ACCC: Airport "monopolies" are forcing up the price of air travel
Written on the 26 April 2018 by David Simmons
Australian travellers are being slugged higher ticket prices for air travel thanks to what has been described as monopolistic behaviour from airports.
The Australian Competition and Consumer Commission (ACCC) says passengers are paying higher ticket prices as a direct result of a rise in profits per passenger at each of the country's four largest airports.
Flight operators are passing on the fees charged by airports for parking and use of infrastructure which the airports have a total monopoly over.
The ACCC revealed Sydney Airport's "aeronautical revenue" rose by more than four per cent to $18.30 per passenger last financial year.
The four biggest airports, in Brisbane, Melbourne, Sydney and Perth, earned a combined $757.6 million in operating profits in 2016-17, up nearly 10 per cent from the previous year.
Sydney Airport alone earned $360.8 million.
ACCC chairman Rod Sims says this damage to consumers is unsurprising considering the nature of airports in Australia.
"It is not surprising that the airports are so profitable, given that they face little competitive pressure and no price regulation," says Sims.
"Airfares are going down but they would have been going down further if you hadn't had constant increases in the aeronautical charges from the airports."
Sims has called for the government to implement regulation over the "unconstrained" airports in Sydney, Melbourne, Brisbane and Perth.
"Unconstrained monopolies often have an incentive and ability to charge excessive prices while lacking strong incentives to improve services," says Sims.
"They are free to set their prices, and of course, they are monopolies."
The Australian Airports Association (AAA) has since responded to the statements made by Sims about the excessive charges paid by Australian customers, with AAA chief economist Warren Mundy saying the statement has no basis in reality.
"This is a peculiar observation by Mr Sims seeing that the monitoring report contains no data on airfares," says Mundy.
"Indeed the Board of Airline Representatives of Australian recently reported that international airfares have fallen in real terms by around 40 per cent since 2006 whilst data published by the Bureau of Infrastructure, Transport and Regional Economics shows domestic airfares have declined in real terms over the last decade until late last year."
"Airport charges have risen to fund investment and these charges, along with the investments, have been determined by negotiation between airports and airlines."
"It is essential we maintain the current regulatory environment that promotes private investment, largely by Australian superannuation funds, and ensures airports remain focused on delivering the best possible outcomes for passengers and their airline partners."
"The regime is not broken and it will deliver continued investment over the next decade to ensure Australia is well positioned to reap the rewards of a safe, strong, affordable and efficient aviation network."
Airport car parking continues to be incredibly profitable for Australian airports. Sydney Airport recorded an operating profit of $97 million from car parking operations, representing an operating profit margin of 71.9 per cent of revenues.
(UPDATE 5.10pm AEDT: article edited to reflect the position of the Australian Airports Association)
Business News Australia
Author: David Simmons