Some Australian capital city airports possess significant market power, whereas other airports are in a weaker bargaining position. Under the light-handed monitoring regime that replaced price cap regulation:
there has been a marked increase in aeronautical investment and airports have not experienced the bottlenecks that have beset other infrastructure areas
aeronautical charges do not point to the inappropriate exercise of market power
service quality outcomes overall are 'satisfactory' to 'good', although airlines have, on occasion rated two airports as 'poor'
Australian airports' aeronautical charges, revenues, costs, profits and investment look reasonable compared with (the mostly non-commercial) overseas airports.
Commercial agreements with airlines are becoming more sophisticated. Agreements often include service level obligations, consultation on capital investment, price paths and dispute resolution when 'in-contract', but not during contract formation.
And while airlines maintain that airports adopt 'take it or leave it' negotiation stances and some fail to provide adequate information, no party sought a return to regulatory price setting, given past experience with its associated costs.
Price monitoring aims to constrain airports from inappropriately exercising any inherent market power. But neither the regulator nor Governments have acted when the regulator has raised the possibility that some airports might potentially be exercising market power.
Where the regulator, in undertaking its monitoring role, finds prima facie evidence that an airport has misused its market power, the airport should be required to 'show cause' why its conduct should not be subject to a 'forensic' Part VIIA price inquiry. If the regulator is dissatisfied with the airport's response it should formally recommend that the Government institute such an inquiry.
An airport that offered an 'approved' dispute resolution framework with binding arbitration during contract formation would not be subject to such a price inquiry.
The access charges and conditions faced by competitors to on-airport car parking are not so high as to impede competition. However, because of vertical integration, charges and conditions should be public and included in monitoring reports.
Such transparency would facilitate regulatory action under competition law if an airport acted to impede competition in order to inflate its car park prices or revenues.
Access to airport precincts in most major cities is congested owing to inadequate arterial roads and insufficient mass transit services.
Developments on airport land (a Commonwealth responsibility) can also add to congestion on connecting transport links (state and territory responsibilities)
Recent reforms to better integrate airport transport planning across jurisdictions have been introduced. A review of their efficacy should be undertaken in 2015.
Preliminaries
Cover, Copyright, Letter of transmittal, Terms of reference, Contents, Abbreviations, Explanations and Glossary
Overview - including key points
Findings and Recommendations
Chapter 1 About the inquiry
1.1 Background to the inquiry
1.2 The Commission's task
1.3 The Commission's approach
1.4 Conduct of the inquiry
Chapter 2 Australia's major airports
2.1 Australia's major airports: an introduction
2.2 Inside a major airport
2.3 Developments in the air travel market
Chapter 3 The institutional environment
3.1 Airport sale and lease conditions
3.2 Price and quality of service monitoring
3.3 Other relevant competition legislation
3.4 Other regulation of airports
3.5 Airport planning arrangements
3.6 Land access infrastructure and services
Chapter 4 Performance of Australian airports
4.1 Benchmarking in the airport sector
4.2 Benchmarking and regulation
4.3 Performance of Australian airports
4.4 Conclusion
Chapter 5 Market power and regulation
5.1 Economically efficient airports
5.2 The market power rationale for airport regulation
5.3 Which airports have market power?
5.4 For which services do airports have market power?
5.5 Other rationales for regulating airport services?
5.6 Optimising regulation to address airports' market power
Chapter 6 Investment and capacity
6.1 What is investment and capacity?
6.2 Investment determinants
6.3 Investment at Australian airports/li>
6.4 Concerns about investment at Australian airports
Annex on investment and pricing
Chapter 7 Airside and terminal: monitoring outcomes
7.1 Reported price outcomes
7.2 Reported quality of service outcomes
Chapter 8 Commercial negotiation
8.1 The slow path from regulation to negotiation
8.2 Airport users' views on commercial negotiation
8.3 Where to now?
Chapter 9 Options for future airport regulation
9.1 The anecdotal evidence is contradictory
9.2 How is the light-handed regime performing?
9.3 What remedies exist now?
9.4 The regime would benefit from a credible threat
9.5 Is an arbitration mechanism also needed?
9.6 Future role for price and quality monitoring?
Chapter 10 Improving the monitoring regime
10.1 Objectives of monitoring
10.2 Administrative and compliance costs
10.3 Specific components of monitoring
10.4 Reporting and interpretation of monitoring results
10.5 Coverage of quality of service monitoring
10.6 Is monitoring effective?
10.7 Improvements to the monitoring regime
Chapter 11 Airport car parking and ground transport access
11.1 Market power in ground transport access
11.2 The broader ground transport market
11.3 Car parking prices reflect more than cost of supply
11.4 Car park investment
11.5 Evidence of misuse of market power in car parking
11.6 Ground transport access fees and conditions
11.7 Future regulatory arrangements
Chapter 12 Broader land transport access and integration issues
12.1 The state of play 'on the ground'
12.2 Coordination of planning systems
12.3 Government funding of road infrastructure
12.4 Funding infrastructure on and around airports
Chapter 13 Broader aviation issues
13.1 Conduct of rural and regional airports
13.2 General aviation at major capital city airports
13.3 Aviation security charges
13.4 Noise management at airports
13.5 Fuel throughput levies
Appendix A Conduct of the inquiry
Appendix B Airports and related information
Appendix C Economic regulation of airports: an international comparison
Economic regulation of airport services (PDF - 3313 Kb)
Economic regulation of airport services (Word/Zip - 2074 Kb)