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Toll Group calls for a crackdown on airport prices

Toll Group wants the Federal Government to improve the price monitoring regime of Australia's airports

By Ruza Zivkusic | April 27, 2011

Toll Group is calling for an improved price monitoring regime of Australia’s airports, saying a service monitoring mechanism that includes measures common to businesses like ground handlers and cargo terminal operators is needed.

In a submission to the Productivity Commission’s Economic Regulation of Airport Services inquiry, it
calls on
the Federal Government to strengthen pricing and service quality standards at airports.

“We acknowledge that airport operators have the right to earn a commensurate return on their investment; however a number of them are doing so with scant regard to the provision of quality airport services for our businesses and our clients, including major domestic and international airlines,” the submission states.

“Our experiences and the actions of some airport managers suggest that a number of airports are acting in contravention of these objectives and have been for some time.

“Toll Group would like airport managers to demonstrate increased transparency and accountability so as to support the people and businesses involved in the provision of aeronautical operations at their facilities.

“In our opinion some airport managers are only interested in the airfield as a form of rental income, not because it contributes to the economic wellbeing of businesses and the nation as a whole.”

The report states there has been “extremely limited” commercial negotiation between airport operators and Toll Group, and little transparency of decision making applied by some airports.

“In numerous instances we have found that leases have increased in cost regardless of improvements to the standards of facilities or services provided by airport operators.

“Justification for price increases is usually on the basis that the increases are in line with the market, with rental costs in the nearby metropolitan central business districts often cited.

“Cleary this is unreasonable.

“Toll Group supports the introduction of an airport arbitration mechanism to facilitate outcomes between airport managers and tenants, saying negotiations “can never be even handed when one side holds such substantial market power.

“Unlike airlines, cargo businesses and ground handling operations like ours do not have the ability to coordinate as an industry and arguably have insufficient countervailing power to positively influence the behaviour at some airports.”

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