How much would it cost travellers to settle the impasse at Brisbane Airport over the funding of a new major runway?
According to Brisbane Airport Corporation it would amount to an extra 35 cents per domestic passenger this year rising to $1.80 in 2017 while international travellers would pay no more than $3.50 extra on a flight to or from Brisbane .
The additional 3300 metre long parallel runway would be built on what are very unstable waterlogged soils that barely rise above mean sea level.
This requires massive amount of dredging and preparation with a new base which would take up to four years to render sufficiently strong and stable for the actual pavement of the runway was laid down, with a target date of mid 2017 for that final stage of the project to get underway for completion by late 2020.
But when completed Brisbane would get, or so it is promised, an end to congestion and delays that can sometimes remind travellers of Sydney Airport on a good day and also get new air services or an increase in the frequency of existing services.
All at a cost of $1.3 billion, which BAC says it can’t afford to finance and build without this advance contribution from the airlines, which are refusing to pay, well, objecting to suggestions that they should pay.
The airport, now largely owned by Australian superannuation funds, is seeking about 25% of those costs from the airlines, up front from now and during preparation and construction.
It makes no bones about the need to deliver reliable dividends to its ‘mum and dad shareholders’ but says that :
The new runway will be funded by a mix of retained earnings, debt, and modest increases in airline charges during the construction period. In our case, the partial contribution for the construction of runway system set by BAC is a modest incremental increase of only an extra 35 cents per domestic passenger on the landing fees. It will increase gradually, to at the most, an extra $3.15 per international passenger or an extra $1.80 per domestic passenger by 2017 (during the construction phase).
The price increase to airlines (passed onto passengers) for the new runway is modest, and significantly lower than Airline fuel levies, which airlines seemingly have no difficulty in passing on with no material impact on demand. We believe the approach to pricing is fair and reasonable, the actual price increases modest, and at a level such that there would be no effect on passenger demand.
This disagreement with the airlines has been going on for some time, but the issue is getting more prominence as the drum beat of the rising SEQ economy becomes louder in the jungle.
By not just getting on with it and giving the south-eastern corner of the state what it wants , which is the instant gratification of hassle free access to Brisbane airport flights, BAC is seen as an obstacle to the Queensland miracle.
And is most unhappy with that depiction.
The situation is also not instantly fixable. This is an engineering problem that money and machinery can solve in seven years, if everything works as intended and there are no massive floods or cyclones.
The Australian Airports Association, to which airports large and small refer finance issues, says there is a proven funding model that has been in use since 2002 which ought not be tampered with.
The AAA’s CEO Caroline Wilkie says the model, in which infrastructure needs can be funded by a building block approach, has been used for projects totaling $9 billion by the various major airports of Australia in the last 10 years.
So why are the airlines so stubborn about such things? It could be put down to the 20 cents multiplied by 200 passengers on each of 200 flights a day per 365 days a year syndrome which obsesses low cost and full service carriers alike these days.
There is no recurring saving too small not to kill for. Um, go for.
If it turns out that the airlines and Brisbane Airport can’t agree on the proposed major runway pre-payment contribution package the problem can be referred to the ACCC for resolution.
But the ACCC doesn’t appear to have the power to force any airport to build anything that its management says it hasn’t the money to build.
Which leaves the curious traveller casting around for other explanations as to why the airlines might want to delay or impede the opening up of Brisbane airport to more flights.
Maybe the answer is just that, more flights. Who benefits the most from blocking more flights is the carriers with the most flights today. Which is the Qantas Group and Virgin Australia group flights. Who would of course, also like more of each other’s prime time slots at Brisbane, or Sydney, or anywhere that congestion, and thus scarcity driven higher yielding fares, become a factor.
Maybe that answer is however also wrong, or partially wrong. Airline business models are generally successfully built on increasing numbers of flights, as well as yields, ie, they want it all, and there isn’t much evidence that shrinking an airline to make it profitable actually works for very long in a game where there are few constraints on competition.
Except airport access. So maybe that answer is right after all. Maybe there is an underlying Brisbane line strategy in play here, not just a line in the sand strategy.
If there is such a strategy at play at Brisbane Airport it will soon change from being a case of everyone in SEQ versus BAC, to everyone including the airport being versus the airlines, and the ACCC will give the airport the ‘contribution’ it wants from airport users, if the established airlines remain stubborn.