The Productivity Commission (PC) draft report into the economic regulation of airports has expressed concerns about unjustified infrastructure investment at regional airports.
In the report released this week, the commission warned that without proper consultation with stakeholders, operators of regional airports could be enticed into upgrades that users were unable or unwilling to pay for.
Submissions to the report argued that infrastructure upgrades at some airports were being driven by politics or regional development objectives rather than to meet an identified need.
"These objectives include, for example, facilitating international tourism by upgrading runway and terminal capacity to cater for larger aircraft than any airline is proposing to fly at that destination," the PC report states.
"Participants noted that Australian, State and Territory Governments support many infrastructure improvements at regional airports and that the assessment criteria used to assess projects can lack rigour and lead to unwarranted infrastructure investments.
"The Commission shares these concerns – unnecessary or unjustified infrastructure upgrades could lead to the perverse outcome of a loss of air services to communities if they result in increased aeronautical charges that airlines (and by extension, passengers) are not willing to pay."
Airlines also argued in their submissions that operators do not adequately consult users on infrastructure investments that lead to increased aeronautical charges, prompting the PC to recommend independent assessments of projects.
"Consultation with airport users is likely to assist airport operators to identify necessary investments in regional airports and help to avoid unnecessary or unjustified expenditure.
"Australian, State and Territory Government funding of airport infrastructure should be transparent and subject to an independent public assessment of the project, including an assessment of airport users’ willingness to pay for the infrastructure."
Geoff Breust, convenor of the Regional Airport Users Advisory Group (RAUAG), welcomed the report's acknowledgment of funding issues, but was disappointed the PC did not adopt some of his group's recommendations.
"As convenor of the RAUAG I am somewhat pleased that the PC has recognised these issues associated with the financial funding provided by State and Federal Governments particularly that the assessments have often been out of touch with the needs of operators, that past decisions have often been political rather than rational and that close consultation with operators is essential," he told Australian Flying.
"However, I am disappointed the commission didn’t go further to recommend the formal establishment of Airport Advisory Committees with the Terms of Reference set out in our submission.
"I am also disappointed the commission did not at least comment about our proposal to establish a National Airports Infrastructure Fund to not only iron out the uncertainty in regional airport infrastructure development, but also redirect some of the profits from the big end to regions. If they considered it outside their terms of reference, then they could have at least said so.
"At least they did concede regional airports could not pay their way."
The PC draft report also recommended that government investment in regional airports needed to be based on the economic region the airport is in rather than just the council the airport is located in.
In May 2018, the Australian Airports Assocation estimated that 60% of regional airports around the country were operating at a loss.
The draft PC report is open for comments until Monday 25 March. Submissions can be made on the Productivity Commission website.