Economic Regulation

Introduction

The four largest leased federal airports are subject to regulation and oversight in relation to prices of aeronautical services and facilities, financial statements and quality of service. Annual monitoring is conducted by the Australian Competition and Consumer Commission (ACCC) in accordance with the Airports Act 1996 and Competition and Consumer Act 2010. Information on airport regulation from the ACCC is available on the ACCC website.

Prior to 1997, Australia's major airports were operated and managed by the Federal Airports Corporation (FAC), a self-regulated Government-owned business enterprise. Between 1997 and 2003, the previous Australian Government sold long term leases over the 22 FAC-operated airports to the private sector (50-year leases with options to renew for a further 49 years).

In privatising these airports, the then Government recognised that some had significant market power. Hence, it also introduced price regulation, though the number of airports covered and the nature of the regulation has changed over time. The regulatory framework was initially put in place for a five year period, with various reviews completed since then.

From July 1997 to June 2002

The privatisation of airports from 1997 was accompanied by price regulation measures under which increases in aeronautical charges were capped for the first five years. Increases for certain aeronautical charges were limited to a notified percentage less than the Consumer Price Index (CPI). The CPI-X regime encouraged efficiencies in airport operations. Applications for annual price increases were assessed and agreed by the ACCC before becoming effective. The price cap did not apply to Government mandated security requirements (where direct costs were passed through) and ACCC agreement could be sought for additional charges to fund necessary new investment.

The ACCC also monitored the quality of services at airports as a complement to the price caps that assisted in deliberations on proposed price increases.

From July 2002 to June 2007

In response to the 2002 Productivity Commission report into price regulation of aviation services, price capping was replaced by price monitoring at the seven major airports (Adelaide, Brisbane, Canberra, Darwin, Melbourne, Perth and Sydney Kingsford-Smith).

From July 2007

Price monitoring of the five major airports (Adelaide, Brisbane, Melbourne (Tullamarine), Perth and Sydney (Kingsford-Smith) airports) continued from 1 July 2007 in response to the Productivity Commission's 2007 report, Review of Price Regulation of Airport Services. Implementation of this regime included the amendment of the Airports Regulations 1997 to slightly expand the definition of aeronautical services and facilities. In 2008 the Government expanded the range of airport services monitored by the ACCC to include short-term and long-term car parking services at the major airports.

Economic regulation of leased federal airports is discussed in Chapter 10 of the National Aviation Policy White Paper.

In December 2009, as part of the White Paper, the Government announced a second tier of economic regulation to be implemented in the four next largest leased federal airports. Under the self reporting arrangements, Canberra, Darwin, Gold Coast and Hobart Airports disclose various pricing, quality of service and complaints handling procedures and outcomes through the airports' websites.

From July 2012

A Productivity Commission Inquiry into airport economic regulation was released on 30 March 2012 and is available on the Commission’s website.  The Government Response to the report’s recommendations was also released on 30 March 2012 and can be accessed through the same website.

The Inquiry found that Adelaide Airport had limited market power and the Government agreed that Adelaide Airport would no longer be subject to mandatory price and quality of service monitoring by the ACCC, effective 30 June 2012. Adelaide Airport will now report on its pricing and quality of service outcomes under the second tier reporting system alongside Canberra, Darwin, Gold Coast and Hobart.

Prices and the quality of services at the four major leased federal airports—Sydney, Melbourne, Brisbane and Perth—continue to be monitored annually by the Australian Competition and Consumer Commission (ACCC) in accordance with the Airports Act 1996 and Competition and Consumer Act 2010. Information and annual reports are available on the ACCC website.

Quality of Service Monitoring of Airports

In 2009 the Department released a discussion paper to assist with the development of the National Aviation Policy White Paper which sought the views of airports and airport stakeholders, including the travelling public, on whether changes should be made to the regulatory arrangements for monitoring quality of service at airports. The discussion paper and submissions are avaialble here.

As part of its Inquiry, the Productivity Commission recommended and the Government agreed that quality of service monitoring continue until June 2020. It also recommended that the objective criteria should be reviewed and updated by June 2013. The ACCC is undertaking the review, and will release a draft discussion paper in late 2012. The ACCC website can be accessed on the ACCC website.