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6 June, 2022

ACCC to keep “close eye” on airport profits as industry recovers from pandemic

Australia’s four largest airports made about five per cent of their combined pre-pandemic profit over the past two years, according to the ACCC’s latest Airport Monitoring Report.

The report also showed the number of domestic and international passengers using the four airports (Sydney, Melbourne, Brisbane and Perth) in 2020-21 was between about 17 per cent and 40 per cent of their average pre-pandemic levels.

Yet, despite this, Sydney, Brisbane and Perth airports still recorded operating profits in 2020-21, although their margins fell sharply.

Victoria’s longer periods with COVID travel restrictions contributed to an operating loss for Melbourne Airport in 2020-21.

“Unsurprisingly, the pandemic resulted in far fewer passengers visiting our four largest airports and that led to greatly reduced operating profits and margins,” ACCC commissioner Anna Brakey said.

“Despite severely reduced aeronautical revenues, Sydney, Brisbane and Perth airports were still able to turn a profit last financial year as a result of reduced operating costs.

“This is a surprising result given the impact of the pandemic on the aviation industry, and it demonstrates the resilience of the airports.”

According to the ACCC, airports have substantial market power, prompting the consumer watchdog to keep a close eye on their profit margins as the industry recovers from the pandemic.

In February this year, the Supreme Court of Western Australia ruled that Perth Airport had likely exercised substantial market power in negotiating aeronautical charges with airlines in 2018.

The ACCC said it is not surprised by the court’s finding, and prior to the pandemic had raised concerns about the sustained high-profit margins earned by Sydney, Melbourne, Brisbane and Perth airports.

“The Perth Airport and Qantas case, combined with our own findings over a long period, suggest the Government’s Aeronautical Pricing Principles are currently not assisting airlines in their negotiations with all airports as intended,” Brakey said.

“We’ll consider what can be done to improve how the Aeronautical Pricing Principles operate in commercial negotiations.”

Retail chains operating at Sydney, Melbourne, Brisbane and Perth airports told the ACCC that their sales turnover in 2020-21 was only about five per cent of their pre-pandemic average. As a result, many retailers at the four airports had to close their operations.

Hire car operators at the four airports also told the ACCC that their revenues were between about 10 per cent and 50 per cent of pre-pandemic levels. Some of the hire car companies had to close their booths at airports and sell parts of their fleets to generate enough cashflow to continue.

All four airports provided various levels of financial support to commercial and property tenants in 2020-21, such as rent relief, rent deferral and waiving fixed payments.

Image source: iStock/Lighthousebay

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accc airport Airport Monitoring Report Anna Brakey