ACCC says consumers to be better off if proposed Badgerys Creek airport independent or government owned

The federal government has officially "declared" Badgerys Creek as the site for a second airport in Sydney. (Jordan Chong)
The federal government officially “declared” Badgerys Creek as the site for a second airport in Sydney in August 2015. (Jordan Chong)

An independent or government-owned airport at Badgerys Creek would be a win for airlines and the passengers they carry, the Australian Competition and Consumer Commission (ACCC) says.

Currently, Sydney Airport is mulling over whether to exercise its right of first refusal to build and operate the proposed airport in Sydney’s west. It has until May to come to a decision.

In February, Sydney Airport chief executive Kerrie Mather said the government’s proposal represented a “challenging investment proposition” given the Commonwealth was not offering any funding assistance for the construction of the terminals and runways that are estimated to cost between $5-6 billion.

The federal government has said it was prepared to build the airport itself should Sydney Airport not exercise its right of first refusal.

The ACCC said in its annual Airport Monitoring Report for 2015/16 the government’s move to offer no direct financial support towards building and operating the airport was “encouraging”.

“This has raised the possibility of increased competition with Sydney Airport to the long-term benefit of consumers and the economy,” the ACCC report said.

“A second international airport competing with Sydney Airport could yield significant benefits to both consumers and airlines. An independent operator of Western Sydney Airport would have a strong incentive to invest, set competitive prices and offer improved service levels to effectively compete with Sydney Airport.

“On the other hand, a common owner of the two airports would have an incentive to restrict investment and delay the new airport in order to maximise returns from its existing assets.”

When the Commonwealth sold Sydney Airport in 2002 it included a 30-year first right of refusal to build and operate any airport within 100km of the existing terminals at Mascot.

The ACCC described that right of first refusal as “an example of a government focussing on maximising the sale price of an asset at the risk of longer term benefits to consumers through competition”.

While Sydney Airport has objected to the four-month timeframe given when the Notice of Intention (NOI) or sales contract was issued in December and continues to argue it should have nine months to consider the offer, the company said on in February it would work towards the May 8 2017 deadline.

The final Western Sydney Airport Plan shows Stage 1 of the airport would feature a terminal capable of handling up to 10 million domestic and international passengers a year, with a single 3,700m long by 60m wide runway on a 05/23 orientation.

The design of the facility would allow for a second parallel runway and expansion of the terminals to cater for 37 million passengers a year by 2050 and 82 million a year by about 2063.

The terminal design would feature swing gates capable of handling both domestic and international flights, which would increase the efficiency of transfers and increase the use of contact gates equipped with aerobridges.

Meanwhile, jet fuel supply was expected to be delivered by road tanker in a similar way to other airports operating on this scale, such as Canberra and Gold Coast.

And the Airport Plan said flightpaths had not been finalised, noting the draft flightpaths shown in the draft Airport Plan were a “conceptual model for aircraft arrivals”.

Meanwhile, the ACCC report said Melbourne and Sydney airports had improved their quality of service rating to “good” in 2015/16, from “satisfactory” in the prior year.

Brisbane and Perth airports maintained their “good” rating in 2015/16, and were rated “equal highest” of the four monitored airports.

“It is encouraging to see that all four airports made it into the “good” category for overall quality of service ratings this year, in addition to a second straight year of notable improvement by Perth Airport,” ACCC chairman Rod Sims said in a statement.

“However, there is still room for the airports to better satisfy both passengers and airlines.”

The ACCC report also found car parking profit margins at the four airports “continue to remain high”, noting Sydney Airport achieved a profit margin of 73.1 per cent for car parking in 2015/16. Sydney Airport’s revenue per car parking space rose 6.9 per cent to $8,395 for the 12 months to June 30 2016, the ACCC said.

It was the only one of the four airports to report an improvement in car park profit margin and revenue per parking space.

“The returns that the airports get on car parking show that they do not face significant competitive constraints when setting prices,” Sims said.

“Airports set the terms and prices to landside areas. This means that they are in a position to impede competition to on-airport car parking by increasing access costs for alternatives such as off-airport car park operators.”

Sydney Airport also led the pack for aeronautical revenue per passenger, a measure the the ACCC described as a “useful proxy measure for average airport prices”.

Kingsford Smith Airport collected $17.27 of aeronautical revenue per passenger in 2015/16, ahead of Perth at $14.48.

The report found airports were “collecting substantially more aeronautical revenue per passenger than a decade ago”, which have been used to cover both increasing costs per passenger and to grow profit margins.

“The ACCC estimates that over the past decade, these airports have collected $1.57 billion more in revenue from airlines than they would otherwise have collected if average prices were held constant in real terms,” Sims said.

“Despite these much higher revenues per passenger, ratings of service quality are not materially different from those seen a decade ago.”

The full report can be found on the ACCC website.

An ACCC chart of airport service ratings and revenues in the 10 years to 2015/16. (ACCC)
An ACCC chart of airport service ratings and revenues in the 10 years to 2015/16. (ACCC)
An summary of the ACCC’s findings in its 2015/16 airport monitoring report. (ACCC)
An summary of the ACCC’s findings in its 2015/16 airport monitoring report. (ACCC)

Aeronautical revenue per passenger (in A$)
Airport          2014/15           2015/16       
Brisbane           $12.22                $12.25
Melbourne       $10.47                $11.58
Perth                 $12.64                $14.48
Sydney              $16.40                $17.27
(Source: ACCC)

Comments

  1. grahame says

    Last friday a bit of rain around Sydney and its chaos at the airport… Happens all to often,
    Badgerys Creek with no curfew is the way of the future, invest early in the infrastructure (fast trains – CBD Airport).
    Maybe the Wellcamp boys should be offered the contract?

  2. Russell M says

    I can think of a certain family near Toowoomba who could probably have this knocked up in a couple of years?

    Can’t help but to giggle at that photo of whomever the somewhat rotund Transport or Aviation Minister at the time…….turning the first sod at Badgerys, under the hopeful billboard, with the ceremonial silver shovel……….30 years ago?