New research released today by the Australia Institute shows that airports in Australia are exploiting their monopoly power to make excessive profits, and that this major issue is being overlooked by the Productivity Commission.
Over the Christmas holiday period, Australia’s airports are likely to be busier than ever. And as a result, passengers are going to be ripped off more than ever.
- Excessive profits are estimated to be running at well over $1.2 billion per annum across the four main airports; Sydney, Melbourne, Brisbane and Perth.
- The Productivity Commission report overlooks returns on assets required to operate an airport—like cash, buildings and runways—which when considered shows significant profits:
- $112.6 million to Perth airport owned by Perth Airport Pty Ltd (58.6% return)
- $328.9 million to Brisbane airport owned by Brisbane Airport Corporation (45.3% return)
- $438.4 million to Melbourne & Launceston airports combined, both owned by Australia Pacific Airports Corporation (110.4% return)
- $665.3 million to Sydney airport owned by Sydney Airport (on zero real assets, making profits incalculable as a percentage)
“As we have seen across other industries like banking, companies that hold monopoly power will, more often than not, end up ripping customers off,” says David Richardson, senior research fellow at the Australia Institute.
“Our research shows airports in Australia are exploiting their monopoly advantage and making staggering returns, well above the costs associated with running an airport.
“The Productivity Commission’s report is filled with contrived arguments designed to justify airports’ high profits, saying profitability is within ‘reasonable bounds’, but even a cursory glance shows this is not the case –their financial accounts shows excessive profitability and suggests major rip-offs are occurring.
“Sydney airport, the worst offender, made a profit of $665 million in 2018 despite being in debt for more than their real assets are actually worth.
“Any assessment of profitability should look at returns on the assets required to operate an airport—like runways and buildings—which the Productivity Commission has not done in this case.”