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Call to drop airport review

Jenny Wiggins
Jenny WigginsInfrastructure reporter

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The Qantas Group has called on the Productivity Commission to abandon future reviews of airport regulation, saying its current review lacked "rigour" – but acknowledged it sometimes changes flights when it has disputes with airports.

The commission had turned a blind eye to "compelling evidence" of airports' exorbitant aeronautical and car-parking charges in its draft report on airport regulation, Qantas told commissioners at a hearing in Sydney on Tuesday.

"An expert, open-minded body should assess this matter in future and/or the parliament should should directly legislate," said Qantas executive Andrew Parker, who oversees government relations.

Qantas and other airlines have been pushing for access to commercial arbitration when there are aeronautical disputes, but airports are resistant, with Sydney Airport and Brisbane Airport's chief executives saying airlines could use arbitration to "game" the system.

We seem to be grasping for a new regime when the existing regime is working really well.

Geoff Culbert, Sydney Airport chief executive

Airports are worried that domestic airlines could use arbitration to resist investment in infrastructure, such as additional gates, to try to prevent other airlines adding routes that could eat into their market share.

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Airlines could also put in low-ball offers during aeronautical negotiations, encouraging arbitrators to make decisions based on their low prices, airports say.

Sydney Airport chief executive Geoff Culbert said even if guidelines were put in place to manage the gaming issue, it would be difficult for an arbitrator to understand the history and complexity of aeronautical agreements. Sydney Airport has agreements with 47 airlines.

"We seem to be grasping for a new regime when the existing regime is working really well," Mr Culbert said, adding that airports were attracting more airlines and Qantas was making record profits. "Light-handed regulation is doing its job."

Sydney Airport has agreed to provide more detailed information to competition watchdog the Australian Competition and Consumer Commission, including separately reporting revenue for domestic and international flights.

But it claims it would need to be careful about providing information on aeronautical agreements to ensure this was not misinterpreted and did not allow commercially sensitive information to be "back-solved".

Mr Parker disagreed that arbitration would lead to gaming of the system, arguing arbitration was a "brutally efficient process" and that it would resolve disputes faster than courts.

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He said Qantas's dispute with Perth Airport – which is before the West Australian Supreme Court after the airport sued the airline – would take years to resolve and would cost millions of dollars, and argued the process of "declaring" an airport under the National Access Regime was inefficient.

Commissioners pushed Qantas to confirm whether it had ever changed its flight plan or services, such as cancelling flights, as a response to airports increasing aeronautical prices.

Mr Parker acknowledged that Qantas did reassess "the economics" of its routes when aeronautical prices changed, saying the airline routinely was subject to price increases of between 40 and 50 per cent. Perth Airport had made a "take it or leave it" offer to Qantas on aeronautical pricing and had refused to resolve the dispute through arbitration, he said.

Virgin Australia has also complained about take-it-or-leave-it offers, providing case studies to the commission in its response to the draft report. The case studies were redacted from the public copy of Virgin's report.

Virgin has opposed the commission's recommendation to review Sydney Airport's slot management scheme, arguing the International Air Transport Association is doing its own global review that will be completed this year.

Sydney Airport supports a review of the scheme that is independent of IATA's review, arguing the scheme encourages airlines to protect their allocated slots by operating smaller aircraft with greater frequency to hoard slots, therefore limiting opportunities for others to enter the market and increasing domestic airfares.

Jenny Wiggins writes on business, specialising in infrastructure and transport. Connect with Jenny on Twitter. Email Jenny at jwiggins@afr.com

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