John Murphy (Lowe, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Hansard source

I rise to speak on Appropriation Bill (No. 1) 2007-2008 and related bills. In particular, I want to raise the matter of the demise of pricing surveillance at Sydney airport following a sequence of decisions by the Howard government. I raise this issue because of the ongoing practical implications for both passengers who purchase services from Sydney as well as corporate tenants who hold retail leases on Sydney airport land. Both airport tenants and passengers are subject to the decisions of this chamber—in particular, the price people pay for airline tickets and other airside and landside fees and charges. Everything we pay for from the moment we park our car at Sydney airport—from the airline ticket to the cup of coffee or newspaper we buy—is affected by this chamber’s decisions concerning pricing surveillance. There are two issues of critical importance to all Australians—and particularly to Sydney residents and to the people I represent who rely so heavily on our only airport—that bring me to raise this within the context of the appropriation bills. Both these issues are closely connected. These issues concern access to travel. The first issue is financial access and the second issue is geographic access.

I will not speak today about the geographic issue because there is not sufficient time, but that is connected insofar as Macquarie Bank has bought all the motorways that access Sydney airport. From the petrol bowsers to the aircraft seats, consumers pay Macquarie Bank and its affiliates and subsidiaries many times over, which is why I raise the matter of pricing surveillance at Sydney airport in this debate today. On 6 April 2006, the Howard government asked the Productivity Commission to review the existing arrangements of airport pricing regulation. In September 2006, the Productivity Commission issued a draft report titled Review of price regulation of airport services. At page 12, that review said:

... it is still too early to judge whether price monitoring, in conjunction with the Part IIIA national access regime, will:

• provide a reasonable constraint on misuse of market power by airports as the influence of the previous regulatory regime recedes; and
• foster the attitudes, trust and commercial relationships between the parties that could, at some stage in the future, obviate the need for prices oversight.

Thus, neither reversion to stricter price controls, nor dispensing with price monitoring and relying solely on Part IIIA, would be justified.

To fully appreciate the Productivity Commission’s conclusion it is necessary to review the history of pricing surveillance at Sydney airport. It is further necessary to understand how this so-called price monitoring has worked relative to the recent history of operational manipulation being attempted by the Sydney Airport Corporation Ltd. I will explain this point later in this debate in light of the recent decision of the ACCC in the Virgin Blue matter.

I note that the conclusion of the Productivity Commission report that I have just cited was published in September 2006. It is now May 2007, some eight months since the date of that conclusion. For this reason I believe it is important to revisit the issue of pricing surveillance today, particularly in light of the recent developments in the Australian Competition and Consumer Commission in the Virgin Blue decision that I referred to earlier. I will speak on this decision and its significance to pricing surveillance of Sydney airport, but first I wish to remind members of the House of the history leading to the debacle between Sydney Airports Corporation Ltd and Virgin Blue as a clear example of this government’s flawed aviation and pricing surveillance policy concerning Sydney airport.

Members of the House and the general public are aware that Sydney airport is a designated airport within the meaning of the Airports Act 1996. As noted in the 2003 annual report of Southern Cross Airports Corporation Holdings Ltd:

On 25 June 2002, the Commonwealth Government announced the sale of Sydney Airport to the Southern Cross Airports Consortium for $5.6 billion. The sale transaction was completed on 28 June 2002, at which time Sydney Airport Corporation Limited (SACL) was acquired by Southern Cross Airports Corporation Pty Limited.

This means that Southern Cross Airports Corporation is the parent of SACL. Sydney Airport is one of 17 major airports, all of which have been privatised. Between 1997 and 1998, the Howard government introduced transitional price regulation, which included a five-year cap on prices for what are called ‘aeronautical services’ at 11 of the largest of the 17 major airports. This pricing was to be capped against what is known as the CPI-X index. It is significant to note that, at that time, Sydney airport was not subject to this price capping. Instead, Sydney airport was subject to what was known as ‘pricing notification’ and ‘price monitoring’. I quote from page 248 of an inquiry report of the Productivity Commission, titled Price regulation of airport services, Report No. 19, published on 23 January 2002. It states:

Since it took over the operation of Sydney Airport, SACL has been subject to prices notification for aeronautical services and monitoring for aeronautical-related services under the PS Act for the same groups of services as the privatised airports (chapter 3). It has not had a price cap imposed but, like all declared companies, it must inform the ACCC of proposed price increases for notified aeronautical services … Additional elements include the introduction of price monitoring for some services, the inclusion of necessary new investment as a justification for price increases and the monitoring of service quality under the Airports Act.

In 2000 the Productivity Commission was asked by the government to inquire whether price regulation was required at private airports. In response, the Productivity Commission drafted the Price regulation of airport services report, which I have referred to. This report recommended what was to become known as the ‘light handed’ regulatory regime. I quote from page 46 of that report, where it states:

For Sydney, Melbourne, Brisbane and Perth airports, price caps and prices notification arrangements should be replaced by mandatory price monitoring arrangements for a probationary five-year period …

On 13 May 2002, the government announced that it had accepted the recommendation that price monitoring will be carried out for five years, commencing from 1 July 2002, and an independent review will be carried out towards the end of the five-year period to ascertain the need for future airport price regulation. It is significant to note that, in 2002, these price monitoring arrangements were not to impact on so-called regional services into and out of Sydney airport. It is equally significant to note that the Productivity Commission defines ‘aeronautical services’ as services provided by infrastructure that facilitate aircraft movements—for example, runways—and passenger processing facilities.

The current regime of pricing regulation, loosely defined, may thus be described as (1) the monitoring of charges for aeronautical and aeronautical related services; (2) notification for regional air services; (3) service quality is monitored at Sydney airport; and (4) price notification is made under the Prices Surveillance Act. Members of the House will know that the major tenants of airports are the major airline carriers, such as Qantas, and domestic carriers, including Virgin Blue Airlines. Commencing in 2003, a major commercial dispute arose between the Sydney airport lessee company, Sydney Airports Corporation Ltd, and Virgin Blue on the basis upon which landing fees, an aeronautical fee, related to the use of aeronautical or airside services—in this case landing fees.

In September 2003 Virgin Blue tabled its application for declaration of the airside service at Sydney airport in response to the issues raised in submissions on the NCC’s draft recommendation. The dispute is best described in the Virgin Blue media statement released only seven days ago:

After four and a half years of commercial conflict, Virgin Blue and Sydney Airport Corporation have reached an amicable agreement regarding domestic runway landing and take off charges at Sydney Airport.

…     …         …

We simply sought an independent view—

via application to the ACCC for declarations—

of a unilaterally imposed pricing regime which was applied to and impacted our business without the right to a normal negotiation process. Airports have the ability to dictate pricing terms and conditions upon airlines and many have.

SACL’s change to aircraft landing and take off charges from calculation on aircraft maximum take-off weight (MTOW) to calculation on per passenger basis, severely disadvantaged our business increasing our landing fees by approximately 53 percent.

I put it to this chamber that this recent example of the manner in which SACL is ‘dictating pricing terms’ with a ‘unilaterally imposed pricing regime’ is self-evident of a pricing regime that is manifestly monopolistic and shows flagrant disregard for basic regulatory safeguards that are in place to prevent exactly what the media statement notes with much authority—that is, airport lessee companies indeed have ‘the ability to dictate pricing terms and conditions upon airlines and many have’.

This brings us to the independent review of 6 April 2006, which I have mentioned, and its draft report. We are now eight months into these famous last words. Here we are, in the debate on the appropriation bills, discussing the question of how well the government has faired in responding to the question, posed by the Productivity Commission’s draft report of 6 April 2006, of whether we are now in a position:

... to judge whether price monitoring, in conjunction with part IIIA—

the national access regime—

will provide a reasonable constraint on misuse of market power by airports as the influence of the previous regulatory regime recedes ... and foster the attitudes, trust and commercial relationships between the parties that could, at some stage in the future, obviate the need for prices oversight.

I put to this House that, but for binding declarations by the ACCC in a formal dispute process, Virgin Blue would be out of pocket with up to 53 per cent increases in landing fees—fees which inevitably would have been forced onto the passenger. I further put to this House that on the contrary, thanks to this government’s laissez faire attitude towards giving Macquarie Bank carte blanche on pricing and the way it charges for landing and other fees, an attitude of manifest distrust has emerged where SACL has done everything in its power to drain moneys from both tenant and passenger in the most underhanded way. The result is self-evident in the Virgin Blue debacle. It ought not come down to all-out litigation and quasi-judicial determinations of the kind seen in the ACCC that place an entire industry in jeopardy, including the servicing of our domestic fight services for Australia. The Virgin Blue case is evidence enough that we are certainly now in a position to judge whether price monitoring alone is sufficient. The answer is a resounding no. I therefore call upon the Howard government, in light of the demonstrated failure of price monitoring and its so-called light-handed approach, to rediscover and implement true pricing surveillance for Sydney airport.

I was elected to federal parliament on the issue of aircraft noise. I have a keen interest on behalf of my constituents in relation to the operations of Sydney airport, particularly since it has been privatised and bought by Southern Cross consortium and bankrolled by Macquarie Bank, who, I have said many times in this chamber, are only interested in seeing Sydney airport operate as a car park and a shopping centre, to the detriment of people living in the inner west particularly.

I would like to raise the Australian National Audit Office report No. 29 2006-07: Implementation of the Sydney Airport Demand Management Act 1997. On page 17 of that report, paragraph 15, it says:

The SADM established a system of penalties for unauthorised aircraft movements so as to protect the integrity of the movement limit, and establish clear guides for airport users as to the range of sanctions that may be levied in the form of an infringement notice or civil prosecution.

At paragraph 16 it goes on:

There is evidence of a high number of unauthorised aircraft movements (movements without a slot and movements outside the slot tolerances) having occurred at Sydney Airport. However, since the scheme commenced in 1998, no infringement notices have been issued to operators or other penalties applied.

At paragraph 18 it says:

Further, the SADM Act requires Airservices Australia to monitor and report breaches of the movement limit to the Parliament through its Minister. However, reliable and accurate records do not exist to evidence past monitoring of compliance with the movement limit, and support the reports made to Parliament.

Here, again, Airservices Australia, which is responsible for this, is not doing its job. I take this opportunity this afternoon to call on the minister to require Airservices Australia to provide information in relation to these breaches so that the parliament, principally the Howard government, can do something to redress the breaches that are occurring every day at Sydney airport.

I have been speaking for years on behalf of my constituents about the failures also of Airservices Australia to fully implement the long-term operating plan at Sydney airport. The plan was introduced by the Howard government to alleviate noise for people living around the airport—particularly those people who live to the north of Sydney airport—and we were promised that, under the long-term operating plan, constituents in my electorate immediately to the north of Sydney airport would receive 17 per cent of all air traffic movements to and from Sydney airport.

It is with profound regret that I report today that the very latest statistics for March available from Airservices Australia indicate that we are receiving 31.5 per cent of all air traffic movements to and from Sydney airport. So my constituents and all the people of the inner west of Sydney airport are being bombarded with dirty, noisy planes flying over homes, schools, child-care centres and nursing homes when, more appropriately, the planes should be flying over the water and cow paddocks, and they would be if the government did something about giving Sydney a second airport to give some relief from Sydney airport. It is disgraceful that under the master plan for Sydney airport, which the government has signed off on and which has been readily embraced by Southern Cross and Macquarie Bank, there is going to be massive expansion of Sydney airport over the next 20 years. We are going to receive double the number of air traffic movements and we are going to receive within the foreseeable future up to 500,000 air traffic movements in and out of Sydney airport.

That is a disgrace. After all the questions I have asked exposing the fact that the long-term operating plan for Sydney airport has not been properly implemented and that the people that I represent are at the moment unfairly carrying the burden of something like double the air traffic movements promised and getting close to a third of all the air traffic movements in and out of Sydney airport, it is a disgrace that all the transport ministers I have pursued have given up. That is disgraceful and it betrays the very people who elected the Howard government in relation to air traffic noise. I take the government back to its original policy that the coalition produced before the 1996 election. It was called Soaring into Tomorrow, and they promised that they would fix aircraft noise and that Sydney airport would not be sold until the problems associated with aircraft noise at Sydney airport were fixed.

The government has failed on both counts because we continue to receive twice the amount of noise that we were promised in the inner west of Sydney. Worse, the government has announced that there will be no requirement for a second airport in the next 20 years, and has flogged off the airport, which has been used by Macquarie Bank as a milking cow. It is little wonder that we had the unedifying spectacle last week of learning that the Chief Executive Officer of Macquarie Bank, Mr Allan Moss, is on a salary of about $34 million; it is because Sydney airport, amongst other funds, is operating so well— (Time expired)

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