Virgin, airport at odds on charges
Virgin Australia has called for urgent changes to the way airports impose charges at the same time as Australia’s biggest airport insists it has no ability or incentive to overcharge airlines or passengers.
In separate submissions to a Productivity Commission inquiry into the economic regulation of airports, Virgin Australia and Sydney Airport have laid out divergent views of the current monitoring system.
Virgin Australia says the lighthanded regime allows airports to increase prices and reduce the quality of services offered. “The cost of airport use is becoming an increasingly urgent issue for Virgin Australia as these charges have risen, and are likely to continue to increase, inappropriately in the absence of any effective constraint on airports,” the submission says.
However, Sydney Airport, which last month posted a $174 million half-year profit, said the threat of the current regulatory regime was “real and sufficient to constrain any exercise of market power”.
It also suggested the airlines were not shy of exercising their own power by “refusing to pay or delaying payment of charges for aeronautical services while continuing to use airport services”.
“In such circumstances, airports cannot in practice deny access to an airline, and must continue to negotiate and compromise until an agreement is reached,” the submission says.
“This shifts the pressure of reaching a timely agreement from airlines to the airport.”
Although Sydney Airport acknowledged the need for certain airlines to fly there as the main gateway to Australia, the submission says it was a “mutually dependent relationship”.
“Sydney Airport is beholden to its customers as much as its customers are beholden to Sydney Airport,” it says.
Virgin Australia’s submission argued that airports held all the power in negotiations.
“Airlines cannot credibly threaten to withdraw services from most airports, as doing so would typically inflict much greater harm on the airline than the airport,” its submission says.
“For an airline it would have a significant impact on their network reach and the strength of their customer proposition.”
Meanwhile Virgin’s low-cost partner Tigerair will withdraw its business from a Philippines’ heavy maintenance facility after a 737 had to be grounded for three weeks upon return to Australia from a regular check.
Problems with the cockpit voice recorder and cargo smoke detection system were apparently overlooked by engineers.
The airline had used the SIA Engineering facility for the past two years but is now expected to move its business to Singapore.