QF and VA join forces to lobby against rogue monopoly AU airports

[pauly7]

Gathering steam now - with VA and QF combining and heading to lobby CBR together after claiming a huge lack of regulatory oversight of AU’s monopoly airport operators. Watch out PER and all....

PS quoted as saying ‘Landing fees make it almost impossible to discount fares’

Qantas and Virgin take airport stoush to Frydenberg

The chief executives of Qantas and Virgin will meet with Treasurer Josh Frydenberg to urge airports to stop charging excessive landing fees, but an airport boss says the airlines are likely to keep any savings as profit.

mobile.abc.net.au

 

[pauly7]

More detailed report on the problem and issues with lack of government oversight impacting what customers pay:

Intervention demanded on airport 'super profits'

Qantas and Virgin have been relentless in their attacks on airport profits, but airlines' pricing of airfares also lacks scrutiny.

www.afr.com

 

[pauly7]

And a more colourful description:

Airports given carte blanche to keep gouging travellers, airlines

Australian consumers will get ripped off at the nation's airports, despite repeated calls by competition watchdog to change their monopoly position

thenewdaily.com.au

 

[Danger]

So, when Ansett collapsed and Qantas had a monopoly, they played fair and didn't gouge passengers, right? Or . . .

 

[serfty]

So, when Ansett collapsed and Qantas had a monopoly, they played fair and didn't gouge passengers, right? Or . . .

... or maybe the govm't owned and ran the airports.

I do agree though - I wonder how much PAX would see of $10 price cut by the airline owners.

 

[Pleb Status]

I wonder how much PAX would see of $10 price cut by the airline owners.

Easy... it will be a big fat zero...

 

[trooper]

Given the accounts here of QF charging an airfares worth of YQ on Y redemptions it is...ahem... interesting to hear THEM complain of "gouging"...no?

 

[Melburnian1]

... or maybe the govm't owned and ran the airports...

No, airports were privatised starting in c.1997 so that predated AN's collapse IIRC.

 

[serfty]

No, airports were privatised starting in c.1997 so that predated AN's collapse IIRC.

Sydney Airport was sold to Macquarie in June 2002.

Sydney Airport sold for $5.58 billion

www.smh.com.au

 

[dajop]

To be honest, they have a point. But it's bigger than just what they charge airlines by pax (if they weren't charging it QF or VA would be), it's the rents, the rental car company charges, the taxi/rideshare charges, the parking, etc etc ....

 

[Melburnian1]

To be honest, they have a point. But it's bigger than just what they charge airlines by pax (if they weren't charging it QF or VA would be), it's the rents, the rental car company charges, the taxi/rideshare charges, the parking, etc etc ....

IIRC at MEL (and perhaps others) non-aeronautical revenue exceeds that from the airlines.

 

[pauly7]

Another front page for BFF’s VA and QF today on the AFR. Their PR teams have certainly earned their money...

 

[dajop]

Meantime at the other end the scale Rex having something to say as well .. whilst taking another poke at Dubbo city council ...

Responding to the AustralianAirportsAssociation’s(AAA) call for an end to airline secrecy to high regional airfares, Regional Express (Rex) says that the AAA is being hypocritical as its own members have never disclosed its basis for the astronomical head taxes they impose which in some cases can amount to over $50 for a one-hour flight.

 

[33kft]

Given the accounts here of QF charging an airfares worth of YQ on Y redemptions it is...ahem... interesting to hear THEM complain of "gouging"...no?

Whilst the point is valid (QF's YQ charges are high), the premise isn't - I have heard this fact quoted several times over the last week, funny I can't find such a flight though. Are we suggesting the economic rationale here is such that points + pay would be better value than a straight up classic reward in Y? Given that for the last 5 years of posts I've read, people have claimed that it's horribly inefficient as a use of points, yet it seems a rate of 0.07 off the retail price (P+P) would well and truly beat 0.00 after YQ for Y classic redemptions. What gives?

(Also required is the ability to ignore the fact that fess & taxes are charged on revenue tickets as well, and so by definition couldn't exceed 50% of retail, and yes I recognise they differ between revenue and award bookings but again - this cannot equate to nearly what is being suggested, so what's the go? Have we gone from Australian Frequent Flyers to Herald Sun's letters to the editor overflow forums?)

 

[eastwest101]

Its behind a paywall but getting a mention here by Adam Creighton in The Australian.

Have you ever wondered about the mark-up on the $4.50 toll on taxi services from Sydney Airport? It must be 1000 per cent. But the airport can get away with it. Perhaps it is mere coincidence that last month Melbourne Airport lifted its taxi toll to — you guessed it — $4.50. If you want to catch the train to Sydney — a government train — you’ll pay almost $20, more than double the fare from Sydney to Newcastle

Even when Badgerys Creek opens, Sydney Airport will retain extraordinary market power over passengers and airlines, given its unique position, obtained through no effort or innovation of its own. For the time being, it’s as close to a pure monopoly as you can find. If you live in Sydney, landing in Melbourne is not a good substitute.

No one is saying privatised airports shouldn’t be profitable but they shouldn’t be allowed to gouge. It seems they are. Four of the six most profitable airports in the world are in Australia, Sydney being No 1.

“Sydney Airport has an unregulated revenue stream in a monopoly environment. This is a key reason why it trades at a premium multiple to global peers,” UBS stated in a recent note.

According to the Australian Competition & Consumer Commission, average revenue per passenger has increased 26 per cent in real terms across the four major airports — Sydney, Perth, Melbourne and Brisbane — during the past decade.

Airlines have borne the brunt of the higher charges. Collectively, they have paid an additional $1.6bn to airports in landing fees without much change in quality. A decision by Perth Airport, whose profit has grown 133 per cent in the decade to last year according to the ACCC, to jack up its landing fees by almost 40 per cent over several years was the last straw.

Qantas, the other airlines, retailers and rental car companies have combined to advocate for some form of compulsory arbitration to sort out landing charges, at least.

In its final report the Productivity Commission recommends against compulsory arbitration, arguing the airlines and airports are big enough to sort pricing out among themselves.

“Qantas does not pay charges it does not agree to,” the commission says in its report, pointing out the airports must let planes land as a condition of their leases. “It may be airlines, rather than airports, that have an incentive to hold out on reaching agreement,” it adds.

Reasonable minds can disagree. Airlines do ultimately have to pay, otherwise why would airlines ever pay airports a cent? Graeme Samuel, advocating for the airlines in this debate, says airports can in fact refuse airlines the right to land if they have failed to pay a legitimate invoice for 21 days.

Scope to appoint an arbitrator with instructions to resolve disputes in consumers’ interest, as the ACCC suggests, would be quicker and cheaper than the prevailing arrangement, which can leave decisions held up for years in the ordinary courts.

Even when the Western Australia Supreme Court attempts to resolve the case between Perth Airport and Qantas, it will only determine the retrospective charges. A new dispute will arise immediately over charges in future, and perhaps, if the airport wins, at other airports throughout the country. These could last years.

The commission rightly points out that Qantas has significant market power. It enjoys 60 per cent of domestic passenger movements. With Rex and Virgin, the three top airlines have 95 per cent.

But market share alone doesn’t mean airports can’t overcharge airlines, which pass on the costs to passengers. And, by the way, their profitability pales in comparison to the airports, whose margins are about five times that of Qantas.

Speaking of Qantas, it’s a pity for airport users that the “national carrier” and its woke chief executive, Alan Joyce, have featured so prominently in the debate. Joyce’s pay — $24m in one year (about $90m since taking over as chief executive) — is as egregious as it is ludicrous, and signals ready capacity to offer lower airfares without any change to arbitration arrangements.

Moreover, while the Treasurer urges corporate Australia to invest and shun share buybacks, Qantas appears to have done the opposite. Graeme Ferguson, an analyst at S&P who has tracked Qantas financial policies for years, says it has consistently underinvested to pump up its share price as much as possible.

“Management are incentivised to return money to shareholders rather than making long-term investments,” he told The Australian, highlighting that the company has bought back a third of its stock since 2015. “They used to talk about the virtues of a young fleet, around seven years; now it’s approaching 12 on average.”

That said, the issue is bigger than Qantas, whose management will eventually change. And it’s not only airlines that are affected. Nine of the 10 most expensive airports for rental cars in the world are in Australia.

It will be a difficult political decision for the government. The politically powerful industry super funds own big chunks of all the major airports. UniSuper owns 16 per cent of Sydney Airport. The government’s own Future Fund owns a fifth of Melbourne Airport and almost a third of Perth Airport. On the other hand, no one wants to get kicked out of the Chairman’s Lounge, Qantas’s exclusive pre-flight club for the nation’s A-listers.

The airlines’ proposals are no silver bullet, relating only to landing charges, not parking fees or other airport services, which are more salient to travellers. There’s no guarantee lower landing fees would be passed on to customers, especially if it affects Joyce’s bonus. Indeed, lower landing charges for airlines could see airports jack up their fees for other services.

On balance, though, the government should send a message that the era of gouging by monopolies is coming to an end, be it in banking, energy or air travel.




As someone mentioned, I don't think Adam Creighton will be on the invitation list to the Qantas CL, or the corporate box of Sydney Airport Limited anytime soon.

I think it was interesting that the Productivity Commission argued against compulsory arbitration, was it the compulsory nature of it?

Just thinking aloud here - but if the airline business is so bad and owning monopolistic infrastructure is so good, why didn't Qantas just use the money it spent on its own share buybacks to buy a 19.99% of Sydney Airport Corporation? At least that way they are getting upside from SACL profits back to their own business and shareholders?