission itself consisted of a minute dated 31 October 1986 and a series of attachments labelled A to M. Those attachments include departmental minutes - some titled "LEGAL-IN-CONFIDENCE" - from the Secretary to the Minister concerning aspects of the capacity determination process; correspondence between the Department and the three airlines; documents described as "revised information requirements" from the airlines; extracts from papers prepared within the Domestic Policy Division of the Department; decisions of Arbitrators in earlier matters; papers prepared within the Domestic Policy Division of the Department; file notes and other documents. The material used in the preparation of the submission of 31 October 1986 included submissions prepared by Australian Airlines and by Ansett for the capacity determination; airline timetables; a submission for capacity determination No. 6 provided by East-West; affidavits filed in proceedings in this Court in other matters; reports from State Departments of Tourism; Department of Aviation weekly management reports; various statistics; departmental analyses; and historical data.

3. Capacity determination No. 6 was made by the Minister on 3 November 1986 for the period 1 February to 30 June 1987 in which he gave notice estimating the total traffic on all prescribed routes to be 290.679 million passenger kilometres and determining that the maximum aircraft capacity of the aircraft required by East-West for the purpose of operating passenger air services on prescribed routes to be 424.349 million passenger kilometres.

1. The section 13 statement with respect to capacity determination No. 6 shows that the Minister based his findings upon various departmental submissions and refers to similar material to that to which I referred earlier in relation to capacity determination No. 54.
   
   5. SUBMISSIONS AND FINDINGS
   
   

2. In the light of the statutory background and the facts, I turn now to the submissions of the parties. It is convenient to deal with them under the particular headings which counsel themselves adopted. I shall turn first to the submissions challenging the decisions of the Minister based on grounds other than denial of natural justice and then to the submissions asserting denial of natural justice. Most of the submissions on behalf of the applicants were made by counsel for Ansett. Counsel for Australian Airlines, whilst addressing separately where the interests of the two major airlines did not coincide, adopted the submissions of counsel for Ansett and supplemented them where necessary. The interests of Ansett and Australian Airlines in these proceedings are largely identical.
   
   5.1 SUBMISSIONS ON GROUNDS OTHER THAN DENIAL OF NATURAL JUSTICE
   
   5.1.1 Failure to Estimate Total Traffic on Competitive Routes
   
   

3. Sub-paragraph 12(1)(a)(i) requires the Minister, from time to time, in relation to a specified future period, to estimate the total traffic on each of the competitive routes. Sub-paragraph 12(1)(b)(i) requires the Minister to determine the maximum aircraft capacity of the aircraft required by the Australian Airlines and Ansett respectively for the purposes of carrying one-half of so much of the total traffic estimated by the Minister in respect of the competitive routes as will not in his opinion be carried by regional operators or commuter operators.

4. It was submitted by counsel for Ansett that the Minister failed to carry out the task required of him by sub-para. 12(1)(a)(i) and sub-para. 12(1)(b)(i) of the Equipment Act.

5. The argument depends on the correct application of those two sub-paragraphs and para. 12(2)(a) of the Equipment Act. Paragraph 12(2)(a) provides that for the purposes of s. 12 the Minister shall have regard to rates of traffic increase.

6. It was submitted that, in making capacity determination No. 54, the Minister failed to estimate the total traffic on each competitive route and estimated only the total traffic that would be carried on all competitive routes by Ansett and Australian Airlines. Having failed to make an estimate of total traffic on each of the competitive routes, he did not form an opinion, for the purposes of para. 12(1)(b), of the portion of the total estimated traffic that would be carried by East-West as a regional operator. Hence, the determination wrongly represented that the Minister formed the opinion required by sub-para. 12(1)(b)(i). A related submission was that, after estimating the total traffic on the competitive routes Sydney/Coolangatta and Brisbane/Cairns the Minister used that estimate to adjust the separate estimates for Ansett and Australian Airlines on these two routes; but did not, even for these routes, estimate the total market and deduct an estimate for East-West's traffic.

7. It was also submitted that the Minister did not apply a uniform growth rate for the total market on each or all of the competitive routes. For example, in the case of the route Sydney/Coolangatta he applied a market growth rate of 5.915% in estimating Ansett's and Australian Airlines' traffic, whereas in capacity determination No. 6 he applied a growth rate of 12.2% for the same route in estimating East-West's traffic. It was submitted that the Minister should have estimated a rate of growth for the total traffic on that route as it was a competitive route and should have done likewise for all competitive routes. A consequence of the Minister's approach was said to be that he underestimated Ansett's and Australian Airlines' traffic on the Sydney/Coolangatta and other competitive routes (e.g. Brisbane/Cairns and Sydney/Canberra). It was said that one cannot be satisfied that the Minister's failure to do the task set for him by sub-para. 12(1)(a)(i) of the Equipment Act made no material difference to the result which he achieved.

8. It was submitted that, if the Minister erroneously under-estimated Ansett's and Australian Airlines' traffic or over-estimated East-West's traffic on the competitive routes, this error would carry through to the capacity determination and hence set a limit on the traffic achievable during the determination period. The next determination may take as its base the traffic, so limited, achieved during the determination period and the initial error will be compounded. Although it was conceded that the Minister may have taken a practical approach in acting as he did, it was submitted that it was not in accordance with law and should lead to the quashing of capacity determination No. 54.

9. This attack is confined to the validity of capacity determination No. 54. It was not submitted that capacity determination No. 6 was similarly vitiated.

10. Neither Ansett nor Australian Airlines provided the Minister with its estimate of total traffic on each competitive route. They supplied the information to him on different bases. He did have before him, however, estimates of through traffic for Ansett and Australian Airlines. At the time of making capacity determination No. 54 the Minister had before him East-West's estimate of the through traffic it would be carrying on competitive routes and those estimates excluded sector traffic. The Minister also had before him East-West's combined through and sector traffic.

11. East-West is the only regional operator independent of the two major airlines. It was not suggested that the Minister had before him any details of commuter traffic, but it was common ground that any such traffic would be de minimis.

12. The evidence establishes to my satisfaction that the Minister took account of Ansett's and Australian Airlines' traffic on competitive routes for all practical purposes contemporaneously with his consideration of traffic estimates for East-West. It is important to note what the Minister had before him when making capacity determination No. 54 and it will be remembered that he made that determination on the same day as he made capacity determination No. 6 (3 November 1986), the former pursuant to s. 12 and the latter pursuant to s. 18 of the Equipment Act. Much of the material before the Minister on or about 3 November was common to each determination. He had, for example, East-West's own traffic estimates as well as the traffic estimates of the two major airlines. Although the making of each traffic estimate and capacity determination was technically an independent exercise, it would be unreal to say that the Minister did not have before him all relevant material.

13. I am satisfied that the Minister carried out the task required by sub-para. 12(1)(a)(i). I make this finding on the basis, which was common ground, that the terms of that sub-paragraph require the Minister to estimate total traffic on each of the competitive routes and not on the competitive routes treated globally. The Minister is undertaking what is essentially a practical exercise when making estimates of traffic and capacity determinations under s. 12 and s. 18. One must apply a sensible and balanced analysis of the evidence in concluding whether the Minister has complied with the duties imposed upon him by s. 12. Although there is some support on the face of capacity determination No. 54 itself for the conclusion that the Minister did not estimate the total traffic on each competitive route but only the traffic that would be carried on all competitive routes by Ansett and Australian Airlines, having in mind the matters to which I have referred, I think the sensible and practical construction of the events revealed by the evidence is that he did comply with the task required by para. 12(1)(a).

14. If I had not reached this conclusion, in my opinion, any failure by the Minister strictly to observe the requirements of sub-paras. 12(1)(a)(i) and 12(1)(b)(i) was a technical error of no practical significance. I assume for this purpose that the Minister did not estimate the total traffic on each of the competitive routes and did not take into account an estimate of East-West traffic on competitive routes as the sub-paragraphs require. However, the failure to take these steps would result in a self cancelling exercise. The function of s. 12 is to control the total capacity of the two major airlines, whether deployed on competitive routes or non-competitive routes, and to ensure that neither of them has available for deployment on competitive routes more aircraft capacity than the other. The object of the section is to determine the capacity required by both Ansett and Australian Airlines to carry their respective shares of the total traffic on competitive and non-competitive routes. Ultimately, the estimate of East-West's traffic on competitive routes can have no effect on the capacity determination made under para. 12(1)(b). Although the traffic estimate for East-West on competitive routes should technically be taken into account at the beginning of the exercise, it is taken out again by sub-para. 12(1)(b)(i), leaving the relevant total traffic estimate as being that of the two major airlines.

15. This alternative approach was described in argument by counsel for Ansett as an argument of "substantial equivalence"; and in a sense I suppose it is. But by whatever name the approach is dubbed, in my view, no practical difference is achieved in the end. Regional traffic and commuter traffic, though technically included in the equation by sub-para. 12(1)(a)(i), is then taken out by sub-para. 12(1)(b)(i), without any effect on the result. It must also be borne in mind, as I said earlier, that neither Ansett nor Australian Airlines provided the Minister with estimates of total traffic on each competitive route. In other words, the estimate of total traffic on each competitive route includes the East-West component but, by subtracting the same figure for sub-para. 12(1)(b)(i) purposes, no different result is produced.

16. There is a third possibility. If neither of the two approaches mentioned above is correct, the evidence establishes that the maximum effect of the error of the Minister (an error assumed for present purposes only) would be a difference in traffic estimates of 0.136% of the total traffic forecast in capacity determination No. 54 of 4,418,000 revenue passenger kilometres; a minimal difference. If this assumed error had been established then, subject to any other errors in the Minister's traffic estimates or capacity determinations that may be established in these proceedings, in the exercise of the Court's discretion, I would not quash capacity determination No. 54 or otherwise interfere with it.
    
    5.1.2 Exclusion of January 1987 from the statistics based on the
    

five month period of February to June 1987.

1. The Minister estimated the traffic which would be carried during the five month period of February to June 1987 for the purposes of making capacity determination No. 54. Ansett submitted that the Minister should have included the month of January in the base period. January is a month that carries very heavy traffic due to the Christmas and holiday season. It was submitted that, by not including January, the Minister failed to take into account the requirement of para. 12(2)(h) of the Equipment Act that the Minister shall have regard to "any other factors affecting the stability of the domestic air transport industry". Ansett informed the Minister, in response to his enquiry, that the appropriate adjustment factor to be used in converting base period statistics for Sydney/Coolangatta and Brisbane/Cairns for the capacity determinations should be 150/181. The Minister rejected that adjustment factor, giving as the reason that, because January was a heavy traffic month, a conversion factor of 150/181 would substantially inflate Ansett's and Australian Airlines' traffic by 105.4789 million revenue passenger kilometres; the equivalent of about two F28 aircraft.

2. It was submitted by counsel for Ansett that the purpose of the Equipment Act is to relate aircraft capacity to traffic demand with a view to maintaining a balance between the two and that it was therefore unreasonable to exclude the heavy January traffic from an estimate of maximum aircraft capacity for the immediately ensuing period of five months: February to June. Capacity determination No. 54, with a base period that excluded January, was said to be capable of founding a requirement that Ansett dispose of aircraft which it needs in January and might preclude the acquisition of additional aircraft during the determination period. This submission relied on the provisions of para. 13(b) relating to the disposal of aircraft and 13(c) relating to the acquisition of aircraft.

3. It was also submitted that, because the exclusion of January reduces the estimate of Ansett's traffic and hence lowers its determined capacity, the traffic it can lawfully achieve during the period of the determination will be limited. It was said that this effect may be compounded in subsequent determinations because the traffic so limited may be a basic element in subsequent estimates of traffic.

4. The task before the Minister was to estimate the traffic for a particular period, in this case the five month period February to June 1987, and then to determine the maximum aircraft capacity to carry that traffic during that period. It is common ground that January is a month of heavier traffic than average. In my opinion no ground has been established for upsetting the Minister's view that, if he had included January in the base statistics for a future period which excludes that month, then by applying the 150/181 factor it would result in a inflated and false estimate of traffic for the five month period and an excessive aircraft capacity. The Minister was not purporting to determine the capacity which might be required in a higher than average month such as January or December.

5. It was also part of Ansett's criticism that the Minister was inconsistent in his approach to the estimate of traffic and capacity determination No. 54 on the one hand and the estimate of traffic and capacity determination No. 6 with respect to East-West on the other hand in that, so it was submitted, the Minister used the conversion factor of 150/181 as a scaling figure for capacity determination No. 6. But this submission fails because the base period figures provided by East-West to the Minister were for the period of five months of February to June only and no scaling was required. No scaling factor was in fact used by the Minister in the requisite estimate of traffic and subsequently the capacity determination for East-West resulting in capacity determination No. 6.

6. This ground of attack has not been established.
   
   5.1.3 Traffic on non-competitive routes
   
   

7. Ansett contended that, when estimating total traffic on each of the competitive routes and on the non-competitive routes of Ansett and on the non-competitive routes of Australian Airlines (para. 12(1)(a)), the Minister committed a fundamental error in that he treated certain non-competitive routes as competitive routes. The question concerns the allocation of traffic between the competitive routes (sub-para. 12(1)(a)(i)) and the non-competitive routes of Australian Airlines (sub-para. 12(1)(a)(ii)) and the non-competitive routes of Ansett (sub-para. 12(1)(a)(iii)). It was asserted that the method of allocation adopted by the Minister had the effect of transferring traffic on non-competitive routes, where each of the two major airlines would receive capacity for all of the traffic, to competitive routes where each of them would receive capacity for one-half of what remains of the total after the deduction of regional and commuter traffic. As Ansett operates on more non-competitive routes than does Australian Airlines the result was said to be that Ansett suffers and Australian Airlines benefits from the Minister's allocation. It was said that the traffic so "transferred" is 82.466 million revenue passenger kilometres in the case of Ansett and 3.3573 million revenue passenger kilometres in the case of Australian Airlines. This issue has no effect on capacity determination No. 6 involving East-West, but is one of the few points of departure in the case between Ansett and Australian Airlines.

8. Ansett submitted that a "route" must be distinguished from the "passenger air services" operated over it for the purposes of s. 12 of the Equipment Act. For example, a passenger service operated between Sydney and Hobart via Devonport might to some extent compete for traffic with a direct passenger service between Sydney and Hobart, but the two services are not operated over the same route. It was said that it is permissible to use the Two Airlines Agreement as a guide to the interpretation of the Equipment Act and that that agreement makes a clear distinction between "services" and "routes" over which services are provided. Clause 6 was cited as an illustration. It was submitted that the Minister confused two distinct concepts, namely, that of a route and that of the traffic carried over it. It was also submitted that the Minister did not consistently adhere to the approach which he adopted in that some routes served by Ansett alone were treated by him as competitive with regard to all traffic and not just end-to-end or through traffic; for example, Melbourne/Mackay, Melbourne/Albury/Sydney.

9. The expression "competitive route" is defined by sub-s. 11(1) of the Equipment Act as meaning "a route over which passenger air services are operated both by the Commission and the Company". "Non-competitive route" is also defined by the same section as meaning "a route other than a competitive route". The word "route" is not defined by the Equipment Act. "Traffic" is defined by s. 11 as meaning "traffic in respect of passengers".

10. The Minister adopted as a working definition of the expression "competitive route" the following:
    
    

"A city pair between which traffic is carried either directly or indirectly by both Ansett and Australian including their subsidiaries and operating divisions."

It is essential to the argument of Ansett that there is a fundamental distinction between the concepts of a route and of the traffic carried over it for the purposes of the Equipment Act. Relevant provisions of the Equipment Act, especially s. 12, are concerned with regulating a market and dividing capacity between the two major airlines to carry passengers between ports. Section 12 is concerned to ensure that each of Ansett and Australian Airlines is able to compete for at least half of the traffic on the competitive routes. The traffic for which they may compete may be carried directly between the particular passenger's port of origin and port of destination or indirectly, that is via intermediate ports. Although the Equipment Act uses the expression "competitive route" it defines it with reference to a route over which passenger air services are operated by both major airlines. Hence, although the expression "route" in its ordinary usage contemplates a certain or particular direction taken in travelling from one place to another or a regular line of travel or passage it is not to be treated separately or distinctly from the passenger air service provided over it. Section 12 is not concerned with routes as such but with the passenger air services which operate on them. For presently relevant purposes an air route exists in my view only in relation to passenger air services that are or may be conducted over it.

1. The Minister's approach was to examine the routes over which passengers who used the passenger air services that operated over the relevant routes had common origins and destinations. In my opinion that was a permissible approach. It has not been established that the Minister fell into error in adopting the course which he did by applying his working definition ("city pairs") to which I referred earlier.

- The Minister took into account BTE growth forecasts.

- The Minister took into account the BTE survey "A Fourth

Survey of Passenger Response to EWA Discount Fares on Trunk Routes".

- The Minister estimated the rate of traffic increase in

East-West's services for the period 1 February to 30 June 1987 over the period 1 February 1986 to June 1986 would be 12.64%.

- The Minister assumed that the type of aircraft which

East-West would have available to it during the period 1 February to 30 June 1987 would include aircraft in respect of which East-West was seeking an acquisition certificate.

1. The same considerations and answers apply with respect to these matters as in the case of the equivalent submission in relation to capacity determination No. 54.
   
   5.6 CONCLUSION - SUBMISSIONS ON NATURAL JUSTICE
   
   

2. In my opinion none of the grounds of attack have been established as a matter of fact on the evidence. In addition, certain of the criticisms are in essence complaints that Ansett did not have access to confidential information of East-West which was provided by that company to the Minister for the purposes of the traffic estimates and capacity determinations. Generally, I am satisfied on the evidence that in the course of discussions and exchange of material relating to the capacity determinations, both Ansett and Australian Airlines had sufficient opportunity to furnish whatever information they wished on relevant matters to the Minister and to seek further clarification from him on matters that concerned them. To the extent that they sought clarification it was forthcoming. Neither Ansett nor Australian Airlines was denied the opportunity to make submissions on any materially relevant matters. Nor am I satisfied that the Minister was obliged to inform either of the airlines of his view or evaluation of the material that either of them had put forward before he made the relevant traffic estimates and capacity determinations.
   
   6. CONCLUSION
   
   

3. Ansett and Australian Airlines have not established their case for a review of the Minister's decisions relating to capacity determinations No. 54 and No. 6. All three applications for review are dismissed. Ansett must pay the costs of the Minister and East-West of proceeding G584/1986; and I make no order as to the costs of Australian Airlines of that proceeding since it was joined as a respondent during the hearing for the purpose of ensuring that it was bound by the Court's orders and in argument supported Ansett's case. Ansett and Australian Airlines must pay the costs of the Minister and East-West of proceeding G585/1986. Australian Airlines must pay the costs of the Minister and East-West of proceeding VG429/1986.