LIFE AFTER SQ006 - Orient Aviation

n e w sAirlines face 79% rise in Sydney feesBy Tom BallantyneAustralia’s pricing watchdog, the Competitionand Consumer Commission(ACCC) has attracted criticism fromall sides with a draft ruling which wouldallow Sydney Airport to increase aeronauticalcharges an estimated 79% later this year.The body has been slammed by airlinesfor allowing such a big increase, by airportmanagement for trimming back its originaldemands and by government for the impactit may have on the potential sale price of theairport when it is privatised.The draft decision would allow theairport to raise its revenue from the currentUS$47 million a year to US$85 million perannum. The airport management had soughtpermission to lift revenue to US$109 millionannually.That proposal, made nearly a year ago,sparked an angry response from airlines,which instigated legal action. They havecontinued to fight the proposed increases,which they claim breaks a promise the airportmade that it would not attempt to recoupmoney spent on its costly improvementsfor the 2000 Olympic Games by raising usercharges.Airlines remain unhappy. They wantedincreases restricted to around 30%, farbelow the 130% sought by Sydney AirportsCorporation (SACL). In the event, the ACCChas opted to approve a figure midwaybetween the two demands.Warren Bennett, executive directorof the Board of Airline Representativesof Australia (BARA), which representsinternational carriers using the airport,expressed disappointment and said the draftdecision seems to contemplate a 79% increasein aeronautical charges.“The ACCC’s draft decision will have asignificant affect on the operating costs ofairlines. Ultimately these costs must passthrough to the air travelling public of Australia,”he said.The ACCC estimated its formula forincreases would add about US$1.06 to theprice of a return domestic ticket and around$5.30 to an international return flight.Parties were given less than a month torespond to the draft finding. Both BARA andthe SACL have made it clear they are rushingto prepare “strong” submissions to arguetheir respective cases.SACL said it sought increases inlanding charges and infrastructure usagecharges to better reflect the airlines’ useof the substantially upgraded facilities andservices.“Sydney Airport’s proposal to increaseaeronautical charges was designed to influenceairline behaviour, not affect passengerbehaviour,” said its chief executive Tony Stuart.“For airlines, the airport will remain oneof the most competitive in the world and theincrease in charges will not affect the capacityfor regional airlines to use Sydney Airport.”BARA’s Bennett suspects the rush tofinalise the new fees – final submissions aredue March 5 – is a result of political pressurefor a speedy decision in order to meet thegovernment’s timetable for privatisation ofthe airport. A draft report should have beendelivered by February 28 setting out the strategyand timing of the airport sale – expectedto be complete by the end of this year. It isexpected to involve a public float.Some government officials are privatelyconcerned the failure of the ACCC to approvemuch higher increases in aeronautical chargescould seriously affect the expected US$2.1billion asking price for Sydney Airport.Indeed, leading credit rating agency,Standard & Poor’s (S&P), promptly placedits A+ long-term and A-1 short-term ratingson SACL on a negative watch after the draftACCC announcement.S&P said the ACCC’s restriction was“likely to place some pressure on SACL’s totalrevenues and cash flows in the near term,which could weaken the company’s financialcoverage levels.”Sources from several airlines said theyare determined to mount a powerful fight toreduce the proposed fee rises.visit our web siteorientaviation.comincorporatingInflight AsiaIn addition to a selection of news, features and comment from Orient Aviation our web site provides:• real-time news updates to our published stories • breaking news throughout the industry• access to back issues• advertising details• and a feedback facility where the readers can have their sayAnd in the months to comeorientaviation.com will be adding a number of other functions to the siteMarch 01 | Orient Aviation | 27