ABC News with Patricia Karvelas

PATRICIA KARVELAS: As we mentioned in our headlines, the Government says they are prepared to acquire Rex Airlines if a suitable buyer for the collapsed business isn’t found. Now, rival regional airlines have questioned why the Federal Government has refused to meet with them to discuss their offers of support on key Rex routes. The Nationals say any move by the Government to buy out Rex should be a last resort.

[Excerpt]

DAVID LITTLEPROUD: We don’t want the taxpayer to have to prop up what should be a commercially viable enterprise. The reality is Rex proved that until they took a change of course, and it’s difficult for then other smaller aviation companies to actually compete with the Australian taxpayer if we enter it. So, what needs to happen is that we need to accelerate the process to allow the solution to be created by the aviation sector themselves. They’re willing and able. They’re prepared to come to the table, but they’ve been locked out because it’s been the unions that have been dictating to the Government about who can actually put their hand up to buy Rex. 

[End of excerpt]

PATRICIA KARVELAS: To tell us more, Transport Minister Catherine King joins us live. Catherine King, welcome. 

CATHERINE KING: Hi. It’s really lovely to be with you.

PATRICIA KARVELAS: It is. You have put this on the table, but you say it’s not your preference. So, what? Is it just a political tactic?

CATHERINE KING: No, not at all. What we’ve seen, and we’ve been working with the voluntary administration right the way along, the first sort of thing that we had to do was we put in the guarantee, so you’ll either fly or you’ll get your money back. Luckily, that hasn’t had to be drawn on, passenger numbers are keeping up. The next thing we had to do is – obviously, there was a first sale process that was not successful and we are working our way with the administrators on how can we best support a second sale process – we have come to the party with a credit, a line of credit, in order to keep the administration going. It’s not a grant. It’s a line of credit so that the administration can keep flying the airline. And then, what we’ve also done is stepped into the shoes of the largest creditor so that the company doesn’t get liquidated while we have this second sale process.

What we’ve said today is that it’s abundantly clear that a second sale process won’t be successful without government support. And we are saying we are prepared to, where there are credible bidders that make its way through the administration process, that we will negotiate that support. Which is also why I can’t meet with individual airlines because they are potential bidders. [Indistinct]…

PATRICIA KARVELAS: [Interrupts] Okay. Because the Financial Review is reporting that 43 airlines under the Regional Aviation Association of Australia wrote to you last year requesting a meeting that you wouldn’t.

CATHERINE KING: I can’t meet with them for probity reasons because some of them will be bidders and they will be in a negotiation again, possibly against each other, and I will have to treat every bidder equally, which is why they need to work through the administration. So I can’t, for probity reasons, meet with them. I have met with their peak body before, I meet with them regularly, but I can’t meet with individual airlines who may be bidders in terms of Rex itself.

PATRICIA KARVELAS: The RAAA Chief Executive has said that you’ve refused to meet them, but also says that they want to put forward a market-based solution for their association’s members. So, perhaps something quite different. 

CATHERINE KING: Yep.

PATRICIA KARVELAS: Isn’t that worth pursuing?

CATHERINE KING: They can now do that. That’s what this has opened up today, through this second sale process. 

PATRICIA KARVELAS: [Talks over] Has that meeting happened?

CATHERINE KING: They can now do that, but I can’t meet with them because-

PATRICIA KARVELAS: [Interrupts] The department can?

CATHERINE KING: The department’s been meeting with potential bidders all the way along, and that’s been happening. That’s been happening all the way along. But I can’t meet with them because this is now a process where the Government will step in with some support, and we will need to treat every single bidder exactly the same. And so, I don’t know who those are going to be so I can’t meet with individual potential bidders, and I really welcome that there are airlines wanting to do that. 

What I don’t want to see, though, is the cannibalisation of the routes, and some people saying, well, we want this bit, not this bit, and it really hollowing out.

PATRICIA KARVELAS: [Talks over] Correct. I was going to go to that, because some people are proposing different- 

CATHERINE KING: Yeah.

PATRICIA KARVELAS: What’s wrong with that if it provides a commercial solution rather than the government stepping in?

CATHERINE KING: It might provide a solution. But again, what – from the first principles of policy – what the Government wants to do is keep routes in regional aviation. We want to keep them flying and we want to make sure they’re viable, not just in the short term but in the longer term as well. Which is why we think the second sale process won’t be successful without government support, and that’s why we’ve got this process now in place. It may be-

PATRICIA KARVELAS: [Interrupts]When you say with government support…

CATHERINE KING: Yep.

PATRICIA KARVELAS: …does that look like a sort of co-ownership model? Like, what sort of [indistinct] could it look like?

CATHERINE KING: Yeah. At the moment, we’re very open to all of that. And different bidders will come forward and say, you know, we will buy the airline if you do X, Y and Z. And that is the competitive tension that needs to happen as part of this second sale process.

PATRICIA KARVELAS: [Talks over] Does that mean the government could have, let’s say, a 40 per cent stake?

CATHERINE KING: It could say that. But the biggest barrier for a sale of this airline at the moment has been that the planes are old and it is highly capital intensive to replace them. And so, that has been the largest barrier. And again, we will have to look at what someone is bringing to the table and what is the best value for taxpayer money; where we’re we going to be able to keep as many of the routes going as possible – I want to keep all of them going if we can; and-

PATRICIA KARVELAS: [Interrupts]Well, is that a guarantee, if I can just pick you up on that? 

CATHERINE KING: I would like to but, obviously, we’re going to- that is in the hands of whoever purchases the airline. 

PATRICIA KARVELAS: Shouldn’t it be, actually, a pre-condition that you must keep them all open?

CATHERINE KING: It is certainly one of the things that we will be looking at as part of that process. But at the first principle, what the Government is absolutely determined to do is to keep regional aviation and regional communities connected. I was pretty shocked today to see some of the commentary from the National and the Liberal Party who are, basically – I don’t know what that was about today – who are, basically I think, abandoning regional communities and regional aviation.

PATRICIA KARVELAS: Well, they’re arguing there should be a commercial solution.

CATHERINE KING: Well, and we’re saying that as well, but we’re also saying that if there isn’t, we are saying that we will start the process to consider if government should acquire it. We’ll need to do that with states and territories as partners, they subsidise a lot of these routes currently. And we’ll need to start the process for that as the buyer of last resort. 

PATRICIA KARVELAS: Okay. And the buyer of last resort, does that mean that sort of states and territories go in with you?

CATHERINE KING: We would certainly- we’re certainly in discussions with states and territories who subsidise many of the intrastate routes, which are their responsibility now. 

PATRICIA KARVELAS: And can you give me a sense of which states are showing an interest in going in?

CATHERINE KING: Well, every state wants to keep regional aviation going. All of them want regional aviation to… Rex flies everywhere. There’s more than 40 routes that are different routes that are flown weekly. Almost half of those are routes where they’re the only airline that actually flies in. And that’s pretty critical to getting people in regional communities to medical appointments, to their homes, to keep businesses going, to get FIFO workers in. They’re pretty- it’s a pretty important piece of economic infrastructure for our regions. 

PATRICIA KARVELAS: Just on another topic, but still very much in your portfolio, is it right that the Victorian Government wants a top-up to the contentious Suburban Rail Loop? 

CATHERINE KING: So, I mean, it’s in- all in the public domain. I must admit, I’ve been reluctant to comment on this because there’s a fair bit of gossip going around and it’s unhelpful, I think, as we [Indistinct] not you just-

PATRICIA KARVELAS: [Interrupts] I am happy for you to just tell us the facts now.

CATHERINE KING: So I will say- yeah. So on Suburban Rail Loop, I have released the $2.2 billion. Infrastructure Australia and my department have now assessed that and recommended that money be released to the Victorian Government on the basis of very specific things that it will be going towards. And so I have now signed that off. And the Victorian Government, I’m sure, will be receiving the news of that now as we speak. So you’ve got [Indistinct].

PATRICIA KARVELAS: [Talks over] So, can you just be clear, that’s not- just the distinction, I know that they’re asking for a top up. You’re saying that’s not the top up? That’s…?

CATHERINE KING: No, that’s the- so that’s the existing money that we’ve had on the table for Suburban Rail East. We will continue discussions, as we do through budget processes with every state and territory, and the Victorians are no different, who come to us with an ask. But I’ve been pretty consistent in terms of suburban rail to say there are still some hurdles that the Victorian Government will need to overcome in relation to advice that I will receive from Infrastructure Australia about particularly the costings around value capture before the Commonwealth can make another investment.

PATRICIA KARVELAS: So you’re not convinced that this is a value for money proposition? 

CATHERINE KING: I do think it’s a really good project. As a Victorian, I actually know- you know, and I grew up in the south eastern suburbs of Melbourne. That was my home and was my home well into my 20s. And I would catch that Glen Waverley train…

PATRICIA KARVELAS: [Talks over] Same here.

CATHERINE KING: [Indistinct]…train into the city as a 14-year-old all the time. I’ve seen the huge population growth around Box Hill where you and I would go shopping and you’d take your friends there as well. So really, it’s an important project for the city. It’s a big project for the city. You know, I’m a supporter of it, but I also need to make sure that I’m getting value for money for Australian taxpayers’ dollars and [Indistinct].

PATRICIA KARVELAS: [Interrupts] So, to be clear, you’ve now- you said that they’ll be finding out now you’ve handed over two- just to be clear?

CATHERINE KING: Yeah. The 2.2, which was the election commitment we made, Infrastructure Australia and the- my department have now provided me with advice on the assessment of their- the project appraisal report, which is pretty routine. That’s what I do. And that’s now been released to the Victorian Government. 

PATRICIA KARVELAS: Okay. And that now draws a line for a while, you’re saying no extra funding?

CATHERINE KING: Well, what I’m saying to them is there’s some more work that will need to be done before further investment in Suburban Rail Loop. But there’s also other projects, of course, that we continue to talk to the Victorians about. I work with very closely [Indistinct]…

PATRICIA KARVELAS: [Interrupts] Because it brings me to the Werribee by-election and some of the lessons there. There are parts of your heartland who feel very neglected. Is that part of the lesson here?

CATHERINE KING: I think that, again, I stood with Jacinta Allan to talk about and to put money into a road project, two road projects in Werribee, and they had been worked with and negotiated on and talked with the Victorian Government well over six months ago. You know, they were not new. They were things that the Victorian Government had brought to me to say, we need to invest in the West. 

PATRICIA KARVELAS: But beyond that, you’re talking about something that’s already committed. There’s clearly more demand [Indistinct]…

CATHERINE KING: [Interrupts] Yeah, absolutely. And that’s what happens through budget processes, through the mid-year economic financial outlook. They come to me with projects that they want to invest in, they want us to co-invest in, and they do that all the way around the state. They’ve done- you know, in regional communities, they’ve put $1 billion into a road blitz to really deal with potholes and a range of things in regional communities. You know, we’re really keen to partner with them on a whole range of projects, and we’ll keep talking to them as part of the budget process. 

PATRICIA KARVELAS: Catherine King, thanks for coming in. 

CATHERINE KING: Good to talk to you.