Airports overcome weak passenger growth to report record profits

24 February 2020

Australia’s four major airports have continued to report increasing levels of joint profits from aeronautical activities, according to the ACCC’s annual Airport Monitoring Report, released today.

Brisbane, Melbourne, Perth and Sydney airports collectively earned $863.5 million in operating profit from aeronautical activities in 2018-19, up 3.6 per cent. This result was achieved despite weaker passenger growth and a drop in domestic passenger numbers at Sydney Airport.

The result was driven by the east coast airports, with Brisbane, Melbourne and Sydney all reporting higher aeronautical revenue, revenue per passenger and operating profit.

At Brisbane Airport, revenue per passenger grew by 11.3 per cent, while Melbourne reported the strongest profit growth at 11.1 per cent.

Airport monitoring report 2018-19Click to enlarge

“Despite weaker growth in the number of passengers flying in 2018-19, together the four largest airports have managed to report record profits from aeronautical activities,” ACCC Chair Rod Sims said.

“Australia’s four major airports have collectively increased their aeronautical profit almost every year over the 17-year lifespan of the ACCC’s monitoring. This may illustrate the benefit of being a monopoly.”

Sydney Airport’s return on aeronautical assets was its highest since the monitoring regime began, rising to a return of 12.5 per cent, while returns for the other three airports fell.

At Perth Airport the operating profit from aeronautical operations fell by 19.2 per cent in 2018-19 to $75.7 million due to lower charges to airlines and higher costs associated with taking back operational control of its domestic terminal T4 from Qantas.

Car parking profit margins remain very high, but consumers have options for reducing their prices

The profitability of car parking continued to fall overall, as travellers explore alternative ways of getting to and from airports.

The airports collectively earned $276.1 million in operating profit from car parking in 2018-19, down 2.5 per cent. Both Sydney and Melbourne airports earned lower profits than the previous financial year, however Brisbane and Perth airports’ profits increased.

“While Melbourne Airport has reduced its car parking prices, and profits generally have fallen, the airports are still earning very high profit margins from car parking,” Mr Sims said.

Sydney and Brisbane airports were typically the more expensive airports for short-term parking near the terminals, while Sydney and Perth were generally the more expensive airports for long-term parking away from the terminals. Parking prices generally increased in 2018-19 at Brisbane Airport, while they continued their downward trend at Melbourne Airport.

“We know that consumers are frustrated with the cost of parking at the airport, but there are steps people can take to help secure more favourable rates,” Mr Sims said.

“Last year, motorists who parked at an airport car park away from the terminal paid up to 60 per cent less than those who parked right at the terminal. On top of this, drivers who pre-booked online paid up to 39 per cent less than the drive-up rates available.”

“People looking for the best rates should also consider the prices available from independent car parks near the airport,” Mr Sims said.

The ACCC has published a consumer guide with tips on how to save on airport car parking.

‘Good’ service overall at all four airports, but airlines have concerns

All four airports maintained a rating of ‘good’ for their overall quality of service in 2018-19, which occurred last year for the first time since 2005.

Melbourne and Sydney airports’ overall ratings improved slightly, while Brisbane and Perth’s ratings showed a modest decline. Perth Airport received the highest overall rating of the four airports for the third year in a row, while Sydney Airport received its highest overall rating since ACCC monitoring began.

“We have seen some promising results in terms of quality of service this year, with passengers particularly satisfied with their overall airport experience,” Mr Sims said.

“Airlines, on the other hand, have expressed concerns to us about issues such as congestion of runways and taxiways, as well as the adequacy of the baggage facilities at several airports.”

Congestion of airside facilities may be impacting on flight punctuality. The number of flight delays has increased in recent years. While on-time performance can be influenced by a range of factors, Melbourne Airport has said that its delays will likely worsen until it build its proposed new runway. 

Background

The ACCC monitors the performance of the four largest airports in relation to aeronautical and car parking activities following a direction from the Australian government. It is required to consider prices, costs, profits and quality of service.

The ACCC’s monitoring role does not include the power to intervene in the airports’ setting of prices for parking and aeronautical activities. However, the ACCC is required to assess any proposal by Sydney Airport to raise charges for regional air services.

The ACCC draws its information of the quality of service at airports from airline surveys, passenger surveys and objective data from the monitored airports. The ‘overall quality of service’ measure is calculated as an average of these ratings.

Price and quality comparisons between airports should be treated with some caution because results can be impacted by factors such as different terminal configurations, domestic/international passenger mix, and different approaches to valuing assets.

The Productivity Commission’s final report in its inquiry into the economic regulation of airports, released in October 2019, largely endorsed the current reporting framework based around ACCC monitoring and periodic reviews by the PC.

The Australian government supported many of the PC’s recommendations. These recommendations include for the airports to provide additional information to the ACCC in order to better inform reviews of airport performance, and for the ACCC to review the way in which it monitors the airports’ quality of service.

Supporting data

Operating profit refers to earnings before interest, taxation and amortisation (EBITA). Operating profit margin refers to EBITA as a percentage of revenue. Return on assets refers to EBITA as a percentage of average value of tangible non-current assets.

Table 1: Financial results of aeronautical and car parking services of the monitored airports, 2018–19

  Brisbane Melbourne Perth Sydney
Aeronautical operations        
Revenue ($m) 402.3 484.7 221.4 897.8
Operating profit ($m) 188.8 194.5 75.7 404.4
Return on assets (%) 7.2 8.5 7.6 12.5
Car parking operations        
Revenue ($m) 107.1 145.5 61.7 133.6
Operating profit ($m) 72.0 77.5 35.6 91.0
Profit margin (%) 67.2 53.3 57.6 68.1

Note: Values are expressed in 2018-19 dollars.

Release number: 
20/20
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