[Peetwo]

A4ANZ and AAA go to war?   

Interesting airport related media coverage yesterday in the Oz:

The Oz:

Time to rein in monopoly airports
GRAEME SAMUEL
Australia’s airports use their market power to set excessive prices and provide service of dubious quality for the travelling public.

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We need tighter regulation of monopoly airports

It shouldn’t have come as a surprise to anyone to hear this week that Australia’s monopoly airports are earning excessive profits. Market analysts note that airport profit margins are growing and will continue to do so at an even higher rate than they have done historically.

Despite the airports’ claims that their charges are reasonable to cover costs, the evidence suggests otherwise. Independent analysis undertaken by Frontier Economics confirms that the airports are using their monopoly position to earn excessive profits.

Over the past decade, Australian airports’ margins have grown significantly higher — in some cases more than double — than those of other airports around the world operating in competitive markets or with greater regulation.

The ACCC wouldn’t have been surprised by this finding either. As part of the light-handed regulatory model under which our airports operate, the ACCC Airport Monitoring Reports document the fact that the major airports are collecting over 25 per cent more revenue for every passenger than 10 years ago, in real terms. At the same time passenger numbers have increased by nearly 20 per cent, delivering an even bigger revenue boost for airports. Yet the ACCC found no commensurate increase in overall quality.

We ought to be surprised by this, shocked even, but it’s become part of our passenger experience to park our cars at expensive carparks, walk through the shiny new facilities at the airport that are revenue generating, such as retail and food outlets, and then find our experience in bathrooms and other parts of the airports far less glamorous.

This situation has arisen because Australia’s airports are indisputably monopoly operators and are able to use their market power to set excessive prices and provide service of dubious quality for the travelling public.

Airports’ monopoly status gives them a natural bargaining advantage over airlines and retail operators, which can lead to some of the following behaviours:

●Adopting a “take it or leave it” position;

●Delaying or refusing to disclose necessary background information or material facts, thus delaying agreement;

●In other ways protracting negotiations;

●Developing agreements that fail to provide contractual certainty as to service quality, or lack clarity and transparency;

●Using media to put pressure on airlines to accept deals; and

●Withdrawing unrelated services during negotiations and disputes.

These experiences were a driving force behind the establishment of A4ANZ last year. While fiercely competitive, what A4ANZ’s member airlines all have in common is the challenge of dealing with monopoly airports and rising charges.

So what to do about this?

A4ANZ’s efforts go beyond an attempt to balance the ledger. A vibrant aviation sector will drive efficiency and innovation, which in turn is good for consumers and the economy. It is clear, however, that one part of the sector is capturing the majority of the benefits that this growth brings.

More effective regulatory pressure is required to prevent excessive profits by airports and return more value to consumers and the economy. Unfortunately, the current regulatory system does not create the right environment for airlines and airports to work in partnership to ensure these gains can be achieved. Instead, they foster the monopoly power of airport owners.

The development of commercial relationships between airports and their customers would be encouraged by the existence of a credible ability to seek arbitration, by the competition regulator, the ACCC. A4ANZ is not alone in suggesting that Australia could benefit from such regulatory change. The Grattan Institute has made similar suggestions, and New Zealand is considering amendments to its regulatory regimen. We need to catch up.

Our members are committed to building, maintaining and improving constructive relationships with airports. We also want to see airports and the whole aviation sector prosper. It is not only in the airlines’ interests but also in their passengers’ interests, as well as the interests of tourism and export sectors, and the broader economy for this to occur.

Graeme Samuel is chairman of A4ANZ and former chair of the ACCC

&..

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Airport charges restrict airlines’ ability to invest in fleet renewal

Airport charges are “one of the biggest roadblocks” to airlines’ ability to reinvest in fleet, say local carriers, as they ramp up a push for changes in airport regulation.

Firing a salvo over rising fees, a paper commissioned for Airlines for Australia and New Zealand warns that charges are getting in the way of new routes.

The paper also says that while the aviation sector is enjoying growth, “it is quite clear that at the moment, the airports are capturing a disproportionate share of this growth”.

But the Australian Airports Assoc­iation hit back, saying airports had invested $11.5 billion on improvements over the past decade “without a single tax payer dollar being spent”.

The paper is significant as it has been released ahead of an ­expected review of the economic regulation of airports by the Productivity Commission.

A4ANZ’s members include Qantas and Virgin Australia, their budget arms, Air New Zealand and Regional Express.

Under a plan outlined in the paper modelled on a scheme in use in the US and Canada, it would be made easier to bring in the competition regulator to ­adjudicate on airport charges.

While stopping short of calling for price controls, the report proposes changing the Airports Act 1996 so services from airports with a “substantial degree of market power” would be deemed “declared” — meaning the Australian Competition and Consumer Commission could be called in to arbitrate when airports and airlines cannot strike a commercial deal on charges. The arbitration would be a “final offer” method whereby the regulator chooses between two final offers to settle a dispute.

A4ANZ chairman Graeme Samuel said analysis by Frontier Economics, which was provided for the report, showed “the notion that airlines, and indeed any airport user, can enter into genuine commercial negotiations with a monopoly airport operator in Australia’s cities and regions is clearly nonsense”.

But AAA chief executive Caroline Wilkie said the claims about the airports’ use of market power ignored “robust” negotiations ­between carriers and airports over the delivery of runways, terminals and technology that would meet passenger needs.

“Airlines benefit from higher airfares to support higher profits, and we are concerned the domestic airline duopoly disadvantages the passenger — particularly in the regions,” Ms Wilkie said.

“To suggest airport charges have a major impact on airfares is simply wrong, with charges making up less than 10 per cent of airfares.”

The paper finds that while airfares fell between 42 per cent and 52 per cent in real terms from 2008 to 2017, airport passenger charges on the average airfare rose 15 per cent to 59 per cent.

“The fact Australian airports are now collecting more revenue per passenger and generating significantly higher profit than their international benchmarks stands in stark contrast to the flat or ­declining airfares offered by domestic airlines,” the report says.

“These charges are one of the biggest roadblocks to the airlines’ ability to introduce new and grow existing routes and to reinvest in product and fleet.”

Anyone else spot the fact that Rex is playing on both sides of the airport perimeter fence? 

While on the subject of possible changes to the Airports Act, I note that the Dept 'Aviation & Airport' division seemed to be primed for Bear at Senate Estimates but were bizarrely knocked off early before they could even get a proper "..look what we've been up to.." presented to the 'don't give a RRAT's arse committee' to review...

However there was small passage of Q&A that Senator Rice inadvertently unearthed that shows there is stuff going on behind the scenes on the matter of airports and aviation safety:

Senator RICE: My final issue is, what status does the National Airports Safeguarding Framework have as a guide to zoning and planning issues around airports? It's a document that I've been alerted to on your website, and I'm keen to know how it's used in airport planning.
Mr McRandle : I might ask Mr McArthur to come to the table and assist with this one. There are a number of guidelines that operate around the National Airports Safeguarding Framework. These have been developed over several years, and it's been a focus of the Transport and Infrastructure Council, which is a ministerial council of state and federal governments. You'd recognise that a lot of the planning aspects are beyond the airport boundary and really sit with local government and state government to implement. Mr McArthur may be able to provide some additional advice.
Ms Spence : I can jump in a little bit. By way of context, the National Airports Safeguarding Framework is a commitment from Commonwealth, state and territory governments, with involvement of local government, to address a number of issues associated with airports. It's supported by the National Airports Safeguarding Advisory Group, which is a forum that brings together transport and planning officials to work through issues—whether it be noise, whether it be the public safety zones or whether it be technical issues such as wind shear—to make sure that planning approvals and processes can actually take into account how to factor in airport operations with the amenity of the community.
Mr McArthur : As has been indicated by Ms Spence, the National Airports Safeguarding Advisory Group is formed with both the Commonwealth and the states and territories, basically around land use planning off airports, because essentially land use planning still falls within the purview of the state and territory authorities to actually manage the off-airport parts of that. There are a number of guidelines that basically sit under that. As Senator Patrick alluded to, the public safety zone guideline is now out for consultation at the moment publicly. That's been endorsed by the Transport and Infrastructure Senior Officials' Committee and is going to the Transport and Infrastructure Council for the ministers' endorsement later this year—that is the anticipation around that one.
Senator RICE: That's all of these guidelines or just the—
Mr McArthur : There are a number of guidelines that actually fall under that in a number of areas that have been indicated: public safety zones, wind shear, aircraft noise, helicopter landing sites—there's a guideline that's been put out currently around that one—and wind turbine risk to aircraft. There's also pilot lighting distraction, managing airspace intrusion, and protection of airspace facilities around communication, navigation and surveillance.
Mr McRandle : Some of these have been dealt with previously. The current issues before the council will be around the public safety zone and the helicopter strategic landing facilities.
Senator RICE: The helicopter strategic landing facilities?
Mr McRandle : This is around protecting access for emergency helicopters, such as medical helicopters coming into hospitals, so that the planning in cities takes account of the fact that these aircraft need to get into hospitals and landing pads safely.
Senator RICE: So they're signed off by the—I can't remember the—
Mr McRandle : The ministerial council.
Senator RICE: The ministerial council. But, even after they're signed off, they are still guidelines? They're not mandatory?
Mr McRandle : They are guidelines, and it's the responsibility of the relevant state or territory to actually implement those.
Senator RICE: Do they apply to all airports or just the major airports?
Ms Spence : They actually apply to all airports, not just the federally leased airports. As we were saying, it's a matter for all the states and territories to implement through their planning regimes, but they should apply to any airport.
Senator RICE: So states and territories should be applying them around the more secondary airports?
Ms Spence : Yes.
Senator RICE: Good. Thank you very much.

 
Hmm...anyone else notice that there is a lot of Mc's related to aviation safety and the related bureaucracy these days - 


MTF...P2