Qantas, Virgin dealt massive defeat in battle.

The nation’s biggest airlines have suffered a resounding defeat in their campaign for tighter regulation of airports with the Productivity Commission finding the airports are not misusing their market power.

In a blow to Qantas and Virgin Australia, the federal government’s advisory body said in a final report on airport regulation released on Tuesday that a new independent arbitrator was not necessary. The creation of the body was one of the key demands from the airlines who wanted it to rule on disputes between airports and carriers.

The long-running inquiry heard airline claims that Sydney, Melbourne, Brisbane and Perth airports were using their monopoly positions to demand unfair prices to use their runways and terminals, citing access fees that are among some of the highest in the world.

Airlines, in a position backed by the Australian Competition and Consumer Commission (ACCC), had pushed for an independent arbitrator to be created that could rule on disputes.

But the commission’s final report found that such a regime was unnecessary, would undermine incentives for genuine commercial negotiation and increase risks for airports in making investments.
An arbitrator would also create an opportunity for incumbent airlines to “engage in anti-competitive conduct”.

For example, the report saID a full-service airline might use arbitration to seek a higher level of service in an airport’s common facilities and have this same service – and associated higher price – imposed on budget airline competitors.

The commission did raise concerns about the relatively high international airline fees at Sydney and Brisbane airports, and said the ACCC’s annual monitoring of the country’s biggest airports should be expanded to include profit margins for domestic and international services separately in future. The commission also said scheduling at Sydney Airport should be reviewed to allow more movements per hour.

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