The Audit found that the DEC for airport infrastructure in Australia is expected to grow faster than GDP over the period to 2031. Airports will play an increasingly vital role in supporting the business and leisure activities of Australians, as well as supporting the tourism sector as the gateway for growing numbers of international visitors.
Growth in demand for airport services is expected to be marginally lower than the growth in demand for ports infrastructure (3.6 per cent per year) but still higher than forecast GDP growth (3.1 per cent).213 While the two sectors cater to vastly different domestic and global economic markets, both will be critical to supporting Australia's economic growth over the period to 2031.
Audit finding 58. Demand for airport infrastructure is projected to approximately double between 2011 and 2031. |
The forecast growth in demand for airports in Australia's major cities is likely to lead to capacity shortfalls in the short to medium-term.
Joint work by the Australian and NSW Governments in 2011 and 2012 forecast that passenger numbers at Sydney Airport would grow to 76 million by 2035.214 Projections prepared by the airport operator, suggesting a passenger throughput of 74.3 million in 2033, are consistent with these projections.215 The proposed Western Sydney Airport will be developed and operated by the private sector, with the operator of Kingsford Smith Airport having the first right of refusal to undertake this development. The Australian Government has committed $3 billion to developing the road network servicing the proposed site. The NSW Government has committed a further $600 million for the roads and has proposed reserving a rail corridor to the site.
Melbourne Airport's runways are projected to reach capacity at peak periods in the medium-term. The operator is preparing to develop a parallel East-West runway, which will provide capacity to cater for several decades of growth. This development will be funded by the operator.
Brisbane Airport's main runway is projected to reach capacity at peak periods in the medium-term. The operator has commenced development of a parallel runway, which it expects will be completed by 2020 and will provide capacity to cater for several decades of growth. This development is being funded by the operator, in part from additional landing fees paid by current users.
Both the runways and terminals at Perth Airport are approaching capacity at peak periods. The operator is currently developing additional terminal capacity, and preparing to develop a parallel runway. These developments are being funded by the operator.
If airports do not (or cannot) expand to cope with the expected growth in demand, airlines will raise fares and freight charges as flights reach capacity and new airlines (e.g. low cost carriers) will be unable to obtain landing slots, particularly during peak periods. This would reduce consumer welfare and the competitiveness of businesses across the country, and there would be a knock-on effect for the wider economy. The adverse consequences of congestion in the aviation network were set out in the Joint Study on Aviation Capacity in the Sydney Region.216
Audit finding 59. Australia's 10 busiest airports handle more than 80 per cent of total passenger traffic. Over the next 15 years, additional capacity will be required in Sydney, Brisbane, Perth and Melbourne. The regulatory framework for airports, which obliges private airport operators to provide required airport capacity, appears to be working appropriately. |
The major airports in Australia generally operate at sustainable commercial returns on the capital invested, and are subject to a light handed price regulation regime that replaced price cap regulation.
The Productivity Commission found that, while some capital city airports hold considerable market power, the current regulatory framework facilitates delivery of a reasonably competitive domestic air services market, with relatively good service quality outcomes.217
The Australian Competition and Consumer Commission monitors information relating to prices, costs, profits and service quality of aeronautical services and facilities at Australia's four largest airports, publishing its findings at regular intervals. The Productivity Commission found this mechanism to be adequate in the current market.218
As the major airports have been privatised, their owners have assumed the primary role in developing facilities to meet customer and economic needs.
Given the strength of demand for air services across Australia's major cities, airport service providers have the capacity to finance their operations and necessary infrastructure improvements to support demand through user charges and private financing.
Audit finding 60. The larger airports are all privately operated commercial enterprises, and investment requirements for these airports should be able to be met by user charges. However, given wider funding constraints, governments and airport operators face challenges in ensuring adequate landside access to airports. |
Governments (Australian, state and territory) need to play a role in developing or supporting road and public transport links. Land transport links to airports will need to be improved as demand for air services increases. This will involve developing an integrated transport plan to manage the passenger task to and from terminals through a mix of road, bus and rail options according to local requirements.
In some cities, the airport precincts already act as a bottleneck within the local network, requiring considerable investment to resolve current issues and adequately manage projected demand. Governments should work with airport service providers to establish arrangements for ensuring that landside transport links function effectively and to the benefit of all stakeholders.
Airport services provide critical links for supporting economic and social outcomes in many regional centres. Although airport service providers in Australia's major cities will be able to offset infrastructure investments through user charges and private financing, this may not be the case for smaller regional airports.
Where appropriate, governments should undertake assessments of the economic and social benefits of smaller airports in order to support regional communities.
Audit finding 61. A number of smaller airports are unlikely to have the throughput to cover their maintenance and potential capital costs. Governments will need to prioritise their outlays in support of these airports. |
Audit finding 62. As well as being the largest infrastructure sector, transport is also the most challenging, with relatively high projected growth in demand, a low proportion of user-based funding and market-based pricing mechanisms, challenges with project selection processes, and emerging maintenance issues in some segments. |
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213. ACIL Allen Consulting (2014a)
214. Australian Government and New South Wales Government (2012), p. 6. On these figures, the airport will be handling more passengers than London's Heathrow Airport handled in 2013 (72.4 million).
215. Sydney Airport Corporation Limited (2014), p. 49
216. Australian Government and New South Wales Government (2012)
217. Productivity Commission (2012)
218. Productivity Commission (2012)