BAC says current economic regulatory model needed to ensure private sector investment

Greater regulation of the financial arrangements of Australia’s airports would risk future private sector investment in vital national infrastructure, according the Brisbane Airport Corporation Pty Limited (BAC).

BAC Chief Financial Officer Tim Rothwell today told a Productivity Commission hearing into the Economic Regulation of Airport Services that the growth of Brisbane Airport, and the significant investment in it over recent years, was a direct result of the light-handed regulatory pricing regime originally proposed by the Productivity Commission in 2002.

“This regime has been an unquestionable success,” he said.

“More than $1 billion has been invested by BAC in both aeronautical and non-aeronautical infrastructure between 2002 and 2011. This includes terminal and apron expansions, major new road systems, car parks and other essential infrastructure for the region.

“That’s more than eight times as much as was invested in the five years to 2002 when airport charges were regulated by the ACCC.

“This leap in investment is clear evidence that the aim of successive Australian governments to see private investment in Australian infrastructure, particularly by superannuation funds, is best realised by a light-handed regulatory regime.”

BAC is 81 per cent owned by Australian superannuation and similar funds.

Current and upcoming infrastructure investment at Brisbane Airport includes new domestic terminal carparks and road systems, and expansion of the domestic and international terminal apron to meet forecast demand growth.

The single largest infrastructure project, the construction of a $1.3 billion new parallel runway which will ensure the Queensland economy can meet its economic growth targets across the tourism, trade and business sectors, will commence in 2012.

“All of these are private sector projects, with no government funding. This kind of investment is only possible if pricing rules are clear and applied consistently over time,” he said.

Mr Rothwell said the significant growth in employment at Brisbane Airport was also a reflection of the success of the privatisation of Australian airports in 1997.

“Brisbane Airport Corporation’s employee numbers are now double what the FAC employed in Brisbane prior to privatisation, and jobs on airport have grown from 4,700 to around 17,000.”

Mr Rothwell said BAC believed the Commission’s Draft Report presented a broadly fair assessment of the current reality of airport operations, investment and management across Australia.

“We are pleased that the Commission has recognised that expanding the scope of monitoring of airports is unnecessary,” he said.

“We applaud too that the Commission has found that there is little or no evidence to support claims that airports misuse their market power.

“We are, however, concerned by some recommendations in the Draft Report, most notably those in relation to the proposed ‘show cause’ mechanism, and those which query the efficacy of current commercial negotiations between airports and airlines.

“Suggestions that there is any market failure in the commercial relationships between airports and airlines simply cannot be borne out,” Mr Rothwell said.