Some Australian airports earn profits double those in other countries © PA Images
Some Australian airports earn profits double those in other countries © PA Images

Airports 'getting rich at expense of passengers'

4 June 2018

Australian airports have become rich the expense of passengers, enjoying a 25% increase in revenue per passenger over the past decade due to a lack of regulation in the sector, according to a report.

The report, by Airlines for Australia and New Zealand (A4ANZ), showed how the absence of appropriate regulation has benefited airports, leading them to increase their profits without improving services.

Australian airports had enjoyed a 25% increase in revenue per passenger in real terms over the past decade but there has been no overall increase in quality. Meanwhile, air fares have fallen by 40% over the same period.

Profits in some cases were more than double those of other airports internationally, who are forced to operate under greater regulation or competition.

A4ANZ chairman Graeme Samuel described claims made by the Australian Airports Association (AAA) and Airports Council International (ACI) that Australia’s airport regulatory framework is a “global role model” as “laughable”.

“A model in which the regulator only has a watching brief has set both Australia and New Zealand up as global leaders in making airport shareholders rich at the expense of passengers,” he said.

“When airports are raising prices and earning more per passenger while quality stagnates and congestion worsens, how can they pretend to be enabling economic activity?”

A4ANZ CEO Alison Roberts said the only people for whom the current model was a success were the owners of AAA’s member airports.

“It comes as no surprise to us that the only group who wants to defend the current model are those who are reaping all the benefits: the highly profitable, private monopoly airport operators in our region,” she said.

Roberts said Australian airports had the lightest regulation and earn the biggest profits in the world.

A Productivity Commission inquiry into airport regulation in Australia is set to be released this year and New Zealand’s regulatory model has also come under scrutiny, she said.

In 2002 the Productivity Commission reviewed of regulatory arrangements for airports and the Government removed price notification and price caps on aeronautical charges.

Airports’ revenues come from two main sources: aeronautical revenue – including airline terminal space rentals, landing fees and usage fees for terminals and gates – and non-aeronautical revenue, which includes parking, shuttle buses and rental car fees.

A4ANZ said airlines’ experiences with many airports reflect an imbalance in the bargaining power as they are forced to pay whatever prices airports demand or sacrifice routes altogether.

The report added that commercial negotiations between parties is often not conducted in accordance with the government’s Aeronautical Pricing Principles, which include, for example, sharing of risks when there are changes in passenger traffic.

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