ACCC decision on Melbourne Airport taxi fee proposal

The Australian Competition and Consumer Commission has considered Melbourne Airport’s proposal to introduce a taxi fee of $1.40. The ACCC Commissioner with responsibility for airports, Mr John Martin, said the ACCC accepts that $0.66 of the proposed fee is justified as necessary new investment attributed to the taxi facility.

"This decision does not necessarily prevent Melbourne Airport from introducing the $1.40 fee", he said. "But if Melbourne Airport wants to bring in the full fee it will need to lower other aeronautical charges. Melbourne Airport will have to seek ACCC approval of any such off-setting proposal.

"Melbourne Airport notified the ACCC of the proposed taxi fee on 30 March 2001. The airport says the fee is justified by infrastructure spending, including the construction of a new taxi queuing facility and certain roadworks. Melbourne Airport also seeks to recover the costs of taxi rank management labour.

"The ACCC considers some of the costs built into the proposed fee are not justified as new investment. In particular, the new taxi queuing area partly replaces an existing facility, so only a portion can be recovered.

"Melbourne Airport’s proposed fee was calculated on the basis of a 10-year recovery period, yet Melbourne Airport intended to impose the fee indefinitely. The ACCC considers a 20-year recovery period more accurately reflects the life of the assets. The ACCC calculates the charge on that basis".

Background

The regulatory arrangements covering price-capped airports allow airport operators to apply to the ACCC to recover the costs of 'necessary new infrastructure' expenditure by imposing increases outside the price cap. The provisions are designed to provide incentives for the timely development of necessary new aeronautical infrastructure.

Melbourne Airport asked the ACCC to approve the following items as 'necessary new investment':

• taxi facility: capital $3.4 million; operating $0.633 million per annum. This includes the capital costs associated with a new taxi holding facility on Melrose Drive, modifications to the existing holding area, and the implementation of the new taxi queuing system

• rank labour: $0.696 million per annum. These include staff costs associated with the supervision of the rank and the dispatch of vehicles

• Qantas roads: capital: $5.8 million; operating: $0.041 million per annum. These works include ground level works associated with the extension of the overhead road near the Qantas terminal

The ACCC's decision in relation to these outgoings is:

• taxi facility: On balance the ACCC accepts Melbourne Airport's position that the project is necessary. However as part of the project consists of replacing the existing facility the ACCC finds that only a portion of the costs of the facility are justified under the new investment provisions

• rank labour: The ACCC finds that these costs do not meet the description of 'investment' and accordingly are not justified under the new investment provisions

• Qantas roads: These outgoings are new investment but provide both aeronautical and non-aeronautical services. The ACCC finds that a portion of these costs may be recovered from aeronautical users (i.e. taxis) and are justified under the necessary new investment provisions

The ACCC determines the charge should be calculated on the basis of a 20-year recovery period as this is a reasonable reflection of the lives of the various assets. Melbourne Airport had proposed calculating the charge on a 10-year recovery period. The effect of this change is to reduce the per unit charge.