Costs: It’s airlines v airports
Passengers bear brunt of hefty charges, says new report
Airline chiefs from Australia and New Zealand say passengers are paying the price for light-handed regulation of airports in the absence of appropriate constraints on monopoly power.
The airline bosses put aside commercial rivalry to highlight the challenges they faced at the launch of a report in Canberra.
The report, commissioned by Airlines for Australia and New Zealand (A4ANZ), was launched in Parliament House in Canberra. It said the four main airports across the Tasman were collecting 25 per cent more revenue per passenger than they were 10 years ago, and that services had not improved.
Air New Zealand chief executive Christopher Luxon was at the event and said there were similar problems and challenges in this country and airlines were united on the issue.
“These brands and CEOs compete incredibly hard against each other and want to punch each other’s lights out in the marketplace but we’re saying we’ve got this problem that affects us all.”
Luxon’s airline had good relationships with airports in regards to their operations and other initiatives, such as tourism promotion, but fundamentally disagreed with the pricing regime.
“Now it’s time for us to do what we can do to get a level playing field into place so the airports can make a fair return and the airlines can make a fair return.”
Ultimately, all the added costs affected the public because they were passed on in higher charges.
Legislation dating back to 1966 meant airlines struggled to enter into commercial relationships with airports on an equal footing.
When the Airport Authorities Act came into force, the Government owned the national airline and airports and allowed airports to set prices “as they saw fit”.
Luxon said there was no competition and the Commerce Commission did not have the power to regulate prices.
Rather than price regulation, airlines wanted a negotiate-arbitrate regime.
He said airlines also wanted to end the “dual till” model where money airports made out of nonaeronautical activities such as retailing and car parking — and not overseen by the Commerce Commission — was not used to fund the upgrading of the airports’ capital base.
But the New Zealand Airports Association said the regulatory regime was working and there was close monitoring.
“The charges reflect the actual costs and a fair and reasonable profit,” said association chief executive Kevin Ward.
Any move back to the single till would be a backward step to the old days of cross subsidisation, he said.
The report, The Performance & Impact of Australia’s Airports Since Privatisation, will be followed by a study into pricing in this country.
“The situation has arisen because Australia’s airports are indisputably monopoly operators,” it says.
Analysis by Frontier Economics confirmed that earnings at Australian airports (Sydney, Perth, Melbourne and Brisbane) were excessive, with profit margins significantly higher — in some cases more than double — those of other airports around the world operating in competitive markets or with greater regulation.
Airfares had been kept low and had declined during the past decade at a time when airports had enjoyed uninterrupted growth.
Average aeronautical revenue per passenger had increased at the four airports by 15 to 59 per cent in the nine years to 2017. During the same period, average air fares had fallen by 42 to 52 per cent.
A4ANZ is made up of Air New Zealand, Jetstar, Qantas, Virgin Australia, Tigerair and Rex Regional Express.
The group’s chairman, Graeme Samuel, said New Zealanders should be concerned about an estimated $200 million in excess profits made by the four monitored Australian airports.
During the past decade Kiwis have been big users of them.
He said A4ANZ would release a report on New Zealand airports in the next few weeks which he said could paint an even worse picture.