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The simmering dispute between Australian airlines and airports continues to build, with airlines accusing the airports of monopoly pricing and airports fighting back and blaming the airlines.

Graeme Samuel, who is chairman of Airlines for Australia and New Zealand (A4ANZ) and a professorial fellow in the Monash Business School, wrote in the Australian at the weekend that research showed Australians “have had enough of being gouged by airports and 82 per cent want government to act”. Samuel, who was chairman of the Australian Competition and Consumer Commission (ACCC) from 2003 to 2011, said it should not come as a surprise that the ACCC had said it was time for modest reform.

Samuel said that those seeking “light-handed constraint” on airports exercising their monopoly power included Qantas and every airline — domestic, regional and international — that uses every airport in Australia, as well as rental car, ride-share, commercial vehicle and off-airport parking operators and airport retailers.

“Collectively, these businesses speak for the travellers slugged by the airports at every stage of their journey,” Samuel wrote.

He said competition between airlines had seen airfares fall 40% in a decade while airport charges had risen 25%, adding that Qantas’ profit margin on its operations averaged 8% while profits at Australia’s four major airports — Sydney, Melbourne, Brisbane and Perth — averaged 50%-plus.

A year ago, ACCC Chair Rod Sims said the ACCC could “currently undertake only limited monitoring of the airports in Sydney, Melbourne, Brisbane and Perth.

“Monitoring regimes can influence behaviour if there is a credible threat of regulation and this threat may have constrained behaviour in the past when the airports were first privatised. However, we do not consider that the current regime is effective in constraining behaviour,” Sims said.

The ACCC noted that the monitored airports had significantly raised aeronautical charges to airlines over time.

The ACCC said that over the past decade, revenue per passenger has increased in real terms by 59 per cent at Perth Airport, 36 per cent at Brisbane Airport and 31 per cent at Melbourne Airport. Sydney Airport’s revenue per passenger has increased at a more subdued rate over this time (15 per cent).

“However, Sydney still maintains the highest revenue per passenger of the four airports with the airport almost doubling its charges just before it was privatised in 2002. The increases across the four airports over the last decade represent an additional $1.3 billion in payments from airlines.

“Despite these significant increases in charges, only Perth Airport has materially improved its overall quality of service. The ratings for the other airports have changed little over this period, typically ranging between the high end of ‘satisfactory’ and ‘good’.”

Sims said: “High aeronautical charges imposed by airports need to be addressed by a more effective regulatory regime. While commercially negotiated outcomes are preferred, there is an imbalance in bargaining power between monopoly airports and airlines, particularly small airlines. To achieve this, the airlines need better access to information and recourse to commercial arbitration if a commercial deal cannot be struck.”

This week, the Australian Airports Association (AAA) has hit back, slamming any suggestion that domestic airlines were fighting for a better deal for consumers.

“They are, in fact, fighting for bigger profits for themselves,” the AAA said.

According to an AAA statement, the facts are:

  • Airports do not set retail prices. It would be against the law to do so.
  • Until recently, Qantas operated terminals at Sydney, Melbourne, Brisbane and Perth airports. Many of the retail leases at those terminals were negotiated by Qantas. It’s surprising Qantas’ lobby group is now saying these same leases are unfair.
  • Unlike airports, airlines have direct control over their own prices for food and drinks. Jetstar charges $5 for a large cup of coffee as part of their in-flight service, significantly more than the ‘downtown’ prices quoted by the airlines. Jetstar also charges $4 for a 350ml bottle of water – while a 600ml bottle of the same brand of water costs just $1.90 in a supermarket. If the airlines want to campaign on retail pricing, they should examine their own track record too.
  • A4ANZ’s proposed arbitration model would have no impact on the price of a cup of coffee, or the price of car rental.

The AAA statement claimed the airlines’ real agenda was “to drive up their profits at the expense of passengers”.

The AAA added:

Airport retail operators

We are not aware of any airports who have had concerns raised with them by their retail tenants or car rental operators. Retailers choose to operate at the airport because it is good for their business. They benefit from airport investment to increase passenger numbers and provide better terminals and facilities. The airlines’ proposal would put that investment at risk and limit the growth of the same retail operators they purport to represent. It is baffling that any retail group would support a misleading campaign that, if successful, could damage their future success and lead to poorer outcomes for their customers.

Car rental 

Airports have no involvement in setting car rental prices at the airport. These prices are set by car rental companies, based on their own commercial models. There is also no relationship between ‘airport concession fees’ that may be charged by car rental operators and the commercial agreements they have with airports. These are locational fees charged to their customers for the convenience of picking up a car straight from the terminal.

Written by William Sykes