More Aussie companies sold- more wealth shipped off overseas

[Dick Smith]

Australian owned Aeromil has recently been sold to foreign owned Hawker Pacific.

AMSA has just given a $640 million contract to foreign owned Cobham.

This means all their profits and wealth creation will be drained from Australia and will head off overseas.

A few decades ago most of the Search and Rescue money would end up in the hands of local Aussie owned GA businesses. Remember PADS?

Why can't we own and operate successful aviation businesses that can win these contracts? Are we that mediocre ?

By the way- who owns Hawker Pacific? Where does the money go?

[TWOTBAGS]

Hawker Pacific is now 67% owned by HNA...... who just bought into VAH.

Join the dots.

Why can't we own and operate successful aviation businesses that can win these contracts?

I was going to go into an explanation but the answer is chronic undercapitalisation, of the organisations that actually have the operational capability.

Are we that mediocre ?

Absolutely not, there are many Australians that have left our shores to much better things. They just don't need to put up with the constant BS from persons and organisations that have opinions but not skills.

[Sunfish]

Dick, the reason we can't own and operate successful aviation businesses in Australia is exactly the same as why every other successful Australian business is sold overseas; the economic mandarins of Canberra have built their careers on the theory that no successful businesses can be operated from Australia, and they do anything and everything to prove that their theory is correct.

In their minds the only businesses Australia is "allowed" by economic theory to be internationally competitive are mining and agriculture, anything else is regarded as an aberration that is clearly the result of market distortion by Government action. Therefore any successful Australian non mining, non agriculture business must be suppressed to make their theory work.

The entire taxation and regulatory system is designed to prevent successful development and operation of Australian owned businesses at an internationally competitive level.

Examples: - Fringe benefit taxes make it difficult for Australian businesses to engage with international customers here or overseas. this kills export opportunities.

- taxation treatment of overseas profits.

- taxation treatment of capital investments Eg. depreciation.

-taxation treatment of overseas expenses, travel, etc.

- a rotten system of "Australian standards" and Australian licensing and regulation that does not harmonise with anything on the planet.

Aviation regulation is just a microcosm of the whole economy - we are not ALLOWED to be competitive.

The net result? The only viable business strategy for Australian entrepreneurs is to build a business here and prove your model is locally successful, then sell it to an international player.

if you try and run something here that is remotely internationally successful looking, Canberra will do its best to shut you down, the car industry is a case in point.

I fought this battle for two years in the Geoff Kennett Victorian government and came up against these bastards in Canberra time and again/

[truthinbeer]

Overseas ownership has an unfair tax advantage due to ability to employ transfer pricing and high interest loans from o/s parent to local operation to ensure that the business will never make a profit or pay tax in Australia. Hard to compete against a foreign outfit that does not pay tax at the same rate that you do.

[Dick Smith]

Who is HNA and VAH? Are they Chinese ?

Do we all have to look this up. Why not communicate the full details. What country?

[Plazbot]

Sounds lazy son.

[hiwaytohell]

Here you go Dick:

Virgin Australia sells stake to China's HNA Aviation Group (http://www.smh.com.au/business/aviation/virgin-australia-enters-agreement-with-chinas-hna-aviation-group-20160530-gp7peo.html)

Billionaire Chen?s HNA to Acquire Stake in Virgin Australia - Bloomberg (http://www.bloomberg.com/news/articles/2016-05-30/china-s-hna-to-buy-13-of-virgin-australia-plans-to-lift-stake)

But in response to your question Why can't we own and operate successful aviation businesses that can win these contracts? Are we that mediocre ?

No we are not! When it comes to innovation and service delivery there are Aussie aviation companies that are as good as any in the world. However smaller Australian aviation businesses have a very hard time raising capital to expand and grow, because banks and investors see aviation in this country as high risk.

In respect to government contracts such as AMSA, the bureaucrats who decide these contracts equate size to capability, therefore putting Aussie suppliers at a huge disadvantage. This was the case with AMSA where there were more than one fully conforming & cheaper Australian owned options, and of those Aussie options at least one offered substantially more capability. However Canberra in its wisdom still chose to award the contract to a non-conforming option offered by a "large" corporation that did not meet the initial tender prerequisites (AMSA subsequently quietly changed the tender conditions to allow Cobham's bid to comply).... if you are interested I suggest you follow-up with Senator Michaelia Cash who has been on the trail of this one, and maybe Terry Flynn at Pearl.

[thorn bird]

Dick,

Sunny is so right. Just look at all the tax free dollars that disappear to off shore tax havens each year from our airports alone.

It boggles my mind that our political elite are so ignorant and so hypocritical.
Australia is by far the most over governed country in the world, and it is costing us dearly.

The aviation industry is governed by bureaucrats who govern for their own self interests, not for the interests of those they govern and our politicians completely ignore this fact.

The hypocrisy of it all!!

Politicians, of all persuasions, make statements of their intention to be fiscally responsible on one hand, then completely complicit or blind to their bureaucrats squandering hundreds of millions of dollars on a regulatory folly that unequivocally, undeniably is destroying a whole industry, completely devoid of any quantifiable improvement in what allegedly the regulatory reforms are intended to do, enhance safety.

Almost half a BILLION dollars and thirty years so far to half finish them. How much and how long to complete them?
There will be no industry left long before the regulations are finished, each new suite adding massive cost of compliance.

There is simply no point in continuing with this folly, if the politicians are true to their statements of fiscal probity and are loth to accept the obvious and demand real reform, they should put the industry out of its misery and shut it down completely before CAsA completes the process by a thousand paper cuts of regulatory incompetence and hundreds of millions of wasted dollars.

The solution is so frustratingly simple and cost effective. Ken Cannane and AMROBA showed us the solution, even including a timeline. A few million dollars and a year or so, and our industry unshackled from the burden of overregulation could begin to imagine a future with all the benefits that would bestow on our country. Below an example from an article in Aviation Week illustrates of what could be.

The PM and the opposition make mother goose statements of supporting jobs, encouraging innovation and enterprise on one hand, then completely ignore the efforts of their bureaucrats to smother them.

It is inconceivable to me that AVM Skidmore can, with a straight face, say the industry is in good shape.

To me he is either very naive, if he does actually believe that. A complete incompetent, if he accepts the overwhelming evidence is true and has no vision to fix it, or an arrant coward, if he's not prepared to face down his mis-management team and institute real reform.

We should be asking our politicians why it is that comparable countries to Australia have vibrant aviation Industries?

Countries like Ireland, New Zealand, Canada or Brazil.

Is it because they have a greater need for aviation services?
Some maybe, but Ireland and New Zealand hardly are of a size that would support that theory.

Is it because their citizens are more entrepreneurial?
I don’t believe that is true.

Is it because their citizens are more innovative?
I don’t believe that is true either.

The one glaring difference I see is their regulations support their industries whilst ours suppresses it.

From an Aviation Week article.

"The Irish government and the Irish civil aviation authority (IAA) have adopted a more forward-thinking orientation on aviation than most of their, often much larger, counterparts in Europe.

The policy is paying off — big time. Ireland is one of the smallest countries in Europe, with just 4.6 million inhabitants, yet about half of the world’s leased aircraft are registered in the country and the world’s first duty-free shop was established here. It is also home to Europe’s largest airline by passenger count and the world’s largest airline in terms of international enplanements: Ryanair.

Aviation executives in Ireland commonly joke that it took an Irishman to get International Airlines Group (IAG) off the ground and grow it into an agile, profitable and diversified airline group: IAG CEO Willie Walsh, born in Dublin and a former Aer Lingus CEO.
Aviation is central and strategic to the Irish economy, IAA CEO Eamonn Brennan noted.

“We live on an island; we don’t even have bridges. This is a key thing.” Aviation contributes just over €4 billion ($4.3 billion) directly to the Irish GDP, comprising €1.9 billion from aviation, €1.3 billion through the supply chain and €0.9 billion from associated spending by people employed in aviation.

It supports 26,000 jobs directly and a further 16,000 in the supply chain. Ireland’s tourism industry, which is dependent on aviation, accounts for another €5.3-billion GDP contribution and 180,000 jobs.

The Irish government has earmarked aviation—along with information technology and the pharmaceutical industry—as high-value sectors to the Irish economy. It launched a new aviation policy in 2015, after two years of consultation. “This government policy says that we have to make the industry more competitive and innovative.

The global aviation industry continues to expand and is estimated to double over the next 20 years. This presents opportunities for Ireland in virtually every area of aviation such as airlines, pilot training services, satellite-based air traffic control services and aircraft leasing services,” Brennan said.

Aer Lingus CEO Stephen Kavanagh told the Executive Report that Ireland’s embracing of deregulation and liberalizing access had paid off.

“It’s a very small economy in the global context, but it’s a very open economy, one of the most open economies and on a par with Singapore,” he said.

“Ireland has recognized the requirement for connectivity and, as an island, sees that air transportation is how that’s delivered. We have very strong indigenous competition with Ryanair, but there’s the ability for us to compete not only in the Irish market but also across the Atlantic and in Europe. Deregulation has allowed us to grow scale.

Deregulation, competition and liberalization have brought out the very best in terms of behaviors and competitive response. We’re efficient, we’re focused on returns, and the Irish economy has benefited and the consumer has benefited.”

Kavanagh also believes competition reaps its own rewards. “Competitiveness has fostered demand,” he said. “We see a higher propensity to travel than in most other nations and that’s because we’ve created an opportunity for competitive airfares.

“We are one of the two largest Irish airlines, but there are others and the aviation eco-system, including airlines, lessors, MROs and travel technologists, has prospered because it’s been open to competition. To remain relevant, we have to remain competitive and everyone has reaped the benefits.”

IATA DG & CEO Tony Tyler told the Executive Report, “the Irish government has taken a very pro-aviation strategy for some years now,” pointing out that the country reduced its departure tax to zero in 2014. With the growth and planned second runway at Dublin Airport, there are “clearly signs that the tax policy is bearing fruit and near neighbours should take note,” Tyler said.

Irish Transport Minister Shane Ross is scheduled to speak during the AGM’s opening sessions on Thursday morning".

[Ixixly]

In my mind it comes down to one thing, The Politicians do not care one iota about Aviation at anything below Airline Level, they very rarely see it, they very rarely experience it, ignoring it does almost no harm to their political ambitions as we are a small minority group of voters and in no way does General Aviation help line their pockets. So why would they bother with us? CASA knows this as well, so long as they continue doing things the way they're doing them, their Political Masters are kept happy.

I love GA and have no real desire to go to the Airlines, I'm lucky enough at the moment to be employed by an excellent company that pays me well and gives me excellent opportunities and I want to see more people being given the chance to have the same experience I'm currently having, preferably without all the muck required to get here which will only come about with massive change to the way CASA interacts with the Industry, but I honestly cannot see a way that we can gain the political leverage required to force the Government to actually do anything about it without getting someone to represent us in the Senate, I honestly believe this is where we need to push hard and as one group.

[FlyingChipmunk]

Dick,
if you do not know who HNA is, you have lost your grasp on aviation.

When I left home, SYD, 7 years ago, I joined a HUGE Aussie expat community who will never return to work in OZ. I found out why very quickly. We will now only invest and return home to holiday regularly, baulk at the rising costs, smile wryly, and eventually retire at somewhere nice on the North Coast.

Aviation is Asia and Asia is aviation for the next few generations. China has outsmarted and penetrated OZ in ways you won't even notice. HNA owns everything. I mean everything.

Almost every tail, even Jackie Chan's Embraer ( hence the logo similarity), is owned by HNA. They then went on to build airports, buy hotels, ground transport companies, catering businesses, HR companies, flight training schools, aircraft interior manufacturers, .......should I go on?

Oh, and most if their crew hotels around the world. You name a brand of hotel, and they have a share in it. They even own restaurants around the world with massive crew discounts for affliated staff.

I cringe to hear of an ab-initio in OZ saying his life is aviation in OZ, unless Ambition does not hold priority over that surfboard and schonner. Hence, you now have reluctant pilots with families left behind from QF, Jetstar, VB, REX etc lining up for interviews in the Sandpit each day. Better late than never.

Tax free wages, or 12% taxes here in Sillypore....why not?

Fair dinkum aviation in Asia, like it or not, embrace this, if you can't beat it:

HNA Group: Group Profile (http://www.hnagroup.com/en/corporation/group-profile/about-us/index.html)

Oh, and they're trying to buy out our airports as well :)

[LeadSled]

Sunny, Thorny,

Well said!!

Vote Labor next Saturday, vote for increased income tax, increased superannuation tax, increased capital gains tax, and a Minister who makes no effort to disguise his contempt for aviation in general, and GA in particular. The only boom will be the deficit blowing out.

Oh! And maintaining an uncompetitive company tax structure, to further discourage investment in Australia, whether it is Australian or foreign.

Tootle pip!!

PS: The biggest foreign investor in HNA Group is George Soros. The maximum allowed by applicable PRC law. And who, by the way, believes that Brexit signals the eventual end of the EEC as we have known it, he is not often wrong.

[gerry111]

LeadSled,

I reckon that whether Labor or the Coalition win government next Saturday, very little will change. Both parties are simply so close together in ideology. (Although they try to fool us all that they are completely different during election campaigns.) Perhaps you may explore genuine independents?

If you believe that the Coalition is totally GOOD and Labor totally BAD, then I reckon you've really been suckered.

On Sunday morning, the sun will rise and the magpies may caw.

But CASA regulatory reform will continue forever...

[Dick Smith]

So does that mean Aeromil and Hawker Pacific are now effectively Chinese owned?

Some complained about selling the Darwin wharf. What about aviation maintenance organisations?

[CirrusSR22T]

Mr Smith, I can assure you that Hawker Pacific and Aeromil are not owned by the Chinese...

Two Tea Bags does not know what he is talking about in this instance.

Hawker Pacific is owned by Two USA based companies, So it is 100% U.S. Owned.

PM me if you would like or need any further information on the subject.

[Andy_RR]

Look at Australia's current account - we've been borrowing to fund our collective lifestyle for the last forty-odd years. We can only keep doing it if we sell off our asset base to pay the credit-card down from time to time. The alternative is to have our credit cut off and take a huge dive in our standard of living.

http://cdn.tradingeconomics.com/charts/[email protected]?s=aucabal&v=201606141716n&d1=19160101&d2=20161231

[Arm out the window]

Not to dispute the figures there, but 1980 dollars are worth about 4 times 2015 dollars in relative terms, so the deficit would equate to about 5 billion rather than 20, for comparison purposes.

[Andy_RR]

That's OK, AOTW, but the debt from 1980 has not been retired, is still being serviced and at interest rates far exceeding the rate of inflation...

[Andy_RR]

Here's the capital flow - virtually a mirror of the current account, which is why the AUD is't being trashed. This is inward-flowing capital is basically foreigners capital developing and buying up the Aussie asset base. That's OK up to a point, but the profits those assets generate are shipped offshore at the whim of the foreign owners.

http://cdn.tradingeconomics.com/charts/[email protected]?s=australiacapflo&v=201606141716n&d1=19160101&d2=20161231

[Old Akro]

Just look at all the tax free dollars that disappear to off shore tax havens each year from our airports alone.

This makes me so annoyed. Low tax "Havens" include Singapore (17%) and the UK (20%)

Closer to home, the countries that we compete with for Asia / Pacific head offices, all have lower company tax rates than Australia.

The problem is not that companies are choosing to base them selves at "Tax Havens" They are choosing to avoid one of the highest corporate tax countries in the world.

Australia is a very difficult country to do business. Our tax rates are high. Our Industry support is low. Our freight costs are among the highest in the world. It costs more to get a container from the port of Brisbane to Coopers Plains than from the Thai port of Laemchabang to the Port of Brisbane.

Our fair work legislation is a nightmare with awards that typically run from 90 - 400 pages. Its nearly impossible now to employ someone without breaching one of our (frequently conflicting) labour laws.

Our Telecom costs are outrageously high. In Thailand mobile calls & data are about 1/10th that of Australia - and Thailand has better speed.

In other countries - including the UK, you can get access to politicians and senior public servants. In Australia the bureaucrats that can make decisions that can destroy your business are faceless.

Australia is doing everything it can to tell companies that they are not welcome here.

Where would you rather set up? A country that has a tax rate 10 percentage points above neighboring countries, that has high real estate costs, poor telecom support, expensive & poor airport infrastructure and will jail directors who contravene our byzantine workplace laws - or Singapore, Bangkok, Kuala Lumpur or Hong Kong?

[Sunfish]

....not to mention the nightmares of fringe benefit tax, depreciation and foreign profit taxation.

[tail wheel]

TWOTBAGS

Hawker Pacific is now 67% owned by HNA...... who just bought into VAH.

I think the only Chinese guy involved in Hawker Pacific may be Sum Ting Wong - with your claim!! :=

I have no inside information but a little internet research indicates the Directors of Hawker Pacific, Charles Fabrikant and Max Buirski are both Senior Executives of SEACOR Holdings Inc which is listed on the New York Stock Exchange.

I find it very highly improbable that HNA Group, a Fortune Global 500 company and a leading enterprise group headquartered in Haikou, China, would entrust one of their acquisitions to two American executives from an unrelated entity??

As to why Hawker Pacific acquired Aeromil - it seems obvious they wanted to add Cessna to their Beech, Bell, Mahindra (Gippsland Aeronautics GA8 and in the future the GA10 and GA18) and Diamond Dealerships.

Stick with the facts TWOTS! I get tired of wading through mountains of outrageous fables posted as fact on PPRuNe! :=

[Nulli Secundus]

Why can't we own and operate successful aviation businesses that can win these contracts?

I'd say they got out while they still could. Now, who was it again that advised that?

[gerry111]

Perhaps an Australian marketer who competes with Vegemite?

[Dick Smith]

Nulli. Good point. I will accept the blame in this case.

However the cause is beyond my control.

[cattletruck]

I've always wondered how Brazil can maintain a highly successful technological manufacturing industry and we can't even maintain a factory that assembles cars from foreign components.

[gerry111]

cattletruck,

If the Coalition wins government on Saturday night, that will all be fixed with their well thought out economic plan. Growth, jobs etc. :(

(Malcolm phoned me tonight to tell me so.)

[Andy_RR]

Jowth and Grobs? See, there's something for GA in that policy!