The productivity Commission has released its draft report on Economic Regulation of Airports.
The Airports seem to have come out of this quite well but not everyone is happy it seems: How Australia’s airport monopolies are costing us.
A quick flick through references to Cairns and some charts of interest. Cairns appears in the report as a second tier non-monitored airport. The monitored airports are the big four at Sydney, Melbourne, Brisbane, Perth. The post privatisation circumstances of Cairns Airport are also slightly different.
Cairns Airport, which is operated under a 99-year lease from the Queensland Government, is not regulated under the Airports Act, but is subject to state regulation (Airport Assets (Restructuring and Disposal) Act 2008 (Qld)). It has been encouraged by the Australian Government to publish the same information as the second-tier airports, and it does so with the exception of service quality outcomes.
The profile for Cairns here is, perhaps surprisingly, closest to Townsville and quite different from Mackay and Rockhampton. Unfortunate that Whitsundays isn’t included for comparison where Proserpine and Hamilton Island compete and split the numbers. Virgin/Tiger share is also relatively larger than average for Brisbane and Gold Coast.
Domestic scheduled charges at Adelaide, Darwin and Gold Coast airports have remained relatively flat or grown slowly in real terms since 2011 and at Cairns since 2014. Charges at Hobart Airport increased substantially in 2016 after several years of minimal change and have remained fairly constant in real terms since then.
At Gold Coast and Darwin airports, there is little or no difference between domestic and international charges. At Adelaide and Cairns Airport there has been a persistent gap of more than $10 between the two charges.
Access charges for taxis and rideshare services at some regional airports are similar to those of the monitored airports. For example, North Queensland Airports (sub. 49, pp. 30-31) stated that at Cairns Airport, landside access fees for taxis and ridesharing services are $4.40 and $4.84, respectively. Like the monitored airports, Cairns Airport provides taxi and rideshare drivers access to waiting facilities and amenities.
Cairns, Darwin, Gold Coast and Hobart airports do not have a level of market power that warrants regulation at this time. In summary:
none of these airports are gateways to major business hubs — at least not to the extent of the monitored airports. They are more substitutable as a result and have less market power
these airports serve a higher proportion of leisure passengers than the monitored airports, which is associated with more elastic demand (and less market power). Leisure passengers also have more flexibility in their holiday destination, meaning these airports compete with characteristically similar airports that are not nearby. This is especially the case for Cairns, Gold Coast and Hobart. Gold Coast Airport is also significantly constrained by Brisbane Airport and Sunshine Coast Airport.
You are invited to examine the draft report and to make written submissions by Monday 25 March 2019.
Update after a document search on Whitsundays:
Is the passenger coming or going?
The extent to which a passenger has alternatives also depends on whether they live in the catchment area of the relevant airport. Some passengers have the flexibility to choose the destination of their trip — leisure passengers in particular have the option of switching travel destinations. For example, a passenger interested in scuba diving might choose between a holiday at the Ningaloo Reef in Western Australia and a holiday on the Great Barrier Reef in Queensland. Switching may also occur between international destinations — a passenger may choose between Queenstown and Thredbo for a skiing holiday, or between Sydney and New York for a place to spend the New Year. In these examples, passengers generally have little choice of departure point, regardless of the purpose of their travel (even leisure travellers) but there is no requirement for the two destination airports to be near to each other to be good substitutes.
All airports face a limited amount of competition from other airports due to switching from visiting leisure passengers. Airports with both a high proportion of passengers travelling for leisure and a very small permanent population in their catchment area, such as Hamilton or Whitsunday Island airports in Queensland, will face more competition and have less market power than airports with densely populated catchment areas.
I don’t know who at the Productivity Commission thought this was a clever or informed analysis.