Vexing question

Under current regulations adopted in 2002 the ACCC monitors Australia’s five major airports for ‘market abuses’ and can recommend a government investigation if it spots problems. The government also can order the ACCC to investigate alleged wrongdoing. But so far, neither side has initiated such an investigation.

According to the ACCC, this is be-cause the current system does not allow the consumer watchdog enough access to determine whether airports have misused their monopolies. ACCC chairman Rod Sims said: “You either regulate them or you don’t. The Productivity Commission and the government have decided not to. ” The ACCC has called for increased regu-lation that would allow it to launch binding arbitration in the case of price disputes be-tween airports and airlines or other entities. As the Productivity Commission notes, nei-ther airports nor airlines want a return to the pre-2002 system of regulatory price setting.

But the commission acknowledged that airports and airlines disagree over the effec-tiveness of the current regulatory scheme, with the latter contending that airports often adopt a ‘take it or leave it’ negotiating stance over airport charges.

According to the commission, those charges generally represent between four Passenger numbers (million) and eight per cent of the cost of a one-way fare between Sydney and Melbourne.

Not surprisingly, Sydney Airport – which made easily the highest per passenger profit of the five major airports – came in for particularly tough criticism from airlines and the ACCC. Though airlines gave Sydney slightly better marks this year than last, “airlines consistently identified Sydney Airport as the least responsive of the air-ports in relation to the delivery and quality of aeronautical services over a long period of time”, according to the ACCC.

“Further, despite the airport investing a standard deviation of just over four per cent, while airports bring in an average re-turn on assets of almost nine per cent with a standard deviation of just 0. 5 per cent.

“Airports appear to be partially insulated by airlines against shocks to demand for aeronautical services and, therefore, shock to aeronautical revenue,” the ACCC said.

Nevertheless, relaxed regulations have led to a boom in airport investment, with $9 billion in upgrades already in the pipeline across the five major airports, including an overhaul of Sydney’s terminal structure and new terminals at Melbourne and Perth.

Major Work At The Major Airports

SYDNEY AIRPORT

• What: a terminal overhaul will create an alliance-based system rather than separate inter-national and domestic terminals, with Qantas getting the two current domestic terminals and Virgin Australia and its allies taking the current international terminal.

• When: estimated completion by 2019, currently in consultation phase.

• How much: the airport has not said how much the changes will cost, but estimates run upwards of $1 billion. MELBOURNE AIRPORT

• What: building a fourth terminal focused on budget carriers.

• When: due to open in 2014.

• How much: $300 million, part of a larger $1 billion overhaul.

BRISBANE AIRPORT

• What: a terminal precinct redevelopment including new roads, a skywalk and a nine-story 5,000-space car park billed as the largest in the southern hemisphere.

• When: the car park opened in January.

• How much: $180 million for the car park, $350 million overall.

PERTH AIRPORT

• What: construction of a new domestic terminal aimed at booming regional travel is under-way with a redesign of the international terminal to follow.

• When: domestic terminal set to open next year. Redesign of international terminal to begin this month, finish by 2014.

• How much: $200 million for domestic terminal, $500 million for international terminal.

ADELAIDE AIRPORT

• What: infrastructure improvements including a new multi-level car park, an upgraded road network within the airport and a new plaza fronting the passenger terminal.

• When: the car park is set to open next month.

• How much: $100 million.