Sydney International comes fifth – again
Sydney Airport has again come fifth in the Australian Consumer Competition’s (ACCC) annual assessment of airport performance, despite a consultant’s customer survey earlier this week that revealed it was marginally increasing its popularity with passengers.
“Due to concerns that they might use their monopoly position in aeronautical services to increase profits at the expense of airlines and passengers, the ACCC monitors Adelaide, Brisbane, Melbourne (Tullamarine), Perth and Sydney (Kingsford Smith) airports,” says the Commission, which however does not monitor secondary, regional or rural airports.
Reports are based on indicators including quality of service, prices, costs, profits and investment levels: “While the indicators do not provide conclusive evidence as to whether the airports have been earning monopoly rents, trends in those indicators over time can identify those airports whose performance may require greater scrutiny.” Says the ACCC.
Despite the current economic slowdown, around 93.3 million passengers passed through the five major airports in 2008–09, an increase of just over 1 per cent from the previous period. Sydney Airport was the only monitored airport to report an overall decrease in passenger throughput.
ACCC chairman Graeme Samuel, said: “This year’s report has found the performance of Sydney Airport to be of greatest concern. The indications are that Sydney Airport has increased profits by permitting service quality to fall below that which the airlines reasonably expect.”
“Airport users, including passengers and airlines, rated Sydney Airport last amongst the monitored airports for the fourth consecutive year and it appears that investment in the international terminal has been slow. And while Sydney Airport was the only airport to report a fall in passenger numbers, its revenue and profit margins still increased. Sydney Airport also recorded the highest average prices at $13.63 per passenger, compared to the lowest of $7.96 at Melbourne Airport.”
Airports typically charge airlines on a per passenger basis for using their facilities, and charges are often set in advance for several years at a time, as a result of medium-term contracts with air carriers.
“While airlines lowered their airfares to attract business in the current global economic slowdown, the airports appear to have enjoyed the security of guaranteed prices as well as benefiting from the airlines’ efforts to encourage travel,” Mr Samuel said.
The airports other than Sydney reported more passengers than the previous year and slightly increased service quality. The higher passenger numbers contributed to an increase in revenue and profits.
The ACCC says it is also concerned that the airports’ monopoly position in car parking could be used to exploit the public. To increase the transparency and accountability of airport car parking operations, the Commission monitors indicators including prices, costs and profits, as well as service quality.
“The indications are that car parking prices likely reflect an element of monopoly rent. At least some car parking charges increased at all of the monitored airports during the 2008–09 financial year, or since then. The ACCC has observed that some airports may affect the cost or convenience of potential alternatives to on-airport parking, which could contribute to the high margins reported for on-airport car parking.”
The service that passengers experience at airports is affected by airlines, border agencies and the airports themselves. To better understand the contribution that the airports make, the ACCC says it surveys airlines on whether they are receiving a level of service that would be reasonably expected:
“In their survey responses, airlines have consistently identified Sydney Airport as the least responsive of the airports with respect to service delivery and quality over a sustained period of time. In particular, Sydney Airport’s international terminal was rated below satisfactory on average by the airlines. While Sydney Airport has announced proposed improvements to the terminal, there is a question as to whether this should have been carried out earlier. Although the airport reported higher levels of investment (representing 14 per cent of assets) in 2008–09, this was the largest level of investment by the airport since 1999–2000.
In contrast, over the five years covered in the report, Brisbane and Melbourne airports achieved ratings significantly above satisfactory and both airports reported investment of between 14 and 22 per cent of assets in 2007–08 and 2008–09. Airlines’ ratings of Adelaide Airport improved with the commencement of operations at the new terminal during 2005–06. Finally, although Perth Airport’s service quality results have declined in recent years, these outcomes seem to be relatively short lived and appear to have been largely driven by unexpected growth in passenger numbers. Indeed, Perth Airport has undertaken sizeable investment to address the quality of service problems, with the airport reporting investment of 19 per cent of assets in 2008–09.
The regulation of the five monitored airports, including car parking, is scheduled to be reviewed by the Productivity Commission in 2012.
I love the comment from ACCC that “The ACCC says it is also concerned that the airports’ monopoly position in car parking COULD be used to exploit the public.”.
There’s no COULD about it. The airports rip consumers off blindly with their monopoly rents for carparking. I remember being charged a fortune for a couple of days parking in Brisbane about ten years ago.
And when I raised this issue directly with the ACCC at the time, their insipid answer was essentially that they didn’t give a stuff because they had limited resources and not many complaints in that area!
They clearly still don’t give a stuff, otherwise they would prosecute for what is a clear breach of monopoly powers to charge rentals far above market rates. It shouldn’t have to take mass consumer complaints to investigate an abuse of monopoly power. That is what the ACCC’s role is already supposed to be!
Adelaide Airport recently started construction on a number of redevelopments around the terminal area, including new parking arrangements and a new road network. It is one of the best made and principal airports serving thousands of flights every year.