The Australian Competition and Consumer Commission has issued its preliminary view on proposals to increase prices for services provided by Airservices Australia, Australian Competition and Consumer Commission Chairman, Professor Allan Fels, said today.
The services covered are air traffic control and airport rescue and firefighting.
Airservices Australia is the only provider of the services in Australia and is 'declared' under the Prices Surveillance Act 1983. With its monopoly position, Airservices Australia must notify the ACCC of proposed price increases.
On 13 May Airservices Australia provided a pricing proposal to the ACCC. In the proposal it proposed rises of:
- 3.9 per cent in en route air navigation services;
- an average increase of 5.9 per cent in terminal navigation charges with increases at nine of the 27 airports where services are provided; and
- an average increase of 8.1 per cent at the 16 airports where it provides rescue and firefighting services.
Overall, the average increase proposed was 5.1 per cent.
This follows a four year period since 1998-99 of cumulative real price reductions by Airservices Australia of in excess of 20 per cent.
Airservices Australia's proposal is for price rises that would achieve a return on revenue of 9.1 per cent in 2002-03. According to Airservices Australia the increases were required to offset the effect on profits of lower traffic volumes after the events of 11 September 2001 and the demise of Ansett. The increases were proposed after Airservices Australia reduced costs in its initial response after September 2001.
While there is some justification for a price rise in the forthcoming financial year, the ACCC does not consider that Airservices Australia's proposed increases should necessarily apply beyond 2002-03 without a review of traffic forecasts.
The ACCC released an issues paper in May and submissions were received from Qantas, IATA, Virgin, BARA, British Airways, Adelaide Airport and Karratha Airport. Most argued against the proposed increases in charges.
Under the Prices Surveillance Act 1983 the ACCC can only endorse maximum prices and cannot require prices to be reduced. The ACCC is concerned however, that after the next year traffic volumes may increase ahead of forecasts.
The ACCC has issued a preliminary view and is now calling for further comment by Friday 28 June. A final decision will be issued in mid-July.