Macquarie Airports seeks more freedom over fees

The AFR reports that Macquarie Bank-backed Sydney Airport is mounting a High Court bid to make it harder for airlines to bring the competition regulator in to adjudicate on disputes over airport fees, warning that critical infrastructure spending is under threat.

Sydney Airport wants to overturn a Federal Court decision that it claims has significantly lowered the threshold for infrastructure to be declared essential under the national access regime – thus making it easier for users to take deadlocks over charges to the Australian Competition and Consumer Commission for compulsory arbitration.

“The precedent creates a degree of uncertainty for shareholders in major infrastructure such as airports in going forward with a degree of confidence in putting new investment into that infrastructure,” Sydney Airport chief executive Russell Balding said.

Australia’s main airports are collectively working on an estimated $2 billion of infrastructure upgrades to cope with tough security requirements, increased passenger traffic and the introduction of the larger Airbus A380 aircraft.

Sydney Airport’s move comes at a sensitive time for the aviation industry as a consortium led by Macquarie and United States private equity firm Texas Pacific Group considers a bid for Qantas Airways.

A High Court case potentially creates a situation of Macquarie Bank interests sitting on both sides of litigation.

Sydney Airport’s warnings that the full Federal Court decision will create uncertainty are echoed by Melbourne Airport, which plans to spend about $500 million on aeronautical assets over the next five years.

“Unless we’ve got certainty . . . then we’ve got to think very hard about doing it,” Melbourne Airport chief executive Chris Barlow told The Australian Financial Review.

“If the ACCC came in between the airlines, our customers and ourselves, in simple terms what it means is we say to the airlines, ‘We want to build 12 new stands for you at Melbourne and charge you $X for it’. They go running off to the ACCC. The ACCC spends about a year looking at it, comes back, says, ‘No we don’t think you should charge $X’ . . . our board looks at it again and says, ‘I don’t think so’.”

He said that such processes would delay airport infrastructure projects by 18 months “at the very best”.  “And at the very worst, it just wouldn’t get built.”

Melbourne Airport preferred to strike commercial deals with the airlines, and Mr Barlow thought it unlikely the airlines would seek declaration at that airport.

Mr Balding spoke to the AFR before the High Court special-leave application was filed or the bid for Qantas made. He declined to elaborate after these events. But Qantas and budget carrier Virgin Blue – named as respondents to the potential High Court case – have pledged to fight the Sydney Airports push if special leave is granted.

The airlines have already been leading a furious backlash against a draft decision by the Productivity Commission, which rejected their calls to impose stricter controls on airports by making a new arbitration regime available in disputes over airport charges and conditions.

While their models differ, Qantas and Virgin Blue want a radically new regime because they complain that the process of seeking declaration has been plagued by massive delays and costs. They fear this will continue despite recent amendments to the Trade Practices Act and despite a new lower threshold following the legal precedent.

Qantas Executive General Manager of associated business Grant Fenn said binding arbitration was needed that “so that both parties come to the negotiating table with fair and reasonable positions”, otherwise prices could rise by “a considerable amount”.

On the prospect of being sued by a Macquarie-controlled company when the bank is also backing the Qantas bid, he said: “It’s business as usual and this is about Sydney Airport not Macquarie Bank.”

Report by The Mole