Airlines Accuse Airport Operators of Exploiting Them for Profits

Airlines have criticized Sydney and Perth airport operators for using their monopoly status to increase prices, citing instances of unjustifiable profits and abuse of market power. The Board of Airline Representatives of Australia (BARA), which represents Qantas, Virgin Blue, British Airways, Emirates, and United, among others, has submitted its views to the Productivity Commission's review of the current pricing system for airports. The commission was set up to examine the impact of the 2002 decision to drop price caps and price notification for Australia's major airports, which had been bought by the private sector in the preceding five years.

Key Takeaways:

• BARA accused Sydney Airport Corporation Ltd (SACL) of imposing increases in international aeronautical charges without providing transparent information about its costs, leading to abuse of market power.
• BARA claims that SACL has increased charges by $1 to $2.20 per passenger, resulting in unreasonable profits for the company.
• Perth airport, operated by a wholly owned subsidiary of Airstralia Development Group, has been accused of failing to consult with airlines about price changes, further increasing costs for airlines.
• The airlines believe that the current pricing system allows airport operators to engage in "regulatory gaming and rent seeking," resulting in unjustifiable profits.
• BARA notes that without real penalties and threats, airport operators have no incentive to be transparent about their costs and pricing, leading to overcharging.
• The airlines highlight the fact that increased charges simply end up as higher superannuation returns to fund owners, rather than benefiting customers or airlines.

Statistics:

• The airlines are being charged $1 to $2.20 per passenger more than what SACL claims is necessary for a reasonable return.
• The current pricing system has led to airport operators generating unjustifiable profits, with SACL allegedly making significant increases in international aeronautical charges.
• The submission by BARA is the first to criticize some airport operators for abusing their market power and engaging in rent seeking.
• Submissions to the Productivity Commission's review are due to close next week, with a draft report expected in early September.
• The current system has allowed airport operators to prioritize maximizing short-term cash flows over providing transparent pricing and services to airlines and customers.

Sources:

• Asia Pulse, July 7, 2002
• AAP (Australian Associated Press) dated 07-07 1656, quote not available