Background Information.

A major development in Australia’s air freight industry occurred in February 1963 when IPEC Air Pty Ltd commenced regular air freight operations using a chartered DC-3 aircraft operated by Brain and Brown. This followed the provision of freight forwarding services through sub-contractors by Ansett and Trans-Australia Airlines. The airlines had then become IPEC's direct competitors in the freight forwarding sector as well as the only carriers of its air freight.

In March 1964 IPEC applied for licences to import five Douglas DC-4 freighter aircraft and operate all-freight services between Sydney, Melbourne, Brisbane, Adelaide, Perth and Launceston. The applications were refused by the Director-General of Civil Aviation in December 1964 on the grounds that further facilities for the operation of freight services on trunk routes were not justified on economic grounds. IPEC challenged this refusal in 1965.

The High Court subsequently ruled in favour of IPEC on the question of the issue of a charter licence to operate freighter aircraft but against it on the permit to import aircraft. However there was some relaxation of Commonwealth Government controls on 21 specialist freight carriers in 1977 although it is not clear whether this was a deliberate change in aviation policy. In February 1977 the Minister for Transport agreed to the importation of two Aviation Traders ATL-98A Carvair aircraft by Air Express Ltd and two Armstrong Whitworth AW-650 Argosy freighters by IPEC under the specialist services provision of the Airlines Agreements Act 1972.

However the right of the Secretary of the Department of Transport to issue the necessary import permits for these aircraft was challenged in the High court by Ansett Transport Industries (Operations) Pty Ltd. The Court upheld the Secretary's right to issue the permits in December 1977 and IPEC and Air Express were subsequently issued with import permits. The companies initially acquired aircraft from other Australian operators. Air Express bought two Douglas DC-4 aircraft from Qantas with the support of the Tasmanian Government which provided a $AUD 500, 000 loan guarantee. The aircraft were converted to freighters and entered service in October 1977 when they joined the company's two Bristol Freighters on the Melbourne - Launceston route. Air Express subsequently encountered financial difficulties and went into receivership in September 1979.

IPEC was more successful. It had purchased an out-of-hours Australian-registered Argosy 101 from Brain and Brown in 1976 and after refurbishment to make it airworthy, this aircraft entered service with IPEC on the Bass Strait route in February 1978. Two Argosy 222 aircraft were subsequently imported and introduced into the Bass Strait trade in October 1978 and March 1979. The original Argosy 101 was then placed in reserve and later sold in line with undertakings given to the Government when the company imported the Argosy 222 aircraft.

By 1978 TAA and Ansett were stil1 the only operators generally permitted to carry air cargo on scheduled services on trunk routes. The only exception was the route between Tasmania and the mainland where a number of smaller charter carriers such as Brain and Brown, Air Express, Forrestair, Fleet Air and IPEC operated specialist freighters.

However these companies operated older aircraft such as the Douglas DC-3, Douglas DC-4 and Bristol Freighters which were often unsuitable and uneconomic. All operators except IPEC were subsequently taken over or ceased operations due to financial difficulties.

IPEC's operations were confined to services across Bass Strait under a written agreement with the Minister for Transport and attempts to extend Argosy services north to Sydney in 1979 were unsuccessful.

In May 1979 IPEC was issued with a charter 1icence to operate overnight freight services between Brisbane, Sydney, Melbourne (Essendon), Perth and Adelaide using DC-3 aircraft. The company commenced a Melbourne - Sydney - Melbourne overnight service using a Douglas DC-3 in July 1979. Other aircraft chartered by the company provided connections to Brisbane and Adelaide while IPEC's Argosy aircraft operated to Tasmania. The DC-3 freighter was withdrawn from service in late 1979 as a result of high fuel costs, limited payload and expensive cargo handling procedures. Despite this IPEC continued to act as a forwarder for mainland air freight by chartering TAA and Ansett aircraft and by using a number of smaller operators.

The Airlines Agreement Act 1981 removed freight from the ambit of the two airline policy and the Airlines Equipment Amendment Act 1981 excluded freight from the capacity determination process. These changes eliminated controls over freight rates and removed many of the restrictions on trunk route freight operations. The amended legislation also made provision for pure air freight operators to have access to large jet engined aircraft suitable for their operations. Certain obligations as to the use and disposal of such aircraft were also imposed on the operators. They were required to undertake not to up1ift passengers on their designated jet cargo aircraft and when the aircraft were to be sold they had to either sell them overseas or obtain an undertaking from the Australian buyer to comply with the obligations.

In March 1982 IPEC, which was already operating charter services across Bass Strait, was issued with an airline licence for cargo operations between Essendon and Launceston with its Argosy aircraft. The licence was extended to include Melbourne - Sydney - Brisbane - Rockhampton - Townsville services in September 1982. Operations to all ports except Rockhampton commenced in the following month.

The Melbourne - Adelaide route was added to the licence in October 1982. IPEC also introduced a Douglas DC-9-33F freighter aircraft into domestic charter operations from Melbourne to Hobart and Launceston in September 1982. This was the first large jet aircraft to be used on domestic services by a cargo-only operator. The Argosy aircraft previously used on this route were redeployed on the nightly freight service between the eastern state capital cities. The company also re-acquired the Argosy 101 which it had earlier sold.

This Douglas DC-9-33F was a customised version of the standard DC-9 operated by the domestic airlines. Modifications such as a stronger floor and more powerful engines enabled it to carry up to 18 tonnes of cargo. The three Argosies used by IPEC are the only aircraft operated by a domestic airline that were specifically designed as freighters. The two Argosy 222 aircraft have a maximum payload of 14 tonnes each while the Argosy 101 can carry up to 13 tonnes.

The third largest carrier of air cargo on scheduled airline services in 1985-86 was IPEC. This company was solely a charter operator until March 1982 when it commenced airline operations. Traffic on its airline services grew rapidly and accounted for 15 per cent of domestic airline cargo movements on a weight basis and 10 per cent in terms of tonne-kilometres in 1985-86. A major factor in this expansion was the negotiation of an airfreight contract with Australian (formerly Trans-Australia Airlines).