Jane Nethercote writes:

In the airline industry, Airservices Australia has a legislated
monopoly on the regulation of air safety. But critics are asking, is
this what’s best for consumers, airlines and safety? At present,
profit-making body Airservices has a pretty cushy position – as we
wrote recently (21 April, item 8), it’s akin to a single desk – and
it’s not obliged to pay any state or territory taxes except payroll
tax. All in all, there doesn’t seem to be much incentive for
Airservices to provide the best and most competitive services possible.

At recent senate
estimates committee hearings
, Airservices Australia CEO Greg Russell
revealed that their fire fighting service at Avalon Airport in Victoria was a “sort of
service.” We are “working toward bringing it up to category, and there need to
be some amendments made to the fire service facility there”. International
standards require that any airport with over 350,000 passengers per year must
have a fire service. This year, it’s estimated that over 700,000 passengers will pass through Avalon.

But only Airservices is able to provide that service at Avalon – for
now. There are in fact other companies
looking for a slice of the aviation fire services pie. Until now,
government legislation has stopped them from entering the market, but a
amendment drafted by the Minister for Transport’s office to accept the
provision of fire services by other companies is currently “being
considered” by Warren
Truss although his office couldn’t tell us how long this will take.

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In the meantime, a recent decision by the ACCC is making it more
difficult for new companies to compete with Airservices. The
competition watchdog recently approved a return to network-based
charges for
aviation rescue and fire fighting (ARFF) services rather than location
specific pricing, a system which was put in place in 1997 after a
government-commissioned independent inquiry recommended a change from
network-based charges.

What does this all mean? Airservices Australia currently provides this service
across Australia. By treating all airports as one group rather than individual,
Airservices Australia is able to spread its charges for ARFF services across the
airports – it charges levies at gateway airports (Sydney, Melbourne and
Brisbane) and that money is taken and used to cross-subsidise the regional
airports, in some instances charging a price which is just 30% of the actual
operating cost.

course, this makes good business sense for Airservices, says Terry
Godde of Delta Fire Service who hopes to compete with Airservices for
ARFF contracts. But it’s hardly good for competition. And it’s not
great for consumers either, not to mention the individual airport
operators and the airlines “which have to pass the costs on” adding to
the burden of higher fuel costs.

By reverting to network-based
charges, the ACCC has “effectively over-turned one of the key principles
underpinning the reform of Australian airports and Airservices”, says the Board
of Airline Representatives of Australia.

Will Truss act to end Airservices’ monopoly or will he let an anti-competitive regime continue? Watch this space.

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Peter Fray
Peter Fray
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