Up in the Air, Down Under

Simon Liddy, Matthew Brooks and Caroline Michel, HWL Ebsworth

Things are certainly taking off in the Australian aviation space. Australia’s domestic aviation sector saw record growth in freight movements in 2016, as well as a 2 per cent increase in passengers, a trend that has continued throughout 2017. 

With both regional and global demand for more aviation services in Australia, the industry has been greeted with a plethora of new opportunities for growth and expansion, but also operational challenges, to meet this demand. 


Introducing the “aerotropolis” – Sydney’s second airport 

After years of delay and political stalemate, Australia’s largest city is set to take its rightful place as a modern and competitive air-transport hub in the Asia-Pacific region, after the Australian government gave the green light to begin construction on a second airport in Sydney. 

Construction of the Western Sydney Airport, located at Badgery’s Creek (51km from Sydney’s CBD) is set to begin in February 2018, with an aim to be operational by 2026.

Demand for aviation services in this region is forecast to double over the next 20 years. Increasing pressure on capacity at Sydney (Kingsford Smith) Airport has driven the need for a second commercial airport in the area. Sydney Airport is the biggest in Australia, and was used by 42 million passengers in 2016; but its prime location, 8km south of Sydney CBD, means it is restricted from much further growth due to both space and curfew constraints. However, even if operational restrictions were removed, Sydney Airport is unlikely to meet the region’s long-term aviation needs. 

The new Western Sydney Airport, which several politicians have dubbed an “Aerotropolis”, is proposed to have a single runway around 3.7km in length, long enough to handle the full range of aircraft that may operate at the airport, including the Airbus A380. When the airport opens it is expected to service around 5 million passengers a year, with that number quickly growing. The airport is expected to be progressively developed as demand increases beyond 10 million passengers a year. The need for a second parallel runway would be triggered when demand approaches 37 million passengers annually, which predictions indicate could occur by 2050. 

Australia-China open market

The development of a new airport for Sydney complements a recent focus on the growth of international traffic in Australia, particularly emanating from Eastern Asia: an area gearing up for future growth. 

In December 2016, both the Australian and Chinese governments removed all capacity restrictions from the existing Australia-China air services arrangements. While the most obvious benefit of the decision will be to Chinese carriers, who will able to boost their trajectory of expansion in Australia, there will also be bilateral benefits. Traffic rights and code share arrangements have been liberalised, which directly benefits Australian carriers and passengers, along with the region as a whole. 

Since the change to the arrangements between the two countries, more direct routes have been established between Australia and Hong Kong and mainland China, with more Chinese carriers now landing on Australian shores. The most prominent example this year has been the HNA Group and its affiliates, which are part of an alliance with Virgin Australia that received approval from the Australian Competition and Consumer Commission (ACCC) in June. The Chinese airlines forming the alliance include Beijing Capital Airlines, Hong Kong Airlines, Hainan Airlines and Tianjin Airlines. 

Since June, Beijing Capital Airlines has added a second Australian route, between Sydney and Qingdao; Virgin Australia has commenced a Melbourne–Hong Kong route; Hainan Airlines commenced a Brisbane–Shenzhen route; and, most recently, Tianjin Airlines launched a Melbourne–Chongqing route.

Recent Litigation 

In the litigation space, the New South Wales Court of Appeal recently delivered its decision in Pel-Air Aviation Pty Ltd v Casey [2017] NSWCA 32. The plaintiff, Ms Casey, was a nurse employed by Care Flight (NSW), who travelled on a chartered flight to Samoa to evacuate a patient and her husband to Melbourne. Bad weather resulted in the aircraft ditching at sea. While all of the persons on board were rescued, Ms Casey suffered physical and mental injuries, including post-traumatic stress disorder (PTSD) as a result of the incident. 

Under article 17 of the 1999 Montreal Convention relating to International Carriage by Air (Montreal Convention), which is incorporated into Australian law by the Civil Aviation (Carriers' Liability) Act 1959 (Cth), “the carrier is liable for damage sustained in case of death or bodily injury of a passenger.” The primary judge had concluded that the evidence before her established 

that the PTSD which Ms Casey suffers… is consequent on damage to her brain and to other parts of her bodily processes which have had the result that her brain is no longer capable of functioning normally. 

The main issue on appeal was whether the primary judge erred at first instance in concluding that Ms Casey's PTSD constituted a “bodily injury” as the term is used in the 1999 Montreal Convention.

At appeal, Macfarlan JA concluded that both the English and American case authorities confirmed that while the expression “bodily injury” connotes damage to a person's body, it did not exclude consideration of damage to a person’s brain. However, in the present case, His Honour found that there was no proof that Ms Casey's PTSD resulted from physical damage to her brain. The biochemical changes in Ms Casey's brain did not constitute “bodily injury”, and therefore, the conclusion drawn in the primary judgment was erroneous. 

This decision confirms the view that mental injuries that do not derive from physical injuries are not compensable under the Montreal Convention. This decision should provide some assurance to air carriers because, despite the growing trend for plaintiffs to allege sundry mental injuries, it will restrict the ability of courts to award damages for these types of claims. 

In Outback Ballooning Pty Ltd v Work Health Authority and Bamber [2017] NTCA 7, the Court of Appeal of the Northern Territory allowed an appeal from a decision of the Supreme Court exercising Northern Territory jurisdiction. The case involved an accident during embarkation of a hot air balloon near Alice Springs in central Australia. Ms Stephanie Bernoth (now deceased) suffered fatal injuries after her scarf was sucked into the balloon's inflation fan. The balloon pilot held a commercial balloon pilot's licence issued by the Civil Aviation Safety Authority. 

The main issue in the appeal was not whether the balloon pilot had breached his duties and obligations, but rather, which legislation applied to impose those duties. The question before the court was whether Northern Territory law under the Work Health and Safety (National Uniform Legislation) Act NT is inoperative in this instance because it is inconsistent with Commonwealth civil aviation law, the Civil Aviation Act 1988 (Cth). The primary test for inconsistency between Commonwealth and territory laws was whether Commonwealth civil aviation law evinced an intention to completely state the law governing all pre-flight operations of balloon aircraft. 

Southwood J found that the Commonwealth law not only extends to, but is a complete statement of, the law governing the loading of passengers onto a balloon in the circumstances of the case, and therefore, there was an indirect inconsistency between the Northern Territory law and the Commonwealth law. Under the Commonwealth law, the pilot was under a duty to take all reasonable steps to point out the dangers of the inflation fan to passengers, and to supervise the area around the inflation fan. If the pilot failed to carry out these duties, he would be operating the balloon in contravention of the Commonwealth Act and would be amenable to prosecution under section 29(1)(a) and (b)(ii) of that Act. His Honour found that the health and safety duty pleaded in the complaint against the pilot under the territory law was similar to the duty imposed by the Commonwealth law. The Commonwealth law was intended to “cover the field” and was not intended to operate in conjunction with any state or territory scheme directed to the same end. Therefore, the territory law was inconsistent, and inoperative in the circumstances of this case.

This decision confirms that the Civil Aviation Act 1988 (Cth) is intended to “cover the field” of the safety of air navigation, including the safety of air operations, as well as the system for safety management, which includes the safety of the process of embarkation of passengers.

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