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Article: Fees rejig hit airlines for $5m

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Yada Yada

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theaustralian.news.com.au said:
Fees rejig hit airlines for $5m
Steve Creedy, Aviation writer
December 13, 2005

THE fee system introduced by Sydney Airport increased its take by $5 million a year, largely from Virgin Blue, the Australian Competition Tribunal has heard.

The Federal Court last week found Sydney Airport, controlled by Macquarie Bank, used its monopoly power to introduce the new fee system knowing it would disadvantage Virgin Blue but boost its own coffers.

The domestic aeronautical charges were changed from a system based on aircraft weight to a per-passenger charge.

Releasing detailed reasons for its decision on Friday to partially re-regulate Sydney, the tribunal accepted Virgin's argument that the change represented a 50-53 per cent increase in its fees compared with a rise for Qantas of just 4 per cent.

"We are satisfied that, as a result of discussions with Qantas, SACL (Sydney Airport Corporation Ltd) was aware ... that Qantas particularly wanted the domestic passenger service charge (PSC) introduced to give it a competitive advantage over Virgin Blue," the judgment said.

"That is, to put Virgin Blue at a competitive disadvantage to Qantas.

"To change from a maximum-take-off-weight-based charge to a domestic PSC because Qantas preferred it was a misuse of monopoly power."

Shares in SACL's majority owner, Macquarie Airports, slumped 8c yesterday in the wake of the tribunal's decision that domestic aeronautical charges, such as landing and parking fees, at Sydney should be be "declared" for five years.

The tribunal said it was satisfied SACL had misused its monopoly power and that, unless the airside service was declared, the market would continue to be affected.

It also found competition in the Sydney domestic aviation market would be enhanced if the airside services were declared.

The decision came after a four-year legal battle which saw Virgin Blue appeal to the tribunal after the National Competition Council found against it and the Government refused to declare Sydney in early 2004.

Virgin was subsequently joined by Qantas in the appeal.

The ruling gives airlines the option of referring any dispute with SACL about domestic pricing to the Australian Competition and Consumer Commission for arbitration. While the finding is a moral blow for SACL and its owners, the overall economic impact is limited.

The decision does not affect international operations and domestic aeronautical charges account for less that 10 per cent of the airport's total revenue, or about $50 million. The decision also does not automatically carry over to other airports: airlines would have to mount a separate case. However, airline officials believe it has set a precedent that would result in a shorter process for subsequent claims.

A SACL spokesman said last night that officials were still combing through the lengthy judgment - to be considered at a board meeting next week.
 

JohnK

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Yada Yada said:
theaustralian.news.com.au said:
Releasing detailed reasons for its decision on Friday to partially re-regulate Sydney, the tribunal accepted Virgin's argument that the change represented a 50-53 per cent increase in its fees compared with a rise for Qantas of just 4 per cent.
Justs shows how much influence Qantas still has.
 

Yada Yada

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JohnK said:
Justs shows how much influence Qantas still has.
Yes indeed. They've been busted, again. But I guess they will continue to try to eliminate their competition, just as happened with YM back in the 1990's. I always felt pissed off at AN more than anyone for that. :(
 

NM

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The system whereby the airlines pay based on the max registered take-off weight of the aircraft resulted in some strange compliance processes by airlines. QF reduced the registered MGTW of some of their aircraft (mainly 767-338) that are used primarily for domestic ops in order to reduce the fees. The fee was based on the registered MGTW as listed on the aircraft compliance plate (usually installed in the cockpit) and not the actual take-off weight of the aircraft. So if the aircraft was operating below its MGTW, as is the case with domestic ops for 767's due to the light fuel load, they still pay the fees for the full MGTW.

So on aircraft that would be used sometimes for long-haul international ops (and hence needing the full MGTW), and sometimes for short-haul domestic ops, they would actually replace the compliance plate so that it was "registered" with a lower weight for the domestic ops and hence paying a lower fee.

I think a per-passenger fee is more realistic and fairer, rather than a fee based on aircraft weight. There is no way I can believe the SACL's costs are in greatly impacted by the registered MGTW of an aircraft, but are more proportional to the number of passengers passing through the airport.

So I understand why QF wanted the system changes. It was not reflective of the the airport's cost structure, and discriminated against them because they used aircraft that were bought initially for long-haul international ops (767-200ER, 767-300ER) and hence had registered MGTW significantly higher than needed for the short-haul domestic ops.

However, the facts are that the new system resulted in a significant change in the balance of how much each airline pays in fees, and that meant DJ's fees went up a lot more than QF's did.
 
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