Australian Airport Users Call For Greater Regulation To Stop Airport Monopolies

Big airport customers in Australia have teamed up to call for greater regulation to protect against monopoly powers at Australian Airports. Airlines, car rental agencies, retailers, carpark operators and other customers are arguing that Australia’s powerful airport operators are abusing their monopoly positions by overcharging, being inflexible, and failing to negotiate.

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Qantas is one of the users asking for more regulation of Australia’s airports. Photo: MORX via Wikimedia Commons.

Australia’s Productivity Commission, a federal government agency that provides research and advice on social, environmental and economic matters, has recently completed a report on the economic regulation of airports. It has been handed to parliament but not yet made publicly available.

A draft report suggested that oversight of Australia’s airports was working. This draft conclusion has set alarm bells ringing amongst users of Australia’s airports.

Key airport infrastructure working as cash cows for owners

Australia’s biggest airports were formerly public assets. Subsequent governments over the years have sold these key pieces of critical public infrastructure. In 2002, the Australian Federal Government sold a 99-year lease of Sydney Airport to Macquarie Bank for AUD$5.6 billion.

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Melbourne Airport, in comparison, was a relative bargain. Australia Pacific Airports Corporations Limited (APAC) bought a 50-year lease in 1997 for AUD$1.307 billion with an option for another 49-year lease. Brisbane Airport Corporation (BAC) bought a 49-year lease from the Federal Government in 1997 for AUD$1.4 billion with an option for a further 50-year lease.

The airports have become big profit centers for their owners. In 2018, Sydney Airport made a net profit of AUD$372.5 million, Melbourne Airport made a net profit of AUD$314.9 million, and Brisbane Airport had a net profit of AUD$230.1 million.

Airport users say monopoly position being abused

No-one argues with a for-profit business making a profit, but given these airports (and the other major airports around Australia) are monopolies in the cities in which they operate, users are saying they are abusing their monopoly position and that some regulation to reign in the abuse is needed.

As the Chairman of the Airlines for Australian and New Zealand (A4ANZ), Gordon Samuel, said in a media statement;

 “Australia’s monopoly airports were now the only privatized infrastructure assets in Australia not appropriately regulated for the protection of consumers.”

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Skyhigh rents are one reason why food at airports is twice as expensive as anywhere else. Photo: Nick_D via Wikimedia Commons.

Gordon Samuel goes on to say that airports are being operated in a way that may generate revenue for shareholders, but abjectly fail to fairly meet the needs of airport customers and passengers. Gordon Samuel, formerly a Chairman of Australia’s Competition and Consumer Commission slammed the Productivity Commission for being prepared to tick off on the status quo.

“For decades now, Australian travelers have felt the impact of monopoly pricing at our airports, and the ACCC has repeatedly said that we have a problem. But while other sectors have caught up with regulatory regimes that better reflect consumer interests and expectations, the Productivity Commission (PC) – inexplicably – seems intent on retaining the status quo for airports.

“In practice, this means inefficient, protracted negotiations, disputes that end up in court, costing millions of dollars, and creating uncertainty over investment. The system has passed its use-by date; it’s neither efficient nor effective.”

Passengers feel the impacts

On one level this seems to be a squabble between a bunch of vested interests – airlines, ride share operators, carpark operators and their landlord. On a more passenger orientated level, when an airport business customer is grossly overcharged on an inflexible lease, it goes a king way towards explaining why a schooner at Brisbane airport can cost AUD$13 and parking at Sydney Airport costs AUD$22 for the first hour.

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Why does it cost $20 for a 20 minutes bus ride into Melbourne city? Photo: Canley via Wikimedia Commons.

As Travel Weekly puts it, a more appropriate regulatory environment for airport operators would benefit both passengers and the wider economy.

Some regulatory reform is desperately needed. Regulation doesn’t need to be a blunt instrument – it is possible to use a light touch. But with the Productivity Commission showing signs of burying its head in the sand (in the finest tradition of government agencies everywhere), relief for customers and passengers using Australia’s big airports looks to be a long way off.

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Phillip

The problem is we don’t have alternative airports in most of our major cities. However that may change since we have Gold Coast as an alternative to Brisbane, The new Western Sydney airport and Avalon airport slowly expanding however it isn’t fast enough. Adelaide and Perth have pretty much no choice. Australia’s cities need alternative airports.

gaf

No, that is not the problem. The contracts given to the operators of those airports have competition clauses that give them control over any alternatives.

Stephen Van Beek

Not my favorite clauses, but who is going to invest for 50 or 99 years if you are going to build a new airport next door?

William

Is it possible to get around these clauses with smaller airports with runways under say 2000m. The A220, A319, B737 MAX 7 can all operate to ranges between 3500NM-3940NM in 1400 meter runways. Apart from the contractual clauses the current operators control enormous airports taking up enormous tracts of land with wide long runways traditional jet aircraft need massive terminals that are extremely expensive to build. These new small aircraft have serious range and can now undertake routes into S.E. Asia from any capital potentially from much smaller more easily built airports and terminals.

Vedant Ganesh

Oh my god. Not Australian but this is not a good system. Maybe have more govt regulations on airport ops?

kfj

When the Australian Liberal or Labour party sell off these public assests to plug holes in the budget, they give the buyers various guarantees to ensure revenue. This normally includes assurances that anything that could compete with the operation will be restricted. It often even includes a profit guarantee whereby the government will give the buyers money if they don’t not make as much money as expected. Some of the more extreme examples are Sydney’s Cross City Tunnel and Lane Cove Tunnel where the free public roads were purposely restricted and altered to funnel traffic into the privately run roll… Read more »

Jon DeGeorge

This is why privatization is bad…
But it isn’t as bad as BAA in the UK.

Stephen Van Beek

A bit simplistic–these airports provided leases, they make money, therefore they are behaving like monopolies. That is not how competition analyses work. In their defense, these companies have improved these airports dramatically, something that requires a return on their cost of capital. Given that non-aeronautical revenues today have become a much larger part of the business for airport operators, that actually can help take pressure of aeronautical rates–after all if you raise fees too high you risk losing passengers and the revenues they pay for their beer or parking (and if you price beers to high people simply won’t buy… Read more »