Monday, 25 April 2011

Qantas, Toll slam sky-high airport prices and urge Canberra to act


qantasTWO of the nation's most powerful transport companies have launched a scathing attack on Australia'sairports, calling on the federal government to crack down on their "demonstrably excessive" pricing practices. Qantas Airways and transport giant Toll Holdings say the light-handed approach to airport regulation currently adopted by the government has failed to curb monopoly pricing and protect airport users from abuses of market power. The cost of parking a car at airports is cited as just one hot-button consumer issue.
They claim the light-handed approach has not led to acceptable improvements in service levels to airport users.

Just last week Qantas's budget airline Jetstar said it would seek damages from Sydney Airport (SACL) for a security lapse that stranded thousands of travellers following a power failure.

Jetstar recently clashed with the airport over plans to install self-service equipment in domestic terminals to help passengers use SMS technology for check-in.
It claimed the airport identified a number of trivial issues not raised by any other airport in negotiations, including the potential fading of carpet at a different rate due to the equipment blocking sunlight.

The calls by Qantas and Toll have been backed by the powerful Board of Airline Representatives of Australia (BARA), which represents most of the international airline carriers using Australian airports.

The International Air Transport Association, representing international airlines, has also criticised airports for increasing charges for airlines while running services down.

But BARA goes further, demanding a detailed investigation by the competition regulator into the practices of Sydney airport, which is majority-owned by the listed company MAp Airports.

"BARA believes that SACL has probably progressed to a point where only the imposition of stricter economic regulation is likely to be able to correct its long-term commercial conduct," the group says in a new submission to the Productivity Commission.

An inquiry by the commission is investigating how airports are run and regulated, including looking at the effectiveness of the Australian Competition & Consumer Commission's price and service quality monitoring regime.

The review comes at a critical time, with airports expected to invest almost $6 billion on airport infrastructure over the next 10 years.

The ACCC has already called for airlines to be allowed to take disputes over the fees for aeronautical services to the regulator for compulsory arbitration by having the airports "declared".

Qantas has backed the push, and also called for an additional set of binding codes of conduct to facilitate commercial negotiations between the airports and airlines.

It says commercially negotiated outcomes with airports are "the exception rather than the rule".

"Where such agreements have been reached they are inevitably the result of protracted negotiations often taking years," the carrier says in its submission to the commission.

Qantas is especially worried about charges for facilities that are not covered by the current price monitoring regime.

"In particular, excessive lease costs for critical infrastructure such as airline offices, lounges, hangars, maintenance facilities, check-in counters, service desks and staff car parking all sit outside any protection provided by the current regime," the airline says.

"Airlines, and indeed airports, cannot function without these facilities and yet no protection is afforded to airlines in relation to the provision of these services by airports. Collectively these costs add significantly to the total cost of operations at airports and to the costs airlines and consumers must incur as a result."

It also wants regional airports to be bound by new codes of conduct, albeit less onerous than those applying to the major metropolitan airports.

Toll says it has become increasingly concerned by the actions of some airport operators who "show little regard for the needs of businesses, such as Toll Dnata and Toll Air Express, and give priority to non-aeronautical businesses such as retail outlets, motels and other industrial uses".

"Toll Group firmly believes the primary function of airport managers should be to manage their facility as an airport and promote aeronautical operations for the benefit of Australia's economy and population. Unfortunately, we see substantial evidence to the contrary," it says.

The ACCC's price monitoring system for airports was introduced in 2002 following the lifting of price caps that were in place after the wholesale privatisation of the airports that started in 1997.

The privatisation process means the airports are now owned or operated by some highly profitable companies.

A report by the ACCC last year found the major airports -- Sydney, Melbourne, Brisbane, Adelaide and Perth -- each used some form of monopoly pricing for car parking.

It prompted the government to order a review of the current monitoring regime.

A draft report of the findings is due in August.

But the airports argue airport competition has substantially increased over the past nine years and say shareholders have a right to "a fair return" on investments made by airports.

In its submission to the ACCC, Sydney Airport says the inquiry should support the broad benefits of improved and updated light-handed regulation of the aviation industry.

"This would continue to foster commercial relationships designed to service consumer needs and, through the resulting partnerships, the aviation services and connectivity required by a growing modern economy," it says. It also wants a framework for governments to address road, rail and bus transport needs and planning links with the airport to "improve competition and consumer welfare".

The ACCC has suggested that airports could be required to build new multi-level carparks and make it easier for buses, taxis and hire cars to drop off and pick up passengers to curb high parking costs at the capital city terminals.

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