Jetstar vows to fight air safety levies

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DECEMBER DEADLINE: Jetstar is about to lose its passenger levies exemption.

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Budget carrier Jetstar's pressure on aviation rivals in New Zealand to match or undercut its cheap airfares could be coming to an end.

The Transport Ministry is expected to announce that December 1 is the date Jetstar must start paying passenger levies on its New Zealand routes which it has not done since its June domestic launch.

Jetstar says this will cost it about $4.8 million a year based on its present loadings and these will have to be added to fares.

Chief executive Bruce Buchanan said he was not going to take the charges lying down. "It goes smack against closer economic relations (CER) principles

"This has much wider implications for CER," he said but conceded that once the Transport Ministry enshrined the fees in legislation it would be hard to change.

The root of the fee issue lies in the cost of overseeing safety for the carrier in New Zealand.

The Civil Aviation Authority charges all airlines for that and says Jetstar should be levied for each passenger per sector for this service like the others.

CAA charges other airlines $2 a sector but it has recommended that Jetstar pay only 83 per cent because it is the first operator under the relatively new Australia-New Zealand Aviation (Anza) mutual recognition privileges agreement in New Zealand.

Mr Buchanan said Jetstar was advised in writing by the New Zealand Transport Ministry in April 2009 that "under the Anza Mutual Recognition arrangement, the Australian Civil Aviation Authority (CASA) will be responsible for safety oversight for Jetstar and for recovering the cost for that oversight".

Mr Buchanan said it paid the Australian authority A$10m (NZ$12.5m) a year in fees, which covered the safety oversight function for Jetstar's operations in New Zealand.

But CASA communications manager Peter Gibson said it was not the case.

"It [safety oversight] has nothing to do with us."

He said he didn't know where the A$10m figure came from either because CASA charged airlines by the hour for regulatory services from audits to inspections, certifications, assessments and approvals. CASA did not charge airlines for safety oversight in Australia nor could it do safety oversight in New Zealand for Jetstar from Australia.

New Zealand's CAA was left with a multimillion-dollar hole in its accounts after the departure of Qantas from the domestic scene, though Qantas still flies the Tasman from New Zealand and must pay the levies for those flights.

It had sought opinion from Jetstar's domestic rivals on its exemption, a move which incensed Mr Buchanan because he said the other carriers were obviously biased. Jetstar would be checking the legal implications of the levies and would challenge them as far as it could.

CAA was charging only because it had a hole in its budget left by Qantas' exit, he said.