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September 11, 2018

Regulation of airport fees will add $12.82bn of benefits to Australia

Airlines for Australia and New Zealand (A4ANZ) said that a lack of regulation to curtail airport monopolies has proved costly for Australian passengers and the economy.

Airlines for Australia and New Zealand (A4ANZ) said that a lack of regulation to curtail airport monopolies has resulted in high airport fees, proving costly for Australian passengers and the economy.

In a submission made to the Productivity Commission’s Inquiry into the Economic Regulation of Airports, the industry body said that regulating airports fees will help deliver A$18bn ($12.82bn) in benefits into Australia’s economy over the next 15 years while helping to reduce the airfares.

A4ANZ is an industry body that represents the Qantas and Virgin groups, Air New Zealand and Regional Express.

The A4ANZ further added that consumer surplus will be about A$5.9bn ($4.2bn), with travel time savings valued at A$819m ($583.23m) due to connectivity improvements. It will also see A$10.9bn ($7.76bn) in GDP benefits due to productivity gains through increases to trade and foreign investments and tourism benefits of A$480m ($341.82m).

“The price monitoring regime is failing to facilitate commercial negotiations between airports and their customers.”

A4ANZ chairman, professor Graeme Samuel AC said: “The price monitoring regime is failing to facilitate commercial negotiations between airports and their customers. This should not come as a surprise to anyone, as monopolists will overcharge unless faced with a credible threat of regulation.

“A4ANZ’s position on this is supported by all the expert advice we received – legal, economic, and regulatory – that the current system is not sustainable. It lacks a credible threat.”

The A4ANZ further said that the competition regulator should decide on the issues related to airport fees for using runways, terminals as well as other infrastructure.

The inquiry comes following the Monitoring Report by ACCC earlier this year, in which chairman Rod Sims expressed concern about the lack of constraint on the airports’ market power.

A4ANZ CEO Dr Alison Roberts said: “Australian airports are currently able to use their monopoly position to charge prices that generate excess returns, but this is not delivering improvements in quality or efficiency.

“Something has to change if consumers are to be shielded from the impact of what is ahead.

“While airlines have been able to keep downward pressure on airfares over the past decade, globally, fares are expected to rise next year, driven by rising oil prices, pilot shortages, costs for mandated upgrades to security and technology, not to mention the pipeline of infrastructure investment.”

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