Economic Regulation

Introduction

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 Trade Practices Act 1974. Information on airport regulation from the ACCC is available at www.accc.gov.au.

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 (generally a 50-year lease with an option 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 for a five-year 'CPI-X' annual cap on prices of aeronautical services at certain airports. Any proposed increase in prices by the regulated leased federal airports had to be assessed and agreed by the ACCC.

From July 2002 to June 2007

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

From July 2007

A new price monitoring regime at the five major airports (Adelaide, Brisbane, Melbourne (Tullamarine), Perth and Sydney (Kingsford-Smith) airports) commenced on 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. 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 being considered in the development of the Aviation White Paper and will be the subject of further review in 2012.