Airport opportunities

The dominant reasons for airports being privatised, and a light-handed regulatory regime being applied, was to fill government coffers, remove the cost of administering larger airports from the federal budget, and to encourage new airport owners to invest in upgrading their newly acquired assets.

What appears to have happened is that the larger airports now operate as monopolies and extract the maximum return from their operator and business tenants. In short, most aircraft operators, including regional airlines, are forced to be price takers. The only operators that seem to have significant negotiating power are those at the heavy jet end of the market.

While successive governments wished to encourage ongoing capital investment by airport owners, where are the policies encouraging new investment by aircraft operators? With the cheapest new entry-level RPT turboprop listing at around $20m, and at nearly $320m for the Boeing 747-8 series, it is no wonder that airline owners and executives lose sleep over their 20 year purchasing decisions. Note these prices are for a single aircraft, not fleet replacement, and yet most government discussions and policies in recent years seem to focus on airports, noise and passenger satisfaction, with little understanding as to how airline operators, including freight, grapple with their significant capital upgrades.

A single aircraft at the larger end and a small fleet at the regional end of the market can cost as much, or more, than the airport from which it operates, and yet the operators receive almost no investment encouragement. The government’s upcoming tax summit will receive close attention from regional aviation in order to put its case that if you want newer aircraft in our skies, you must have new policies to support their purchase.

Most regional operators land at privatised airports that are local monopolies. Operators purchase their air traffic and regulatory services from large government entities.

The Productivity Commission has commented in the past that these combined monopoly forces are a serious impediment to future aviation operator investment. It is no wonder that regional aviation profits are generally slim and the decisions to upgrade are so carefully weighed up.

It is hoped that the PC inquiry will suggest tangible ways to reduce the monopoly power of airports, and offer suggestions to control rising government charges so that operators and businesses can negotiate in good faith for reasonable access at a fair price. The undeclared war between many operators and their airports is hurting the industry and the economy.

There are some instances where cooperation and good business sense has prevailed, but these are few and far between.

Aviation is a complex, technical transport system designed to produce safe and efficient outcomes for all who use it.

With respect to airports and operators, the system is out of balance. It is up to politicians and the policy makers to redress this imbalance before the regional operators in particular are brought to their financial knees. It is unlikely that we will ever return to the FAC days, and it is debatable whether this would be desirable.

The PC has the opportunity to gather the evidence, make clear recommendations and give a new balance to the operator/airport relationship.

Australia must solve these infrastructure challenges if it is to return to aviation’s first rank.

Great opportunity lies with our Asian trading partners and we must have the facilities and systems to exploit rising aviation demand across our region.

Providing long term, predictable and reasonable access to airports for all operators is a challenge that must be met. n