ACCC issues first airport monitoring report

The prices airlines pay Australia's major airports for aeronautical services such as use of runways and terminal facilities have increased sharply in the past two years, according to a report issued by the Australian Competition and Consumer Commission today.

The Airports price monitoring and financial report 2002-03 reviews the prices charged by Adelaide, Brisbane, Canberra, Darwin, Melbourne, Perth and Sydney airports.

"The report shows that in the two years from 2000-01 to 2002-03, average prices have increased significantly at all major airports", ACCC Chairman, Mr Graeme Samuel, said.

"Average charges for aeronautical services increased at these airports by between 40 per cent and 160 per cent over the past two years".

Until recently aeronautical charges were subject to price caps and price surveillance. Since 2000-01, this approach has gradually been replaced by price monitoring.

"The removal of price caps and price surveillance means airports are no longer required to notify the ACCC prior to increasing charges for aeronautical services".

The ACCC report shows average airport costs also increased between 2000-01 and 2002-03. Mr Samuel said greater security requirements at airports since September 11 have been a significant contributor to this rise in airport costs.

However, the changes in unit costs and volumes were small by comparison to the price rises, resulting in significant increases in several measures of airport profitability.

"Aeronautical margins, as well as returns on assets, have risen", he said.

BACKGROUND

Aeronautical charges are the prices airports charge airlines for airport services such as use of runways, parking aprons and terminal facilities.

The price changes cited above are based on annual revenue from aeronautical services (with some adjustments), which is divided by the number of passengers at each airport as a measure of average aeronautical prices.

Prior to 30 June 2002, aeronautical charges levied by Melbourne, Brisbane and Perth Airports were subject to a price cap.

Price caps also applied to Adelaide, Canberra and Darwin airports until October 2001.

Under the price caps, all these airports (as well as Sydney Airport) were required to notify the ACCC prior to increasing aeronautical charges.

The price cap arrangements have been replaced by a price monitoring system. Under the price monitoring arrangement, the ACCC is responsible for reporting annually on aeronautical prices, costs and profits at the airports. However, it does not have any role in approving price increases prior to their introduction.

As well as its price monitoring role, the ACCC is required to:

• administer the financial accounts reporting provisions of the Airports Act 1996 (this information is included in the price monitoring report), and
• monitor the quality of airport services (the ACCC’s quality monitoring report was issued in November 2003).