Hub Buster

Mr Barnett said that “the State Government played an intermediary role in negotiations and our contribution is based on border control, quarantine and immigration services at T3 being an interim measure with Qantas committing to relocate to the international terminal T1 by 2025.”

He added that it is “an appropriate funding contribution by the Government.”

It may well come to pass that both state and federal governments will have to fund more such airport projects because the wider interests of the community and state are not necessarily those of the private airport operators.

Already the benefits are flowing with an enormous global reaction to the news with significant coverage in the BBC, CNN and the Wall Street Journal to name just a few.

Mr Barnett summed it up well: “Today’s announcement is fantastic for West Australians with the non-stop service making travel to the UK more appealing and over time it is expected it will open up the potential for direct routes to and from other European cities.

“The tourism benefits to the State are enormous. The service will create opportunities for people to stop over in Perth for a day or two if on route to or from another Australian destination.

The tourism benefits to the state are enormous.

“With Perth’s large UK expat population, direct flights are anticipated to drive increased visitation from visiting friends and relatives. In addition, direct services from a Qantas hub are likely to improve trade links.

The benefits of such a service should have been very clear to all involved six months ago when negotiations first started.

That it took this long and the intervention of business leaders and the state premier to force a deal is of concern.

But that is not necessarily the airport’s fault as it is duty bound to have its shareholders interests at the core of its business.

There are very differing demands with a private company (airport) on commonwealth land serving a state.

State governments have the economic prosperity of the wider community at heart and when the ACCC said in its 2015 report that airports are leaving investment, to the “very last minute” it is of concern.

Many would argue that the initial privatization agreements of airports may not have been well structured without enough accountability, while others feel that such an important asset should not have been privatized at all.

What is emerging is that as demand has grown beyond the capabilities and capacity of the airports that were purchased from the Commonwealth over 15 years ago pressures are building on the speed of the new investment required.

The airline landscape has also changed dramatically since the privatization started in the mid-1990s.

Low cost airlines had tried and failed and the cozy duopoly between Ansett and Qantas kept fares and profits reasonable.

Thus cost recovery for infrastructure through ticket prices wasn’t a significant issue.

Fast forward to the last five years the “cozy duopoly” has been replaced by a “rocky duopoly” where cost recovery is almost impossible with much high fuel prices and intense local and international competition that sets the bench mark for airfares at rock bottom.

This “new normal” requires governments to become more involved to help airports with infrastructure as airlines struggle to pass the costs on.

And it doesn’t help when the Commonwealth levies a sky-high departure tax but doesn’t deliver the staffing to meet the demands.

Aviation is a critical economic enabler, while airlines typically struggle to make even close to a return on invested capital.

If governments want the economic benefit that tourism and a robust aviation sector can provide they need to do more to assist in funding and the resolution of disputes between airports and airlines.

Macquarie Group WA chairman Mark Barnaba sums it up well when he said of the Qantas / Perth airport impasse;

“Surely the Government and the airport understand the extraordinary nature of this opportunity for the State of WA,” he said. “The payback period is literally months.

“Singapore and Dubai have developed their tourism sectors in no small part because of their hub airports.”