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Competition watchdog puts airports on notice over fee increases

written by Hannah Dowling | September 30, 2021

The Australian Competition and Consumer Commission has warned that consumers could soon face higher airfares if airports increase the fees imposed on airlines to recuperate lost profits during the pandemic.

The watchdog said it would closely monitor airports to ensure they continue to adhere to the Aeronautical Pricing Principles, and do not work to improperly increase fees paid by airlines.

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“Large airports face minimal constraints on their pricing because they are effectively unregulated regional monopolies with significant market power,” the ACCC said in its latest Airline Competition in Australia report.

“As part of its monitoring program, the ACCC has heard concerns from some airlines that, as contracts for aeronautical charges are renegotiated over the coming years, airports may seek to significantly increase aeronautical charges to recover their COVID-19 lost profits.”

According to the watchdog, the Aeronautical Pricing Principles, which outline the Australian government’s expectations for how airport operators set their prices, stipulates that prices should be set only to allow airports to recover costs that it actually incurs to provide services.

“This does not include recovery of lost profits,” the ACCC said.

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“Should airports increase their aeronautical charges to recover their losses from COVID-19, this would be a clear example of airports systematically taking advantage of their market power.”

Doing so would not only further deteriorate the cash flow of already cash-strapped airlines, but would likely see increased operating costs passed on to passengers, the ACCC said.

Competition could also be impacted should airlines choose to withdraw from, or not expand into, a route that imposes higher charges, it said.

Elsewhere in the report, the ACCC also noted that passengers on regional routes are already facing increased airfares, due to “low economies of scale”, and often less competition due to lower demand for services.

In June 2021, Qantas Group, Rex and Virgin combined carried 1.3 million passengers across 134 routes connecting at least one regional airport.

“Access to affordable air services is particularly important for regional and rural communities in a large country like Australia,” the report notes.

It comes as the court case between Perth Airport and Qantas continues, over $17 million in unpaid fees.

It follows the airline not signing a new seven-year deal to use the airport’s facilities in July of 2018, leading to a disagreement as to the amount owed.

Qantas QC John Sheahan insisted in Supreme Court that Qantas was looking only for a fair deal, and pointed to data released by the ACCC that suggested the amount of aeronautical revenue per passenger collected by Perth Airport had risen 60 per cent in six years.

“While airlines are making less, Perth Airport is doing very well,” said Sheahan.

Earlier in the week, Neil Young QC, representing Perth Airport, said Qantas had used its services and paid less than it should have, based on its own calculations rather than an agreed position.

“Qantas has continued to land planes at Perth Airport, carry freight, and to use the airport’s facilities and services without any agreement. Indeed, without any ongoing licence or right to operate terminals 3 and 4,” he said.

“Qantas has continued to refuse to pay a fair value for services and facilities since December 17, 2018. They have done so on the footing they do not need to make any commitments, whether short or long term. It’s done on the basis they will simply tender an amount of money they consider is sufficient.”

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