Airport Monitoring Report 2011-12 ContentsiiiContentsGlossary vKey Findings viiSummary xiii1 Overview of the monitoring results for aeronautical services 11.1 Introduction 21.2 Airport terminal configurations 21.3 Key observations from the monitoring results for aeronautical services 41.4 Price monitoring results 151.5 Quality of service monitoring results 461.6 Price and quality outcomes for the airports 522 Potential aeronautical capacity issues at airports 532.1 Introduction 532.2 Recent growth in passenger throughput and aeronautical investment 542.3 Congestion is emerging at a number of monitored airports 572.4 Passenger throughput is forecast to continue to grow over the next 59two decades2.5 Inadequate investment and effects on ongoing congestion 602.6 Approaches for dealing with congestion in the short-term and long-term 602.7 Airports’ incentives for aeronautical investment 642.8 Airports’ current investment plans in response to emerging congestion 652.9 Different approaches to funding aeronautical investment 682.10 The impact of regulatory access arrangements 713 Overview of airport car parking and landside services 733.1 Introduction 743.2 Airport car parking configurations 743.3 Airport car parking prices 773.4 Airport car parking revenues, costs and profits 803.5 Airport car parking availability and quality 863.6 Landside access charges and revenues 903.7 Observations from the monitoring results for airport car parking and 93landside access3.8 Passenger growth, capacity constraints and investment in airport 97car parking and landside services4 Adelaide Airport 1034.1 Overview of aeronautical and car parking monitoring results 1044.2 Airport overview and major airport investments 105
Contents Airport Monitoring Report 2011-12iv4.3 Aeronautical prices monitoring and financial performance results 1084.4 Aeronautical services quality of service monitoring results 1324.5 Car parking services monitoring results 1544.6 Adelaide Airport price and quality of service monitoring beyond 2011-12 1645 Brisbane Airport 1675.1 Overview of aeronautical and car parking monitoring results 1685.2 Airport overview and major airport investments 1705.3 Aeronautical prices monitoring and financial performance results 1735.4 Aeronautical services quality of service monitoring results 1935.5 Car parking services monitoring results 2186 Melbourne Airport 2316.1 Overview of aeronautical and car parking monitoring results 2326.2 Airport overview and major airport investments 2346.3 Aeronautical prices monitoring and financial performance results 2366.4 Aeronautical services quality of service monitoring results 2536.5 Car parking services monitoring results 2827 Perth Airport 2957.1 Overview of aeronautical and car parking monitoring results 2967.2 Airport overview and major airport investments 2987.3 Aeronautical prices monitoring and financial performance results 3017.4 Aeronautical services quality of service monitoring results 3227.5 Car parking services monitoring results 3518 Sydney Airport 3638.1 Overview of aeronautical and car parking monitoring results 3648.2 Airport overview and major airport investments 3668.3 Aeronautical prices monitoring and financial performance results 3708.4 Aeronautical services quality of service monitoring results 3948.5 Car parking services monitoring results 422AppendicesA1 Regulatory accounts for the monitored airports 437A2 Indicators and statistics used in the report 458A3 Airport car parking statistics 489A4 History of airport regulation in Australia 504A5 Regulatory framework 509A6 Services provided by airports 514A7 Methodology for this report 517
Airport Monitoring Report 2011-12 GlossaryvGlossaryAASB Australian Accounting Standards BoardACCC Australian Competition and Consumer CommissionAC&BPS Australian Customs and Border Protection ServiceAGAAP Australian Generally Accepted Accounting PrinciplesAIFRS Australian equivalents to International Financial Reporting StandardsAPS Australian Protective ServiceAvailability Describes the amount of the facility/service made available relative to demandsfor the facility or service. May include whether facilities or services are availableor restricted due to congestion, positioning, maintenance, or repairs, theaccessibility or usefulness of the facility/service provided, and the efficiency ofthe system to allocate usage.BARA Board of Airline Representatives of AustraliaBITRE Bureau of Infrastructure, Transport and Regional EconomicsCBD central business districtCCA Competition and Consumer Act 2010CTFR Counter Terrorism First ResponseCPI consumer price indexDAFF Department of Agriculture, Fisheries and Forestry, BiosecurityBiosecurityDIAC Department of Immigration and CitizenshipDIT Department of Infrastructure and TransportDTL domestic terminal leaseEBITA earnings before interest, tax and amortisationEBITDA earnings before interest, tax, depreciation and amortisationFAC Federal Airports CorporationFSC full service carrierGA general aviationGST goods and services taxIASB International Accounting Standards BoardLCC low cost carrier
Glossary Airport Monitoring Report 2011-12viLHS left-hand sideLIS Line in the sandMinister Minister with portfolio responsibility for Transport and InfrastructureMTOW maximum take-off weightPeak hour The hour that, on average for each day in the financial year, has the highestnumber of (arriving/departing/total of both) passengers.PC Productivity CommissionPFC passenger facilitation chargesPSC passenger services chargeRHS right-hand sideRPT regular public transportSLA Service level agreementsStandard Describes the physical condition of the facility/service supplied and condition inwhich it is generally maintained.SAR state of the art renewalTPA Trade Practices Act 1974 (renamed the Competition and Consumer Act 2010on 1 January 2011)White paper Aviation White Paper: Flight path to the future, Australian Government, 2009
Airport Monitoring Report 2011-12 Key FindingsviiKey Findings – Airport Monitoring 2011-12The ACCC’s monitoring role for the major airportsThis report presents the results of the ACCC’s monitoring of the quality, prices,costs and profits related to aeronautical and car parking services supplied byAdelaide, Brisbane, Melbourne, Perth and Sydney airports for the 2011-12 financialyear.As confirmed in the recent inquiry into the economic regulation of airport services bythe Productivity Commission (PC), the monitored airports have market power.These airports are monitored to provide information to the public and thegovernment about the airport operators performance. However, monitoring does notrestrict the airports from increasing prices or degrading service standards to earnmonopoly profits.In 2011-12, airports continued to be profitable but quality of service was downMonitored airports earned profits in 2011-12 but despite continued investment inaeronautical assets, overall ratings for quality of service were lower at each of themonitored airports compared with 2010-11.Sydney, Brisbane and Perth airports reported higher margins in 2011-12 relative tothe previous year. Melbourne Airport’s margins were adversely affected by a jump incosts while Adelaide Airport experienced a large drop in passenger numbers andrevenue.The lower overall ratings for quality of service at monitored airports reinforces theneed for more investment as demand for airport services grows more quickly thanairports’ capacity to accommodate the increase in demand.In 2011-12, demand for airport services was underpinned by solid growth inpassenger numbersGrowth in combined passenger numbers at the monitored airports continued todrive demand for airport services during 2011-12. Passenger numbers at themonitored airports increased 2.5 per cent in 2011-12, the tenth consecutive year ofgrowth in airport patronage.Total passenger numbers fell at Adelaide Airport, but falls in domestic travelSydney and Melbourne airports were offset by solid growth in internationaltravel at these airports.Perth Airport registered the strongest growth among monitored airports drivenby substantial growth in domestic travel and strong growth in internationaltravel. Growth in both domestic and international travel contributed to a solidincrease in passenger numbers at Brisbane Airport.Average prices charged by airports and aeronautical revenue higher in 2011-12Combined revenues from aeronautical services at the monitored airports increased4.5 per cent in 2011-12. All airports other than Adelaide Airport earned higheraeronautical revenues.
Key Findings Airport Monitoring Report 2011-12viiiAverage aeronautical revenue per passenger (a proxy for average prices) acrossmonitored airports increased around 1.9 per cent.Aeronautical revenue per passenger increased at Sydney, Melbourne andBrisbane airports but fell at Adelaide and Perth airports.Sydney Airport remained the airport with the highest aeronautical revenue perpassenger at $14.96.Aeronautical margins also higher in 2011-12Combined margins on aeronautical services at the five monitored airports increased2.2 per cent during 2011-12. Margins increased at all airports other than Adelaideand Melbourne airports.On a per passenger basis, average aeronautical margins across the monitoredairports were largely unchanged in 2011-12.Brisbane and Sydney airports earned higher margins per passenger butAdelaide, Melbourne and Perth airports experiencing lower margins.Sydney Airport continued to be the airport with the highest aeronautical marginper passenger at $7.33 per passenger.Overall quality of aeronautical services fell at all airports during 2011-12The overall ratings for quality of service (that is, quality of service ratings fromsurveys of airlines, passengers, border agencies as well as objective indicators) fellat each of the monitored airports during 2011-12.For the first time since 2007-08, none of the airports achieved an overall rating of atleast good, that is, all airports were rated satisfactory.Key quality of service results for Australia’s monitored airports during 2011-12 were:Sydney Airport continues to be rated lowest overall. Passengers increasedtheir ratings within the satisfactory category, while airlines’ ratings droppedfrom satisfactory to poor.Brisbane Airport was rated highest for overall quality of service. Passengerscontinued to rate Brisbane Airport good while airlines dropped their ratingswithin the satisfactory category. Airlines’ ratings for runway availabilitydecreased significantly from good in 2010-11 to poor in 2011-12.Perth Airport continued to be rated second lowest overall. Airlines’ ratingsremained unchanged at poor while passengers’ ratings decreased from good tosatisfactory.Car parking revenues higher during 2011-12The number of car park spaces increased at all airports other than MelbourneAirport in 2011-12. Overall, Melbourne Airport had the largest number of car parkspaces (21 924) followed by Perth Airport (15 626) and Sydney Airport (13 116).
Airport Monitoring Report 2011-12 Key FindingsixTotal revenue earned from the monitored airports’ landside access operationsincreased by almost 20 per cent to around $28.7 million.Sydney Airport continues to earn the highest revenue and margin per car parkspace ($7654 and $5290 respectively) while Perth Airport reported the lowest($3239 and $2187 respectively).Sydney Airport reported the largest increase in landside revenues(36.9 per cent) and continued to be the airport with the highest revenues fromlandside charges ($13.3 million).Airport investments increased during 2011-12In 2011-12, monitored airports collectively invested $547.4 million in aeronauticalassets - this was 61.7 per cent more than $339.5 million invested in 2010-11.Congestion emerging at some airportsStrong growth in passenger numbers in recent years has placed increasingpressure on existing aeronautical infrastructure and landside arrangements.Despite continued investment in aeronautical assets, there are signs of congestionemerging at Australia’s monitored airports. Data published by the Bureau ofInfrastructure, Transport and Regional Economics (BITRE) indicates increasingincidence of delays to scheduled domestic flight arrivals and departures atmonitored airports. While these data are not direct evidence of capacity constraintsat airports, they are indicative of emerging system-wide congestion.Aeronautical services:Brisbane Airport: According to Brisbane Airport the current runway system islikely to reach capacity in the next two years. While Brisbane Airport is in theearly stages of constructing a new runway, there is conjecture as to how theproject will proceed given the differences between the airport and airlines onhow its cost should be recovered.Melbourne Airport: investment is planned for expansion of runway capacity inthe next seven years in order to meet the growing demand.Perth Airport: demand concentration, particularly during ‘fly-in/fly-out’ peakperiods, is placing pressure on its infrastructure. A new domestic terminal wascompleted in March 2013.Sydney Airport: concerns over capacity issues are reflected in the reduction topoor in this year’s ratings by airlines of availability of airside services, includingrunways, taxiways and aprons. The current legislated runway managementsystem sets a cap of 80 hourly aircraft movements which places limits onoptions.Car parking and landside arrangements:Evidence of congestion in terminal forecourts and landside services hasprompted airports to improve arrangements for dealing with traffic flows, suchas establishing new public passenger pick up areas and additional car parkingspaces.
Key Findings Airport Monitoring Report 2011-12xInvestment will be required for additional capacityAeronautical servicesForecasts of continued growth in passenger throughput and aircraftmovements at monitored airports suggests that existing aeronauticalinfrastructure will be under increasing pressure in the years ahead.In 2011-12, the decline in overall ratings for quality of service suggests thatdemand for aeronautical services, may be growing more quickly than theapparent ability to accommodate the increased demands placed oninfrastructure, particularly at Brisbane, Sydney and Perth airports.Australian airports have typically not used peak-period pricing to efficientlyration excess demand, preferring to ration quantity through slot managementschemes. In the short term, dealing with congestion through slot managementschemes based on grandfathered landing rights may discourage entry of newairlines.In the long term, it is apparent that without additional investment inaeronautical capacity Australia’s largest airports will face challenges in the nextfew years continuing to provide aeronautical services that meet the reasonableexpectations of users.Landside servicesIn order to facilitate access to landside services and maximise the efficiency oflandside infrastructure networks, Australia’s major airports will need to ensurethat they engage all relevant stakeholders. While an airport is responsible forplanning and developing terminal access roads and car parking facilities withinthe airport boundaries, local and state governments must work in conjunctionwith the airports.The ACCC will continue to report on progress with airport investments and howairports are responding to airside and landside congestion.
Airport Monitoring Report 2011-12 Key FindingsxiKey Performance Indicators 2011-12Table 1: Key indicators for the monitored airports for 2011-12Airport Passengernumbers(million)Totalaeronauticalrevenue($million)Aeronauticalrevenue perpassenger($)Aeronauticaloperatingmargin perpassenger($)Return onaeronauticalassets(%)Overallrating forquality ofservice(out of 5)Adelaide 7.1 78.1 11.01 4.53 7.6 3.87Brisbane 21.2 212.4 10.02 4.47 6.8 3.92Melbourne 28.4 243.6 8.58 3.38 10.1 3.44Perth 13.3 118.0 8.86 3.12 11.3 3.36Sydney 36.3 543.5 14.96 7.33 10.5 3.33Note: Comparisons across monitored airports must be treated with caution. Results can be affected by the airports’varying terminal configurations and the different approaches to valuing assets.Table 2: Percentage change in key indicators from 2010-11 to 2011-12Airport PassengernumbersTotalaeronauticalrevenueAeronauticalrevenue perpassengerAeronauticaloperatingmargin perpassengerReturn onaeronauticalassetsOverallrating forquality ofserviceAdelaide ▼ 4.0% ▼ 9.3% ▼ 5.5% ▼ 14.8% ▼ 2.6pp ▼ 1.5%Brisbane ▲ 4.6% ▲ 7.0% ▲ 2.2% ▲ 9.2% ▲ 0.6pp ▼ 7.1%Melbourne ▲ 0.2% ▲ 5.0% ▲ 4.8% ▼ 9.9% ▼ 2.2pp ▼ 7.6%Perth ▲ 16.3% ▲ 14.5% ▼ 1.6% ▼ 12.5% ▼ 1.9pp ▼ 8.7%Sydney ▲ 0.1% ▲ 3.6% ▲ 3.5% ▲ 6.4% ▲ 0.9pp ▼ 9.0%Note: pp = percentage pointsTable 3: Car parking prices as at 30 June 20121Airport Short-term car parking Long-term car parking1 hour 3 hours 8 hours 24 hours 1 day 7 daysAdelaide $4.00 $11.00 $26.00 $30.00 $25.00 $70.00Brisbane $14.00 $22.00 $50.00 $50.00 $40.00 $140.00Melbourne $12.00 $28.00 $55.00 $55.00 $29.00 $77.00Perth $6.00 $10.20 $15.20 $38.00 $17.00 $93.00Sydney $16.00 $29.00 $56.00 $56.00 $26.00 $127.00Table 4: Percentage change in car parking prices from 30 June 2011 to 30 June2012Airport Short-term car parking Long-term car parking1 hour 3 hours 8 hours 24 hours 1 day 7 daysAdelaide 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Brisbane ▲ 7.7% 0.0% ▲ 25.0% ▲ 25.0% 0.0% 0.0%Melbourne 0.0% 0.0% ▲ 5.8% ▲ 5.8% 0.0% 0.0%Perth ▲ 7.1% ▲ 2.0% ▲ 1.3% ▲ 5.6% ▲ 6.3% ▲ 5.7%Sydney ▲ 6.7% ▲11.5% ▲ 7.7% ▲ 7.7% ▲ 4.0% ▲ 4.1%1Brisbane, Perth and Sydney airports’ short-term and long-term car parking prices are based on the domestic terminalcar park at each airport. Melbourne Airport’s long-term car parking prices are based on the long-term uncovered carpark located at distance from the terminal precinct.
Airport Monitoring Report 2011-12 SummaryxiiiSummary - Airport Monitoring 2011-12Prices, revenue, margins and quality of service foraeronautical servicesDemand for aeronautical servicesIn 2011-12 demand for aeronautical services increased at all airports except Adelaide Airport.Growth in total passenger numbers was relatively flat at Melbourne and Sydney airportsincreasing by 0.2 per cent and 0.1 per cent respectively. Growth was stronger at BrisbaneAirport (4.6 per cent) and Perth Airport (16.3 per cent).Passenger numbers at Adelaide Airport fell by 4.0 per cent compared with 2010-11. It is likelythat a number of factors may have contributed to the drop in passenger numbers at AdelaideAirport, including subdued economic conditions, Tiger Airways ceasing operations at the airportfrom July 2011 and the Qantas grounding and associated industrial action.2Perth and Brisbane airport have experienced strong growth in domestic passenger numbers.Falls in domestic passenger numbers at Sydney and Melbourne airports were off-set by highernumbers of international passengers.Section 1.4.1 discusses airport throughput levels at monitored airports.Total and average revenues and pricesAll airports other than Adelaide Airport earned higher aeronautical revenues during 2011-12.In 2011-12, higher average prices at Sydney and Melbourne airports contributed to solid growthin aeronautical revenues of 3.6 per cent and 5.0 per cent respectively despite relatively lowgrowth in passenger numbers.Higher average prices and an increase in passenger numbers at Brisbane Airport during2011-12 contributed to a strong increase in aeronautical revenues of 7.0 per cent.Perth Airport reported a slight fall in aeronautical revenue per passenger (average prices)(-1.6 per cent) but significantly higher total aeronautical revenues (14.5 per cent) due mainly tostrong growth in total passenger numbers.At Adelaide Airport, lower average prices and a fall in passenger numbers resulted in loweraeronautical revenues (-9.3 per cent).Sections 1.4.2 and 1.4.3 describe total aeronautical revenues and average prices at monitoredairports.2Tiger Airways re-commenced operations at Adelaide Airport after the end of the 2011-12 financial year.
Summary Airport Monitoring Report 2011-12xivAeronautical marginsSydney and Brisbane airports were the only two airports to report higher aeronautical operatingmargins per passenger during 2011-12.At Sydney Airport, aeronautical operating margins per passenger increased 6.4 per cent due tohigher increases in revenue than costs and comparatively low growth in overall passengernumbers.At Brisbane Airport, higher aeronautical revenue per passenger coupled with loweraeronautical operating expenses per passenger resulted in an increase in operatingaeronautical margins per passenger of 9.2 per cent.Adelaide, Melbourne and Perth airports experienced falls in aeronautical operating margins perpassenger of 14.8 per cent, 9.9 per cent and 12.5 per cent respectively.At Melbourne Airport, an increase in average aeronautical revenues per passenger of4.8 per cent was not enough to offset the effects of an increase in aeronautical operatingexpenses of 17.3 per cent. Higher depreciation and salaries contributed to higher costs atMelbourne Airport.At Adelaide Airport, aeronautical margins per passenger fell as aeronautical revenues perpassenger decreased while operating expenses per passenger increased by 2.4 per cent.At Perth Airport, aeronautical margins per passenger fell as aeronautical revenues perpassenger fell 1.6 per cent while operating expenses associated with the airport’s expansionincreased.Section 1.4.5 presents an analysis of aeronautical margins at monitored airports.Returns on assetsSydney and Brisbane airports recorded slightly higher returns on aeronautical assets in2011-12 relative to 2010-11, consistent with the changes in aeronautical operating margins.Returns fell at the other three monitored airports.In the 2009-10 and 2010-11 AMRs, the ACCC noted that airports are partially insulated fromthe effects of economic shocks (such as the global financial crisis and natural disasters) thatcan reduce demand for air travel.Section 1.4.6 describes returns on assets at monitored airports.Quality of servicesThe overall ratings for quality of service (that is, quality of service ratings based on objectiveindicators and responses from surveys of airlines, passengers and border agencies) fell at allmonitored airports during 2011-12, with each airport receiving an overall rating of satisfactory.For the first time since 2007-08, none of the airports achieved an overall rating of good (that is,a rating equal to 4.0 or higher).Adelaide Airport’s rating by passengers and airlines decreased within the satisfactory category.Passengers rated Adelaide Airport lowest along with Sydney Airport while airlines rated ithighest for quality of service provided to airlines.
Airport Monitoring Report 2011-12 SummaryxvBrisbane Airport achieved highest overall rating among monitored airports. Passengers’ ratingdropped slightly within the good range while airlines’ ratings decreased but remainedsatisfactory. Airlines’ rating for runway availability fell significantly in 2011-12 to poor after itwas rated good in 2010-11. Brisbane Airport was ranked highest by passengers and secondhighest by airlines.Melbourne Airport’s rating by passengers decreased slightly in 2011-12, though remainedgood. Airlines’ ratings increased within the satisfactory range. Passengers rated MelbourneAirport second among the five monitored airports while airlines ranked it third.Perth Airports’ average passenger rating decreased from good in 2010-11 to satisfactory in2011-12. Airlines’ rating for Perth Airport remained poor. Passengers rated Perth Airport thirdwhile airlines rated it last for quality of service provided to airlines.Sydney Airport had the lowest overall rating among monitored airports for 2011-12.Passengers’ rating increased within the satisfactory range in 2011-12. Sydney Airport was theonly airport that received an increased passenger rating in 2011-12. Airlines’ rating decreasedfrom satisfactory in 2010-11 to poor in 2011-12. Passengers rated Sydney Airport, along withAdelaide Airport, lowest among monitored airports while airlines rated it second lowest.Section 1.5 presents an analysis of quality of service outcomes for all monitored airports.Emerging capacity constraints in aeronautical infrastructureWhile in 2011-12 passenger numbers fell at Adelaide Airport and were essentially flat atMelbourne and Sydney airports, the monitored airports as a whole have experienced significantgrowth in passenger numbers in recent years.Total passenger throughput at the five monitored airports has increased by 71.1 per cent since2001-02, with passenger numbers increasing from 62.1 million in 2001-02 to 106.3 million in2011-12. Aircraft movements have increased by 30.7 per cent over the same time period,increasing from 733 694 in 2001-02 to 958 863 in 2011-12.It is likely that further investment will be required by the monitored airports over the next fewyears to ensure that aeronautical capacity is sufficient to accommodate the future needs ofusers.Forecasts of continued growth in passenger throughput and aircraft movements at themonitored airports suggests that existing aeronautical infrastructure is likely to be underincreasing pressure in the medium to long term. The Bureau of Infrastructure, Transport andRegional Economics (BITRE) has projected that by 2031 total passenger throughput at the fivemonitored airports will increase by 103.8 per cent, from 106.3 million passengers in 2011-12 to216.7 million passengers in 2030-31.3BITRE also projected that by 2030, total aircraftmovements at the five monitored airports will increase by 55.5 per cent, from 958 863movements in 2011-12 to just under 1.5 million movements in 2029-30.4If unaddressed, congestion issues will have direct impacts on users of the airports, as well asindirect impacts on the economy more broadly. Australia’s major airports are a significantcomponent of the national transport infrastructure, facilitating the movement of people and thesupply of goods and services. As a result, the major airports make a considerable contributionto Australia’s overall economic prosperity. Notably, the direct contribution of the air and space3Bureau of Infrastructure, Transport and Regional Economics, Research Report 133: Air passenger movementsthrough capital and non-capital city airports to 2030-31, November 2012.4Bureau of Infrastructure, Transport and Regional Economics, Research Report 117: Aircraft movements throughcapital city airports to 2029-30, April 2010.
Summary Airport Monitoring Report 2011-12xviindustry to the Australian economy in the year ending 30 June 2012 was approximately$7.1 billion, or approximately 0.5 per cent of Australia’s Gross Domestic Product.5Despite investment in aeronautical assets over the last 11 years, there is evidence of emergingsystem-wide congestion at Australia’s monitored airports. According to the BITRE, betweenNovember 2003 and January 2013, the proportion of domestic flights that arrived on-time fell,on average, 11.4 per cent while the proportion of domestic flights that departed on-time fell8.9 per cent across monitored airports. At the same time the number of flights into and out ofthe monitored airports has increased markedly.6The government’s pricing principles for Australian monitored airports provide for the use ofpeak-period pricing to deal with the effects of congestion. It is noted, however, that monitoredairports have preferred to ration excess demand through slot management schemes based ongrandfathered landing rights. The use of grandfathered quantity rationing systems may havethe effect of discouraging efficient new entry.In the long run, the most efficient way for airports to respond to congestion is to invest in newinfrastructure to accommodate the increase in demand. A number of airports have noted theemergence of capacity constraints and the need for additional capacity.Melbourne Airport has noted that investment to expand runway capacity will be required beforethe end of the decade in order to meet growing demand. Brisbane Airport has stated that itexpects the growth in air travel to start exceeding the capacity of its current runway systembetween 2013 and 2015. Perth Airport has noted that demand concentration during peakperiods is placing pressure on its infrastructure.7In respect of Sydney Airport, the report to the Australian and NSW governments by theSteering Committee of the Joint Study on aviation capacity in the Sydney region concluded thatimmediate action is needed to increase Sydney Airport’s capacity to meet growing demand.The Steering Committee concluded that from around 2030, an additional airport will be neededto supplement the capacity of Sydney Airport.8Section 2.3 discusses evidence of congestion at monitored airports.Master planning process at Australian airportsTo ensure that airports continue to invest in airport infrastructure, the government requiresairports to prepare master plans and major development plans, so that airports can indicate theareas where investments will be undertaken. These plans also require public consultation, sothat users can express views to the airports and the Government about where investmentshould be targeted to meet their needs.Under the Airports Act 1996 (Airports Act), Australian airports are required to establish a20 year forward-looking master plan, which identifies, for example, development objectives andfuture aviation requirements. Master plans are updated by the airports every five years andhave to be approved by the Minister for Infrastructure and Transport (the Minister). The fivemonitored airports have master plans in place which are due to be updated over the next twoyears.5ABS, Australian National Accounts, National Income, Expenditure and Product (ABS cat. no. 5206.0, June 2012,Table 45).6Bureau of Infrastructure, Transport and Regional Economics, Domestic airline on time performance, December 2003and December 2012.7Perth Airport, Submission to ACCC Airport Monitoring Report, 28 September 2012. See also Brad Geatches, PerthAirport challenges, West Australian Perth, 15 October 2012.8Steering Committee, Joint Study on aviation capacity in the Sydney region, March 2012.
Airport Monitoring Report 2011-12 SummaryxviiThe Government stated in its 2009 National Aviation Policy White Paper (the White Paper) thatimproved planning is one of its policy goals for Australian airports, in order to facilitate betterintegration and coordination with off-airport planning and to facilitate continued investment inAustralia’s airport infrastructure and land transport links.9Following the release of the WhitePaper, the Government has increased the requirements for airports to consult and engage withthe broader community throughput the planning process.Airports must also prepare major development plans for major projectsUnder the Airports Act, Australian airports are also required to prepare a major developmentplan for each major individual development at an airport, including aeronautical andnon-aeronautical projects. Airports must undertake public consultation on draft majordevelopment plans before submitting the plan to the Minister for approval.Planning for future investment in aeronautical servicesThe monitored airports have plans to invest in aeronautical assets over the next few years, inorder to expand aeronautical capacity.Brisbane Airport has recently completed the detailed design for the first construction phase ofits new parallel runway and has commenced civil works. Brisbane Airport has proposed thatconstruction will be completed by 2020.In November 2012, Melbourne Airport announced its preferred orientation for a third runway,with its proposal to be outlined in its 2013 master plan.10Melbourne Airport noted that a thirdrunway will be required from around 2018-22 to meet the growing demand for access to theairport.Perth Airport has planned a number of projects within the international terminal followingopening of a new domestic terminal in March 2013, including an expansion and redesign of theinternational arrivals area and the departures customs, security screening and lounge areas. Ithas been reported in the media that Perth Airport has commenced planning for a thirdrunway.11Sydney Airport, while constrained by legislative requirements from increasing runway capacity,is planning to undertake a number of initiatives, including a proposed reconfiguration of thecurrent domestic and international precincts.12ACCC to monitor and report on airports’ investment projectsThe ACCC intends to track progress by airports in implementing investment plans. FutureAMRs will assess and report on the extent to which planned investments are taking place.Chapter 2 presents an in-depth analysis of emerging capacity constraints on the supply ofaeronautical services and future investment needs at monitored airports.9Australian Government, National Aviation Policy White Paper, December 2009.10Melbourne Airport, Melbourne Airport announces third runway preference, Media Release, 20 November 2012.11Examples include; Geoffrey Thomas, Airport had warning of chaos, West Australian, 12 October 2012 and; BradGeatches, Perth Airport challenges, 15 October 2012 and; Natalie Gerritsen, Perth unlocks keys to terminal, AustralianFinancial Review, 8 January 2013.12Sydney Airport, New Vision To Integrate International , Domestic and Regional Services, 5 December 2011, viewedon 9 January 2013 at; http://www.sydneyairport.com.au/corporate/media-centre/media-releases/media-release-detail.aspx?item=%7B19FE83DF-66A6-49CA-A219-72C3A4A4C7E0%7D&lst=%7BC313C142-0E4E-4269-A2FB-BDEB95B3BC9E%7D.
Summary Airport Monitoring Report 2011-12xviiiPrices, revenue, margins and capacity for airport carparkingThe ACCC monitors on-airport car parking prices and revenues, costs and profits associatedwith on-airport car parking for all monitored airports.The ACCC also collects information on charges imposed by airports on operators of alternativeservices to on-airport car parking as well as the amount of revenue received from thoseoperators. Alternatives to on-airport car parking include taxi services, limousine and hire carservices, and private and public bus services.By imposing excessive charges or restrictive terms and conditions for landside access, airportscould potentially obstruct competition from alternatives to on-airport car parking. This couldhave the effect of shifting demand from those alternatives to an airport’s own car parkingservices, and allow the airport to charge higher prices.However, it is important to note that, for the reasons outlined at the end of this chapter, careneeds to be taken when interpreting the levels of on-airport car parking and landside accessprices, revenues, costs and profits, and when making comparisons of performance across themonitored airports and over time.Because of the many different types of price points available on car parking (that is, differentprices per different lengths of car park stays), it is not possible to make reference to an averageprice for car parking. Instead, car parking revenue, costs and margins per car park space areused as indicators of unit revenue, unit costs and unit margins.Prices and RevenuesAt Brisbane, Melbourne Perth and Sydney airports car park revenues increased in 2011-12 dueto a combination of higher car parking charges and increased demand. See Table 3 in the KeyFindings for data on car parking prices and revenues.Perth Airport reported a 23.2 per cent increase in revenues as a result of increases in car parkprices in three of the four price points shown in Table 3 in the Key Findings and an increase of7.4 per cent in the number of car park spaces.Brisbane and Sydney airports recorded slight increases in revenue (up 1.4 per cent and2.5 per cent respectively) and large increases in the number of car park spaces (up31.7 per cent and 6.9 per cent respectively).Melbourne Airport’s car parking revenues were largely unchanged in 2011-12. Two of the pricepoints were increased and the number of car spaces decreased by 2.2 per cent. In 2011-12,Melbourne Airport earned the highest revenues from car parking ($114.7 million) and thehighest proportion of total airport revenue from car parking (20 per cent).Car parking prices did not change at Adelaide Airport which recorded a fall in car parkingrevenues of 4.9 per cent.Section 3.3 describes prices charged for car parking at monitored airports, while section 3.4discusses revenues earned by airport operators from their car parking businesses.MarginsTwo airports, Adelaide and Brisbane, experienced a fall in margins earned on their car parkingoperations. Adelaide and Brisbane airports recorded falls in margins, of 10.0 per cent and
Airport Monitoring Report 2011-12 Summaryxix11.8 per cent respectively, and in margins per car park space of 10.1 per cent and33.0 per cent respectively.Sydney Airport reported a rise in total margins of 0.4 per cent but, because of a rise of6.9 per cent in the number of car park spaces, margins per car park space fell 6.1 per cent.Despite this, Sydney Airport continued to earn the highest margin per car park space with$5 290.Perth Airport car parking margins increased 24.3 per cent while margin per car park spaceincreased 15.8 per cent.Melbourne Airport car parking margins were largely unchanged from 2010-11 levels butremained the highest among monitored airports ($86.4 million).Section 3.4 assesses margins earned on car parking facilities at monitored airports.Landside servicesRecent trends in landside access prices and revenuesThe ability of operators of landside alternatives to on-airport car parking, such as taxis, trains,off-airport car parking, buses and hire cars, to supply these services depends on whether theycan have access to airport land, and on the terms and conditions of access.Airports control access to airport land, and the associated terms and conditions of access, andso have the ability to influence the level of competition between on-airport car parking andother off-airport landside alternatives.Results of monitoring charges and revenues associated with landside access include:Three airports, Brisbane, Perth and Sydney, increased some charges while Melbourne andAdelaide airports left all landside access charges unchanged in 2011-12.Total landside revenue increased at all airports other than Adelaide Airport. Total revenueearned from landside access operations at all airports increased by almost 20 per cent toaround $28.7 million in 2011-12.Revenue at Brisbane, Melbourne and Perth airports increased 9.2 per cent, 6.4 per cent and10.1 per cent respectively. Sydney Airport’s revenue from landside access was the highest ofall five airports at about $13.3 million, increasing by around 36.9 per cent in 2011-12. SydneyAirport accounted for around 46 per cent of the combined land-side revenue earned bymonitored airports.Section 3.6 presents additional information on landside charges and revenues.Investing in landside servicesProjected growth in passenger numbers will also increase demand for landside access atmonitored airports. This will create the need for investment in car parking facilities, terminalroads, kerbside management, and other facilities used by landside operators supplyingalternatives to on-airport car parking.An airport’s landside infrastructure can be broadly categorised as that existing within an airportand immediately adjacent to the airport precinct. Landside infrastructure within an airportbroadly consists of car parks, taxi holding areas, train platforms and other facilities, pick-up anddrop-off areas and roads surrounding the terminals and connecting the airport to the majorroads outside of the airport precinct. Beyond the airport boundaries, landside infrastructureconsists of road and rail networks used by consumers to access the airport.
Summary Airport Monitoring Report 2011-12xxAs noted, several major investment projects are underway or have recently been completed bythe monitored airports. Looking forward, it will be imperative that the airports liaise with usersand governments to develop appropriate landside solutions to address growth. Suchengagement with stakeholders will ensure landside developments are fit for purpose, deliversufficient spare capacity and integrate with wider infrastructure networks.Section 3.8 analyses possible capacity issues at landside facilities including future investmentrequirements in section 3.8.1.Cooperation is necessaryPlanning, collaboration and investment in landside facilities, particularly those transportationnetworks outside of airport borders, will be required to complement significant airside capacityexpansion and aeronautical growth at airports.Establishing efficient landside networks for getting to and from an airport requires input from anumber of parties such as airports, landside operators, state governments and theCommonwealth. As airports continue to grow, and the surrounding landside infrastructurebecomes increasingly congested, effective cooperation between responsible parties will beimportant to implement effective landside solutions.It will be important that the airports liaise with users and governments to develop appropriatelandside solutions to address forecast growth, to ensure that they are fit for purpose and deliversufficient spare capacity.Section 3.8.2 discusses investment planning processes for landside facilities.Monitoring investment outcomesTo improve the scope and ability for the ACCC to assess the airport operator’s performanceand progress against investment plans, this year’s airport monitoring program was extended tocollect details of completed, ongoing and planned investment in landside infrastructure.By reporting on progress with airport investment, the AMR can provide further observations ofhow airports are responding to any congestion issues at the landside and whether there areissues outside the airport boundaries that are influencing the efficiency of landsideinfrastructure networks.This information, in conjunction with the airports’ own master plans, will assist in assessing theextent to which the airports are meeting the needs of their users.The ACCC’s role in monitoring aeronautical and carparking servicesThe ACCC’s monitoring role for the major airportsIn a number of inquiries into the economic regulation of airport services, the most recent ofwhich was in 2011, the PC has reiterated that airports monitored by the ACCC have marketpower. According to the PC “...the market power of Sydney, Melbourne, Brisbane and PerthAirports is sufficient to warrant policy attention”.13Airports control access to the keyinfrastructure necessary for air transportation and for users of airports to access terminals. Inmany cases, there is a lack of practical alternatives for travelling overseas and the largedistances between capital cities. Consequently, the air transportation industry plays a pivotal13Productivity Commission, Economic Regulation of Airport Services, Inquiry report No. 57, Canberra, December 2011.
Airport Monitoring Report 2011-12 Summaryxxirole in the Australian economy in facilitating travel as well as movement of time sensitive goodsand services.Due to concerns that airports could use their position to earn monopoly profits to the detrimentof Australians, the Australian Government has directed the ACCC to monitor the quality, prices,costs and profits relating to the supply of aeronautical and car parking services by Australia’sfive major airports—Adelaide, Brisbane, Melbourne (Tullamarine), Perth and Sydney (KingsfordSmith) airports.The government established a price monitoring approach to regulating airports in 2002following consideration of the recommendations of a PC inquiry. The move from a priceregulation regime to a monitoring regime was intended to facilitate investment and innovation,while retaining a constraint on the exercise of market power by the airports in their dealingswith airlines and other customers. In responses to subsequent PC inquiries in 2006 and 2011,the government has reiterated its commitment to the continuation of the airports monitoringprogram.The ACCC is also required to monitor the quality of service in relation to the provision ofprescribed aspects of airport services and facilities by those airports.Productivity Commission 2011 inquiry into the economic regulation of airportservices and the Government’s responseDuring 2010, the government responded to concerns raised by the ACCC in relation to its2008-09 AMR. These concerns included that Sydney Airport had potentially increased profitsby permitting service-quality standards to fall below that which could be expected in acompetitive environment over a sustained period.The 2011 PC report into the economic regulation of airport services concluded that Brisbane,Melbourne, Perth and Sydney airports retain sufficient market power to be of policy concern.14The PC recommended that the current monitoring program should continue to operate until atleast 2020.The government agreed in principle with the PC’s recommendations to continue monitoring ofairports by the ACCC and that the next review of the monitoring program should be done in2018.Limitations of monitoringMonitoring of itself does not restrict airports from using their monopoly position to increaseprices and/or lower service standards.Monitoring is limited in its scope to undertake a detailed assessment of the performance ofairport operators. The results from monitoring do not provide conclusive evidence as to whetherairport operators are exercising market power. For example, it is not possible to determinewhether airports are earning monopoly rents from information obtained through the monitoringprogram. A more detailed evaluation of the airports’ performance would be required to makemore definitive findings, including a comparison with economically efficient benchmarks.However, such an evaluation is beyond the scope of monitoring. Among other things, withinaccepted accounting conventions airports have discretion on asset values. This limits theusefulness of data on returns on assets as an indicator of economic performance.14Productivity Commission, Economic Regulation of Airport Services, Inquiry Report No. 57, Canberra, December2011.
Summary Airport Monitoring Report 2011-12xxiiImportantly, monitoring does not directly restrict the airports from increasing prices and/orlowering service standards and does not provide the ACCC with a general power to intervenein the airports’ conduct in setting of terms and conditions of access.For these reasons, monitoring is not effective in addressing the policy concern that anunconstrained airport presents and is not a substitute for effective regulation.That said, monitoring allows the performance of airports to be considered based onobservations from the monitoring results over time. It is possible for the ACCC to make generalobservations about whether certain outcomes might be consistent with firms with marketpower. For example, the ACCC may express concerns about an airport’s performance whereprices increase while quality of service is observed to have remained constant or even fallenbelow satisfactory, over a sustained period of time.By providing a greater level of transparency to the airports’ performance, monitoring also seeksto address information asymmetries that may exist between airports and its customers.Analysis and interpretation of monitoring resultsPresentation of data and charts in the 2011-12 reportThe 2010-11 AMR presented most charts and tables with airport data commencing from2006-07.In the current AMR, the time series presented and discussed in the accompanying notesextends from 2001-02 to 2011-12, representing 11 years of data.The ACCC believes that an appropriate period to assess trends over time is for data to bepresented from 2001-02 to 2011-12. The change to presenting data with a longer time seriesenables analysis of pricing and long term asset values and changes over time. Airport assetsare usually long-term investments. Where practicable, long-term time series, such as datacovering the period from 2001-02 is presented in both nominal and real terms.Monitoring prices, profits and quality of aeronautical servicesA number of indicators have been developed to monitor prices, profits and quality ofaeronautical services.The ACCC publishes a schedule of prices charged by each airport for the supply ofaeronautical services (see chapters 4-8). Airports provide many different types of services withcharges levied on different bases - such as on a per passenger basis or by aircraft weight.Further, airports might offer discounts for certain periods or to certain users, or there might beminimum and maximum charges in place which affect some users but not others.In addition, the price changes for particular airport users might vary depending on thecomposition of the airport services they utilise, the times at which they use them and so on. Forexample, the costs to an airline of a domestic flight are likely to be different to those associatedwith an international one due to differing security and processing requirements. Similarly,changes in price structure by an airport might affect users in different ways—even to the pointof effectively lowering the costs for one user while raising them for another.For these reasons, it is difficult to aggregate all services and prices into a single average priceof aeronautical services for monitoring purposes. The lack of a single aggregate pricecomplicates the task of establishing trends over time given and comparing prices acrossairports.
Airport Monitoring Report 2011-12 SummaryxxiiiGiven these complications, the ACCC’s primary measure of average airport prices isaeronautical revenue per passenger. This relies on a consistently defined service definition andprovides a measure of the cost to airlines expressed in terms of the most significant chargingunit.Similarly, when measuring net earnings, the ACCC has relied on aeronautical operatingmargins per passenger as an indicator of unit profits and return on aeronautical assets as anindicator of profitability.Measures of service quality include survey ratings by airlines, passengers and border agenciesas well as objective indicators.Caveats - monitoring costs and profitsAs noted, care should be taken when making comparisons of performance across airports andover time. There are many factors that may influence the price and quality of service monitoringresults.The price, cost and profit data presented in this report is based on accounting data provided bythe monitored airports. The main caveats for price monitoring results include:• difficulties in consistently reporting financial information because of changes in legislationand regulations that can affect how items are reported (including in accounting practicessuch as the transition to Australian equivalents to International Financial ReportingStandards in 2005–06)• indicators of profitability based on accounting data in particular are not effective measuresof economic performance and only provide guidance on trends in operating performanceover time• airports’ return on assets can be significantly affected by the discretion they have on assetrevaluations. This affects the usefulness of analyses of rates of return on assets forassessing economic performance and also complicates comparisons of changes in rates ofreturn over time and across airports.A change in the definition of aeronautical services and non-aeronautical services in 2007–08 bythe Australian Government significantly affected how revenues are reported and reduced thecomparability of airports’ revenues with prior years.As with other multi-product firms, airports incur a range of costs that are common acrossaeronautical and non-aeronautical services. As there is no economically meaningful way ofallocating common costs to individual products and services, allocation of expenses to differenttypes of services requires some discretion by the airport operators, which in turn can influencemeasures of profitability of services.Financial indicators can provide useful insights into the operational performance of airportsover time. However, they should not be interpreted in isolation as they only provide a partialindication of performance and are not definitive. Trends of operational performance acrossairports are more reliable if comparable results are present for a range of relevant indicators.For example, the ACCC employs a number of indicators to measure profitability to account fortheir respective limitations. Aeronautical operating margin per passenger is used by the ACCCas a measure of unit profits. However, this measure does not make an allowance forrisk-adjusted returns on capital associated with the provision of services.The ACCC also uses return on average assets as an additional measure of profitability,although this measure is likely to vary according to the stage of a given airport’s investment
Summary Airport Monitoring Report 2011-12xxivcycle. In addition, rates of return can also be affected by different asset valuationmethodologies employed by airports. Among other things, airports’ upward revaluation ofassets might lower measures of return on average assets. This can possibly distortcomparisons across airports and over time.In order to establish asset values to facilitate the monitoring of rates of return a ‘line in the sand’measure was reported for the first time in the 2007–08 ACCC AMR. The line in the sandapproach removes for monitoring purposes the effects of revaluations of aeronautical assets byairports after 30 June 2005. This approach, however, may also be affected to the extent thatairport operators had chosen to revalue assets prior to this cut-off date.Another reason that may make comparisons across airports difficult is the fact that the ACCC’smonitoring role for aeronautical services relates only to those terminals that are owned andoperated by the monitored airports. However, some of the airports’ domestic terminals, such asthe Qantas and Virgin Australia domestic terminals at Brisbane Airport are leased and operatedby those airlines and are not subject to the ACCC’s monitoring. Therefore the revenues, costs,profits and quality of service associated with those terminals are not included in the monitoringresults presented in this report.15Caveats - monitoring quality of serviceThe provision of airport services can be influenced by different parties and, therefore,interpretation of the quality of service results need to take these different factors into account.Indeed, airport services are commonly the combined responsibility of a number of entities—including airlines, government agencies, the airport operator and sub-lessees of the airportoperator.The quality of service results should not be considered in isolation of other indicators as doingso can result in misinterpretation of the outcomes. The objective measures of quality of servicemay provide useful context to the understanding of survey results and should therefore beinterpreted in conjunction with each other.15Note that the rent charged by the Airport operators to Airlines such as Qantas and Virgin for the use of the terminal isincluded in non-aeronautical revenue.
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services11 Overview of the monitoring resultsfor aeronautical servicesKey pointsTrends in prices, costs and margins for aeronautical services• With the exception of Adelaide Airport, passenger numbers increased at the monitoredairports in 2011-12. Sydney Airport has had the highest passenger throughput in everyyear since 2001-02, while Perth Airport has had the highest growth in passengerthroughput since 2001-02.• Domestic passenger numbers fell but international passenger numbers increased in2011-12 at Australia’s two largest airports at Sydney and Melbourne. On the other hand,domestic passenger travel made significant contributions to the strong growth in passengernumbers at Perth and Brisbane airports.• Aeronautical revenue per passenger (an indicator of average prices) fell at Adelaide andPerth airports but rose at the other monitored airports.• Sydney Airport remained the airport with the highest aeronautical revenue per passenger at$14.95 per passenger compared with the second highest at Adelaide Airport with $11.01per passenger.• Adelaide, Melbourne and Perth airports reported a decrease in aeronautical operatingmargin per passenger (an indicator of profitability), while Brisbane and Sydney airportsreported an increase in aeronautical operating margin per passenger.• Sydney Airport continued to be the airport with the highest aeronautical margin perpassenger at $7.33 per passenger compared with the second highest at Adelaide Airportwith $4.53 per passenger.Trends in quality of service for aeronautical services• Overall quality of service ratings, based on objective indicators and encompassing theviews of airlines, passengers and border agencies, decreased for all monitored airports in2011-12, though all airports remained rated as satisfactory.• Sydney Airport recorded the lowest ratings in terms of overall quality of service for theseventh consecutive year.• Airlines’ ratings, which can provide a more direct indication of the quality that the airportoperators provide, decreased at Adelaide, Brisbane and Sydney airports in 2011-12.Airlines’ rating of Melbourne Airport’s quality of service increased, and remainedunchanged at Perth Airport.Price and quality ratings for the airports• Sydney Airport had the highest aeronautical revenue per passenger and the lowest overallrating for quality of service in 2011-12.• In contrast, Melbourne Airport had the lowest aeronautical revenue per passenger and wasthird behind Brisbane and Adelaide airports for overall quality of service.
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-1221.1 IntroductionThis chapter presents observations on the performance of Adelaide, Brisbane, Melbourne(Tullamarine), Perth and Sydney (Kingsford Smith) airports in relation to the supply ofaeronautical services.For the purposes of the ACCC AMRs, aeronautical services are defined as services providedby airport infrastructure to facilitate air transportation of passengers and freight. Underregulation 7.02 of the Airports Regulations 1997, aeronautical services and facilities are definedas “services and facilities at an airport that are necessary for the operation and maintenance ofcivil aviation at the airport”. These include services and facilities listed in the tablesaccompanying the regulations: aircraft-related services and facilities such as runways,taxiways, and passenger-related services and facilities such as public areas in terminals,departure and holding lounges.Section 2 describes terminal configurations at different airports. Section 1.3 provides some keyobservations about the performance of each of the monitored airports during 2011-12. Keyindicators relating to activity, prices, revenues, costs, margins and investments for aeronauticalservices are discussed in section 1.4, showing changes in indicators over time in nominalvalues, as well as inflation-adjusted values. Section 1.5 presents the quality of service results,while section 1.6 compares the airports’ price and quality of service outcomes for the mostrecent year (2011-12).More detailed information about the monitoring results for aeronautical services since 2001-02is provided on an airport-by-airport basis in chapters 4 to 8. Monitoring data going back to2001-02 is presented in order to provide an analysis of long-term trends. Aeronautical assets,such as terminals and runways, are generally long-lived assets, and long-term analysis canprovide an indication of the adequacy of these investments over time.Appendices A.1 and A.2 of this report provide the individual airports’ regulatory accounts anddetailed information on the airports’ indicators and statistics used in this report. For detailsregarding the approach taken by the ACCC in preparing the measures used in this report, aswell as a full list of aeronautical services covered by the monitoring program, see appendicesA.4 to A.7.1.2 Airport terminal configurationsThe monitored airports have considerably different terminal configurations. Some airports offera combined terminal for international and domestic passengers, while others have separateterminals.Importantly, some of the domestic terminals at the monitored airports are leased and operatedby airlines under domestic terminal leases (DTLs). Under DTLs, airlines operate their terminalsindependently of the airports and have greater discretion over the quality of services andfacilities offered.16The existence of DTLs at some of the monitored airports complicatescomparisons of monitoring results across airports (see box 1.2.1)The various terminal configurations offered by the monitored airports and the DTLs that applyare outlined in table 18.104.22.168For more detailed information on the implications of domestic terminal leases, see chapter 3 of the ACCC’s AirportMonitoring Report 2008-09.
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services3Table 1.2.1: Terminal configurations at the monitored airportsAirport Terminal configuration Domestic terminal leases (DTLs)Adelaide One multi-user integrated terminal (T1) thatservices international, domestic and regionalpassengersNone (expired February 2006)Brisbane One international terminal and one domesticterminalThe majority of the domesticterminal is occupied by Qantasand Virgin Australia under DTLs(expires December 2018)Melbourne One international terminal and three domesticterminals as follows:• T1—Qantas domestic terminal• T2—international terminal• T3—common-user domestic terminal (VirginAustralia, Regional Express and Skywest)• T4—common-user domestic terminal (TigerAirways)T1 (Qantas domestic terminal)(expires December 2018)Perth One international terminal and two domesticterminals as follows:• T1—international terminal• T2—Qantas domestic terminal• T3—common-user domestic terminal (TigerAirways, Virgin Australia and others)T2 (Qantas domestic terminal)(expires 2018)Sydney One international terminal and two domesticterminals as follows:• T1—international terminal• T2—common-user domestic terminal (TigerAirways, Jetstar, Virgin Australia, RegionalExpress and others)• T3—Qantas domestic terminalT3 (Qantas domestic terminal)(expires June 2019)
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-124Box 1.2.1: Domestic Terminal LeasesComparisons of airports’ revenues, prices, costs, margins and quality of service arecomplicated by domestic terminal leases (DTLs) at some of the monitored airports.The direction issued to the ACCC under s.95ZF of the CCA to undertake airport monitoring upto 2011-12 (Direction No 29) relates to aeronautical and car parking services and facilitiesprovided by Sydney Airport Corporation Limited (Sydney Airport), Australia Pacific AirportsCorporation Limited (Melbourne Airport), Brisbane Airport Corporation Pty Limited (BrisbaneAirport), Perth Airport Pty Ltd (Perth Airport) and Adelaide Airport Limited (Adelaide Airport).The Airports Regulations 1997 define aeronautical services and facilities to include bothaircraft-related and passenger-related services and facilities provided at an airport.17However,the ACCC’s monitoring program does not include passenger-related services and facilities thatare provided within a terminal that is occupied and operated by an airline under a DTL.Therefore, the revenues, prices, costs, margins and quality of service associated with thepassenger-related services and facilities provided within these terminals are excluded from theresults presented in this report.18Adelaide Airport is the only monitored airport that does not have any DTLs. Adelaide Airportopened its multi-user terminal in October 2005, with Qantas transferring its domestic operationsfrom the terminal that it occupied and operated under a DTL to the new terminal in February2006. Therefore, monitoring data collected from Adelaide Airport prior to February 2006 doesnot include data on passenger-related services and facilities provided within the domesticterminal operations of Qantas. This contributed to Adelaide Airport reporting significantincreases in aeronautical revenue, expenses and margins in 2005-06 and 2006-07, as data onpassenger-related services and facilities previously provided within the domestic terminaloperations of Qantas were included in the monitoring programme for the first time.1.3 Key observations from the monitoring results foraeronautical servicesIn performing its monitoring role, the ACCC looks at levels and trends across a range ofindicators—including prices, costs, margins, returns on assets, investment and quality ofservice—at the individual airports. However, although observations from monitoring may raisesome concerns about an individual airport’s performance, monitoring does not allow a detailedassessment of the airport’s performance to be undertaken and cannot be used to conclusivelyestablish whether an airport has exercised market power to earn monopoly rents. Thelimitations of monitoring are set out in further detail in the executive summary, while appendixA.7 discusses the ACCC’s monitoring methodology.For the purposes of the discussion in this section, analysis of quality of service is focused onthe quality of service provided to airlines and on the results of the airline survey results, asairline ratings can provide a more direct indicator of the quality of service that the airportoperator provides. This is because airports provide services directly to airlines undercommercial arrangements and are in a position to make an informed assessment of qualityagainst price.17Aeronautical services and facilities have the meaning given by regulation 7.02A of the Airports Regulations 1997.18For more detailed information on the implications of domestic terminal leases, see chapter 3 of the ACCC’s AirportMonitoring Report 2008-09.
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services5Given the complex nature of airports’ bundling of charges, and changes on the basis of howthese charges are applied, the ACCC adopts aeronautical revenue per passenger as anindicator of average prices that the airlines pay to airports. Aeronautical operating expensesper passenger are used as an indication of unit costs.It should be noted that aeronautical revenue and aeronautical operating expenses on a perpassenger basis include revenues and costs associated with the provision of governmentmandated security services. The revenues and costs associated with these services do notreflect decisions made by airport operators. Therefore, where appropriate, the discussion in thischapter and the individual airport chapters (chapters 4-8) also consider aeronautical revenueper passenger and aeronautical operating expenses per passenger excluding security.Unlike average prices and unit costs, aeronautical operating margin per passenger isdiscussed including security. This is because government mandated security revenue is set torecover the costs associated with security services and does not affect the overall profitabilityof the airports.The following sections outline some observations from the monitoring results for each of theairports.1.3.1 Observations about Adelaide AirportIn 2011-12, Adelaide Airport was the only monitored airport to report a decrease in passengernumbers, with passenger numbers decreasing by 4.0 per cent to 7.1 million passengers. Anumber of factors may have contributed to the drop in passenger numbers at Adelaide Airport,including subdued economic conditions, Tiger Airways ceasing operations at the airport fromJuly 201119and the Qantas grounding and associated industrial action.Declining passenger numbers impacted on Adelaide Airport’s aeronautical revenue during2011-12, with total aeronautical revenue decreasing by 9.3 per cent. The impact onaeronautical operating expenses was less pronounced, with total aeronautical operatingexpenses decreasing by 1.7 per cent.In 2011-12, Adelaide Airport’s aeronautical operating margin decreased by 18.3 per cent anddecreased by 14.8 per cent on a per passenger basis.As a measure of investment in aeronautical services, Adelaide Airport’s additions as apercentage of tangible non-current assets for aeronautical services have been relatively lowsince the completion of the new multi-user terminal in 2006. However, Adelaide Airport hasbegun to increase its additions over the last two years, with additions increasing to13.4 per cent of tangible non-current aeronautical assets in 2011-12. Adelaide Airport’sadditions during 2011-12 have mostly related to the landside infrastructure project, whichinvolved construction of a new car park and landside facilities.Chart 1.3.1 shows that since the opening of its new multi-user terminal in 2006, quality ofservice results improved significantly at Adelaide Airport and have on average been rated assatisfactory or above. This is in contrast with the period prior to the opening of the newterminal, when Adelaide Airport recorded poor quality of service results.19Tiger Airways re-commenced operations at Adelaide Airport after the end of the 2011-12 financial year.
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-126Chart 1.3.1: Airlines’ average ratings for quality of service at Adelaide Airport,2001-02 to 2011-12It should be noted that following the release of the 2011-12 AMR, Adelaide Airport will berequired to join the second-tier price and quality of service reporting process established by theNational Aviation Policy White Paper in December 2009. This is a self-administered scheme,where the airport will be expected to disclose on its website:• prices of aeronautical services• prices of car parking services• various quality of service outcomes• airport complaint-handling processes and outcomes.The reasons for this change to the monitoring regime are discussed in more detail in AdelaideAirport’s individual airport chapter (chapter 4).1.3.2 Observations about Brisbane AirportIn 2011-12 over 21 million passengers travelled through Brisbane Airport, an increase of4.7 per cent over 2010-11 numbers. International passenger numbers increased 4.9 per cent in2011-12 while domestic passenger numbers increased 4.6 per cent. In 2011-12, almost78 per cent of passengers were travelling domestically, while just over 21 per cent wereinternational passengers. Both domestic and international travellers contributed to the increasein passenger numbers at Brisbane Airport in 2011-12. Since 2001-02 domestic andinternational travellers have contributed roughly equally to the 70.3 per cent growth inpassenger numbers. Since 2007-08 domestic passengers travelling through Brisbane Airporthave increased by 14.4 per cent compared with 7.5 per cent growth in internationalpassengers.Since 2001-02, Brisbane Airport’s quality of service indicators have been consistently rated assatisfactory to good. These quality of service trends were repeated during 2011-12.01234562001–022002–032003–042004–052005–062006–072007–082008–092009–102010–112011–12AverageratingInternational terminal Domestic terminalAirside services and facilities Managements responsivenessExcellentGoodPoorVery poorSatisfactory
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services7In 2011-12, Brisbane Airport increased prices for a number of services, while prices of otherservices were unchanged, such as landing fees, aircraft parking fees and noise surcharge.Airlines continue to rate Brisbane Airport’s quality of service as satisfactory orhigher but identify runway availability as a problemAverage quality of service ratings for Brisbane Airport have consistently been rated assatisfactory. Individual ratings have ranged from satisfactory to good over the period 2001-02 to2010-11. However in 2011-12, airlines changed their rating of runway availability whichdeclined from good to poor. Commentary from the airlines on this issue referred to significantdelays during peak periods. Some airlines noted that Brisbane Airport was taking measures toaddress the issue.Brisbane Airport has completed the detailed design for the first construction phase for a newparallel runway. Civil works have commenced and the new runway is expected to becommissioned in 2020. The ACCC notes the new runway was approved by the state andAustralian governments in 2007.Prior to 2011-12, airlines’ rating of the availability of check-in desks in 2003-04 and airlines’rating of the standard of aerobridges in 2007-08 were the only occasions when ratings wereless than satisfactory across the range of Brisbane Airport’s individual services and facilities.It is noted that recent media articles have stated that Brisbane Airport has been unable to reacha commercial agreement with airlines regarding the funding of its new parallel runway.20Theconstruction of this runway is unusual as it is spread over eight or nine years, with about halfthe cost being involved in preparing the site for the runway.Chart 1.3.2: Airlines’ average ratings for quality of service at Brisbane Airport,2001-02 to 2011-1221Chart 1.3.2 presents average quality of service indicators for Brisbane Airport as rated byairlines. Of the three average indicators presented, not one increased or decreased between20Robyn Ironside, Airlines angry at new toll, Courier Mail, Brisbane, 28 September 2012 and; Steve Creedy, Runwaybill irks carriers, The Australian, 5 October 2012.21Note that average measures for Brisbane Airport’s domestic terminal are not presented due to the unavailability ofsome individual quality of service indicators.01234562001–022002–032003–042004–052005–062006–072007–082008–092009–102010–112011–12AverageratingInternational terminal Airside services and facilities Managements responsivenessExcellentGoodPoorVery poorSatisfactory
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-128categories during 2011-12. Airline ratings for the international terminal increased slightly withinthe satisfactory category, while the rating for management responsiveness decreased slightlywithin the same category. There was a larger decrease in the rating for airside services andfacilities, primarily due to the decline in the airlines’ rating of runway availability.Brisbane Airport’s average prices and unit margins are higher, but is investingin aeronautical servicesBrisbane Airport’s aeronautical revenue per passenger increased by 2.2 per cent in 2011-12, to$10.02 per passenger. This is lower than the 4.7 per cent annual increase in aeronauticalrevenue per passenger in 2010-11.In 2011-12, Brisbane Airport’s aeronautical operating margin per passenger was $4.47,representing an increase of 9.2 per cent from 2010-11. This is the smallest annual increase forthe operating margin over the period from 2001-02 to 2011-12.Since 2001-02, Brisbane Airport’s aeronautical operating margin per passenger has increasedsignificantly. Brisbane Airport’s aeronautical operating margin per passenger was negative in2001-02, however, since 2002-03 aeronautical operating margin per passenger has increasedby 397.7 per cent. This increase is equivalent to an average annual increase of 19.5 per centper annum. When adjusted for inflation, this increase is equivalent to an average annualincrease of 14.7 per cent. In 2011-12, Brisbane Airport’s aeronautical operating margin perpassenger increase was driven by the operating margin increasing at a faster rate than thenumber of passengers.Brisbane Airport increased terminal charges for international and domestic passengers in2011-12, while aircraft related charges, aircraft parking fees and noise surcharge remainedunchanged. Brisbane Airport has advised that price increases were set out in the five-yearpricing agreements with airlines to recover the costs of investment. However, and as noted inthe 2010-11 AMR, the ACCC is cognisant that in submissions to the PC’s inquiry airlinesclaimed that, while there are agreements in place with airports, commercial negotiations withsome airports tend to be one-sided and dysfunctional.22The ACCC is not privy to thecommercial negotiations between Brisbane Airport and the airlines and, therefore, is unable todetermine whether or not the price increases at Brisbane Airport are a reflection of the highquality of services delivered at the airport or whether they are a symptom of an imbalance inthe negotiating power between airlines and the airport. That said, the airlines have not raisedany specific concerns in their survey responses and the ACCC continues to note the highquality of service results at the airport.Brisbane Airport has increased its level of investment in aeronautical services in recent years.Between 2006-07 and 2011-12, annual additions as a percentage of tangible non-currentassets for aeronautical assets have been over 10.0 per cent on average, with the exception of2010-11 when addition as a percentage of tangible non-current assets for aeronautical servicesfell to 4.7 per cent. In 2011-12, additions as a percentage of tangible non-current assetsincreased to 10.8 per cent.1.3.3 Observations about Melbourne AirportMelbourne Airport had the second largest number of passengers among monitored airportspass through its terminals in 2011-12, with 28.4 million passengers. This represented anincrease of 0.2 per cent over 2010-11: international passenger numbers increased by7.6 per cent while domestic passenger numbers fell by 2.0 per cent. In 2011-12, domesticpassengers accounted for around three quarters of total passengers travelling throughMelbourne Airport. Melbourne Airport stated that the decrease in domestic passengers in22Productivity Commission, Economic Regulation of Airport Services, Inquiry report no. 57, Canberra, December 2011.
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services92011-12 reflected some of the difficulties experienced by domestic operators during the year.23In particular, Melbourne Airport pointed to the cessation of services by Tiger Airways at theairport between 2 July 2011 and 10 August 2011, as well as the Qantas grounding andassociated industrial issues. That said, international passenger numbers have been growing ata faster rate than domestic passenger numbers over the last ten years: since 2001-02,international passenger numbers have increased 96.8 per cent compared with 67.5 per cent fordomestic passenger numbers.Melbourne Airport had the largest increase in aeronautical revenue per passenger among themonitored airports in 2011-12, increasing by 4.8 per cent to $8.58 per passenger.The ACCC has observed that since 2001-02, Melbourne Airport’s quality of service ratingshave largely remained above satisfactory. Following a decline in the airport’s rating in 2010-11,quality of service ratings by airlines have somewhat improved in 2011-12.Following a decline in ratings by airlines for quality of service last year, airlineratings have shown improvement in 2011-12In 2011-12 Melbourne Airport’s quality of service ratings by airlines improved within thesatisfactory range, with airlines noting improvements in its international terminal services andfacilities, as shown in chart 1.3.3. In particular, airlines noted improvements in baggageprocessing facilities at the international terminal. However, some airlines continued to state thatservices at the international and domestic terminal were constrained during peak periods.Chart 1.3.3: Airlines’ average ratings for quality of service at Melbourne Airport,2001-02 to 2011-12On average, from 2001-02 to 2011-12, airlines have generally rated Melbourne Airport’s qualityof service as satisfactory. Airline average ratings for the airport’s quality of service, however,experienced a notable decline in 2004-05 and again in 2010-11 but recovered in 2011-12.Services provided at the domestic terminal were the only services that received a poor rating in2011-12.23Melbourne Airport, Melbourne Airport achieves 8 per cent international growth for 2011/12, Media Release, 24 July2012. See: http://melbourneairport.com.au/News-Events/News-Events-Archive/2012/melbourne-airport-achieves-8-per-cent-international-growth-for-2011-12.html.01234562001–022002–032003–042004–052005–062006–072007–082008–092009–102010–112011–12AverageratingInternational terminal Domestic terminalAirside services and facilities Managements responsivenessExcellentGoodPoorVery poorSatisfactory
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-1210While Melbourne Airport’s average prices increased in 2011-12, the airport isundertaking investment and is reporting increasing average costsMelbourne Airport’s aeronautical revenue per passenger (excluding security) has increased inalmost every year since 2002-03.Between 2001-02 and 2002-03, Melbourne Airport reported a 44.5 per cent increase inaeronautical revenue per passenger and a 380.7 per cent increase in aeronautical margin perpassenger. This was largely driven by Melbourne Airport increasing aeronautical chargesfollowing the removal of price caps on 1 July 2002.Between 2002-03 and 2011-12, Melbourne Airport’s aeronautical operating margin perpassenger increased by 43.1 per cent. When adjusted for inflation, the increase in aeronauticaloperating margin per passenger since 2002-03 is 12.0 per cent. However, in three of the lastfour years Melbourne Airport experienced a decline in aeronautical operating margin perpassenger, which decreased by 9.9 per cent in 2011-12. The decrease in aeronauticaloperating margins was driven by an increase in aeronautical operating expenses perpassenger (excluding security) of 20.5 per cent, related mainly to salaries and depreciationcharges. The increase in salaries was due to an increase in staff levels and in average salariesper staff. Average salaries in 2011-12 were 9.4 per cent higher than the previous year.Melbourne Airport noted that increases in salaries and depreciation charges were driven byactivities associated with the airport’s expansion, specifically investing in new aeronauticalassets and accommodating passenger growth. Melbourne Airport has noted that staff numbershave moved in both the planning and construction areas during the year, in line with its currentand future development requirements. Further, Melbourne Airport has stated that operationalstaff numbers have moved in line with the need to operate an airport with increasingcongestion.Melbourne Airport continued to invest in aeronautical services in 2011-12 with additions tobuildings and plant and machinery assets as well as land improvements. Some of theaeronautical projects completed during 2011-12 include fitting out several departure gates andworks in the baggage reclaim area of the international terminal, as well as expanding rooms forAustralian Customs and Border Protection Services search and interview functions. Since2006-07, Melbourne Airport’s additions as a percentage of tangible non-current assets foraeronautical services have remained over 10.0 per cent, with a high of 22.1 per cent in2008-09. In 2011-12, additions were $155.8 million, or 15.5 per cent of tangible non-currentaeronautical assets.Melbourne Airport has announced that investment to expand runway capacity will be requiredbefore the end of the decade in order to meet the growing demand for access to the airport.The proposal is to be outlined in its 2013 draft master plan (chapter 2 provides more detail onthe master planning process).241.3.4 Observations about Perth AirportPerth Airport faced the fastest growing demand of the monitored airports in 2011-12, with totalpassenger numbers increasing by 16.3 per cent to 13.3 million passengers. Internationalpassenger numbers increased by 7 per cent in 2011-12 while domestic passenger numbersincreased 20 per cent. Perth Airport has experienced an increase in passenger numbers of86.6 per cent since 2005-06. More than three quarters of the total growth in passengernumbers since 2001-02 has been accounted for by domestic passengers. The share of totalpassenger numbers accounted for by domestic passengers has increased from 65.4 per cent in2001-02 to 73.7 per cent in 2011-12.24Melbourne Airport, Melbourne Airport announces third runway preference, Media Release, 20 November 2012.
Airport Monitoring Report 2011-12 Overview of the monitoring results for aeronautical services11In previous monitoring reports, the ACCC observed that the evidence about Perth Airport wascontinuing to show mixed results. Quality of service results were seen to be a concern,although investment was occurring and price changes were moderate.In 2011-12, the quality of service results for aeronautical services did not show materialimprovements across the majority of indicators measured. Yet, as occurred in previous years,Perth Airport has invested in terminals and airfield improvements during 2011-12. AlthoughPerth Airport is investing in upgraded or new facilities, these investments do not appear to behaving a major impact on average quality of service indicators for aeronautical services. Thatsaid, a new domestic terminal that opened in March 2013 is expected to have an impact onservice levels.In 2011-12, Perth Airport implemented upward and downward revision of the prices of anumber of services. Overall, however, Perth Airport had a slight fall in aeronautical revenue perpassenger among the monitored airports, decreasing by 1.6 per cent to $8.86 per passenger.Airlines have continued to raise concerns about quality of service levels atPerth AirportPerth Airport’s average quality of service ratings by airlines remained at poor in 2011-12. Theseservice ratings have been at poor in four out of the last five years. This is despite Perth Airportundertaking substantial investments in aeronautical services. A number of completedinvestments in 2011-12 including the terminal 3 phase 1 expansion, other terminalenhancements and apron reconfiguration and ground support equipment storage upgrades.Other substantial investments that commenced or were underway during 2011-12 include thenew domestic terminal, completed during 2013, and airfield investments planned for completionin 2014.Chart 1.3.4 presents average quality of service indicators for Perth Airport as rated by airlines.Although none of these quality of service ratings increased between rating categories, therewere slight increases within categories for two of the indicators. The ratings for the domesticterminal and management’s responsiveness both increased within their categories, butremained at poor and satisfactory respectively. Airline ratings for the international terminal andairside services and facilities both decreased within the category of poor.
Overview of the monitoring results for aeronautical services Airport Monitoring Report 2011-1212Chart 1.3.4: Airlines’ average ratings for quality of service at Perth Airport,2001-02 to 2011-12In the 2011-12 survey results, airlines rated 15 of the 28 indicators at the international terminal,domestic terminal and airside services as either poor or very poor. Again in 2011-12, airlineshave commented on insufficient numbers (and quality) of aerobridges in both the internationaland domestic terminals. Ratings for the availability and standard of all aerobridges were poorfor 2011-12.A more detailed discussion of Perth Airport’s quality of service results is available in section 7.4of this report.Perth Airport is continuing to invest in aeronautical servicesAs noted, the ACCC has previously acknowledged that Perth Airport had increased investmentin aeronautical services in more recent periods, including a major redevelopment of its airportannounced in November 2010. In particular, this redevelopment includes new and expandedpassenger terminals, expanded aircraft parking areas and public access infrastructure. PerthAirport noted in 2011-12 that the substantial passenger growth over the past few years hasresulted in the ‘customer experience suffering’ due to passenger congestion during peak hours.Perth Airport commented that the investment and redevelopment was intended to address thisdeclining customer experience and standard of quality of service, as well as increasing airportcapacity.The monitoring results for 2011-12 show that Perth Airport is continuing to invest inaeronautical services. In 2011-12, Perth Airport’s additions as a percentage of tangible non-current assets for aeronautical services were 19 per cent, slightly down from the 21 per centrecorded in 2010-11.As noted, Perth Airport completed a number of major investment projects during 2011-12,including the first stage of the terminal 3 refurbishments, various international terminalrefurbishments and a number of airfield improvements. The recently completed new domesticterminal 2 (opened in March 2013) will primarily service regional Western Australia and somelimited interstate routes. The new terminal is part of a larger investment plan for the airportwhich will include a new domestic pier due for completion in 2014.01234562001–022002–032003–042004–052005–062006–072007–082008–092009–102010–112011–12AverageratingInternational terminal Domestic terminalAirside services and facilities Managements responsivenessExcellentGoodPoorVery poorSatisfactory