Why the ACCC wants more control over airports

Prices are going up but service quality is idling on the runway.

Here's how it goes: you hit the airport and you start complaining about the price of everything. Parking is costly, airport taxes and charges on your ticket are high, shopping seems expensive, even the burger costs more than it would at your local fast food chain. But what else are you going to do? You're a captive consumer. Now the Australian Competition and Consumer Commission (ACCC) is pushing to be allowed greater regulatory control over what airports charge in some of those areas.

The competition regulator has published a submission it has made to a current Productivity Commission review into the economic regulation of airports. While that might sound even duller than an enforced stopover at LAX terminal 6, it raises some interesting issues around how airports should be managed so that they're able to function effectively without overcharging.

Currently, the ACCC has limited powers to regulate how prices are set at Sydney, Melbourne, Brisbane and Perth airports, which is a direct consequence of how these airports have been privatised in recent decades. It doesn't have full oversight of those airports, and it has almost no influence on other regional airports, which are generally run by local councils.

That's unusual, because for the most part airports in Australia are monopolies: there isn't more than one serving any given community. (There are a few partial exceptions, like Melbourne, where you can fly as a passenger from Tullamarine, Avalon or Essendon, but in most places the rules hold.)

Monopolies are usually regulated by the ACCC, to ensure they don't "exploit their market power", which is ACCC speak for "set prices as high as they like because customers don't have any choice". But as ACCC chair Rod Sims notes, regulation "is not currently the case with Australia's major airports".

To be clear, the ACCC isn't going to have anything to say about what you pay for a meal at the airport. In that case, the argument goes, rival businesses can also set up at the airport to offer cheaper food. But it does worry about the fees which airports charge airlines, because those have a direct impact on the prices consumers pay for tickets. (It also takes an interest in airport parking charges, because in reality it's impossible for anyone to build a new car park at the airport other than the airport owner. That's a topic Findings will revisit another time.)

The key issue that gets the ACCC's goat? Revenues per passenger at the four airports it monitors have gone up massively over the last decade. Perth Airport has seen a 59% rise, Brisbane 36%, Melbourne 31% and Sydney 15%. Note that while Sydney has the lowest rise over that decade, its revenue per passenger remains the highest.

The problem is that while revenues have risen, quality of service for the airports largely remains static. The exception is Perth, which has "materially improved its overall quality of service", the ACCC says. Yet at every other airport the ACCC has data on, higher charges for the same level of service is not a great outcome. And the likelihood that this situation is being repeated in other capital city airports that aren't regulated seems high.

"Given that some of the second-tier airports such as Adelaide and Canberra potentially hold significant market power, the current inquiry provides an opportunity for the Productivity Commission to consider whether other major airports should be subject to similar types of regulatory oversight as the four monitored airports," Sims argues.

In an era where sub-$50 fares from Tigerair are a weekly occurrence and AirAsia is selling international tickets where the actual fare component is just $12, it's clear that passengers do benefit from competition. As such, constraints on competition do deserve careful examination.

There's no guarantee that the ACCC's submission will be reflected in the final Productivity Commission findings. There's also no guarantee that any Productivity Commission recommendations will actually became law, since that's ultimately down to the government of the day. Nonetheless, I'll be watching for the outcome.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

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