Normal text size Larger text size Very large text size Qantas boss Alan Joyce is fond of pointing out that it's never been more affordable for Australians to fly. While this might be the case, airfares becoming drastically cheaper over the past couple of decades doesn't mean that flying is always cheap. In fact, there's a mile-high bunfight going on right now between Australia's airlines and airports over exactly who gets charged for what, who is gouging whom, and whether it all means Australians pay more to fly than they otherwise might. Airlines maintain that, ever since the country's largest airports were handed from government control to private owners about 20 years ago, the airports have gradually strangled them with higher and higher fees for the use of their runways and other facilities. The airports, in turn, say these fees are needed to fund the building of infrastructure to accommodate the ballooning number of travellers wheeling suitcases through their terminals (a number that's risen from 76 million to 159 million over the past 15 years). The airlines are simply seeking to transfer airports' profits to their own coffers, the airports say. While disputes between airlines and airports over fees are common worldwide, a few factors make the Australian situation particularly testy – including that each of our capital cities are essentially serviced by a single airport, all of which have been privatised. Nearly all airports in the US are still government owned while many major cities abroad have multiple airports.


Our two major airline companies, Qantas and Virgin Australia (which own the budget airlines Jetstar and Tigerair, respectively), say they can't negotiate with airports over fees fairly because they don't have the option of landing anywhere else. The Australian Consumer and Competition Commission (ACCC) reports annually on the airports' profits to see if they are misusing their market power, and says they need to be more closely regulated. Meanwhile, the federal government's policy advisory committee, the Productivity Commission, is currently revisiting the issue. It found, in 2012, that there was no systemic misuse of market power by the airports – but it did say an eye needed to be kept on things. Now it is examining whether or not new rules are needed to stop airports ripping off airlines – and by extension, the public. So where does the truth lie? Here's a breakdown of what you pay – and to whom – when you fly, and how that cash is being squabbled over... Taxis pay $3.60 just to pick you up at Melbourne Airport. Credit:Angela Wylie


The cost of the drop-off Before you step inside an airport, the bill starts adding up. Airports own the roads in and around their terminals and charge taxis, buses and trains for what they call “landside access”. That means they pay a fee to drive up to the terminal to drop-off or pick-up passengers, or use waiting areas, which are passed directly on to passengers. At Melbourne Airport, for example, taxis pay $3.60 per pick-up (compared to $1.50 eight years ago) while ride-share service such as Uber pay $4 and private vehicles pay $4.40. At most airports, extra charges kick in as “congestion fees” if the vehicle has been waiting for longer than 10 minutes. Australia's four largest airports (Sydney, Melbourne, Brisbane and Perth) made a combined $48 million from landside access fees in 2017 – almost double what they made in 2010. Airport parking, long-term or short-term, is expensive. Credit:Paul Jeffers


Parking your car This is where airports make between 10 and 15 per cent of their revenue, charging from between $15 and $17 for up to an hour and up to $138 for a week in their long-term car parks. It's a lucrative business too: for every dollar passengers pay for parking, Sydney Airport keeps 72¢ as profit and Melbourne keeps 60¢. Travellers can get cheaper rates at the independent car parks that pop up around airports and ferry passengers to the terminal by minibus. But some of these operators say it is hard to compete because they are being gouged on the access fees when they drive their customers to the terminal. Sydney Airport. Credit:Kate Geraghty Inside the terminal


That bottle of water you paid $6 for? The airline’s lobby group reckons most prices are 25 per cent higher at shops in airport terminals than elsewhere. Renting out space to shops, cafes and fast-food outlets made up almost a quarter of Sydney Airport's revenue last year, which was growing at a rate of 12 per cent annually. Qantas leases and operates its own terminals at Melbourne, Brisbane and Perth airports, while Virgin operates its own in Brisbane. The rest are run by the airports themselves, meaning they are responsible for providing toilets and other facilities for travellers. And how do they do? The ACCC tracks passenger and airlines satisfaction surveys that show Sydney, Melbourne, Brisbane and Perth have all maintained a rating of between “satisfactory” and just below “good” over the past 10 years, with only Perth showing a significant improvement – despite all four significantly increasing their fees. Pricey business: the tarmac at Melbourne Airport. Credit:Paul Rovere Arm doors and cross-check Airports make most of their money from airlines through what they call “aeronautical charges”.


These are fees airlines pay to use runways, parking bays, aerobridges, navigation equipment, security services and other infrastructure. On a one-way flight from Melbourne to Perth, for instance, these fees costs an airline an average of $29.20 per passenger. Here’s a break down, provided by the airports' lobby group the Australian Airports Association. Total aeronautical fees: $29.20 A trip from Perth to Melbourne would have fees of $36. The airports estimate their charges represent about 8 to 10 per cent of an average full-service domestic airfare, and about 7 per cent of the cost of an international fare. But that proportion becomes bigger for budget airlines that offer lower fares, meaning airport charges could represent 30 or 40 per cent of a discount Jetstar or Tiger ticket. Qantas says airport expenses are equal to 14 per cent of it and Virgin’s revenue compared to 9 per cent in Europe and 6 per cent in the US. The ACCC's monitoring shows that airports have increased aeronautical charges per passenger significantly in real terms (ex inflation) over the past decade: up 31 per cent at Melbourne Airport, up 59 per cent at Perth Airport, up 36 per cent at Brisbane Airport and 15 per cent at Sydney Airport. These increases across the four airports represent an additional $1.3 billion in payments from airlines over that period. While discounted airfares have fallen by 41.4 per cent in real terms over the past decade, the ACCC says they would have fallen further if it wasn't for these rising airport fees. The fees are negotiated on but the airlines say they are held over a barrel because of the airports' monopoly powers. This applies at airports both big and small. Qantas, for instance, has been locked in particularly acrimonious disputes with Canberra and Townsville airports. (From a traveller point of view, the government takes its cut as well, with the 10 per cent GST automatically applied to all fares and a $60 departure tax added to each outbound international ticket.) Cruising at altitude Sydney Airport (which is publicly listed so we have a better insight into its finances) last year made 51 per cent of its $1.4 billion revenue from aeronautical operations last year, 23 per cent from retail, and 15 per cent from property, hotels and car rental, and 11 per cent from parking and ground transport. On aeronautical services, airports are making around 40 to 50 per cent earnings before interest, depreciation and amortisation (EBITDA) profit margin, which has been fairly stable over the past decade. This puts Sydney, Melbourne, Brisbane and Perth all in the top-10 most profitable airports in the world, according to Qantas. Qantas itself had an profit margin of only 10 per cent last year – one of its most profitable years on record. So who's benefiting? Australian superannuation own about 47 per cent of the equity in our private airports, and the government Future Fund sovereign wealth investment vehicle owns about 9 per cent, according to the Australian Airports Association. Another quarter is held by private Australian investors - including some major players such as the Snow family, who control Canberra Airport - and about 19 per cent is owned by foreign investors. Qantas, meanwhile, is 43 per cent owned by foreign investors (the Qantas Sale Act caps it at 49 per cent) while Virgin is more than 90 per cent foreign owned, with Singapore Airlines, Etihad Airways, and China's HNA and Nanshan groups owning about 20 per cent each and Richard Branson's Virgin Group owning about 10 per cent. Airports in the upright position The airports argue that rising fees are needed to fund a combined investment of $10 billion in airport upgrades over the past 15 years. This work - such as longer runways for larger aircraft - has made it possible for new international carriers to start flying to our shores, which have brought lower airfares with them. (Airlines say some of the upgrades they are being asked to fund is "gold plating", in excess of what is actually necessary, and object to being asked to pay higher fees for upgrades before they're actually built.) The airports dispute any strong link between their fees and airfares. Fees contribute less than 10 per cent of domestic airfares, they say, so cutting them in half would only see fares fall by 5 per cent – if the airlines even passed it on to customers rather than keep it as profit. Meanwhile, they've also highlighted that domestic airfares have been creeping up over the past couple of years as the truce to Qantas and Virgin's airfare and capacity war holds – symptoms of a comfortable duopoly. Routes with similar passenger demand in the US and Europe have four or five airlines competing for customers on price, whereas Australia has only two companies. Are we there yet? The airlines are calling on the government to level the playing field when negotiating with the airports. They want an “arbitrator” to be established, which could step in and make a final ruling on disputes between airlines and airports over fees and other terms. Secondly, they want the ACCC to change how it monitors the airports' profits. The competition watchdog tracks only earnings from aeronautical fees and not the other ways airports make money, which they say misses the full extent of their market power and the excessiveness of their profits. The airports have warned an arbitration model could have a “chilling effect” on investment, and say that airlines already have an arbitrator they can appeal to - the National Access Regime, which Virgin used to get a better foothold at Sydney Airport back in 2005. The Productivity Commission will release its draft findings early next year. . Credit:Paul Jeffers