Travellers worst off in an airport monopoly

Air travellers have been urged to make their voices heard in a major national review of competition policy that is expected to look at the decision of governments, both Labor and Liberal, to duck the regulation of Australia’s capital city airport monopolies.

The federal government’s long-promised “root-and-branch review” of the Competition and Consumer Act, which replaced the Trades Practices Act in 2010, may also have something to say about the strong possibility that Sydney’s second airport will be owned by the existing Sydney airport monopoly – a potential disaster for consumers and airlines alike.

In the Australian Competition and Consumer Commission’s annual report on airports, published last week, Sydney again emerged as the airport with the poorest record of price-gouging and below-par service standards.

Sydney airport is now the price leader for aeronautical services, charging airlines $15.53 per passenger, compared with $9.34 at Melbourne’s Tullamarine, while Tullamarine is the parking monopoly leader, generating nearly 20 per cent of its revenue from car parking, compared with 10 per cent at Sydney.

“Their margins have grown a hell of a lot by any standard at all airports – at Melbourne and Perth, huge increases, but at Sydney and Brisbane, very healthy increases,” ACCC chairman Rod Sims told Traveller’s Check.

“And yet the performance of the airports isn’t improving. There’s evidence of not enough investment, looking at the growing congestion and also looking at the small level of investments.

“I mean, the Sydney investments aren’t even keeping pace with depreciation, so their asset base is declining. So you really do have all the classic signs.

“This is a monopoly, therefore they have an incentive to raise prices and decrease service as any other monopoly does and there’s evidence that they’re doing that.”

Sims says the issue should be dealt with by the coming competition policy review, but that will depend on whether consumers and their representatives show enough interest.

“The question that people need to wrestle with and that the panel needs to wrestle with is what’s the cost of regulation?,” Sims says. “Is there enough counterveiling power from the airlines to improve things? And so it just has to get debated again.

“The last time it was debated, the previous government wasn’t interested in looking at it.

“I think it will depend on whether the public and their representatives put it on the agenda. If they (the review panel) don’t see much interest, then I don’t think it will (be examined). If the travelling public through various representatives (raise it), then it will get a guernsey.

“When they invite submissions, which they’ll do in another couple of weeks’ time, I think a lot will depend on the submissions they get.”

The Howard government removed pricing controls on the capital city airport monopolies at the turn of the century in order to improve the price it received for the sale of Sydney airport.

But the provision in the sale of Sydney airport in 2002, which gave Sydney Airport Corporation (SACL) first right of refusal on management of any second airport in the Sydney basin, was anti-competitive, Sims admits.

“There’s no doubt that, if you have the airports owned by different people, you get much better outcomes,” he says. “And that will be preferable to regulation, I think it’s fair to say as well.

“How much those two airports will compete, when one will be in the city and the other will be out west – a bit like Tullamarine and Avalon and Avalon’s not terribly attractive if you live in Frankston – there’s no doubt that that sort of competition has a pronounced effect, an enormous effect.

“They’re watching the competition, they’re getting compared with the competition. These are high-fixed-cost facilities so, even if they’re at risk of losing even a little bit of traffic to the competition, that makes an enormous difference.

“That would be a very good example of something the root and branch review can look at.”

Meanwhile, the airlines, which have been loathe to criticise their airport “partners” in public, are getting very stroppy about the poor deal they’re getting in comments made to the ACCC.

“They’re concerned about runway availability, taxiway availability, parking bay availability, apron availability and quality and their comments are getting stronger,” Sims says.

“And they are a powerful voice. If they felt that a different regulatory regime was appropriate, that would have a lot of sway and it would be interesting to see how the root and branch review responded.”

Details of the competition policy review are here. Details of the latest ACCC report on airports are here and here.

Should Australian consumer organisations like Choice get involved in the airports issue? Would you make a personal submission to the competition review? Should other organisations make their voice heard?