[Peetwo]

The Great Aussie Airports v Airlines War??

In the wake of the PC report on Airports - see HERE - the following Oz article reflects how deep the rift has become between Airports and Airlines  :  

Buckle up — those who fly in for a long, rough ride from airports
ADAM CREIGHTON
Follow @Adam_Creighton



Qantas CEO Alan Joyce’s high public profile hasn’t helped the airlines in their bid to regulate airports. Photo: AAP


Have you ever wondered about the mark-up on the $4.50 toll on taxi services from Sydney Airport? It must be 1000 per cent. But the airport can get away with it.

Perhaps it is mere coincidence that last month Melbourne Airport lifted its taxi toll to — you guessed it — $4.50.

If you want to catch the train to Sydney — a government train — you’ll pay almost $20, more than double the fare from Sydney to Newcastle.

Even when Badgerys Creek opens, Sydney Airport will retain extraordinary market power over passengers and airlines, given its unique position, obtained through no effort or innovation of its own.

For the time being, it’s as close to a pure monopoly as you can find. If you live in Sydney, landing in Melbourne is not a good substitute.

No one is saying privatised airports shouldn’t be profitable but they shouldn’t be allowed to gouge. It seems they are. Four of the six most profitable airports in the world are in Australia, Sydney being No 1.

“Sydney Airport has an unregulated revenue stream in a monopoly environment. This is a key reason why it trades at a premium multiple to global peers,” UBS stated in a recent note.

According to the Australian Competition & Consumer Commission, average revenue per passenger has increased 26 per cent in real terms across the four major airports — Sydney, Perth, Melbourne and Brisbane — during the past decade.

Airlines have borne the brunt of the higher charges. Collectively, they have paid an additional $1.6bn to airports in landing fees without much change in quality. A decision by Perth Airport, whose profit has grown 133 per cent in the decade to last year according to the ACCC, to jack up its landing fees by almost 40 per cent over several years was the last straw.

Qantas, the other airlines, retailers and rental car companies have combined to advocate for some form of compulsory arbitration to sort out landing charges, at least.

In its final report the Productivity Commission recommends against compulsory arbitration, arguing the airlines and airports are big enough to sort pricing out among themselves.

“Qantas does not pay charges it does not agree to,” the commission says in its report, pointing out the airports must let planes land as a condition of their leases. “It may be airlines, rather than airports, that have an incentive to hold out on reaching agreement,” it adds.

Reasonable minds can disagree. Airlines do ultimately have to pay, otherwise why would airlines ever pay airports a cent? Graeme Samuel, advocating for the airlines in this debate, says airports can in fact refuse airlines the right to land if they have failed to pay a legitimate invoice for 21 days.

Scope to appoint an arbitrator with instructions to resolve disputes in consumers’ interest, as the ACCC suggests, would be quicker and cheaper than the prevailing arrangement, which can leave decisions held up for years in the ordinary courts.

Even when the Western Australia Supreme Court attempts to resolve the case between Perth Airport and Qantas, it will only determine the retrospective charges. A new dispute will arise immediately over charges in future, and perhaps, if the airport wins, at other airports throughout the country. These could last years.

The commission rightly points out that Qantas has significant market power. It enjoys 60 per cent of domestic passenger movements. With Rex and Virgin, the three top airlines have 95 per cent.

But market share alone doesn’t mean airports can’t overcharge airlines, which pass on the costs to passengers. And, by the way, their profitability pales in comparison to the airports, whose margins are about five times that of Qantas.

Speaking of Qantas, it’s a pity for airport users that the “national carrier” and its woke chief executive, Alan Joyce, have featured so prominently in the debate. Joyce’s pay — $24m in one year (about $90m since taking over as chief executive) — is as egregious as it is ludicrous, and signals ready capacity to offer lower airfares without any change to arbitration arrangements.

Moreover, while the Treasurer urges corporate Australia to invest and shun share buybacks, Qantas appears to have done the opposite. Graeme Ferguson, an analyst at S&P who has tracked Qantas fin­ancial policies for years, says it has consistently underinvested to pump up its share price as much as possible.

“Management are incentivised to return money to shareholders rather than making long-term investments,” he told The Australian, highlighting that the company has bought back a third of its stock since 2015. “They used to talk about the virtues of a young fleet, around seven years; now it’s approaching 12 on average.”

That said, the issue is bigger than Qantas, whose management will eventually change. And it’s not only airlines that are affected. Nine of the 10 most expensive airports for rental cars in the world are in Australia.

It will be a difficult political decision for the government. The politically powerful industry super funds own big chunks of all the major airports. UniSuper owns 16 per cent of Sydney Airport. The government’s own Future Fund owns a fifth of Melbourne Airport and almost a third of Perth Airport. On the other hand, no one wants to get kicked out of the Chairman’s Lounge, Qantas’s exclusive pre-flight club for the nation’s A-listers.

The airlines’ proposals are no silver bullet, relating only to landing charges, not parking fees or other airport services, which are more salient to travellers. There’s no guarantee lower landing fees would be passed on to customers, especially if it affects Joyce’s bonus. Indeed, lower landing charges for airlines could see airports jack up their fees for other services.

On balance, though, the government should send a message that the era of gouging by monopolies is coming to an end, be it in banking, energy or air travel.

The RAAA (via Shannon Wells) counters that with much more pragmatic approach to the problem...

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Shannon Wells
Managing Director, Airlines of Tasmania (Par Avion Tours & Par Avion Flight Training)
21h · Edited

..sometimes I think Australian Airports Association (AAA) actually means Airlines Are Arseholes ? we need to cooperate - it’s aviation, not airlines vs airports

Regional Aviation Association of Australia
22h
Middle Ground
Much has been published over recent times about the Productivity Commission review into the Economic Regulation of Airports. What we don’t see published is the evidence that some airports are using their monopoly position in overcharging airlines. Indeed we see some cases of airlines being charged for services and infrastructure that is unnecessary for safe operations.
Having said that, there are many airports that have excellent working relationships with regional airlines. More importantly these airports are distinguished from other airports in that they care to understand the costs involved in providing an air service to their communities, particularly on thin routes and over long distances.
Examples of these airports include:
• Wellcamp (Brisbane West) Airport
• Archerfield Airport
• Devonport Airport
• Essendon Airport
• Rockhampton Airport
• Sydney Airport and
• Bankstown and Camden Airports
There are plenty of other airports doing the right thing, however the airports listed have elected to join the RAAA as members as a tangible expression of mutual support for the benefit of both parties. There is much good work continuing to be done by many regional and rural airports. Don’t tar all airports with the same brush, there is a vibrant middle ground.

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Hmmm...no comment required me thinks...

MTF...P2