Bega Valley Shire Council has open mind on management of Merimbula Airport

Speakers at a public consultation regarding the future management and operation of Merimbula Airport were overwhelmingly in favour of a change to the management model and if the council were to opt for a lease agreement again (as is the current arrangement) the lease would require a complete rewrite, they recommended.

It was apparent that the council remains open minded at this juncture but it accepts that some terms and conditions of the current head lease, drawn up in 1997, must be changed to better reflect today’s business environment.   This has also been identified in numerous independent reports to the council, including the Kothes report.      

With the June 30 2014 expiry date of the current lease bearing down on the council, it will have to make a decision relatively swiftly to enable the processes to commence.

While a council resolution taken at the December 18 council meeting had narrowed four management options to two, it emerged at the consultation meeting that the other two options were “still on the desk” and a fifth also emerged as an option.  This further complicates the decision-making process as instead of a choice of one from two the council now faces one from five.

The options before the council are 1: Council directly manages the airport; 2. Contract manage; 3. Lease agreement; 4 Private ownership; 5. Council separate the hangar sub leases from the lease agreement.

Eight of the nine councillors were at the meeting and this could be construed as a measure of the importance council places on this issue. The general manager, Leanne Barnes, and council’s group manager infrastructure, waste & water Wayne Sartori were also present.

About 50 people attended the meeting held on Wednesday, January 15 in Club Sapphire, some of whom took the opportunity to question the speakers at the conclusion of their submissions. There was a brief Q&A session with the councillors after all submissions were presented.

Mayor Bill Taylor said the community consultation was “step one” in the process.

He said what council was obliged to do was “get the documentation right”.

“It (the head lease) is 15 years old and it needs updating.”

“We are open to take information at any point; any time.” He said there was no reason to prevent the council from looking at the way other airports are being self-managed.

Cr Taylor said if the council were to choose the lease option it would be “openly advertised.”

The first speaker to take the floor was Don McDowell. Mr McDowell is a former director of aviation in the Northern Territory where he was responsible for airline operations, scheduling, pricing and associated infrastructure policy. He was also engaged by council as a consultant in conducting studies of Merimbula Airport operations and management 2012-2013.

He said that the council has a community duty of care in respect of its ownership and management of the airport and for its future development.

All other regional airports in NSW are owned and operated by their local councils, he said.

“Merimbula has operated under a lease since 1997 with scant oversight, a fact well recognised. The airport operations and related industry activities area a source of continuing complaint, with negligible evidence to suggest these are taken seriously by council, or staff or the lease holder.”

He said that the ratepayers and the airport would be best served by the council adopting a contract management model. “Council safeguards, controls and responsibilities previously, and still missing from the head lease must be cleverly crafted.

He stopped short of telling council to take a cold shower and hose down its income and passenger projections for the airport. “Much of the income projected has been cast in the light of incredible and unbelievable optimism based on no data of consequence, no questionnaires to commuters and no co-operative input from the accommodation sector. If passenger numbers were to reach 350,000 a year as predicted by the council in 10 years’ time, I will eat my shirt,” Mr McDowell said.

The Bega Valley Shire Business Forum (BVSBF) has thrown its support behind the current lease arrangement and lease holder, Airport Agencies Pty Ltd.

Janette Neilson read the BVSBF submission on behalf of its members.

Referring to pre 1997, Mrs Neilson said that (the council direct manage) “was not a very successful model and a return to this idea should be avoided at all costs. It would be such a backward step with no incentive for future expansion or increase in flight availability.”

Selling the airport was not an option either for the BVSBF.

”Selling the airport would see our only corporate business outside of council itself and the only transport arm council controls disappearing from sight.”

Nor did the contract management option suit. “A contract to operate the airport site would be a backward step. Under a contract the operator has to fulfil the terms of the contract only. There is no incentive to work extra hours.”

BVSBF gives its full support to the Lease option and the current lessee, Airport Agencies.  “We have already seen under the existing lease arrangement that it is in the best interests of the lessee (at his own cost) to improve the facility, extend potential for better business operations and be available to operate the airport whenever needed night and day.  This means that the risk taker has the ability to make a better profit but this would be a well-earned profit.”

Ian Baker, of Airport Agencies, gave his perspective of lease management.

He said that the volatility of the aviation industry called for proactive management, keen judgement and a strong commitment to succeed.

“Lease management requires this commitment and dedication to make the business model sustainable and productive as the very existence of the lease is dependent on its success. As opposed to contract management where the main drive of the contractor is the requirement to fulfil the terms of the contract. As evidence of this, Mr Baker cited Airport Agencies’ responses to:  the Ansett collapse, where they arranged a charter service for three weeks until air services were reintroduced; Security requirements following September 11. A rapid response secured $850,000 to upgrade security, that became a model for other regional airports; Upgrade of fuel facilities  where at a time when the current fuel supplier was removing fuel installations Merimbula achieved a substantial upgrade. “An airport without fuel is like a pub with no beer,” Mr Baker said.

He said the above three examples demonstrated where a lessee as opposed to a contractor “will go the distance.”

Mr Baker said he was aware of only one RPT airport that had adopted the contract manage option and that failed within four years forcing the council to take back operations.

“Airport Agencies and associated companies employ 14 full-time employees and contributes $55,000 per month directly into the local economy. The airport terminal is open for business seven days a week with fuel available on the airport 24/7 365 days per year.

“This does not equate to a spectacular failure as has been reported in today’s paper (MNW January 15 - quote from president of the Merimbula Airport Users Group Rex Koerbin).

President of the Merimbula Airport Users Group Rex Koerbin, whose views were reported in MNW January 15 said the Users Group’s preference was for a management option which combined all of the advantages of the direct option while distancing the BVSC from the day to day management.

“MAUG proposes the use of a Board of Management Model which is used by numerous councils throughout Australia.  BVSC would establish an airport management company which would be under the overall control of the board of management whose powers and responsibilities would be set out in a deed of management,” Mr Koerbin said.

Merimbula resident Fraser Buchanan said that under the current lease arrangement the council had missed out on revenue. He said it was “perplexing” as to why the lease arrangement was being put up as an option when all the reports had identified that it was not working in the best interests of council and the ratepayers.”

Ken Davenish, retired after 48 years in the aviation industry and owner of property at the airport expressed his dissatisfaction with the current lease.

“Owners of property at the airport need security of tenure. There is no process for conflict resolution.”

He said when his last lease was drawn up its clauses were so punitive that his solicitor described it as draconian. Mr Davenish said he was told by council’s general manager at the time, Peter Tegart that it was unfair but there was nothing council could do about it as it was a matter for the head lessee.

Alan Lindsay, chief pilot and flying instructor Merimbula Air Services

said that their preferred option was the contract manage model.

“This would be best for us and offers the best bang for the buck for ratepayers.

“We are virtually now giving the family silver away. I suggest that the council looks at the operation of other airports, particularly Latrobe Valley.

“It is easy to discount criticisms; they are not made lightly; they are real and tangible.” 

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