ACCC chairman Graeme Samuel’s radio interviews this morning — about whether or by how much the major airports screw the airlines and their passengers with handling and parking charges — came close to the really tricky question, which is how to ensure the benefits of competition.
Tricky because the only certain answer is to build or expand second airports.
The five-year long privatisation of airports that ended with the $5.6 billion sale of Sydney Airport in June 2002 yielded a total $9.4 billion to the Commonwealth.
But despite all the rhetoric to the contrary, those sales included selling off the future right of passengers and air transport dependent enterprises to competitive offers from new airports.
For a collective $9.4 billion the major airport buyers bought the right to charge customers at the airline, retail and individual level anything they think they can get away with in the medium- to long-term.
Hence the annual ritual of the ACCC airport monitoring report, which it sent to the government yesterday.
The fact that Melbourne’s main airport at Tullamarine only charged an average of $7.96 per passenger for the use of its facilities in the year to June 30 last year compared to Sydney’s average of $13.63, the highest of any major Australian gateway, makes the point about second airports.
Melbourne also has Avalon. It might be 20 kilometres further away than Tullamarine, but it is well run, and has unrealised potential to compete very fiercely should a future rise in patronage coincide with far better or more frequent surface connections to the CBD’s Southern Cross station.
(Orly or Charles de Gaulle in Paris, or even JFK would be Tullamarine’s worst nightmare, where each uses automated mini-trains to shuttle travellers between terminals and to the nearest rail/metro station, a future scenario that Lindsay Fox must cherish as the owner of Avalon.)
So Melbourne has a powerful motive, despite its outrageous car parking charges, to keep the airlines on side, a struggle it may be about to lose with Tiger, which seems very close to doing a deal to shift all or part of its traffic to Avalon.
In Sydney, the chances of a new jet airport that will be even remotely useful as an alternative facility are almost zero. Giving Sydney any sort of competitive airport in the metropolitan basin is political poison, and the city is choking on its other transport failings anyhow having just trumped its 999th metro fiasco by stuffing up the importation of new rolling stock from China for its heavy rail network.
Contrary to popular myth, the Macquarie bank-led ownership of the airport can’t actually stop another jet airport being built in Sydney. It only has first right of refusal, so if another consortium wanted to build one at Badgerys Creek, or let’s be nearly as implausible, Palm Beach, and the governments agreed, another layer of implausibility, it could only stop them doing so by building it themselves.
In an extreme response to recent provocation by the Macquarie Bank-led consortium that owns Hobart Airport, Jetstar and Tiger said they might cut all or some of their flights and send them to Launceston instead. While it is too far away from Hobart to be a serious alternative for business travellers, Launceston is already making all the running as the best airport for leisure travellers to Tasmania, and a recent proposal by Hobart to lift passenger charges by 50% to about $12 per person is a fee neither airline is likely to pay.
The sleeping giant in the second airport scenarios in major Australian cities is the Jacobs Wells site, between the Gold Coast and Brisbane. For two reasons. Brisbane Airport is so successful it will get very full by about 2025-2030, and it isn’t all that convenient to at least half of greater outer Brisbane, while Coolangatta Airport, which is competitive and also successful, really does have a looming capacity issue given its tight boundaries
An airport at or near Jacobs Wells could serve southern and western Brisbane, and the Gold Coast, and be the catalyst for future expansion of both cities.
Although not monitored by the ACCC, there are also pricing issues at Darwin, where Tiger quit the scene early, and Jetstar is now threatening to call off plans to double its presence at what is intended to be a large cross-over hub between its Australian and Asian franchises.
Darwin is compromised by dual use by the RAAF, but there are said to be sites where either a single strip, low-cost airport reasonably near to town could be built, if not grown to a full-sized facility.
Ben said: “Orly or Charles de Gaulle in Paris, or even JFK would be Tullamarine’s worst nightmare, where each uses automated mini-trains to shuttle travellers between terminals and to the nearest rail/metro station, a future scenario that Lindsay Fox must cherish as the owner of Avalon.”
Indeed, but of course all Paris’ airports are under the control of one government entity, Aeroports de Paris. Ditto, JFK and all the airports in the greater NY area, including Newark, are run by the quasi-govermental Port Authority of NY & NJ. Airports are natural monopolies and it does not serve citizens to be held to ransom by commercial entities. Even the americans don’t engage in the nonsense we have inflicted on ourselves. No doubt the Port Authority likes to turn a profit too but that hasn’t impeded fulfilling its public interest role in building excellent public transport links as you said. (Using the free shuttle to the A-train subway, last time I took it–all the way to Columbia University Medical Centre above 168th street (ie. a long, long ride) it cost all of $1.50, and got you there with no drama or sweat.)
Whereas Melbourne-Tullamarine is obstructing a train line purely to protect its parking rip-off monopoly (and taxi levy income).
And of course the real competition for the existing monopoly providers would be TGV lines connecting Sydney-Canberra-Melbourne. Unless our governments contracted with Macquarie to never compete in that way too? In the first year of operation of the TGV linking Paris and Lyon, planes stopped flying the route. Ditto for the recently opened TGV linking Barcelona-Madrid.
Ben – yes, Jacobs Well, located in the swampy and undesirable-to-live-at- locality between Brissy and GC should be earmaked right now for the new SEQ airport. If we had any pollies with foresight, Brisbane airport would have been built there back in the late 70s instead of it’s present limited location. At Brisbane, you have a main runway which was aligned for political purposes not the prevailing winds. Crosswinds were a real problem there for earlier generation a/c like DC-9s. If a new airport was built at Jacobs Well, a high speed rail link between Brissy and GC could run through the airport as well as a new highway to duplicate the existing M1 to the GC. Let’s hope it comes to fruition.
But, but, but Ben, you don’t understand the disciplines of the market! If Sydney airport really is gouging, an entrepeneur will raise some venture capital and go and build a second Sydney airport to compete! As no such entrepeneural project has turned up, we can therefore assume that Sydney airport is providing a cost-effective service. The market is working perfectly!
Thus we must, at all costs, ensure that the government doesn’t force a new airport on Sydney, as this would interfere with the free workings of the market.
I don’t see how there would any increase in competition if the existing owner of Sydney Airport took up the first right of refusal they currently have (and I can’t see any reason they wouldn’t to protect their monopoly rents).
The situation is unfixable under the existing law unless the ACCC or similar body is able to mandate what charges an airport may levy on it’s users for such things as carparking etc, and I can only imagine the years of court battles that would follow should MAp be subjected to such regulation.
This would be the time to have a go at a geographically true second Sydney Airport, that is, one that is ‘in’ Sydney, not somewhere in the far beyond.
Why. Because the current owners are not in investment mode. They are in circle-the-wagons mode, and in no position to borrow large to dilute the revenue stream they must exploit, to the fullest, to make sense of the existing ownership structure at Sydney Airport.
If ever there was a right time, this is it. But will it happen? Of course not. Badgery’s Creek will become tight pack housing estates and a commercial wasteland, under served by the transport infrastructure needed to link to the rest of Sydney in an efficient manner, with next to zero by way of additional schools or hospitals.
It’s the NSW way. Lots of studies, lots of camera opportunities, lots of sanctimonious posturing, and sod all action.