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Major airports saw strong profits despite COVID: ACCC

written by Hannah Dowling | June 6, 2022

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Three of Australia’s top four airports saw operating profits in the 2020-21 financial year, despite the impact of the COVID-19 pandemic, according to the Australian Competition and Consumer Commission.

The ACCC on Monday published a report stating that Sydney, Brisbane and Perth airports all managed to achieve an operating profit in 2020-21, while Melbourne saw a $108 million operating loss.

However, the report noted that collectively, operating profits of the four major airports have fallen 95 per cent since before the pandemic, and current profit margins remain slim.

“Unsurprisingly, the pandemic resulted in far fewer passengers visiting our four largest airports and that led to greatly reduced operating profits and margins,” ACCC Commissioner Anna Brakey said.

“Despite severely reduced aeronautical revenues, Sydney, Brisbane and Perth airports were still able to turn a profit last financial year as a result of reduced operating costs.

“This is a surprising result given the impact of the pandemic on the aviation industry, and it demonstrates the resilience of the airports.”

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In response, Sydney Airport has lashed out at the ACCC, stating its report “omits and simplifies important data” about the airport’s financial standing, such as the $1 billion in lost expected revenue during 2020-21, $220 million in rental abatements, and $43 million in debt write-offs to Qantas and Virgin.

“We are disappointed by the presentation of the ACCC’s report, having just gone through an incredibly difficult period where we lost more than $1.3 billion in revenue yet provided millions in relief to our partners and kept the airport open for essential workers and returning Australians,” said Sydney Airport CEO Geoff Culbert.

“The report creates the impression that Sydney Airport profited during COVID, when the reality is we recorded significant losses, had to raise $2 billion from the market, $800 million in debt, and let go a quarter of our workforce just to survive.”

The ACCC report stated that “airports, as regional monopolies, have substantial power”, and that the watchdog will continue to “carefully monitor” the airports’ profit margins moving forward.

In September, Australian Aviation reported that airports had been put on notice by the ACCC over possible future fee increases imposed on airlines to recuperate lost profits during the pandemic.

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

“Large airports face minimal constraints on their pricing because they are effectively unregulated regional monopolies with significant market power,” the ACCC said at that time.

Earlier this year, the Supreme Court in WA ruled that Perth Airport had likely exercised substantial market power when renegotiating its aeronautical charges with airlines in 2018.

The case saw Qantas ordered to pay $9 million in additional airport charges, which was $16 million less than Perth had sued it for.

“The Perth Airport and Qantas case, combined with our own findings over a long period, suggest the government’s Aeronautical Pricing Principles are currently not assisting airlines in their negotiations with all airports as intended,” Brakey added.

“We’ll consider what can be done to improve how the Aeronautical Pricing Principles operate in commercial negotiations.”

Industry body Airlines for Australia and New Zealand (A4ANZ) – which represents the Qantas Group, Virgin Australia, Rex and Air New Zealand – agreed and said Monday’s report highlights how “monitoring serves no purpose to constrain monopolies”.

A4ANZ CEO Dr Alison Roberts said that APPs are “unenforceable”, and airlines are left with little recourse when airports refuse to adhere to them.

“As an industry, we must find a solution for resolving disputes that avoids the sort of protracted and expensive process we have seen with Perth Airport and Qantas,” she said.

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