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Price Regulation of Airport Services (2002)

Inquiry report

This report was released on 13 May 2002.

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Cover, Copyright, Signing Page, Terms of reference, Contents, Abbreviations and explanations, Glossary, Key messages, Overview, Recommendations and findings

1   Introduction
1.1   Terms of reference
1.2   Background to the current inquiry
1.3   The Commission’s approach
1.4   Conduct of the inquiry

2   Australian airports and their markets
2.1   Airport facilities and services
2.2   Australian airports
2.3   The airport business at core-regulated airports
2.4   The airport business at other Australian airports

3   The regulatory environment
3.1   Price regulation until October 2001
3.2   Price regulation since October 2001
3.3   Quality of service monitoring
3.4   Access regulation
3.5   Other relevant regulation for core-regulated airports
3.6   Regulation of airports not subject to price regulation

4   Assessing the need for price regulation of airport services: some preliminary issues
4.1   Why regulate prices of airport services?
4.2   Potential efficiency and distributional effects of market power
4.3   Principles of efficient pricing of airport services
4.4   Principles of good regulation

5   Market power of airports
5.1   Introduction
5.2   Airports and barriers to entry
5.3   Price elasticity of demand for an airport’s services
5.4   Summing up

6   Market power in particular airport services
6.1   Introduction
6.2   Aircraft movement facilities
6.3   Passenger processing facilities
6.4   Lounge space (VIP and business)
6.5   Landside vehicle facilities
6.6   Aircraft refuelling
6.7   Maintenance facilities
6.8   Flight catering facilities
6.9   Freight handling and ground service equipment storage sites
6.10   Freight facility sites and buildings
6.11   Waste disposal facilities
6.12   Administrative office space
6.13   Commercial and retail activities
6.14   Summary

7   Conduct of unregulated airports
7.1   Influences on unregulated airport pricing
7.2   Conduct of unregulated airports: efficiency and distributional effects

8   Review of airport price regulation: price-cap and prices-notification arrangements
8.1   Introduction1
8.2   The price cap: CPI-X and prices notification of aeronautical services
8.3   The price cap: allowable price increases above the cap
8.4   Recent changes to price regulation
8.5   Price regulation of Sydney Airport services

9   Review of airport regulation: price monitoring, quality monitoring
9.1   Price monitoring of airport services
9.2   Monitoring of quality of service provision
9.3   Access regulation

10   Regulatory options: cost-based and incentive regulation
10.1   Cost-based and incentive regulation
10.2   Future regulation: price caps and Australian airports
10.3   Coverage of price caps and cost-based regulation

11   Regulatory options: price monitoring, access provisions and general competition law
11.1   Price monitoring
11.2   Access provisions and general competition law

12   Appropriate future regulation: the Commission’s assessment
12.1   The Commission’s task
12.2   The Commission’s assessment of the need for regulation
12.3   Option A: dual-till price caps
12.4   Option B: price monitoring
12.5   Weighing the options

A   Terms of reference: correspondence

B   Public consultation
B.1   List of submissions
B.2   Visits
B.3   Public hearing participants

C   Aeronautical and non-aeronautical services
C.1   The effect of non-aeronautical profits on aeronautical charges
C.2   Non-aeronautical profits: locational rents and/or market power?
C.3   Arguments for and against a single till

D   Characteristics of demand and competition at core-regulated airports

E   Fuel throughput levies and taxi charges
E.1   Fuel throughput levy
E.2   Taxi charges
E.3   Issues arising from price regulation

F   Valuation of aeronautical land and efficient land use
F.1   Efficient land use
F.2   Sydney Airport and the ACCC decision
F.3   Distributional issues

G   Economic regulation of privatised airports: international experiences
G.1   United Kingdom
G.2   New Zealand
G.3   Germany
G.4   Denmark
G.5   Summary of international experiences

H   Issues in allocating scarce airport slots
H.1   Airports and congestion
H.2   Price or quantity rationing?
H.3   Assessing the options