Australian Watchdog Considers Stronger Pricing Powers For Airlines

The competition regulator is looking at giving airlines more bargaining power in the wake of Perth Airport’s court victory over Qantas, expressing concern that the “light-handed” regulatory regime covering airports is not working as intended.

The ACCC says its investigations and February’s Supreme Court decision ordering Qantas pay more than $11.5 million in disputed aeronautical charges and interest indicate that airports have too much power in setting fees.

It is now considering “what can be done” to strengthen and balance the fees negotiating framework to give airlines more say.

Commenting in its annual report on Australia’s major airports, the ACCC said while airports and carriers acknowledged the benefit of the country’s aeronautical pricing principles (APPs) in negotiating commercial deals, the APPs lack muscle.

“The outcome of the Perth Airport case against Qantas as well as the ACCC’s findings in this report indicate that the APPs are currently not assisting airlines in negotiations as intended,” the regulator said on Monday.

“The APPs are not enforceable, which means that airlines do not have any formal recourse to address any conduct by an airport that is inconsistent with the APPs. There is also limited guidance available to the parties on how to interpret various elements of the APPs.

“The ACCC will consider what can be done to improve the operation of the APPs in commercial negotiations. If the APPs can be made more effective, this would unlock the full benefits of the APPs to airlines and thereby protect Australian businesses and consumers from excessive prices or declining service quality.”

The Supreme Court ruled that aeronautical fees charged by Perth Airport during a five-month period in 2018 were fair and reasonable.

“However, the court also found that Perth Airport acted inconsistently with the APPs in establishing its aeronautical prices,” the ACCC said.

In particular, the regulator said, the court found that Perth Airport set its prices for Qantas above the highest prices negotiated with other airlines, “likely exercised, substantial market power” and sought to include unrelated costs in the aeronautical prices charged to Qantas.

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