Australia’s two major airlines have locked horns with airports over passenger fees, with the CEOs of Qantas and Virgin both calling for airports to drop the charges.
In a speech to the Press Club today, Qantas CEO Alan Joyce said airports have “airlines and passengers over a barrel”.
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"Fees and charges from monopoly airports are excessive and damaging the economy. And airports continue to reap super profits because there is no real threat of intervention to moderate their behaviour," said Joyce, who was yesterday crowned Australia’s highest-paid CEO, taking home $24 million.
"Australian airports are literally the only game in town. Their business model is based on it.”
Virgin CEO Paul Scurrah echoed those complaints, saying that all airlines are “swimming against the tide of costs being imposed by asset owners who are exempt from real competition”.
He said the Productivity Commission has “dropped the ball” with its May draft report on the issue.
That report said changes to the way airlines and airports handle disputes will need to focus on the interests of the airline and the airport “and would not consider the broader public interest".
“It goes without saying that a strong, competitive airline industry is vital to Australia’s economy,” Scurrah said.
“It seems hard to argue that Australian travellers, and the economy more broadly, should have to pay the price of a system which prevents airport customers from negotiating fair and reasonable deals.”
What do Qantas and Virgin want?
The airlines want a new arbitration regime allowing airport and airline disputes over passenger fees to escalate more quickly.
This has been backed by the Australian Competition and Consumer Commission (ACCC) which agrees that both airlines and airports should be able to direct disputes to an independent arbitrator, rather than to court.
“Providing airlines with access to arbitration would provide a constraint on the monopolist airports’ market power without jeopardising investment,” the ACCC submitted in March this year.
“A commercial arbitration regime would be a pragmatic and flexible solution under which both airports and airlines can seek arbitration if negotiation between the two parties break down.
“It is likely that having recourse to arbitration will be enough of an incentive to come to an agreement in negotiations, meaning that in practice few parties will seek to initiate arbitration.”
What do the airports say?
The airports argue that this scheme will make it harder for new airlines to enter the market.
“Qantas and Virgin want to squeeze competition out of the market to entrench the domestic duopoly and they know that’s exactly what will happen if they turn the screws on airport investment,” said Australian Airports Association (AAA) CEO Caroline Wilkie.
She said the new regime would only increase airline profits.
“Australia’s airports are well advanced to deliver on plans to invest around $20 billion dollars in new terminals and new runways which will provide passengers with more choice, more competition and lower prices,” Wilkie said.
“It will also create jobs, boost tourism and help build our national economy.
“The independent economic experts at the Productivity Commission have sent a clear warning that the changes proposed by the airlines will have a ‘chilling effect’ on that investment.”