ACCC issues fourth airport price monitoring report

The Australian Competition and Consumer Commission today issued Airports price monitoring and financial report 2005-06 which reports on the prices charged by Adelaide, Brisbane, Canberra, Darwin, Melbourne, Perth and Sydney airports.

It shows that prices airlines pay Australia's major airports for aeronautical services such as use of runways and passenger processing facilities have continued to increase.

At most airports increases ranged from 1.2 per cent to 12 per cent, while Canberra prices fell by 1.1 per cent. Adelaide airport reported an average price increase of 49 per cent after it began operations at the new Terminal 1 and introduced new Passenger Facilitation Charges for domestic, international and regional passengers. This significantly influenced the increase in aeronautical revenue at Adelaide airport.

"This year's report shows that prices have continued to increase in 2005-06 although to a lesser extent than those increases experienced in previous years," ACCC Chairman, Mr Graeme Samuel, said.

"The ACCC report shows that total aeronautical airport costs have risen between 2002-03 and 2005-06, with greater security requirements at airports since September 11 2001 being a significant cost driver.

"Despite these significant increases in aeronautical costs, most airports have reported increases in aeronautical revenue sufficient to allow aeronautical profitability to rise substantially."

The table below shows the percentage change in key indicators including, passenger volumes, total aeronautical revenue, aeronautical operating revenue and expenses per passenger for all airports. The first of the percentage increases represents the change in 2005–06; the second represents the change since price monitoring began.

	Passengers		Total aeronautical revenue		Aeronautical operating revenue per passenger (adjusted)*		Aeronautical operating expenses per passenger
	2005/06	Since 2002	2005/06	Since 2002	2005/06	Since 2002	2005/06	Since 2002
Adelaide	7.5%	39%	48%	290%	49%	162%	69%	66%
Brisbane	3.3%	33%	11%	112%	7.4%	59%	4.7%	15%
Canberra	2.9%	40%	1.8%	76%	-1.1%	25%	9.0%	-3.5%
Darwin	4.0%	33%	16%	136%	12%	78%	-1.3%	18%
Melbourne	3.1%	30%	5.3%	120%	1.2%	39%	3.2%	4.6%
Perth	7.3%	48%	13%	179%	5.7%	73%	5.9%	28%
Sydney	2.5%	22%	6.9%	47%	4.3%	21%	7.5%	-7.4%

"The revenues that price monitored airports generated from related services also increased. Aeronautical-related revenue, which predominantly consists of revenue sourced from car parking services, increased at all airports by between 7.2 per cent and 20 per cent in 2005–06. Although direct aeronautical–related costs also increased significantly this year, the increase in the margin for aeronautical-related services ranged between 9 per cent and 25 per cent."

*Note to Editors: Care should be taken in comparing airports on the above measure, because, for example, certain estimates include domestic terminal revenue and others do not. Canberra's results do not include terminal services. The emphasis in preparing this table has been to ensure a consistent series for each airport over time. Direction 27 made under Part VIIA of the Trade Practices Act 1974 requires the ACCC to monitor the prices, costs and profits of aeronautical and aeronautical-related services at the seven designated airports. Clause 3 in direction 27 provides an exemption in certain circumstances for airports to exclude aircraft refuelling services from aeronautical revenue. Brisbane, Perth and Sydney have relied on this exemption and such revenues are included in each airport's non-aeronautical revenue. Aeronautical revenue for these airports is therefore understated.

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 arrangement, under which the ACCC is responsible for reporting annually on aeronautical prices, costs and profits at the airports. However, the ACCC does not have any role in approving price increases prior to their introduction.

• one exception to this is in the case of aeronautical services provided by Sydney airport to regional air services. In 2005-06, there was no price increase notified for these services.

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 2006).