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Mar 6, 2017

There is more to the Sydney Airport ‘rip offs’ than costly parking

The annual ritual of having monopoly services overcharging rubbed in the face of airport users is upon us again

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

An Emirates A380 no doubt full of Qantas customers, at Sydney Airport

Opinion Calling the world’s greatest Federal Treasurer, Peter Costello. Hello Mr Costello. Your greatest ever deal has just run over the toes of Sydney airport users again. What do you have to say Mr Costello?

It’s that time of year of course when the ACCC annual report into the performance of Australia’s four largest privately owned airports reminds us of the absolute genius of politicians selling a publicly owned asset into the hands of private monopoly owners so that they can screw everyone who uses them because there is no competitive alternative.

The only thorough report into the ACCC’s findings in the media as of this hour is in the Sydney Morning Herald and it concentrates on car parking, since everyone who uses the privately owned rail stations under its terminals pays a gate fee equal to many of the one way bargains offered to Australian cities by Jetstar or Tiger.

You can read the original ACCC report here, but Granny has done the hard work for the time poor in its coverage. This is not just about Sydney, Melbourne and Brisbane airports, but the mindset shared by the Coalition and Labor parties when it comes to short term privatisation profits versus the economic future of Australia.

In a tragic sort of way, its the same mindset that totally gutted the national benefit from the development of liquified natural gas and mishandled the privatisation of the the Telecom monopoly and contributed to crippling access to cheaper, and faster, broadband as well as telephony.

We don’t do competition very well. And some of our highest profile supposedly red blooded proponents of business competition, like Dick Smith, want the country to shut itself off in dark room anyhow and revert to the economic primitivism of the Menzies and Fadden era, which was briefly of use to the national interest in the early to mid-1950s.

Today’s news is also a reminder that the owners of Sydney Airport want ‘us’, including the victims of their charging regimes, to subsidise through public funds their exercising a first right of refusal to own and operate a 99 year lease on the only other jet airport greater Sydney is likely to ever get, at the Badgerys Creek site.

This would be an intolerably stupid business plan in most of the free world. But not in ‘oi oi oi’ land. There is a good chance they will get every dollar they want, and we can enjoy being robbed blind at whatever Sydney airport we use in future.

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31 thoughts on “There is more to the Sydney Airport ‘rip offs’ than costly parking

  1. comet

    Even though Sydney Airport is pretending it might walk away from its options at Sydney West Airport, we know it won’t.

    It will be back. It will own Sydney West and extend that monopoly at any cost.

  2. Deano DD

    Some businesses should have never been privatized
    KSA is a no-brainer, as it is a monopoly, but the pollies tell us that a private operator will be more cost effective, so why couldn’t the government have employed a management team or company with a base pay plus incentives to run an efficient operation at KSA whilst still addressing the needs of passengers, airlines and safety ?

    Every time the government offloads an asset (company) we all end up paying a price
    Banks
    Utilities
    Insurance
    Etc
    The only exception may be telecommunications (Telstra), however much of the savings were on the back of new technology

    This is primarily because
    Lets look at a power company that the government owns
    Run by the government, it’s duty is to provide reliable to the consumer
    So long as it breaks even, everything works, if it provides a small profit (after it has paid for ongoing upgrades and maintenance) then that is a small bonus to the government

    Ok so the government now decides that it needs cash to build new roads or something and makes the decision to offload the power company, tenders and bids go out and a sales price is reached and the asset is sold

    Here is the problem
    Not only does the new owner need to continue to supply the power, but
    They need to pay off the loan they took out, plus interest
    So your power bill has to rise from $500.00 to $600.00 (perhaps in increments rather than in one hit) to pay for the buying of the business
    Part of the rise may in reality have been done 1-2 years prior to the sale, both to make the power company look as though is was making money as well as to “sell” the idea of the sale to the public (power is getting too expensive, better we sell to private company or it will only get worse)

    The other thing that pushes prices up is shareholders in the company that now owns the power company
    They want shares to rise continuously and get dividends
    So now your $500.00 bill has exceeded $600.00 and is now up around $700.00

    While the new owner has jacked up prices, they cut back on staff and maintenance and provide a sub standard service

    Sound like Maq owning KSA ?

    Some businesses in the national interest should be nationalized again
    For example
    If the government were to buy back Qantas
    The $500 million profit could buy heaps of shiny new aircraft and re-open some routes that have fallen away, perhaps even give better service and roomier seating
    Lets look at that $500 million profit
    This equates to around $11,000.00 PROFIT per aircraft per day (assuming profit is all from Qantas, not Jetstar)
    A government owned Qantas would only need to break even to be a success
    Flood China with new services and bring plane loads more tourists who spend money here in Australia
    Buy back KSA and keep fees in check and encourage even more tourists

    It is bad enough that we tax the crap out of inbound tourism, but private companies needing to look after shareholders are also raping them
    This should be in the national interest
    Tourists = jobs and GST revenue

    Look also at what happened to the cost of every ones insurance when they all de-mutualized
    Look at what happened when government banks (who kept the private banks in check) were sold
    Globalism is failing and it’s time we followed the lead of Trump in the USA and started looking after our own citizens ….

    1. Dan Dair

      Deano DD,
      There’s a hell of a difference between improving the regulation of and better managing the infrastructure of, your own nation,
      and international trade protectionism & tariffs.

      Saving the nation from the short-termism of pollies or the dividend-chasers who buy-out government monopolies, would probably be a good thing.
      The problem, IMO, is for state-owned entities to identify the level of service required & then to provide it at a cost-effective/profitable price
      & also,
      to maintain a ‘competitive-edge’ against other businesses and to ensure that staff remain committed to continuous-improvement & don’t just become ‘time-servers’, as can be the case with government occupational-positions.?

      If Australia was to try to emulate the Toddler-in-Chief by protectionism, I fear it would cost Australia far more than the USA, mostly due to the vastly bigger population of the US. Their domestic/internal market is not far off self-sustaining due to their population & yet, substantial numbers of farm & domestic labour are immigrants, because they will work hard for the available wages. White, lower-class US citizens are much less keen on taking those jobs.!
      If DJT kicked-out those doing these ‘menial’-tasks, it would become necessary for an ‘underclass’ of white-folks to do this work (or else it just won’t get done) & the president will be unlikely to get the votes next time around of those ‘forced’ by such changes, to take-up these poorly-paid jobs.?

      Where would Australia get it’s own ‘seasonal’ agricultural labour from if it closes the door to foreigners coming in on ‘working’ visas, just as an example.?

      The ‘trick’ is to make the best use of internationalism, because it’s more profitable than protectionism.
      But if you’re failing in the international markets, you’ve got the wrong person in charge.?
      So change the leader (of the country or the business) & not the system.
      If your leader is bad at internationalism,
      why would you imagine they’d be any better at protectionism.?

  3. Jacob HSR

    NSW government should buy 51% of SYD airport. VicTrack owns the railway tracks in Victoria, the NSW government should do the same with SYD airport.

    The ALP decided to own the NBN so why can they not own SYD airport? Most people in NSW would jump for joy if the NSW ALP made it a policy.

  4. Jacob HSR

    India has done the same insane thing! Privatised DEL airport and banned a new airport from being built within a 100 km radius!

    Who came up with this “first right of refusal” rubbish? It is against the principle of free markets.

    I was convinced a few years ago that airports should be owned by the state they are in if the federal government does not want to own airports. It would also create competition between the states to have lower landing fees. Who owns the international airports in USA?

    1. old greybearded one

      Howard for his mate Moore-Wilton who jumped ship to Macquarie airports.

  5. George Glass

    The privatization of Sydney and Melbourne airports was probably the most idiotic decision of the Howard government,right up there with the invasion of Iraq.And I’m a conservative voter.Both airports function now as car parks and food halls that happen to have runways attached.Investment on aviation infrastructure,ie runways navigation facilities etc. has been approximately zero since privatization, apart from relatively trivial taxi way upgrades to accommodate the A380.The last major aviation infrastructure in 20 years was the too short ,too close,displaced threshold runway 16L/34R in Sydney.A cockup from day 1.It is not possible to overstate how pathetically inadequate Australia’s aviation infrastructure is.Look at what Changi is doing.Makes you weep.The ironic title “The Lucky Country” has never been more appropriate.Fat dumb and happy is just as applicable. Thank God for Gina Rheinhart and Twiggy Forrest et al or this country would be stuffed.

    1. comet

      But George, your favourite political party is about to do it again at Sydney West Airport.

    2. Cantbeeffed

      Those car parks and food halls keep the airport terminal from being a shed. What this debate overlooks is the rise of low cost carriers (LCCs) and their impact on not just air travel but airports. Low cost carriers don’t want nice terminals with nice facilities, they just want a roof to keep the rain of whole the oinks wait for their plane. They don’t want to pay airports a cent, and just want airports to provide the absolute bare essentials. The problem is the LCC partners want more from the airport, and the airports also have to cater to the legacy carriers who are prepared to pass on more for their passengers.
      Your claim about lack of investment in aviation infrastructure is complete bullshit, capexv since privatisation had skyrocketed. There are a number of new runways at capital cities, runway, taxiway and apron overlays, new terminal expansions.
      This continued comparison to Asia by commenters is utterly disingenuous. Asian governments have high population densities which greatly reduce the per capita cost of infrastructure, they can ride roughshod over community concerns on noise, lots of amenity and pollution, environmental damage, not worry about political costs etc. Additionally, many of them are international hubs with the big tail logos and volumes that come with it. Even or biggest airport, Sydney is just a domestic hub and end point. Just imagine what it’s like for Adelaide, Gold Coast, Cairns, Townsville, Launceston etc.

  6. PaulM

    Parochialism will out. While you discuss the monopoly price gouging at KSA, ABC Radio National and The Age have pointed out that Melbourne (Tulla) airport, and those in Perth and Brisbane are equally into the money pot with their profit margins on parking and other charges.

    To the litany of privatisation disasters you could have added the State electricity systems. The most egregious example of which was the Olsen Liberal Govt in SA turning down a proposal for an interconnector with NSW, to augment that with Vic, so that the sale price of ETSA would be maximised. We’ve seen how well that idea worked out, and the current Federal Govt has the gall to blame SA’s current energy woes on the current Labor Govt!

    The common thread here is that the politicians who make such appalling decisions are usually long gone when the chickens come home to roost (attention Tony Abbott, think about this when your northern beaches electorate is diminished in size by the effects of climate change 20 years hence)

  7. comet

    Psychologists say that when you meet a new person, your first impression is set in stone within a few seconds, and is thereafter difficult to change. First impressions are everything.

    So back to airports… When you fly to a new country and arrive at the airport, you’re first impression of the airport becomes your first impression of the country.

    This is why the grand airports of Asia are so grand. Incheon. Changi Beijing. Hong Kong, etc. It’s all about leaving a good first impression.

    This is the sort of thing that private companies have no interest in. You get a lousy experience at Sydney Airport, and it is tarnishing Australia’s reputation. Sydney West will end up another dull privatised carpark and mall. And shoddy at that.

    1. Cantbeeffed

      The standard of privatised airports is much better post-privatisation. If you want awful airports, go to the US where they’re all public utilities. Privatisation can have its downsides and needs to be done properly, but the public sector is crap at investing in its assets in this country.

      1. Yes No Maybe

        George said “Thank God for Gina Rheinhart and Twiggy Forrest et al or this country would be stuffed.” I digress but do you really think that Gina and Twiggy own their resources that their companies dig up? I’d rather nationalise the miners rather than the airports.

      2. comet

        @ Cantbeeffed: You could cite some pretty awful publicly owned concert halls in the US as well. But when a government wants to build something grand, we get the Sydney Opera House.

        Our biggest airports – where the most tourists arrive (especially Sydney) – should be monuments. The terminal should impress. They carry the reputation of the country.

        All the grand airports I mentioned – Incheon, Changi, Beijing, Hong Kong – are government owned.

        I could also add Kuala Lumpur Airport to the ‘grand’ list, as it is very grand, though it’s monument status is diminished by departing planes going missing, arriving planes being blown up, and passengers getting attacked with chemical weapons in the departures hall.

        1. Cantbeeffed

          Comet, Australia is not Asia. Our government isn’t made to run a business, given both our political system and the intensely risk-averse nature of our public sector. Just look at the disaster that is the NBN. Plus the Sydney Opera House was a success despite the best efforts of government to screw it up right royally.

  8. Dog's Breakfast

    Economic rationalism at it’s finest Ben. Actually, Costello did many worse things than that, his legacy lives on like a millstone around our necks.

    Economic rationalism is irrational. This is just one of many examples.

  9. zut alors

    There must be an answer to this: who, in their right mind, parks at an airport?

    1. Sean

      Zut, it seems there’s a heap of people who are happy to sit in traffic for longer than it takes to take public transport to the airport, often just to drop someone off. It is such a performance within the airport that they do wind up parking and paying through the nose. They seem to think that their lost time and stress isn’t worse than the costly privilege of setting foot on the diamond studded airport stations (currently $13.80 one way, on top of the standard fare).
      A bit of advice if you are mean and not averse to a walk. It is possible, in fact quite easy to walk to the Sydney International and Domestic terminals from nearby train stations. For Domestic, get off at Mascot station. It takes about 25 minutes, though I found that might vary with whatever is going on with building works around the terminal precinct. It’s easy to map online.
      For International, it takes 20 minutes or so. Get off at Wolli Creek station, walk to the highway, cross into the park by the river, follow the bike path to the Marsh Street bridge over the river. Cross over and loop back and under the bridge (Google Maps doesn’t know this bit), you will see an entrance to the airport in front of you, be careful crossing the perimeter road (even though it’s a marked crossing) and walk up to and under the parking station to the terminal. It is all good quality formed tracks so even with a biggish wheelie bag it’s all good. Congratulate yourself on getting a bit of exercise and use the money kept from the greedy clutches of Mac Airports to buy y’self a drink (on arrival, not at the airport obviously).

      1. Ben Sandilands

        PLEASE PLEASE No-one should attempt to follow Sean’s advice about reaching Sydney International on foot from Wolli Creek station. The risk of death or severe injury at the perimeter road, despite the marked crossing, is too high to accept.
        The ALTERNATIVE for the really determined would be to get dropped off at one of the near-airport hotels, loiter in the lobby, and then take the free hotel shuttles that regularly go to the international and domestic terminals. (At least they were free last time I was at two of those hotels. There may be a charge.)

        1. Sean

          Hi Ben, I was unclear about that bit, I think. I’m not talking about crossing the airport external road (Marsh St, Airport, Qantas and Joyce Drive). I agree it’s far too dangerous, and anyway I don’t think there are any marked crossings in the area. To be clear, I meant: cross the Marsh St bridge on the western footpath, then once over the river, turn hard left and follow the path around and under the bridge, and follow the path toward the airport. It is signposted though not well. The “perimeter” road I mean (maybe that’s the wrong word, really an exit road?) is inside the fence, two lane, one way and it’s the same as going to cross a pedestrian crossing on any suburban road, i.e. be certain they are stopping before stepping out. I’ve had no trouble with that. I’ve done both the walks a few times each and the only problem was getting around various building works at Domestic. Thanks for picking up my confused text.
          I like your near-airport hotel fix, too.

  10. 3 Policy options

    Only one thing worse than a public monopoly and that is a private one. Some investigation should go into how Macquarie Investments got the clause on first right of refusal into the KSA sale. Maybe it is more than mere stupidity. At the very least, the Government cannot let any corporation have a double facility monopoly in a modern city – we would be an international laughing stock. So come on Government, apply conditions that make it unattractive for Sydney Airport to exercise its option and finally make a good competition decision!

    1. Dan Dair

      3 Policy Options,
      It anti-competitive & presumably therefor illegal.
      If it’s illegal, it can not then be enforced by the owners of KSA & consequently the government ought not to have to offer BCA to Macquarrie group at all;
      However the Competition Commission don’t appear to have any interest whatsoever in examining it, for the greater-good of the nation.?
      (which is actually what they were created to do.!)

  11. klewso

    I love the smell of privatisation in the mourning.

  12. comet

    There should be a corruption inquiry.

    Which corporations handed the government bags of cash ‘donations’?

    Which members of the government were given cushy well-paid jobs by the airport operator? There’s always a money trail. In this case I think it’s quite blatant.

    1. Dan Telet

      Has there ever been a privatisation that was not corrupt in some way?

  13. AR

    And, despite these terrorist terrified times, the commercial imperative at SKSA overrides every aspect of Customs/AQS that disrupts the customer throughput, once known as passengers.

  14. Andrew McLaren

    Remeber when Sydney Airport wanted to build a huge shopping mall onsite? It wouldn’t have been connected to the airport function in any way, it was just a shopping mall – but not subject to local planning regulations because it was om Commonwealth owned land. Fortunately that idea was knocked on the head, but it reveals the hyper-opportunistic mindset of Sydney Airport corporation. They’ve gouged us in a thousand other ways.

  15. Ian Fraser

    Ben,
    Here, here – keep up the commentary until the Feds really listen.
    I think there is an interesting parallel between KSA/SYD and TCL/CityLink and later PPP’s.

    For the Airport Rail Link to KSA, it was done as a PPP with a payback period for the private component dictated by banking loan tenors. In other words, it had to be paid back over a shorter period than really makes sense in an overall economic context. The same with toll road PPP’s.

    The result : prices for users get set artificially high (it needs to be to cover loan amortisation just like having to pay off your home mortgage in an accelerated fashion). Governments wouldn’t be game enough politically to face the odium of doing that high pricing if they owned the assets themselves (witness our Sydney rail fares a few years back when Michael Lambert and Kerry Schott both reported to the State that they needed to increase) and yet through the back door they let the private sector proponents do the high pricing, then when the concession ends (except for Bob Carr and the original M4 deal) they just let the high pricing run. This is happening now with toll roads in Sydney (it will for M5 South West as part of the Westconnex deal). A back door subsidisation trick for NorthConnex was to give Transurban a concession extension. They are asking for the same in Melbourne for the Western Distributor.

    I like some other comments about how Asia does airports – we need a system where main airports show a sense of national pride – they are actually a reflection on the character of our governments. For that, some crucial government funding needs to go into the financing mix and maybe the whole system of who gets to operate airports and under what KPI’s needs a total revamp.

    Please keep acting as a spokespiece against SYD doing the wrong things by the public.

  16. Reilly57

    Ben I agree with everything you say. It’s a pity the loyal opposition hasn’t made much noise about the SAC option on development of the Badgery creek site. However I wonder if the government’s tight timetable isn’t intended to force SAC to walk away from their first refusal rights. I think the Feds should build it themselves (that’s us) and inject a bit of competition into the Sydney market.

    PS Ben would you give us your thoughts on a third runway at Tullamarine. I look at the traffic on FlightTracker from time to time and delays seem to regularly blow out to 30 min during peak periods and sometimes longer when strong crosswinds prevent the use of the E-W runway.

    1. Ben Sandilands

      Reilly57,
      My view is the same of that of the major airlines and public so far I can tell, which is to build that third runway yesterday. Naturally the airlines are wary however of being asked for special levies or charges to contribute to the cost, an issue that held up Brisbane’s second major runway project for some years.
      Tullamarine is quite tight in terms of area when looked at from the perspective of one or two new runways, but a third runway does figure in the official planning document released by the owners some years ago. I also agree with the often heard view that the owners will leave a decision on a go ahead to the last possible moment, and then plead for urgent government or industry assistance to ensure that the capital expenditure doesn’t reduce profits or dividends in the shorter term.

      1. Dan Dair

        Ben,
        If the government were to accede to Tullamarines request for funding, surely it should be in the form of a loan not a grant.?
        Equally, the state or federal government should also expect that money back, with a competitive level of interest within a reasonable length of time.?

        Perhaps if the government started making those noises now, it would change the mind-set of private commercial airport owners, who might then start to plan their futures for long-term sustainability & not just short-term profit-taking.?
        (& then I woke-up & it had all been just a dream….?)

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