Aussie airlines defeated in fight against “monopoly” airports

Adelaide, Australia - March 21, 2016: Planes from domestic air industry competitors and rivals Qantas and Virgin, coming and going from Adelaide airport.

The Australian airline industry has urged the government not to adopt the recommendations of the Productivity Commission’s Inquiry into the Economic Regulation of Airports, which found airports were not misusing their market power.

The Productivity Commission’s final report said Sydney, Melbourne, Brisbane and Perth’s airports have not “systematically exercised their market power in commercial negotiations, aeronautical services or car parking”.

According to the findings, a new independent arbitrator was not necessary, despite it being one of the key demands from airlines.

However, the report did find that regulatory arrangements for airlines to access Sydney airport should be improved and that international airline fees at both Sydney and Brisbane airports were relatively high.

Airlines for Australia and New Zealand (A4ANZ) chair professor Graeme Samuel said the final report is largely unchanged from the draft “Despite a raft of submissions and credible evidence the Productivity Commission received in favour of modest, sensible reform”.

“The most significant of these was a proposal from the ACCC to address the fact that the existing system provides no constraint on monopoly airport behaviour, and that an independent umpire is needed to efficiently resolve disputes. This was rejected by the Productivity Commission, despite the benefits that similar frameworks have brought to other sectors,” Samuel said.

The report said the current approach to airport regulation benefits passengers and the community and “remains fit for purpose at this time”.

“But the monitoring regime should be strengthened to enhance transparency over airports’ operations and to more readily detect the exercise of market power,” the report said.

To do this, the productivity commission recommended airports report their revenues and costs for providing aeronautical services to airlines to the ACCC.

Samuel said that if the government accepts these recommendations “the next few months and years will see monopoly airports emboldened – as they were after the draft report’s release – to demand unreasonable terms in their negotiations with airlines and other airport users.”

“This means more productivity-sapping disputes and more cases of expensive, inefficient and ineffective litigation through the courts. This is not good for investment, innovation or competition, and it means that consumers and the economy lose out. It’s a problem that isn’t going away,” he said.

“We have previously pointed out the errors of fact and the flaws in the Productivity Commission’s analysis. The Final Report is, disappointingly, no different.

“Better, fairer deals for airport users are what is needed, not 5 more years of the same issues and worse.

“There is a pragmatic, light-handed solution on the table: independent commercial arbitration to resolve disputes. We know that, like the majority of Australians, the Government are convinced there is a problem with our monopoly airports. We believe the Government will act to address this, and await their response to this Report.”

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