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, the profit-making body has a pretty cushy position – as we wrote recently (21 April, item 8), it’s akin to a single desk – and it’s also 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 service possible.
Indeed, at recent senate estimates committee hearings, Airservices Australia CEO Greg Russell revealed that the company’s 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 almost 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 legislative 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.
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.
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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.
Of 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 – if and when that happens. 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.