ACCC draft decision on Melbourne Airport multi-user passenger terminal

The Australian Competition and Consumer Commission today issued its draft decision regarding Australia Pacific Airport Melbourne's application to introduce an aeronautical charge to recover the costs of a new multi-user domestic passenger terminal at Melbourne Airport.

The MUDT will service Impulse Airlines, Virgin Blue and other new entrants.

"The draft decision relates to new investment provisions in the CPI-X price caps which apply to privatised airports", ACCC Chairman, Professor Allan Fels, said. "These provisions were designed to provide incentives for the timely development of necessary new aeronautical infrastructure.

"The ACCC's draft decision approves a new charge to fund construction of the $8.4 million passenger terminal. The facility will include check-in and baggage facilities and a passenger lounge.

"Currently, domestic passenger terminal facilities at Melbourne Airport are provided by Qantas and Ansett. The new facility proposed by APAM will allow new competitors such as Impulse and Virgin Blue to operate at Melbourne Airport in independently provided facilities. These have been designed in consultation with potential users and represent a cost-effective way of servicing new entrants.

"While the ACCC supports the facility proposed by APAM it has not agreed to the prices proposed. The draft decision is for a charge of $1.28 per arriving and departing passenger. This is lower than proposed by APAM. There are two main reasons for the difference.

"The first is the rate of return proposed by APAM. The rate of return adopted by the ACCC is for a post-tax cost of equity of 14.3 per cent. This is in line with other decisions made by the ACCC in relation to airport investment proposals.

"The second is passenger projections. APAM divided total annual costs of the project (including a rate of return) by passenger numbers to give a per passenger charge. The ACCC considers that the passenger projections are overly conservative and result in unnecessarily high prices".

Preliminary comments on APAM's proposals were sought from interested parties. The ACCC had regard to these in reaching its draft decision.

The ACCC now seeks submissions on its draft decision. The reports will be available on the ACCC web site at www.accc.gov.au.