Airport monopolies under fire

Australia’s privatised airports have become the aviation sector’s latest battleground as airlines and consumer advocates express alarm over rising costs at the country’s key departure points.

With the Productivity Commission set to investigate the impact of privatisation on Australia’s major gateways, locally based airlines have joined the Australian Competition and Consumer Commission (ACCC) in voicing concerns over the monopoly powers of the airports.

Gripes have covered everything from the cost of parking to excessive landing charges, amid calls for more stringent regulation from the Federal Government and greater policing powers for the ACCC.

The consumer watchdog set the scene back in April when the ACCC released its annual airport monitoring report, in which it expressed concern over the “unconstrained monopolies” of Australia’s four main privatised airports and highlighted their rising profits.

The ACCC said Brisbane, Melbourne, Perth and Sydney airports earned a combined $757.6 million in operating profits (EBITA) in 2016-17, up 9.9% on the previous year, with SYD alone earning $360.8 million.

“We remain concerned that the current regulatory regime… doesn’t constrain the market power of four of Australia’s major airports,” ACCC chairman Rod Sims said.

“Unconstrained monopolies often have an incentive and ability to charge excessive prices while lacking strong incentives to improve services,” he said.

The ACCC has since been joined by Airlines for Australia and New Zealand (A4ANZ), which slammed airport profit levels and called for greater government intervention.

The group released a report of its own, which blamed “light-handed regulation” for high costs and profits that were in some cases more than double those of other airports overseas.

“Australian passengers and our economy are paying the price of airport privatisation in the absence of appropriate constraints on monopoly power,” the A4ANZ report said.

“More effective regulatory pressure is required to prevent excessive profits by airports and return more value to consumers and the economy.”

A4ANZ argued the promised benefits of privatisation had been overshadowed by high costs for airlines and passengers, without any improvement in the quality of airport service. It said the ACCC should be enlisted to arbitrate in negotiations between airports and airlines, in a method similar to those currently used in the US and Canada.

The issue has also erupted on the other side of the Tasman, where New Zealand’s Commerce Commission is conducting its own inquiry. In a submission to the commission, A4ANZ singled out Auckland International Airport for its “excessive profits”, saying the gateway has set prices that were “not in the long-term interests of consumers”.

Despite the criticisms, the airports weren’t without defenders. Airports Council International world director general Angela Gittens told an aviation gathering in Sydney last month that Australia’s airport regulatory framework was a “global role model”.

She said over the past 20 years Australian airports had delivered better terminals, better services, and more choice for passengers. The airports had invested $11.5 billion in airport improvements over the last decade, without taxpayer funding.

While the representative bodies focused on the upcoming inquiry, tensions between airports and carriers have in recent weeks spilled over into mainstream media.

Qantas and Canberra Airport continued a public stoush in which the airline has been criticised for its high rate of flight cancellations in the capital. In return fire, Qantas CEO Alan Joyce made public an incident in which one of the airline’s planes was allegedly blocked from departure by an airport vehicle while payment was sought for its unscheduled landing, the result of a diversion from Sydney.

With characteristic colour, Joyce likened the airport’s operators to Somali pirates. In an earlier run-in with Perth Airport, Qantas reportedly scrapped plans to launch flights between the WA capital and Johannesburg, apparently over the airport’s refusal to allow departures from the airline’s preferred Terminal 3.