Productivity Commission Report causes industry outrage

    Airlines for Australia and New Zealand (A4ANZ) has called for an urgent rethink by the Productivity Commission of the recommendations contained in its draft report from the Inquiry into the Economic Regulation of Airports. While the Board of Airline Representatives of Australia (BARA) announced it is disappointed and surprised the Commission’s Draft Report has downplayed the problems international airlines have with the provision, management and pricing of airport services.

    Commenting on the report’s release, A4ANZ Chair Professor Graeme Samuel AC, said, “The Australian public know there is an enormous problem with our monopoly airports. They are the ones paying for it. Negotiation delays and disputes with a range of airport users highlight the fact that the system is not working to meet the Government’s policy objectives, and that change is required. Yet this report – unusually for the PC – appears to ignore important evidence clearly showing this, from credible sources including:

    • The ACCC, Frontier Economics, and the Grattan Institute;
    • Regulatory and competition law experts;
    • Data from the Government’s own Department;
    • Market analysts, who have recognised that the “unregulated revenue stream” enjoyed by the airports allowing them to outperform global peers must be reined in if efficient investment is to occur; and
    • Car rental companies, ride share and taxis operators, and consumers themselves.

    BARA believes undesirable outcomes are occurring under the light-handed economic regulatory arrangements for the major international airports. Member airlines consider that the airport operators:

    • Do not provide value for money in airport services;
    • Are disconnected from their actual levels of performance;
    • Essentially receive the same price and profits regardless of actual service outcomes delivered;
    • Frequently present BARA with unfavourable, ambit-claim commercial terms in agreements;
    • Have required airlines to effectively pre-fund compensation through the service level recovery mechanism for equipment failures.

    “BARA has recognised and acknowledged improvements in airport services when they are delivered. Too often, however, international airlines must make do with inadequate airport services in supporting their daily operations. The growth in the requirement for bussing operations, with which members report ongoing problems in service delivery and performance, is one example experienced by airlines and their passengers.

    “BARA has spent a disproportionate amount of its time in dealing with the airport operators’ ambit-claim commercial terms, rather than focusing on the improvements necessary to deliver better service outcomes,” Barry Abrams, Executive Director of BARA said.

    A4ANZ CEO, Dr Alison Roberts said that none of the recommendations, if ultimately adopted by Government, would change the status quo and more unproductive disputes were likely to occur. “We are not seeking restrictive regulations imposed on airports; we know that can stifle growth. But as an industry, we can’t do nothing; we need a regime that encourages innovation and efficiency and we don’t have that right now; we just have high airport profits at the expense of consumers.”

    “What is needed isn’t complex. Access to arbitration when negotiations break down should be provided for all airports with monopoly characteristics. This is standard, commercial practice – why should airports be treated any differently?”