Australia’s four major airports have continued to report increasing profits from aeronautical activities while the current regulatory regime remains “ineffective”, according to the Australian Competition and Consumer Commission’s latest annual Airport Monitoring Report.
The ACCC found that Brisbane, Melbourne, Perth and Sydney airports together generated A$863.5 million ($571 million; €527 million) in operating profit from aeronautical activities in 2018-2019, up 3.6 per cent on the year before.
This was achieved despite weaker passenger growth and a drop in domestic passenger numbers at Sydney Airport, while all three of the east coast airports including Sydney reported higher aeronautical revenue, revenue per passenger and operating profit year-on-year.
“Despite weaker growth in the number of passengers flying in 2018-2019, together the four largest airports have managed to report record profits from aeronautical activities,” ACCC chair Rod Sims said in a statement.
“Australia’s four major airports have collectively increased their aeronautical profit almost every year over the 17-year lifespan of the ACCC’s monitoring. This may illustrate the benefit of being a monopoly.”
The ACCC is directed by the Australian federal government to monitor the country’s four largest airports in relation to aeronautical and car parking activities, considering prices, costs, profits and quality of service. It does not have the power to intervene in the setting of prices for aeronautical and car parking revenues.
The chief executives of Qantas and Virgin Australia last year accused airport operators of making “grossly inflated” profits, which was strongly denied by a group of airport investors.
The Productivity Commission concluded in an inquiry into the economic regulation of airports last year that they did hold market power but had not systematically exercised it to the detriment of the community. It rejected calls to introduce a system of independent commercial arbitration in the event that negotiations between airlines and airport operators broke down because the costs would outweigh any benefits.
The government backed the Productivity Commission’s finding that the current system of ‘light-touch’ regulation supported by ACCC monitoring should remain in place with some small tweaks.
The ACCC expressed concerns over the arrangements in the Airport Monitoring Report, though, because there is no “credible threat” from regulators.
It said: “The ACCC remains of the view that the current reporting framework is ineffective at constraining the ability of the monopoly airports to use their market power.
“While in the past the monitoring regime may have posed some threat to the airports of the implementation of regulation if they had have exercised their market power, this threat has likely diminished over time with the Productivity Commission advocating against any form of regulation in four successive inquiries.”
The ACCC’s monitoring report highlighted that the airports invested A$1.2 billion in 2018-2019 in upgrades and capacity increases, with key projects including a new runway at Brisbane Airport and a new taxiway network at Melbourne Airport.
Sydney Airport, the only airport among the four to be listed on the Australian Securities Exchange, earned by far the most operating profit in 2018-2019 at A$404.4 million.
Melbourne Airport was next, earning A$194.5 million. It is operated by Australian Pacific Airports Corporation, a consortium comprising AMP Capital (27.32 percent stake), IFM Investors (25.17 percent), Future Fund (20.34 percent), State Super (18.47 percent) and Utilities Trust of Australia, managed by Morrison & Co (8.7 percent).
Brisbane Airport, operated by a consortium of investors including QIC (25 percent), IFM Investors (19.8 percent), Royal Schiphol Group (19.6 percent), First Sentier Investors (17 percent), Unisuper (7 percent), MTAA Super (4.9 percent), Commonwealth Bank Group Super (3.9 percent), Sunsuper (1.5 percent) and Equip Super (1.3 percent), made A$188.8 million in profit last year.
Perth Airport made A$75.7 million profits – it is operated by a consortium comprising UTA (38.26 percent), Future Fund (30.01 percent), UTA Perth Airport Property Fund (17.34 percent), the Macquarie Infrastructure and Real Assets-managed The Infrastructure Fund (7.19 percent), AustralianSuper (5.25 percent) and Sunsuper (1.95 percent).
The ACCC found that car parking profits, an area for which airport operators often receive criticism, fell by 2.5 percent last year although profit margins remained high.
All four airports also maintained a rating of ‘good’ for their quality of service, a rating they achieved for the first time last year since 2005.