ACCC issues airport monitoring report

The Australian Competition and Consumer Commission today released the 2006-07 Airport Monitoring Report.  For the first time, it reports both on the quality of service and the prices charged by Adelaide, Brisbane, Canberra, Darwin, Melbourne, Perth and Sydney airports.

"This year the ACCC has observed airports continuing to benefit from strong growth in passengers and increasing prices," ACCC Chairman, Mr Graeme Samuel, said. "This has allowed airport operators to increase the profitability of their aeronautical services, even though many of them have reported rising costs.

"However, the profit performance of the airports does not appear to be related to the quality of service they provide. The ACCC's monitoring of the quality of service offered by the seven airports has again shown a range of results varying from 'below satisfactory' to 'good'.  For the first time Adelaide airport has joined Brisbane airport as the highest rated on quality.  In contrast, services provided by Darwin airport have been ranked by users as only 'satisfactory' while those provided by Canberra airport were regarded as below satisfactory."

The full report will be available on the ACCC website at www.accc.gov.au/content/index.phtml/itemId/347781/fromItemId/3883.

Price monitoring

The report shows that, on average, prices airlines pay Australia's major airports for aeronautical services such as use of runways and terminal facilities have continued to increase.  At most airports increases ranged from approximately one per cent at Perth to 7.9 per cent at Canberra. The average measure for Adelaide airport, at 55 per cent, was considerably higher, although this partly reflects the first full year application of the passenger facilitation charge associated with the new terminal.

At most airports there have been large increases in passenger numbers and aeronautical revenues. Costs have generally increased to a lesser extent, resulting in increases in operating margins.  Lower margins were however reported at Canberra airport.

The table which follows 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 2006–07 while the second represents the change since price monitoring commenced.

[1] 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 while Adelaide’s results contain all domestic terminal lease revenues. The emphasis in preparing this chart has been to ensure a consistent series for each airport over time. In addition, relying on clause 3 in direction 27, reported aeronautical revenue for Perth, Brisbane and Sydney exclude revenue from fuel throughput services and is therefore understated.

The revenues that the airports generated from services related to aeronautical activities also increased. Aeronautical-related revenue, which predominantly consists of revenue from car parking, increased at all airports by between 5.0 per cent and 36 per cent in 2006–07.

Quality of service monitoring

The ACCC's role of monitoring quality of service is complementary to its prices monitoring role. In measuring quality, the ACCC draws on a number of sources. In measuring the views of passengers the ACCC is required to rely on surveys which each airport arranges. The results of the report show the overall quality of service provided by the airports over the period of ACCC monitoring ranging between satisfactory and good.

*The actual rating for Canberra in 2002-03 and 2006-07 was slightly below 'satisfactory'.

The report found that over the past five years, Brisbane has been the top-ranked airport, achieving an overall rating of ‘good’. This year for the first time Brisbane was joined by Adelaide as the top-ranked airport. The commencement of operations at the new terminal in Adelaide has been associated with a rise through the rankings from seventh in 2004-05 to first in 2006-07. Melbourne and Sydney airports rated at the mid-point between ‘satisfactory’ and ‘good’. Perth airport has been rated between ‘satisfactory’ and ‘good’. Both Canberra and Darwin have generally rated at the overall ‘satisfactory’ level although Canberra fell slightly below the overall ‘satisfactory’ level in 2006–07.

New monitoring regime

In response to an inquiry into the airports industry carried out by the Productivity Commission, the government announced some changes to ACCC’s monitoring role that will apply for the 2007–08 report and subsequent reports. The changes include:

• Canberra and Darwin airports will no longer be subject to monitoring;
• Refinement of the definition of ‘aeronautical services and facilities’, which will mean that financial information on certain services, such as aircraft refuelling, will be included in future reports; and
• Requiring the airports to report the value of aeronautical assets that exclude the effect of ‘revaluation’ exercises.

It is intended that this new monitoring regime be in place for six years commencing 2007–08.

Under price monitoring arrangements the ACCC is responsible for reporting annually on aeronautical prices, costs and profits at airports. Prior to these arrangements, airports were subject to a price cap. However, the ACCC no longer has a role in approving price increases prior to their introduction with the exception of regional air services provided by Sydney airport.

ACCC monitoring of the quality of service at airports is intended to discourage airports from providing unsatisfactory service standards, provide information to airport users that will assist them in their commercial negotiations with airports, and assist the government to address public interest matters relating to the regulation of airports.