Billions at stake in airport stoush

CONFLICT between Australia’s airlines and privatised airports is now being played out before the Productivity Commission as it considers whether greater regulation is needed for the country’s major gateways.

After a long and public campaign — in which airlines have accused the airports of over-charging and exploiting their monopoly powers — the parties have now had the chance to put their cases before a formal inquiry as the Productivity Commission prepares to make recommendations to the Federal Government early next year.

Central to the probe is the question of whether the current “light-handed” approach to regulation has allowed the airports to develop too much power, leading to soaring profits and high charges for both passengers and airline users. In its submission to the commission lodged last month, industry group Airlines for Australia & New Zealand (A4ANZ) cites analysis by Frontier Economics that found greater regulation of the airports would deliver more than $18 billion in economic benefits.

“Australian airports are currently able to use their monopoly position to charge prices that generate excess returns, but this is not delivering improvements in quality or efficiency,” said A4ANZ CEO Alison Roberts.

“Something has to change if consumers are to be shielded from the impact of what is ahead,” she said.

“While airlines have been able to keep downward pressure on airfares over the past decade, globally, fares are expected to rise next year. It’s time for the airports to be part of a genuinely collaborative approach.”

However the airports argue that greater regulation would threaten billions of dollars in future investment at the country’s main gateways. In its own submission, the Australian Airports Association (AAA) says the major airports have invested $15 billion in improvements since 2002, with plans to spend a further $20.6 billion in the next decade.

“Policy reform solely designed to reduce prices, as opposed to enhance efficiency… will place future investment at risk,” AAA’s submission said.

It also dismissed claims that higher airport charges automatically lead to higher airfares, and says there is no evidence that savings would be passed on to consumers.

“Even if modest reductions were to be imposed by a regulator, these would simply enhance the profits of airlines,” the airports coalition said.