Sydney Airport, just the eastern part of a two airport monopoly? Commons photo

The damage that could be done to the NSW economy by allowing the new 2nd airport to be built at Badgerys Creek to be owned by the interests that own the existing Sydney Airport have been emphasised by the Australian Competition and Consumer Commission chairman Rod Sims at a conference today Monday.

His wide ranging review of the risks of state privatisation of public assets when the deals suppress competition went well beyond airports, and especially to the generation and distribution of electricity.

Mr Sims wasn’t in one sense saying all that much that hasn’t been raised in public debates about the sale of state sanctioned monopolies since the early 90s, but he was underlining the urgency of addressing the problem as a massive new wave of public asset sales builds up in the states in response to policy leads by the Abbott Government.

The outlines of the speech appear on the ACCC site here, however a more detailed exploration of the competition and consumer authority’s concerns are found in this AFR report, which appears to be outside the paywall.

Unfortunately there appears in law to be little that could be done by consumers, or the airlines, or Federal or State governments, to undo that part of the 2002 sale deal for Sydney Airport which gave its owners first right of refusal to build a second jet airport in the Sydney basin.

While each of the widely separated airports will have its own natural market sphere, there will be an overlap driven by the curfew free status of the site at Badgerys Creek, and competitive offers to airlines in terms of passenger servicing charges which may be reflected in consumer competition that would make sense to passengers for whom the difference in access times ot each airport might for example be less than 40-60 minutes.

Or rather, there would be such a benefit to the NSW economy, if they were owned by separate competing companies.

The idea of being really seriously screwed over electricity prices by ‘poles and wires’ privatisation in NSW might just elevate the whole issue of public asset sales that suffocate competition to one that demands effective political intervention, in which case ways might be found to discourage single company ownership of the two Sydney Airports.

As Mr Sims indicates, there are instances where state owned assets have been sold and competition survived and thrived, in Victoria, and in the case of Qantas and TAA.

However the merging of TAA with Qantas, and the subsequent sale of a strategic stake in Qantas to British Airways prior to the eventual float of the company in 1995 had two things going for it the Sydney Airports situation doesn’t.  The airline assets were not sold into a monopoly market, because there was an Ansett competitor. And the regulation of the domestic industry into an Ansett/TAA (Australian) duopoly had also been ended by the deregulation of that market in 1989.

The battle ground that resulted was one in which new entrants could thrive or perish. Or sell out. Compass and Compass II perished, as did OzJet, while Impulse sold out to Qantas and Virgin Blue, now Virgin Australia, became a serious and enduring competitor.

Those pro-competitive settings do not really exist for Sydney Airports, nor NSW electricity poles and wires.

Crunch time for consumers, and airport dependant enterprises likes airlines, and retail tenants, is coming over the horizon.

Whatever Treasurer Hockey may say if he can be tempted into a discussion of the perverse risks of public asset sales, any promise of proper regulation and consumer protections needs to be something completely different to the failure to protect existing users of Sydney Airport despite all the wishy washy and ineffective undertakings made in the aftermath of the $5.4 billion sale 12 years ago.

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