The ACCC today released a report on fuel throughput levies at privatised airports. The report recommends stricter forms of prices oversight for aircraft refuelling services provided by privatised airport operators.
As part of the economic regulatory framework for newly privatised airports the Treasurer, the Hon Peter Costello MP, directed the ACCC to undertake formal monitoring of aeronautical related services at 12 airports, pursuant to section 27A of the Prices Surveillance Act 1983. Aircraft refuelling services are one of the services the Commission is required to monitor. The Treasurer has directed that the Commission report to him on its monitoring activities following the end of each financial year.
In line with this requirement, and following concerns expressed by airlines and oil companies in relation to fuel throughput levies introduced by Brisbane Airport Corporation Limited (BAC) and proposed by Westralia Airports Corporation Pty Ltd (WAC), the ACCC released its fuel throughput levy monitoring report.
Recently Brisbane Airport introduced a new charge for aircraft refuelling services in the form of a fuel throughput levy of 0.4 cents per litre. The levy will raise some $2.0 to $2.5 million per annum, increasing Brisbane Airport’s revenue from aircraft refuelling services by around 300 per cent.
Similarly Perth Airport has proposed a levy of 0.5 cents per litre at its international terminal. This will raise around $700,000 per annum and will increase Perth Airport’s revenue from refuelling services by some 200 per cent.
The ACCC’s report provides information on the levies and provides a detailed assessment of issues relevant to the price increases. The report reaches the following conclusions.
- Introduction of the fuel throughput levies at Brisbane and Perth Airports will significantly increase the price of refuelling services.
- The price increases are not justified in terms of increases in costs or through offsetting reductions in other charges.
- There is a strong case that airport operators have market power in the provision of refuelling services.
ACCC Chairman, Professor Allan Fels, said today, "When considered in light of the lack of cost related justification for the levies, or offsetting reduction in charges, there is a strong case that in introducing fuel throughput levies airport operators have taken advantage of market power that they have in the provision of aircraft refuelling services
"In light of the report’s conclusions the ACCC has recommended that stricter forms of prices oversight should be considered in relation to aircraft refuelling services."
The report considers what forms the stricter prices oversight should take, outlining a number of options and the advantages and disadvantages of each of them. The report recommends that refuelling services be included within a CPI-X price cap.
The report also considers a number of options for implementation of a CPI-X price cap for refuelling services. It does not make recommendations in relation to these, but concludes that there do not appear to be significant issues which would prevent effective implementation of the report’s recommendation.