Draft report

Economic regulation of airports: draft report

6 Feb 2019
Description

Key points:

Existing airport regulation benefits the community, and remains fit for purpose.

  • The four airports monitored by the Australian Competition and Consumer Commission — Sydney, Melbourne, Brisbane and Perth — have not systematically exercised their market power to the detriment of the community.
  • Each has generated returns sufficient to promote investment while not earning excessive profits.
  • Most indicators of the monitored airports’ operational and financial performance are within reasonable bounds, although some could present cause for concern if considered in isolation.

There is no reason for airport operators to become complacent — further scrutiny of some aspects of airports’ performance is warranted, and tailored reforms are needed to address specific areas of concern.

Sydney, Melbourne, Brisbane and Perth airports have market power in services provided to airlines. Charges to airlines for international services at Sydney and Brisbane airports, in particular, are high compared to overseas airports.

  • Sydney, Melbourne, Brisbane and Perth airports should be required to separately report revenues and costs of providing domestic and international services to airlines.
  • Separate reporting is needed to determine whether charges are the result of an airport exercising its market power, or the higher costs of providing international services.

Airports could exercise their market power in landside access services, such as for those used by taxis and shuttle buses, to encourage people to use airport-owned car parks, but there is insufficient data to determine whether this is the case.

  • The collection of detailed data on access charges, terms of access, costs and revenues for landside services would enable an assessment of exercise of market power in landside access.

On balance, commercial negotiations between airports and airlines give little cause for concern. However, some agreements contain clauses that constrain an airline’s access to regulatory remedies for the exercise of market power and clauses that restrict an airport’s ability to offer incentives to airlines other than the signatory airline.

  • These clauses are anticompetitive and should be removed from all agreements.

Many consumers resent the cost of car parking at the monitored airports. Car parking charges are not due to airports exercising their market power — the price of parking at-terminal can largely be explained by the value passengers place on convenience, the limited amount of land close to the terminal, and the need to manage congestion.

Sydney Airport’s regional access arrangements facilitate access for airlines flying to regional destinations, but the regime should be changed to allow airlines to use non-regional aircraft movement slots for regional or non-regional flights.

Sydney Airport’s cap on aircraft movements restricts the effect of aircraft noise on local residents, although this reduces the airport’s efficiency. The Commission is seeking further evidence on options that could meet current noise objectives at lower cost.

Prima facie, the characteristics of markets to supply jet fuel have enabled incumbent fuel suppliers to restrict competition, which has led to a small number of fuel suppliers at some airports. This has likely led to higher prices to access infrastructure services and higher fuel prices.

Government funding for infrastructure investments at regional airports should be subject to rigorous published assessment. There is also considerable scope to improve the financial management of airport assets at some regional airports.

The final report is expected to be handed to the Australian government in June 2019.

Publication Details
Language: 
English
License Type: 
CC BY
Published year only: 
2019
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