The Australian Competition and Consumer Commission today issued its decision to allow introduction of a "passenger facility charge" of $4.09 per arriving and per departing domestic passenger at Adelaide Airport. A charge of $1 and $6 was determined for regional and international passengers respectively.
"This decision is in response to an application by Adelaide Airport Limited to pass costs of a multi-user integrated terminal" through the price cap," Acting ACCC Chairman, Mr Allan Asher, said today. "The MUIT proposal combines the functions of the currently separate domestic and international passenger terminals in a new common-user terminal building.
"The $4.09 domestic charge settled upon for this decision compares to AALs request for a charge of $4.45. The difference arises from the rate of return methodology used and the allocation of costs between aeronautical and non-aeronautical functions of the MUIT. AAL proposed a pre-tax real weighted average cost of capital of 8.97 per cent. This decision employs a figure of 8.00%, a rate that provides shareholders with an expected 15.61 per cent (post-tax nominal) rate of return on their equity.
"The ACCC made its decision following a rigorous public consultation process, which involved the release of a draft decision in May. A range of interested parties responded to the draft decision and the ACCC took these submissions in consideration in forming its decision. The South Australian Government, in particular, expressed its support for both the MUIT and its associated charges.
"The charge allowed in this decision is higher than that which the ACCC proposed in the Draft Decision. This occurred because in August of this year AAL advised the ACCC that it did not meet its original passenger forecasts for the 1999 financial year and that the growth in passenger numbers in future years would also be lower than originally expected. The adoption of forecasts of lower passenger numbers meant that the cost of the MUIT would be recovered over a fewer number of passengers, meaning the price per passenger increased. Mindful of the significance of passenger forecasts on aeronautical prices, the ACCC has recommended that reviews of passenger forecasts be implemented as part of the process of determining the charge over time.
"The role of the ACCC in determining prices at Adelaide Airport is limited to the aeronautical functions of the airport. A proportion of the cost of the proposed MUIT relates to various non-aeronautical commercial activities. These costs are not being recovered through the charge. Their recovery through other charges is a matter for commercial negotiation between AAL and airport users."
"This decision is in response to an application by Adelaide Airport Limited to pass costs of a multi-user integrated terminal" through the price cap," Acting ACCC Chairman, Mr Allan Asher, said today. "The MUIT proposal combines the functions of the currently separate domestic and international passenger terminals in a new common-user terminal building.
"The $4.09 domestic charge settled upon for this decision compares to AALs request for a charge of $4.45. The difference arises from the rate of return methodology used and the allocation of costs between aeronautical and non-aeronautical functions of the MUIT. AAL proposed a pre-tax real weighted average cost of capital of 8.97 per cent. This decision employs a figure of 8.00%, a rate that provides shareholders with an expected 15.61 per cent (post-tax nominal) rate of return on their equity.
"The ACCC made its decision following a rigorous public consultation process, which involved the release of a draft decision in May. A range of interested parties responded to the draft decision and the ACCC took these submissions in consideration in forming its decision. The South Australian Government, in particular, expressed its support for both the MUIT and its associated charges.
"The charge allowed in this decision is higher than that which the ACCC proposed in the Draft Decision. This occurred because in August of this year AAL advised the ACCC that it did not meet its original passenger forecasts for the 1999 financial year and that the growth in passenger numbers in future years would also be lower than originally expected. The adoption of forecasts of lower passenger numbers meant that the cost of the MUIT would be recovered over a fewer number of passengers, meaning the price per passenger increased. Mindful of the significance of passenger forecasts on aeronautical prices, the ACCC has recommended that reviews of passenger forecasts be implemented as part of the process of determining the charge over time.
"The role of the ACCC in determining prices at Adelaide Airport is limited to the aeronautical functions of the airport. A proportion of the cost of the proposed MUIT relates to various non-aeronautical commercial activities. These costs are not being recovered through the charge. Their recovery through other charges is a matter for commercial negotiation between AAL and airport users."