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NCC Backflip On Regulation Of Sydney Airport Monopoly

29/01/2004

Virgin Blue is appalled by the National Competition Council’s (NCC) complete back flip in deciding not to recommend declaration of the Airside Service at Sydney Airport.


The Government’s decision to accept the NCC recommendation means Sydney Airport Corporation can now continue to use its airport monopoly to increase landing fees and undermine low fares and competition in the industry.


The NCC in its original (draft) decision concluded that:


Sydney Airport unambiguously had monopoly power over landing fees; and

that higher landing fees would hurt low fares and the competitive position of low fare airlines.

In complete contradiction to its earlier findings, the NCC has now concluded:


even if Sydney Airport was to increase its prices by 100%, it would not undermine competition;

the threat of re-regulation will restrain Sydney Airport from charging excessively high prices.

Virgin Blue Head of Communications and Strategy, David Huttner, said that the low fare carrier was carefully reviewing the Government’s decision and considering its options.


“We think the NCC got it right the first time – airports have monopoly power and that undermines low fares and competition.


This decision simply protects the monopoly the Commonwealth sold off in 2002 and puts the interests of the new owners of Sydney Airport ahead of the interests of the travelling public, particularly all those travelling on low fares.


The NCC got it wrong if it thinks that monopoly airport charges don’t lead to higher air fares. The NCC also has its head in the sand if it thinks that airports fear the threat of re-regulation, since the Department of Transport and Regional Services (DOTARS) has not taken up this issue on a single occasion.”


He added, “Virgin Blue is concerned that Sydney Airport will go the way of other airports (which were de-regulated earlier). At other airports we are facing airport charges in the near future which are 400% higher than they were prior to the removal of price regulation by this Government – not just 100%.”


“Now it is up to the Government to demonstrate that if the NCC’s complete about face has any justification, that it will step in and re-regulate where there is clear evidence of price gouging, considering it has just sat on its hands for the last two years.”


Under this decision, Sydney Airport will be able to:


Raise landing fees without any constraint. Virgin Blue has already seen increases and proposed increases at other airports. At Sydney Airport alone, Virgin Blue’s landing charges have increased by 150% since it was put up for sale;

Set fee structures so that passengers on low fare airlines and low fare seats subsidise high fare passengers (including business class passengers). Sydney Airport’s decision last year to move from weight based to per passenger landing charges resulted in a 50% increase in Virgin Blue’s landing charges, with negligible impact on Qantas;

Set fees so that domestic trunk and regional passengers subsidise the cost of upgrading facilities for international passengers travelling on the new A 380s. These aircraft, the largest passenger aircraft ever, will only be used by international passengers.

Virgin Blue doesn’t believe that it or its Guests should be penalised. Higher cost operators should pay their own way and Virgin Blue should not be punished for being more efficient.


The Government’s decision can be appealed to the Australian Competition Tribunal and this appeal is a merits hearing and independent of the political process.