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Airports - the gold standard of monopoly?

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#1

When the room is full of elephants and everyone thinks it’s normal …

Quote of the week goes to Rod Sims,

“It is not surprising that the airports are so profitable, given that they face little competitive pressure and no price regulation,” ACCC Chairman Rod Sims said.

and

“We remain concerned that the current regulatory regime which is limited to monitoring the covered airports, doesn’t constrain the market power of four of Australia’s major airports. Unconstrained monopolies often have an incentive and ability to charge excessive prices while lacking strong incentives to improve services.”

Doesn’t seem so much a regulatory ability as just observation and reporting … by the masters of the obvious?


#2

The only thing missing was advice to use the trains more to circumvent the high costs of airports :smiley:


#3

In Brisbane, the trains are quite expensive when compared to the rest of the urban train network.

Working out costs for an airport can be complex…as the cost per aircraft may remain the same, but the cost per passenger can increase if an airline puts on more flights and the number of filled seats per plane decreases due to the increased capacity.

Then there are the passenger handling charges which I understand are applied to each passenger for things like luggage handling, customs, immigration, security checks etc. Then add other services such as parking etc.

Also, looking at the change in average passenger revenue for the airports from 2007-08 to 2016-17 (9 years), the following annual average percentage increases have been estimated from the graphic at the end of the webpage:

Sydney (total ~13%) - annual average ~1.3%
Perth (total ~60%) - annual average ~ 5.4%
Melbourne (total ~%20%) - annual average ~2.1%
Brisbane (Total ~27%) - Annual average ~2.7%

Noting average inflation is 2.21% over the same time. Perth and Brisbane increases are above the average rate of inflation for the same period…Perth increasing close to 2.5 times the rate of inflation.


#4

The only things that do not seem to be running at the rate of inflation are most peoples’ income. :frowning:


#5

What are other ways you can spell “toothless” again, oh that’s right ACCC, ASIC, & APRA. But it all reflects at a Federal level, Governments who do not wish to constrain Business and profits, instead allowing unfettered greed to fester and which is even perhaps encouraged/enabled. One only needs to look at the Banking Royal Commission to see how the laws & policies have been put into action in the past to enable this.

Should we be surprised and what real outcomes will come out of this report. I suspect little more than some lip service seeming to make the corporations do better, and the real outcome being to leave it alone.


#6

Or maybe not put into action. It appears that many of the things raised by the RC should not have occurred if greater scrutiny had been placed on the financial institutions. But it appears that these same financial institutions are very good at bluffing to distract the regulars from their core roles.

I am always surprised when a government monopoly like airports are sold off (airport are unique as there are often no competitors in the same region for airlines or passengers to use)…as the community could be held to ransom by a money hungry lessee/owner.


#7

Could be? :wink:


#8

The not putting into action is really the result of interpretation of law into policy ie how the law is used or is required to be actioned rather than what it actually says/demands. I am sure we all could list where policy is at a 90 or 180 degree implementation to the law, perhaps something to consider as a topic on this site? Sort of “Let me list the ways” :slight_smile:


#9

Listening to the MacQuarrie News on the radio this morning I heard an item that made me prick my ears up . Tullamarine Airport in Melbourne is pulling $400K a day on packing fees for vehicles . The ACCC are thinking of looking into it in case the Airport is over charging . Words fail me .


#11

Yeah - hah hah :wink: you can’t go lower than “Great Southern Rail”, whose prices are through the roof. On the Ghan they’ve stopped seated travel, loading/unloading vehicles other than Adelaide and Darwin, and one way Adelaide to Alice Springs is a shade over $1400 high season - I didn’t even bother pricing return. Pitching to the high end tourist only - there’s no sentimentality left, and you might think this is just another international raider, but no - follow the money trail back to Quadrant Private Equity through a maze of weasel-worded cover companies and you find this icon of Australia history has been trashed by locals. Sad … experiential travel they call it. BS Bingo played out to the end game.

Of course the airlines and airports raid regional wallets in ways that make the vikings look like childcare workers - a million square kilometres of approximately nothing surrounds our local airport yet for a small patch of tar that they said would cost money to use only for a year or two (decades ago) now costs a (relative) small fortune - but admittedly nothing like the cost of a big city airport.

… and like a flock of sheep, we graze on … (not all of us I know)


#12

Mea culpa, I was thinking MEL-SYD on seniors fares.


#13

It looks even worse. Blind ideology’s bad enough, but govt-created potent monopolies are appalling.

Federal record here is a shocker. First they privatised Telstra as a vertically intact entity with monopoly control over the access network, then they sold airports with very restrictive covenants. For example, it’s been reported Sydney Airport was sold with a right to veto any other airports in the Sydney Basin.

It seems both these decisions were made purely to maximise dollars, because markets love a monopoly and will pay more to get one. Pity everybody gets screwed for evermore by such actions.


#14

Was it a veto or as I believe, an option for first refusal to develop (that was not taken up for Badgerys Creek)? Do you have a citation? I could only find references to the first option to develop.


#15

That is also my understanding…that Sydney Airports has the first right of refusal, that being it will be first asked to develop a second airport but has the right to refuse…which I understand it has done for Badgery’s Creek.


#16

A quick check shows you and TheBBG are correct; my recollection of a right to veto applies only to a first-instance priority for the right to develop another site, as you say.

It was an extraodinary, needless provision to include in the airport sale. Or it would have been needless, if it hadn’t been added with an apparent intention of boosting the sale price - at the continuing expense of consumers.


#17

Maybe boosting the price (of the lease) for the taxpayer, since the government (taxpayer indirectly) owned the airports before privatisation.


#18

I find it very satisfying to catch the train and then the 901 bus from Broadmeadows station every 15 minutes to Melbourne Airport. Both covered under the Myki for about $6 :slight_smile: :slight_smile: and not a cent to the ripoff parking fees.


#19

Hi PHB, Geoff again. At least this time you may not to ask regarding my standing comment.

Before you criticize and abuse, walk a mile in my shoes. As a former Federal Compliance Manager, the real issue with ineffective regulators is the legislation they are burdened by. Legislation at the Federal level is usually (on average) about 50+ years old. Amendments to Regulations are frequent. Review the scrutiny of X days in Parliament for review any new Reg amendment on the floor of The House? Look to the abilities, and skin-in-the-game interest, of Pollies. Yes, give them a cracker - so what are reasonable expectations. ASIC has been criticized for inaction or too few prosecutions. Fact check - look to the success in the Courts to all Federal Regulatory activity. ASIC failed in the Courts wrt a big 4 Bank. What was the ‘penalty’ for Storm Financial indiscretion. The financial institutions can afford more and better lawyers than the underfunded Regulators. Any good or better employees can be headhunted by any and all Corpses. Legal folk are soooo flexible and useful. They must know the strengths of both sides of the argument. Their enthusiasm in Court is matched by their reasonable expectation of success, and equally by the support offered by their enabling legislation.

It is an unemotional financial cost/benefit criteria for Corpses (multi national and local) to challenge Regulators as the enabling legislation is so weak and outdated to a constantly moving world. IMHO any Local, State and Federal Legislation and Regulations should have a sunset clause (say 10 to 20 years). Parliamentary committee(s), or a new all encompassing Integrity Agency, should review enabling legislation for “fit for the purpose” review.

What can be said of our legal system? IMHO it is more antiquainted than the Regulatory framework. The adversarial common law system clearly favours the elites (however quantified). Precedent can be drawn from centuries earlier, and frequently is, by Judges that are nearly that old. The total knowledge of the world doubles in decades, while our three pillars in The Constitution are past their use by date.

The Drum panel discussed the background to the recent formulation of The Aged Care Act. The Howard G required say $30B of funds to meet the demand. Clearly a Conservative crew looked to the private sector, as the matra often repeated is that this is more cost efficient. So do an evaluation, or back end propagation, of the achievements in Health, Aged Care, Education, or utilities such as electricity, gas, and water? The profit motive does what it always does. Power, self interest and narcissism corrupts. Greater power merely potentiates this predictable human behaviour trait. I was in the Federal PS over the four term of JH’s G. IMHO, the first two were ‘normal’, while the last two demonstrated increasing malfeasance, ‘mates rates’ and possible corruption. The issue is that no Regulatory agency is, or was, able to discern this matter!!! Cheers Geoff


#20

Airports are designed to rip us off, just in different ways. Most airports incur special fees for rental cars, local airport friendly hotels and so on, and many include exorbitant fees for the ‘terminal train station’. Folks in Sydney are aware of the difference between fares for the airport vs Mascot stations, but yesterday I learnt if one stays at the HKG airport Regal, there is a free shuttle to Citigate where the train fare to the city is $HKG19.50. The direct train from the airport to the same city stop is $HKG120.

Conclusion, governments often it not universally milk tourists and business travellers as cash cows.


#21

It’s as if there is a category we put some things into where we just expect our wallet/purse to be pillaged.