Economic Regulation
Introduction
Prior to 1997, Australia's major airports were controlled and managed by the Federal Airports Corporation (FAC), a self-regulated Government-owned business enterprise. In the five years to 2002, the 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 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 a review to be conducted towards the end of this period.
From July 1997 to June 2002
The privatisation of airports from 1997 was accompanied by price regulation measures a five-year 'CPI-X' annual cap on prices of aeronautical services. Any proposed increase in prices by the Federal-leased airports had to be assessed and agreed by the Australian Competition and Consumer Commission (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 new Government decided to expand the range of airport services monitored by the ACCC to include short-term and long-term car parking services at the major airports. Changes to quality of service monitoring are also being developed.