Millions of dollars secretly lost by Airservices

[Dick Smith]

This is a rumour network, and there have been rumours around for many months of another Airservices fiasco. Rather than following the US system of WAAS (Wide Area Augmentation System), a number of years ago Airservices decided to go down a special route known as GRAS (Ground Based Regional Augmentation System).

It appears that rather than let others take the design risk, Airservices decided to enter into an agreement with a multinational company, using our industry money, to design the equipment here in Australia. The plan was that it would be sold all around the world – a fortune would be made, and that would be used to reduce the industry’s charges.

By the look of it, it hasn’t quite worked out that way. There are rumours that tens of millions of dollars have been wasted on this project, and there are a number of other projects to go the same way.

In an answer to a question asked by Mr Bob Brown in the Senate (see here (http://www.dicksmithflyer.com.au/downloads/BobBrown.pdf)), Senator Conroy stated:

Airservices Australia has advised that the Ground based Regional Augmentation System (GRAS) project has ceased. The discontinuation of the GRAS project will result in a write-off which will be reflected in the end of year financial results.

Note there is no mention of the actual figure that has been lost. Can anyone find this out?

The money lost to our industry is money that could have been spent in training additional air traffic controllers, even in manning a tower at Avalon, or providing one at Ayers Rock or Broome.

The performance bonuses will still go ahead regardless. These people should all move to the Macquarie Bank or to the United States to work for one of the banking organisations there.

Now for ADS-B - I wonder when we will hear about that write-off and how much it will be?

[VH-UFO]

Uh oh, this is gonna be fun!:E

[Bob Murphie]

And you can hear a pin drop.

[Dick Smith]

And remember if you are running a business and you have a "dual" till and you put your losses in the second till then you actually havn't lost anything at all.

Is Bondy advising AsA?

[PPRuNeUser0163]

Dick,
can i ask you a question.
Some of your proposals/ideas i agree with but,
Why have you been so up in arms regarding Avalon CTAF. Hundreds of planes including jetstar, qantas 747s, 767s for maintenance etc go in without problems and i cant recall any near misses at all or anything out of the ordinary going on here. This is just in light of your post and recent media coverage few months ago ie ACA etc where you advocated they had to immediately put a tower there. Dick, I fly out of Bankstown with a ppl just near where you fly your jet because ive taxied just behind you and to be honest id rather be flying into avalon with a ctaf then into bankstown where we have excellent atc but unfortunately alot of very incompetent, badly taught pilots- both student and others. an example- 1 of a foreign pilot - basair i think it was approaching bankstown for 29R at 1000 ft just near prospect, I was flying out of 29R and narrowly missed him- Tower obviously couldnt fix this problem of seperating traffic as they have no Surface radar like YSSY. Its things like this that cause problems within ctafs, people not flying correct procedures, proper circuits etc.
Matt

[Sunfish]

This is a typical Australian phenomenon. The cost of WAAS is known. The equipment is readily available, and it's a known proven system.

But Oh No! We can reinvent the wheel here and do it on the cheap, avoiding all the pitfalls involved in research and development that seem to beleaguer every development project ever started, but this one is different! And we must do it because Australia has unique requirements!

I have heard this bull**** so many times over the years that it's just not funny, and of course when we fund these "reinventing the wheel" projects, it means we then don't have funds for the really unique projects where we might both surprise and delight the rest of the world.

The saddest and most stupid part of the whole thing is that by now just about every $200 GPS sold is WAAS enabled.

What happens next is also predictable. Industry and agriculture will discover, if they haven't already, that the second or third (or is it fourth?) generation of GPS enabled equipment is going to require WAAS availability to get full performance, so eventually industry and agriculture will demand that WAAS be provided, and it will, making the local system an orphan.

Ferchrissake, fund WAAS and put us out of our misery.

[Bill Woodfull]

money lost by Airservices in a recent currency hedging fiasco.
Why are we hedging FOREX? We are neither an importer or exporter (those Mickey Mouse pacific TWRS notwithstanding)...so why are we even dabbling in FOREX?

:ugh::ugh::ugh:

[max1]

Bob,
I have heard rumours during the last week. Don't know if its true or not though.
If you're looking for ATCs to defend these Aviation bureaucrats, you'll be waiting for eternity.
You might want to check out the annual reports and see some of the exposure we have. From the 05/06 Annual Report Financial Notes on page 97


CROSS BORDER FINANCING ARRANGEMENT.
During the 2003 and 2004 years, Airservices Australia completed a cross-border financing arrangement
in relation to equipment associated with The Australian Advanced Air Traffic System (TAAATS) and radar
systems. The arrangement is for 22.5 years and expires in January 2026.
Airservices Australia has provided certain guarantees and indemnities to various participants in the
transaction. If certain events occur, Airservices Australia could be liable to make additional substantial
payments. The future underlying exposure against which these guarantees and indemnities have been
provided are up to a maximum of US$758m (2005: US$770m). At the time of the transaction, expert external
advisors considered that unless exceptional, extreme and highly unlikely circumstances arise, Airservices
Australia would not be required to make a significant payment under these guarantees and indemnities.
Management regularly monitors the factors affecting this transaction on an ongoing basis.

I have no idea what it is about, it just looked like a really big number to me. I'm don't know who the 'expert external advisors' are either. Merchant bankers?

I wonder if they are handing out the golden parachutes yet?

[xinhua2]

ADSB next cab off the rank to fall, it is all just so predictable, junior woodchucks chasing technological solutions to a problem that doesn't exist.

[Dick Smith]

Notice the key words "at the time of the transaction"

I presume it means that the latest advice is quite different!

[Bob Murphie]

I don't think WAAS is on the cards. Didn't they move the Pacific satelite or something? I recall we didn't support the Japanese satelite either so there is nothing for it but for Airservices to launch their own. I wonder what till that would come out of?

[Dick Smith]

Matt, thanks for the post. When you consider that at Bankstown there have only been two midair collisions in 40 years, it is indeed extraordinarily safe. I’m positive there would have been far more midair collisions – or more likely collisions on or close to the runway – if air traffic control was not present.

From my experience flying around the world, Bankstown is an example of air traffic control being as good as any air traffic control anywhere. The procedures (which we call GAAP procedures) were copied from Van Nuys airport in the United States and in my view provide the best balance of efficiency, traffic movements, cost and safety.

Avalon is an interesting experiment. We will never know how long we can get away without air traffic control at an airport with 1.5 million passenger movements per year until an accident happens. Maybe it will be another few years, maybe it will be another few months.

When you consider that to man the tower at Avalon and use Bankstown-like procedures would probably cost less than 30 cents per passenger. I believe it is an effective way of spending our safety dollars.

If you would like to come flying in the Citation some time, give me a call on 0408 640 221 and I will arrange it.

[LeadSled]

Folks,
Is this amazing --- or what!!

Not really, just depressingly predictable. Remember MLS, remember the home grown radar (before TAAAAATS --- aka Eurocat) that could track trucks on the Geelong Rd., but lost a 747 in the holding patterns around Melbourne.

The fact remains that a successor to ILS is needed, and a successor that gets down to Cat 111C (LAAS), and at least Cat.1 (WAAS) for the Regionals and the mining provinces. Cat 111C (eventually) will be quite possible with the LAAS version of WAAS, which is much like GRAS, except that it is a public signal, not subscription only.

WAAS??? A little bird says that WAAS is dead, because a LAAS will cover 97% of the travelling public, ie: The heavily trafficked east coast routes, and other inter-capitals arrival routes.

A WAAS deal would be available with Japan (ever given thought to why they think they need it??) --- but how would Airservice charge for it ??? They can't.

This may be so, but it only covers maybe 10% of the aircraft (not aircraft movements). If this same logic was applied to, say, roads, we would probably have no sealed roads west of the Blue Mountains – given the % of the population living in and around the big coastal cities, probably 97% of cars and trucks are in these areas.

In short, the approach to WAAS is: Sod Rural and Regional and Remote Australia for modern technology, they get by only with mostly inferior communications generally, (hi-speed broadband, what broadband ?- notwithstanding "election promises"), so why should Rural, Regional and Remote Australia expect to get access to (in national terms) cheap precision approach aids??

Sadly, the "we can do it better" brigade at Airservices, it seems to me, were probably aided and abetted by the Airservices disinterest in anything for which they can't send you a bill, and WAAS (unlike Galileo) has no provision for "subscription only" precision signals.

Perhaps we ( or the Minister, or the Treasurer, in these straightened times) should ask Dick Smith's new best friend, Mike Taylor, he's the head of the "Department", under which all this has transpired.


Tootle pip!!

[airtags]

Maybe it is time for a few carefully structured, strategic FOI's to be sent AirServices way. :E

- Suspect though the volumious defence might be proffered. :ugh:

[K-941]

GRAS was always a bit of an errrm experiment :rolleyes: it was no secret though

WAAS is the best option not only for aviation

do not confuse this with ADS-B though :=

as for the other rumour :eek: :ooh: :hmm: as Airtags suggests ;)

[Dick Smith]

The GRAS project may not have been a secret but the decision to stop funding and let it fail certainly was.

[K-941]

It depends on whether the decision was taken 'early' when perhaps the technology was determined to not be able to deliver what was needed. To push on further would have then been millions of dollars lost! ;)

Have you a credible source for the amount of dollars involved?

[Chimbu chuckles]

So is it only GRAS they have ceased to fund or is it GBAS as well?

TSO146, WAAS and LPVs were always the answers to so many questions.:ugh:

[Howabout]

I'm with Dick on this one, if the rumour is true.

Wasn't a fair amount of money invested in a number of trials of GRAS. I seem to remember an article regarding QANTAS testing of GRAS at Mascot, and another on a tour to Frankfurt (no doubt first class) where Lufthansa did the same deal. Or am I wrong and was that GBAS?

If this expense, in addition to development, has now been flushed then who actually accepts responsibility?

[K-941]

Lots of people in the know were saying the same Chuck, the answer to why they looked at it in the first place will make for interesting reading :E some will be disappointed though, as it is not what Mr Smith would like it to be ;)

[K-941]

Howabout don't confuse GRAS with GBAS :ok:

GBAS (lower minimums for RPT multi-crew with HUD bit like/added to RNP) has been sucessfully trialed in a 'loned' :E 737. Whether it gets the go remains to be seen :} stay tuned for the next 'secret squirel' headline :p

[Howabout]

Thanks K.

So, I am assuming that those trials were GBAS and not GRAS?

[Dick Smith]

GBAS, GRAS, or GRASS if there is to be money made in it why does a government owned air service provider have to risk our money on the design?

Or do the smart business people think there is no money in it?

Another Seasprite fiasco -luckily on a smaller scale.

[max1]

From the 06/07 Annual Report financial notes.

s. Derivative financial instruments
Airservices Australia Group uses derivative financial instruments such as foreign currency
contracts and interest rate swaps to hedge its risks associated with foreign currency and interest
rate fluctuations. Such derivative financial instruments are stated at fair value.
The fair value of forward currency contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap
contracts is determined as the difference in present value, discounted using current market rates,
of future cash flows.
For the purposes of hedge accounting, foreign currency hedges are classified as fair value
hedges as they hedge exposures to changes in the fair value of a recognised asset or liability.
For foreign currency hedges that satisfy the conditions for hedge accounting, the gain or loss on
the hedging instrument is recognised directly in equity. In relation to foreign exchange hedges
that do not meet the conditions for hedge accounting, any gain or loss from remeasuring the
hedging instrument at fair value is recognised immediately in the income statement.

Don't know the amounts involved. There is also something in there about Airservices Pacific Incorporated (API)

Airservices Pacific Incorporated (API)
Airservices Australia has owned 100% of API, based in Delaware in the United States of America, since
December 2004. The investment comprises 1,000 shares at a nominal value of US$1.00 per share.
Airservices Australia previously made available a loan facility of US $0.700m to API at normal
commercial terms and conditions in December 2004 which was repaid with interest in December
2006. A second facility of US $0.700m was made available in September 2005. This facility was fully
drawn in December 2006 to repay the maturing issue and meet working capital requirements.
The new facility expires in December 2009 but can be repaid with interest at any time prior to
maturity. As at 30 June 2007 the principal amount of the loan equates to AUD $0.826m.

[i] Mr Russell is also the ongoing Chairman of the Board of Airservices Australia's wholly-owned subsidiary, Airservices Pacific Incorporated.

Special Purpose Entities
In accordance with the indicators of control for accounting purposes detailed in UIG Interpretation
112, Airservices Australia Group controls four special purpose entities which are involved in the
US cross-border arrangement in relation to equipment associated with 'The Australian Advanced
Air Traffic System' (TAAATS) and radar systems discussed in note 29. However the issued capital in
these entities, which totals US$4,000, is not owned by Airservices Australia Group but is held by
two finance companies. These entities are not consolidated due to materiality.

From some more trawling of the 06/07 Annual Report. Note 29 dicusses the $700+ million exposure.
As I have stated I don't know anything, but these big numbers thrown about may have their seeds in this.

[james michael]

if there is to be money made in it why does a government owned air service provider have to risk our money on the designI think it is called R&D? Not sure how many R&D projects make money and how many fail. Something about speculate to accumulate comes to mind?

Oh dear, another unique Australian system?

EUROCONTROL Navigation Domain - GBAS (http://www.ecacnav.com/Future_Applications/GBAS)

The Ground-Based Augmentation System (GBAS) is a safety-critical system that augments the GPS Standard Positioning Service (SPS) and provides enhanced levels of service (http://www.eurocontrol.fr/Newsletter/2002/November/GBAS/GBASv0.32.htm)

I think the first has a link to the FAA also.

Howabout - spot on, the trials were GBAS.

Reason Foundation: Air Traffic Control Reform Newsletter #53 (May 2008) (http://www.reason.org/atcreform53.shtml)

Approach with Precision - GPS Avionics & Transportation (http://tl.gpsworld.com/gpstl/article/articleDetail.jsp?id=371789)

[K-941]

Howabout :ok:

[Howabout]

DNS, if the American financial crisis is anything to go by; no one. And the bonuses will still be secure.

[K-941]

Mod's.

Could we please separate the two subjects, GRAS and the errrm hedging :ooh: :rolleyes: and might I suggest (as per max's info and d.n.s's point) that the later be 'stickied' :E

now that will be a story :ok:

[K-941]

GBAS, GRAS, or GRASS if there is to be money made in it why does a government owned air service provider have to risk our money on the design?

Or do the smart business people think there is no money in it? did you not read the hansard? :rolleyes: :=

Another Seasprite fiasco -luckily on a smaller scale.Another red's under the non-existent bed more likely :p but if it floats your boat :} make revolutions to flank :E :D

[Swan River Rat]

There are a number of issues here but the primary one is what Airservices Australia spends the money taken from the travelling public on.
Should Airservices Australia be speculating on foreign exchange rates with this money?
Should Airservices Australia be developing emerging technologies and procedures or buying proven ones?
Should Airservices Australia be involved in every scheme that an airheaded manager dreams up to justify their next bonus? Specifically those who fly in and out of Perth and Jandakot strap in tight for the 20th of November. When the Western Australian Route Review is implemented, at best you will need more holding fuel and route fuel. With the threat that ‘people will lose their jobs’ if it is not implemented when safety concerns are raised makes one wonder about the governance of the thing.
Airservices Australia - Projects & Services - Projects & Initiatives - Western Australia Route Review Project (WARRP) (http://www.airservicesaustralia.com/projectsservices/projects/waroutereview/default.asp)

But consider if Airservices Australia concentrated on the task at hand, the safe provision of an air traffic control service then Airservices Australia could provide staff for a tower service at Avalon, upgrade if required the radar feed in Bankstown tower and provide the radar approach service in Broome that the FAA would provide if Broome was in the USA.

Will those who pay the charges to Airservices Australia demand that their monies are used to provide the service paid for rather than be used on wasteful and risky frolics?

Will the minister act to control this out of control air traffic provider or pay a bonus to the architects of this diversion from being an air traffic service provider whose primary concern is the provision of a safe air traffic service?

Why was this not mentioned at Waypoint?
Airservices Australia - Projects & Services - Industry Forums - Waypoint 2008 (http://www.airservicesaustralia.com/projectsservices/industryforums/waypoint/2008/default.asp)

Rat

[Howabout]

So, tell me if I am wrong with my limited education.

If we had WAAS, presumably, and with an appropriate plate, I could do a precision letdown into Ungarlamarnafook in the GAFA. But with GBAS/GRAS I can't.

Is it that simple, or have I missed something?

[Dick Smith]

You are correct however as Leadsled pointed out, with WAAS AsA would not be able to charge you - thats why they would have no incentive to introduce such a system.

[Howabout]

Well Dick,

That seems to me to be a total crock. Why should the likes of regional Australia, particularly like the guys in the RFDS, have to take a back seat?

If there's a serious medical case in, say, somewhere like Oodnattata, and all it takes is a properly designed plate, if the augmenation is available, then why in the hell are we settling for anything less?

[K-941]

Howabout :ok: yet again!

[Track Coastal]

thisthreadneedssplitting.com....mods?

[OZBUSDRIVER]

I seem to remember getting bashed up some where around here for arguing for WAAS as opposed to GRAS. GRAS was a great idea for Honeywell and the AirServices guy who helped design the system. It did give CatIII approaches which are still badly needed in Perth, but at a price. Remember the argument so well, GRAS provides "soverign" control...read that as a toll!

Bob, We already have a reference station in Canberra and there is another one in Hawaii providing a signal for the MTSAT. This particular baby does fall right in the lap of DoTaRS, specifically, the Regional Services part of DoTaRS. The money spent on setting up the ref stations around the capitals to provide for a GRAS would go a very long way to supply enough ref stations around Aus and another uplink over in the West. CC is quite correct. WAAS would save far more lives than ADS-B. YHOT, YBLA and YLHR would all be a distant part of history if we had WAAS in the GAFA.

WAAS is a lot more than just a signal for aeroplanes. DoTaRS must look at this the same way the US does. How much economic benefit for the community can be derived by investing in a better road. I am sitting right next to myself just thinking I am on the same side as Leadsled:}

Dick, this is where your economic rationalist mates come unstuck. User pays and affordable safety does not equate with a government spending money on public works. That model of the ninties has doomed us to not accessing the likes of WAAS unless someone can be charged for it. Your fighting for the least cost to GA has precipitated and locked out neccessary technology gains. Even a capitalist US can see the benefit of allowing the technology free to the world.

[Flying Binghi]

Even a capitalist US can see the benefit of allowing the technology free to the world.

...yes, even Osama agrees :E ............dum-de-dum-de-dum

Hat, coat - I'm out of here :cool:

[Howabout]

Jeez, I'll give it away from here, but:

Apparently WAAS has the potential to give us CAT 1 into every remote airfield provided we have an appropriate plate. GBAS/GRAS will not get me into anywhere other than where there is a ground based piece of kit, or a regional ground based piece of kit, that returns revenue to the owner.

Sometimes it's hard to sleep at night trying to make sense out of a seemingly simple proposition. Aviation used to be relatively understandable.

[Sunfish]

Guys, WAAS is going to have to come, AsA won't provide it because they can't make money out of it because its a public good.

It's not going to be you guys that force this outcome. It's the farmers and miners who want it because it is precise enough for some automatic vehicle control applications that increase productivity. Picture your average cocky who has just laid out $500,000 for his latest John Deer toy and discovers that he can only use 60% of it's features because we don't have WAAS enabled GPS available.

Here is the link covering John Deares applications:

Receivers - How accurate are they (http://www.deere.com/en_US/ag/servicesupport/tips/agmanagementsolutions/AMS-receivers-how-accurate-are-they.html#)

[xinhua2]

Sunfish, you are 100% on the money. General Aviation = small voice Wheat farmers with auto harvesters = big voice it is all to do with the commodities based economy.

And yes it is a common good , Airservices just upset they can't charge for it other than the issue of approach charts.

[Dick Smith]

OZBUSDRIVER, no, not my economic rationalist mates from the 1990s, it was the Labor party in the 1980s that introduced user pays – deciding not only that the air traffic control system should be funded by the industry, but also should make a profit for Government. If I remember correctly, this was after the Bosch report.

I was never a supporter of this – not even involved. When I got involved I said that if the industry has to pay, we have to make sure that the costs are affordable. It is all common sense to me.

[Bob Murphie]

GPS guided tractors are a voluntary evolutionary thing and with demonstrated benefits. There was no safety case to consider and the Agriculture Industry was not forced by mandate to adopt them. Neither was there any regulatory reason for surveillance.

OZBUSDRIVER;

Is a WAAS satelite available to us now?

[Flying Binghi]

GPS guided tractors are a voluntary evolutionary thing and with demonstrated benefits. There was no safety case to consider and the Agriculture Industry was not forced by mandate to adopt them. Neither was there any regulatory reason for surveillance.

OZBUSDRIVER;

Is a WAAS satelite available to us now?

...Tractors now, eh :cool: ...at least if the GPS stops working all that happens is the operater just has to wake up ;)

Here's what's out there now -

Chesterfield Australia's noted John Deere dealership in Goondiwindi.... new Chesnet system offers 2cm repeatable accuracy, courtesy of a Real Time Kinetic (RTK) base station network that remains operational 24/7 to guarantee its performance year-in, year-out.

Via -
http://qcl.farmonline.com.au/news/nationalrural/machinery-and-equipment/general/2cm-accuracy-with-new-rtk-cropping-technology/1278670.aspx

[OZBUSDRIVER]

Bob, that WAAS satellite is visible right NOW as a fixed satellite within the constellation. It is only locked out because we haven't got the ground reference stations and another uplink to transmit the WAAS correction. Japan want us to get on board. Its the same satellite that provides your weatherchannel satellite images so you can see what it does every hour and where its footprint is (It actually would provide a better coverage here than it does in Japan, they are further over the horizon than us)

I think we are getting away from the money trail. GRAS and hundreds of millions and lost FOREX hedge bets...that is a juicier story than Dick and ADS-B

[Track Coastal]

I think we are getting away from the money trail. GRAS and hundreds of millions and lost FOREX hedge bets...that is a juicier story than Dick and ADS-B

Absolutely! This thread needs to be split FFS.


Let one crew talk satellites and things that go ping;
The other's Airservices, DOTARS, the minister, The charter, The service and missing millions.

[peuce]

Track Coastal, you forgot one:


Let one crew talk satellites and things that go ping;
One.. Airservices, DOTARS, the minister, The charter, The service and missing millions.
The last ...WAAS-guided buzz bombs


... to the sin bin for me !:=

[Dick Smith]

I totally agree- can a moderator split the thread so we can concentate on the big issue- the claimed loss of tens of millions of our money!

[max1]

Actually Dick, the vast majority of the money comes directly from the airlines. People need to get away from the old thinking that ASA is bankrolled by the government and costs the taxpayer money. It is actually a contributor to the government coffers.

I will also not be happy if these rumoured stuff-ups are true. If we have a reason to be upset it is because, if these situations have occurred, the government won't be getting their dividend. Indeed being the sole shareholder it may be called upon to bail out its corporation.
It may be semantics, but it is not 'our' money until ASA hand over the dividend.

By the way, the annual report has to be with the minister BY the 15th, and then tabled in Parliament. If you want to apply pressure try to find out where it is with Big Tony.

There is sure to be some juicy stuff in there.

[Dick Smith]

By "our" I meant our industry- not general taxpayers.

[Quokka]

...but max1 you know it's an Investment Bank now... not an Air Navigation Service Provider.

[Air Ace]

If the TAAATS system was bought and paid for in France, where did the US get involved? :confused:

A subsidiary registered in the State of Delaware, the home state of tax lurks perhaps? :E

Are 700 million good Australian taxpayer dollars being gambled for a 60 million tax windfall and at whose expense, Australia or the USA? :confused:

[Dick Smith]

I understand it was at the expense of the American government ie the taxpayer.

Appears some promotors made a mint!!

[Air Ace]

So, we have a Delaware Corporation with an issued capital of 1,000 $1 shares, a wholly owned subsidiary of an Australian statutory authority with extensive guarantees from the parent Authority, gambling $700 million of tax payers funds on a $60 million tax break of US tax payer funds? Does AirServices have $700 million in assets to back the guarantees or did the Australian Government provide the guarantees?

Aside from the obvious short term wind fall in executive bonuses, why would a Government authority take financial risks of that nature or want to be see exploiting tax laws?

I thought those type of deals ceased after the affair with Gough's mate Tirath Khemlani went sour? :confused:

And more importantly, who had the authority to sign off on the deal?

There would have to be 10% to 20% "brokerage, commission and cut lunches" in the deal - I wonder who pocketed the commission?

[K-941]

Fark :ugh: :{ :ugh: :mad: :mad:

[Howabout]

Air Ace,

I am a total thicko when it comes to things financial. But it sounds decidedly dodgy.

Could you please put it in simple terms. In short, 'please explain' in simple terms what all this means.

[Dick Smith]

It appears the US government introduced a tax incentive scheme to assist US manufacturers.

It also appears an error was made with the legislation and some dodgy people worked out that they could re finance existing capital equipment projects even if they were not made in the US and still take the tax saving.

The rest is history.

Interesting comment about bonuses - I wonder what the cash benefit of this scam was to each manager?

[Air Ace]

Why else would one register a "Delaware Corporation" (http://en.wikipedia.org/wiki/Delaware_corporation)?? :confused:

[PA39]

When its not your hard earned money, you don't care how you waste it.....oh dear here we go once again. Perhaps with the US led financial meltdown fiasco, there won't be any money to pull AsA and assoc. out of the s..t.

Vote 1 Obama !!

[Vref+5]

I find it difficult enough keeping up with the CAAs and CARs, but shouldn't the Financial Management Act (FMA) detail what/where/how Financial Delegates of the Federal Government do with our tax dollars?

[Air Ace]

The Rudd Government yesterday called on the US Administration to tighten corporate legislation and regulation to avoid the exploitation which led to the US economic "melt down". At the same time ASA has a corporation registered in Delaware, presumably to exploit corporation law for which that state is notorious.

Bit hypocritical really! :ugh:

[Howabout]

Air Ace,

Keep it going buddy - and Dick as well. If half of what has been alleged here is true then there are people who should be wearing striped clothing and looking over their shoulders in the showers.

[Quokka]

At the same time ASA has a corporation registered in Delaware, presumably to exploit corporation law for which that state is notorious.


The question is being asked as to whether the shareholder... the Howard Government... was aware of the AsA investment banking effort in Delaware. We've only just become aware of it now... after they announced a loss.

Follow the money trail...

[Bob Murphie]

These allegations need investigating by the Commonwealth Ombudsman who will only act after a written submission to do so. If someone... anyone, doesn't act, and the issue remains unresolved, Airservices can take the step of an "own motion" investigation in which terms of reference/ complaint, can be subtly inserted to reflect an answer they want.

Once the matter is under investigation AsA naturally remain silent. I am not sure if political intervention is allowed. A result could take a year or more.

It is better that an outside influence takes the matter up with The Commonwealth Ombudsman if only with an initial receipted complaint so that AsA are prevented from taking the step themselves.

[Air Ace]

The "shareholders" are the people of Australians. The ASA subsidiary (which manages contracts in Hawaii) is registered in Delaware and has offices in Washington.

Delaware is notorious as a "state of convenience" for corporation registration.

Has ASA declared real financial losses or are there only the normal balance sheet provisions associated with loans?

If the US ASA subsidiary has incurred losses, the Minister for Transport owes an explanation to the people of Australia.

[Kangaroo Court]

If the Australian Taxpayer is supposed to subsidise a loss of an American venture; I say we need full and complete disclosure as to the amount and at what currency exchange rate this alledged fiasco is to be buried at!

What about just declaring a bankruptcy status in America and running like hell, like the Yanks do!

Dick, I was down at Port Macquarie the other day and the Hastings District Flying Club has a printed book of it's fifty year history. Very well put together and it recalls your input to making it a great place in Australian GA history. Pick up a copy next time you're up or have me send you one.

[zoics88]

Airservices Australia 06/07 Annual Report financial notes:

s. Derivative financial instruments
Airservices Australia Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations......

Airservices used financial instruments provided by the American insurance giant A.I.G.’s London unit, known as A.I.G. Financial Products, or A.I.G.F.P.

A.I.G.F.P. specialise in intricate financial contracts known as credit derivatives, which insure debt holders against default, protecting clients from losses on debt or foreign currency and interest rate fluctuations. They are fashioned privately and beyond the ken of regulators — sometimes even beyond the understanding of executives peddling them.

When A.I.G.’s credit ratings were down graded on 15th Sept, from AA to A-, the need for more money increased beyond what it could borrow and it asked the US Federal Reserve for help. That help came the very next day with an $85 billion loan to A.I.G., offering it the chance to sell its assets in an orderly fashion and theoretically repay US taxpayers for their trouble.

This down grade in credit rating also triggered a clause in AsA’s contract with A.I.G.F.P. whereby AsA took on full liability for its exposure. This exposure was valued at US$300 million.

AsA senior management moved quickly to ameliorate this situation by seeking and receiving Australian Federal Government guarantees. These guarantees were finalised on or around 18th Sept.

By way of comparison, Goldman Sachs is estimated to have had $20 billion worth of risk tied to A.I.G., not accounting for collateral and hedges that Goldman deployed to reduce its risk.

[Air Ace]

zoics.

What was the original transaction which initiated the $300 million liability? Was it purchase or lease of equipment or associated with ASA's US tower contracts? :confused:

[zoics88]

Ace,

still trying to find out full details...

as you may appreciate, this info is highly guarded as commercial in confidence!

will post as soon as known.

Z

[Philthy]

Ever noticed how many N-reg bizjets are registered to crowds in Delaware? Not for no good reason... ;)

[hoboe]

So now we know why we wont be getting a 'bloody good payrise';

they bet the money on black, and red came up...:=

[5miles]

...this info is highly guarded as commercial in confidence!

AKA... how do we explain this FUBAR if word gets out. :suspect:

[Air Ace]

Governments should be exceedingly careful in the use of "commercial-in-confidence" provisions when it has 20 million share-holders with a right to know!

Is the deal really commercial-in-confidence, or is it a deal Government would prefer it's 20 million share holders did not know about?

[Maggott17]

Ever noticed how many N-reg bizjets are registered to crowds in Delaware? Not for no good reason...
Are you sure that they are not LIBERIAN registered BULK carriers?

[peuce]

Only caught a smidgen of 4 Corners last night ... but they seemed to be talking about some questionable transactions coming out of Delaware Corporations ... by some Australian organisations ...

[5miles]

Only caught a smidgen of 4 Corners last night ... but they seemed to be talking about some questionable transactions coming out of Delaware Corporations ... by some Australian organisations ...

The prime target of that story was how an ex-employee of Lichtenstein's LGT bank has sold a truckload of internal correspondence, implicating hundreds of high wealth individuals & companies in tax avoidance transactions.

The Australian connection was via the Lowy family where they alleged Frank & sons have been involved in some creative transactions.
Delaware did get a fair mention and I gathered that that is where the Lowy's US companies are registered.

[Fly_by_wire]

whats the latest? Any news??

[max1]

ASAs annual report is due on the Ministers desk by no later than October 15, and then we have to wait for the Minister to table it in Parliament. I would think the Minister should have no reason not to table it quickly when Parliament sits.

It will be for the period 07/08 and will only be up to end of June.
It may take a question in Parliament to unearth the last few months going-ons.

It is worth reading the 02/03 report about the cross border transactions. A quote from there:

The corporation’s expertise and skill in innovative financial management was again
showcased during the reporting period. Airservices Australia received an international
award for commercial excellence for completion of a United States cross-border
lease. The lease realised gross revenue of $46.4 million with the benefits from
the transaction underpinning the corporation’s ability to insulate its customers
from higher charges.

Still unsure what dealings went on. But, I believe it was these dealings that led to Delaware Shelf Companies, and exposure to US$700+ million dollars.

What surprises me is that large corporations like BHP can get their annual reports out reasonably quickly, even though their activities are world-wide and involve different currencies , accounting procedures, legislations ,etc and employ a hell of a lot more people than ASA.
ASA have @3000 employees, the great majority of their staff are in Australia, and they have spent millions and millions of dollars on SAP, to ease their reporting. Yet it takes them over 3 months to generate an annual report. Are they writing it or inventing it?

The cynic in me leads me to suggest that they haven't got too much of an idea what they are doing, and use this breathing period to massage the books (especially in an EBA year with their staff) to work out how much they can downgrade profits , by committing to long term infrastructure etc. Then following cries of 'poor' in negotiations, ramp up profits for the next two years, reward those with their hands on the purse strings with large bonuses and move on to the next cycle.

[Brofman]

Airservices has tabled a progress report on its emplooyee equity program today but no sign of the annual report as yet.

[Brofman]

The report has been tabled. It offers no obvious leads and in fact repeats earlier advice about the cross-border financing arrangement.

[Dick Smith]

Does it tell the truth about how much of our industries money has been lost on GRAS- see the first post on this thread.

Does it hold anyone responsible?

[james michael]

Truth is a strange thing Dick - seems to mean different things to different people :ugh:

how much of our industries money has been lost on GRAS (my lilac for emphasis)

I am not going to be an apologist for airservices but let me put the FACTS as I find them:

Have a read of the ASA Annual report 06/07. Pages of note are 40, 49, and 74.

The answer to Brown made it plain the GRAS project – like any other related R&D – comes from OCA, not monopoly charges on “our industry” like airways charges. ASA makes around $25M per annum from OCA and that profit goes to the Government and is never going to be trotted out for “our industry”. It is, as ASA point out, a totally separate bucket.

Therefore we will never have to pay for GRAS. It’s some R&D that Airservices seemingly decided was not worth pursuing. Perhaps that might have something to do with the study that CASA commissioned from Booz etc consultants?

Also note P42 onward of the Corporate Plan http://www.airservicesaustralia.com/media/corporatepubs/docs/corporateplan.pdf

Alternatively, Airservices could drop all R&D and copy the USA like with NAS, banking, automotive, war, obesity ;)

What truthful answer have you received back from the Minister to your complaint about GRAS R&D, Dick?

[Dick Smith]

So was the amount written off (lost!) paid by the taxpayer ie us! or does no one pay?

How much was it?

I think I wanted AOPA to write to the minister -as an organisation representing thousands was- hopefully - more likely to obtain a full answer.

[undervaluedATC]

Air traffic controller in cross-border financial deal : thewest.com.au (http://www.thewest.com.au/default.aspx?MenuID=159&ContentID=105422)#


Air traffic controller in cross-border financial deal
30th October 2008, 16:45 WST
The federal government’s air traffic controller has a potential exposure to a $1 billion liability, it’s annual report shows.
Airservices Australia’s annual report for 2007-08 says the organisation is involved in a deal relating to an air traffic system it uses, known as The Australian Advanced Air Traffic System.
“If certain events occur, the Airservices Australia Group could be liable to make substantial payments under the lease guarantees and indemnities,” the report says.

“The future underlying exposure against which these guarantees and indemnities have been provided are up to a maximum of $US728 million” ($A1,090.56 billion).
Airservices has so far refused to outline details of the arrangement.
“Expert external advisers consider that unless exceptional, extreme and highly unlikely circumstances arise, the Airservices Australia Group would not be required to make a significant payment under these guarantees and indemnities,” the report adds.
It is not clear what those extreme circumstances are.
Exactly who the arrangement is with is not spelled out in the report but it appears to be an international deal given the notes that appear under the headline: “cross-border financing arrangement”.
“Management regularly monitors the factors affecting this transaction on an ongoing basis,” the report says.
Airservices is a wholly government-owned organisation but does not rely on taxpayer funding.
CANBERRA
AAP

http://www.airservicesaustralia.com/media/corporatepubs/docs/annualreports/areport0708.pdf

[james michael]

Dick

What do you not understand about "R&D"?

I think it is called speculate to accumulate. From memory it is not unique to Airservices - in fact R&D is one of the few things left to Australia once we sell off our mineral resources.

You want someone else to write to the Minister? You are suggesting they claim "paid by the taxpayer i.e. us"? Dick, the Comedy Festival is coming up, book yourself in as a stand up. Businesses write off millions on R&D every year - oh gawd, I give up.

[Dick Smith]

When a business writes off millions on R&D someone obviously pays.

I have had three businesses and I have never written anything off on R&D even when I was involved in design and manufacturing.

This smells!

[Scurvy.D.Dog]

... bout as smelly as Lichtenstein Banks eh :suspect:

[james michael]

Dick

I have had three businesses and I have never written anything off on R&D even when I was involved in design and manufactering.And we look to you as an example of a risk taker and astute businessman. :hmm:

Here is but one example of R&D thinking:

Research and development, often called R&D, is a phrase that means different things in different applications. In the world of business (http://www.wisegeek.com/what-is-research-and-development.htm#), research and development is the phase in a product's life that might be considered the product's 'conception'. That is, basic science must exist to support the product's viability, and if the science is lacking, it must be discovered - this is considered the research phase. If the science exists, then turning it into a useful product is the development phase. Further terminology refinements might call it engineering (http://www.wisegeek.com/what-is-engineering.htm) to refine production so that the product can be made for a cost that appeals to consumers.

Research and development is an investment (http://www.wisegeek.com/what-is-research-and-development.htm#) in a company's future - companies that do not spend sufficiently in R&D are often said to be 'eating the seed corn'; that is, when their current product lines become outdated and overtaken by their competitors, they will not have viable successors in the pipeline. So how much is reasonable to spend on research and development? That is highly dependent both on the technology area and how fast the market is moving. Two percent of company revenue, not profit (http://www.wisegeek.com/what-is-research-and-development.htm#), might be enough in a fairly sedate market, but to keep up in rapidly changing markets, companies should expect to spend fifteen percent or more in research and development just to keep up with the rest of the pack.

Older standards hold that research looked at least five to ten years into the future, and development one to five years, but those timeframes have shortened as the speed of technology has increased. It is always difficult, in times of tight money (http://www.wisegeek.com/what-is-research-and-development.htm#), to justify spending significant sums on something that may not yield (http://www.wisegeek.com/what-is-research-and-development.htm#) returns for another ten to fifteen years, if ever. But spending on research and development is vital to continued growth and prosperity, both for a company and for a country or world.

Dick, no wonder you wanted someone other than yourself to rip into Airservices about the GRAS R&D. How about a tip for next Tuesday as it seems you don't want to back a loser yourself :p

[Teal]

From today's crikey.com.au
AirServices burns $14.billion. Who's to pay?

Ben Sandilands writes:

Is the Rudd Government about to impose a very costly version of the ‘Ansett levy’ on domestic flights to pay for a disastrous foray into foreign currency funding by AirServices Australia?
While the answer may be an emphatic ‘No’ there is growing concern in the airline sector that it could be "Yes."
Here is the how and why of the current anxiety and speculation.
The deadline for AirServices Australia to lodge its financial accounts for the year to June 30 with the Minister for Infrastructure, Anthony Albanese, was 15 October.
Convention is for the minister to table that report in Parliament promptly.
As reported in Crikey (http://redirect.cmailer.com.au/LinkRedirector.aspx?clid=9a9365e0-5d7d-4a10-aac3-b0f776e18de3&rid=70ac6a9f-9f82-4748-a87c-e55bbfe757f1), rumors had been building about a serious mishap with what each annual report since 2004 describes as a Cross Border Financing Arrangement.
This is how the last annual report refers to the instrument, in terms that have been almost identical for the last four years: During the 2003 and 2004 years, Airservices Australia completed a cross-border financing arrangement in relation to equipment associated with The Australian Advanced Air Traffic System (TAAATS) and radar systems. The arrangement is for 22.5 years and expires in January 2026.
Airservices Australia has provided certain guarantees and indemnities to various participants in the transaction. If certain events occur, Airservices Australia could be liable to make additional substantial payments. The future underlying exposure against which these guarantees and indemnities have been provided are up to a maximum of US$743m (2006: US$ 758m). At the time of the transaction, expert external advisors considered that unless exceptional, extreme and highly unlikely circumstances arise, Airservices Australia would not be required to make a significant payment under these guarantees and indemnities.
Management regularly monitors the factors affecting this transaction on an ongoing basis.
According to insiders, the deal actually involved the sale and repurchase through a lease finance arrangement of AirServices Australia’s "intellectual property", to a Delaware corporation, or in effect, the sale to foreign investors of the country’s air traffic control system, which if true makes "equipment associated with..." the system seem like a quaint camouflage.
And because the sub prime crisis adversely affected the structure of the deal, and the indemnities given by AirServices Australia, the sums involved may exceed the figures quoted in its previous annual reports, and may be severely affected by the sudden recent weakness of the Australian dollar.
One source said it could cost AirServices around $2 billion a year, which would be enough to turn the deal into the worst cross border funding adventure by a government corporation in history.
But is this true? The Minister and AirServices have been asked and have not yet responded. At current exchange rates the immediate liability going on the 2007 report could be around $1.4 billion.
The domestic traffic stats to the full year to end of August this year show there were almost 50 million individually flown domestic sectors. Traffic is also falling. The maths of even 40 million domestic flights being levied to recover $2 billion is $50. Or an extra $100 on a return flight to anywhere however short or long.
This funding arrangement was put in place during the watch of the Howard government, and the current AirServices CEO, Gregg Russell, wasn’t in the job at that stage. Russell has an entirely different crisis on his hands, having failed to provide enough controllers to keep the system open at all times, and thus unable to charge the fees that until at least recently, produced a tidy return on investment for the government.
There is a need for the truth of the current situation to be revealed.
Is it a "little disaster"or some humungous c*ck up which has sold a vital section of our infrastructure to owners that are going to gouge us for many multiples of what it originally cost?