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.
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