The Productivity Commission is investigating the economics of Australia's airport monopolies

Marianna Massey/AFP/Getty Images

Treasurer Scott Morrison has announced the terms of reference for the Productivity Commission’s (PC) highly anticipated inquiry into the regulation of airport services.

The review comes as airlines wage an ongoing campaign against what they argue is overcharging by Australia’s monopoly airport operators since the infrastructure was privatised by successive governments over the past two decades.

The PC inquiry will review passenger and freight transport services at the main passenger airports in major cities, as well as “any unintended consequences” of the regulatory price cap and price notification regime for regional air services at Sydney Airport.

It’s the first look at how airports operate in seven years. The Commission’s similar investigation in 2011 found that the regulatory oversight had been effective and should be maintained for Brisbane, Melbourne, Perth and Sydney airports.

The conclusions of the latest inquiry are due to the government within 12 months.

Lobby group Airlines for Australia & New Zealand (A4ANZ), representing Qantas, Virgin Australia and their respective subsidiaries, as well as Rex and Air New Zealand, chaired by former ACCC boss Professor Graeme Samuel, has been running a campaign against airport charges in recent months, as details emerged of Canberra airport charging a Qantas 747 freighter $67,000 when it diverted from Sydney.

The charges sparked a slanging match between the airport’s MD and Qantas boss Alan Joyce, who compared the airport’s actions to Somali pirates.

The airlines claim that while airfares fell by 40% over the past decade, Australia’s four main airports collected 25% more revenue per passenger over that time. As a result airport fees are estimated to add as much as 20% to the cost of an airfare.

A4ANZ commissioned a report from Frontier Economics into Australia’s airports since privatisation, which concluded that the profit margins in some instances were more than double those of similar airports around the world.

A4ANZ chair Graeme Samuel said he was pleased the Commission was looking at non-aeronautical services too.

“Consumers face this not only through the landing fees but car parking charges, taxi surcharges, food and beverage prices in the terminals and the quality of facilities. We will not hesitate to bring to the Commission’s attention the consequences of airports’ monopoly behaviours on consumers at all stages of their journey,” he said.

“Airports are vital infrastructure assets that should be run fairly and transparently to promote travel and trade. The current situation allows them to instead behave as the privatised monopolies that they are, overcharging airport users who have no choice but to accept what is offered.”

Australian Airports Association (AAA) CEO Caroline Wilkie also welcomed the terms of reference saying the country’s major airports had invested $11.5 billion in improvements over the last decade.

“Airports continue to work constructively with airlines to invest to meet growing demand and provide passengers with better airport experiences and even more travel options in the future,” she said.

“Unlike other infrastructure around the country, these outcomes are being achieved without a cost to the taxpayer.”

Wilkie said maintaining the current regulatory approach would give investors the certainty required to continue financing airport works.

The terms of reference for the Commission’s inquiry are here.

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