Sheldon Hee, IATA’s Regional Vice President, Asia Pacific, shared the following comment on the Australian Competition and Consumer Commission (ACCC)'s Airport Monitoring Report:
“The recent release of the ACCC’s Airport Monitoring Report raises several important questions about the economic regulation of Australia’s major airports.
It is not surprising that Sydney Airport recorded the highest aeronautical profit among major airports. What is interesting is Sydney Airport’s 20.8% return on its aeronautical assets, a record high for the airport for more than 20 years, and way ahead of its peers in Perth, Brisbane and Melbourne.
The unusually high returns highlight the urgent need for stronger and more effective oversight. IATA has been calling for this for more than 20 years. Hence we welcome and support the ACCC’s recommendation for the government to direct the Productivity Commission to restart its inquiry into airport regulation. A light touch regulatory approach for airport development and charges is no longer fit for purpose. It has been seven years since the last Productivity Commission inquiry. It is time for the government to take decisive actions to rein in airport charges. A first step would be for the ACCC to publish a transparent weighted cost of capital (WACC) benchmark for regulated airports, using its newly adopted methodology.
Australia’s major airports are planning massive infrastructure investments over the next decade. This can lead to runaway costs. With global airline net profit margin of about 3.9%, higher airport charges will lead to higher airfares, putting at risk the economic benefits that aviation brings. Aviation is a lifeline for Australia. It is the primary mode of transport connecting people and goods between Australia and the rest of the world. Aviation supports 604,000 jobs and contributes USD68.4 billion in economic activity, including tourism. A flourishing aviation sector will benefit Australians and all who call Australia home.
A stronger airport regulation regime is needed to require airports to control costs, consult effectively with airlines, deliver right sized infrastructure, and invest in technology efficiently.”
