The Minister for Financial Services and Regulation, Joe Hockey, today issued new instruments under the Prices Surveillance Act 1983 to assist airports to better manage the changes that are currently affecting the aviation market.
"Some airports have indicated that they are facing financial pressures as a result of the suspension of Ansett's operations and reduced global demand for aviation services," the Minister said.
"The Government accepts that it would be difficult for airports to adjust aeronautical prices to compensate for reduced traffic flows, and still comply with the current price oversight arrangements administered by the ACCC. "
Under the changes announced now, the prices oversight arrangements that will apply at core regulated airports from today are as follows:
- CPI-X price caps will continue to govern aeronautical services at Melbourne, Brisbane and Perth airports;
- Prices monitoring will continue to apply to aeronautical-related services at Melbourne, Brisbane and Perth airports;
- Prices monitoring of aeronautical and aeronautical-related services will apply at Adelaide, Canberra and Darwin airports, replacing CPI-X price caps on aeronautical services;
- Notification of aeronautical price increases to the ACCC, and prices monitoring of aeronautical-related services will continue at Sydney (Kingsford Smith) Airport.
Under these arrangements both the price cap and prices monitoring will be removed from Coolangatta, Alice Springs, Hobart, Launceston and Townsville airports. Price caps have also been removed from all airports other than Melbourne, Brisbane and Perth, meaning that Canberra, Adelaide and Darwin airports will have price monitoring of aeronautical services but not CPI-X price caps.
Moreover, the ACCC has been directed to allow Melbourne, Brisbane and Perth airports to pass a one-off price increase through the current price cap. The allowable price increases would be up to 6.2% for Melbourne, 6.7% for Brisbane and 7.2% for Perth.
The Government has taken these measures to temporarily assist airport operators in the light of the difficulties arising from the suspension of Ansett operations and developments in international aviation.
In the period ahead, consumers will be protected by the ACCC, which will be monitoring prices at the regulated airports and will be alert to any misuse of market power.
The measures are consistent with the findings in the Productivity Commission's draft report on Price Regulation of Airport Services. The Government will give further consideration to the prices oversight arrangements at airports in the light of developments in airport prices and the Productivity Commission's final report.
BACKGROUND
In June 1997, when the Government privatised the Phase I airports, the Government announced details of the prices oversight regime that would apply to core-regulated privatised airports. Until today, the prices oversight regime consisted of a price cap on aeronautical services together with prices monitoring of certain aeronautical related services.
This system has been in operation for the Phase I privatised airports at Brisbane, Melbourne and Perth since 1 July 1997, and at the core-regulated Phase II privatised airports (Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston, Townsville) since 1 July 1998.
While Sydney (Kingsford Smith) Airport is subject to prices surveillance similar to that at other core-regulated airports, the airport is not subject to a CPI-X price cap. Proposed aeronautical price increases at Sydney Airport have to be notified to the ACCC, which assesses whether to approve the price increases.