Damon Mcknight
Australia's airports have been privatised over the last few decades, with the Federal Airports Corporation (FAC) selling off many of the country's major airports to private investors and pension funds. This has led to debates around the benefits and drawbacks of privatisation, with some arguing that it has improved efficiency and financial performance, while others point to light regulation and high fees. The Australian government has received significant financial gains from the sales, with US$2.6 billion from the sale of 17 airports by 1999, and continues to regulate ownership and control through the Airports Act 1996.
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What You'll Learn
The Federal Airports Corporation (FAC)
At the beginning of 1997, the FAC operated 22 airports and handled over 60 million passengers annually. The same year, the Australian government began the process of privatising the FAC airports. Melbourne Airport was leased to the Australia Pacific Airports Corporation for $1.3 billion, while Brisbane Airport was leased to the Brisbane Airport Corporation for $1.4 billion. The Australia Pacific Airports Corporation also acquired a 90% stake in Launceston Airport for $19 million, with the remaining 10% owned by the Launceston City Council. Perth Airport was leased to the Australian Development Group.
By June 30, 1998, all significant assets and liabilities of the FAC were transferred to the new airport lessee companies. The FAC continued airport operations until September 24, 1998, and the transfer of residual assets and liabilities to the Federal Government was completed on September 8, 1999.
The privatisation of airports in Australia continued, with Sydney Airport being leased to the Sydney Airport Corporation in 2002. Today, the primary responsibility of the Airports Branch of the Department of Infrastructure and Regional Development is the regulation of 21 leased federal airports on Commonwealth land.
While some argue that privately operated airports have seen higher rates of total factor productivity growth, there is little credible evidence that ownership alone is a significant factor in organisational performance. The discussion surrounding airport privatisation in Australia highlights the importance of considering the "publicness" of these assets and ensuring that any divestment or privatisation efforts take into account the public interest.
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Leasing and ownership
The Federal Airports Corporation (FAC), a government business enterprise, was established in 1987 to operate major passenger airports in Australia. In 1994, the Keating government announced that all airports operated by the FAC would be privatised. By 1997, the FAC had operated 22 airports and handled over 60 million passengers annually.
The privatisation of airports in Australia has resulted in a mixed bag of outcomes. On the one hand, privately operated airports have enjoyed higher rates of total factor productivity growth. Additionally, privatisation has been defended as an efficient and cost-effective way for the government to maximise revenue and improve customer and quality services. The sale of 17 airports generated US$2.6 billion (1998/99 values).
However, there is little credible evidence that ownership per se is a factor in organisational performance. The privatisation of airports has also led to concerns about the role of the private sector in acting in the public interest, as their primary accountability is to their shareholders. This has resulted in debates about the appropriate balance between private ownership and government regulation, especially regarding airport fees.
The Australian government has implemented a planning approvals regime for privatised airports, introducing more demanding environmental requirements. Additionally, the Airports Act 1996 regulates issues of ownership and control at leased federal airports, with restrictions on foreign ownership, airline ownership, and cross-ownership between paired airport operator companies.
Overall, the privatisation of airports in Australia has had varying impacts, and the discussion surrounding the balance between private ownership and government regulation continues.
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Performance of privatised airports
The Federal Airports Corporation (FAC), a government business enterprise, was established in 1987 and began operating in January 1988. It was responsible for the operation of 22 major passenger airports in Australia and handled over 60 million passengers annually.
Discussion about the privatisation of airport operations in Australia began in the early 1990s. In 1994, the Keating government announced that all airports operated by the FAC would be privatised in several phases. The Howard government decided that each airport would be leased to individual operators for 50 years, with an option for a 49-year extension. Airport divestment began in 1997 with the leasing of Melbourne, Brisbane, and Perth Airports, followed by Adelaide, Canberra, and the Gold Coast airports.
The privatisation of airports in Australia has resulted in higher rates of total factor productivity growth. Assaf (2011) concluded that most privatised Australian airports experienced significant total factor productivity increases, while few airports recorded productivity and efficiency declines. This increase in productivity has been attributed to changes in pure and scale efficiencies.
However, the Assaf study has been criticised for not considering user and customer perceptions of service standards and for not accounting for the effective monopoly environment that may have impacted the indicators. Additionally, it is argued that the private sector should not be presumed to act in the public interest, as their primary accountability is to their shareholders.
The Australian government's privatisation policies were driven by the notion of competition as a significant dimension of performance. The government aimed to improve the degree of cost recovery from users and protect the public interest. While the government has received significant proceeds from airport privatisation, it is still too early to fully assess the performance of the new owners and the interaction between access regulation and price-capping.
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Government debt reduction
Australia's airports were previously owned and operated by the Federal Government. However, in 1988, the Federal Airports Corporation (FAC) was formed, and the administration of major airports was transferred from the government to this corporatised entity. The FAC improved airport performance and broadened the revenue base through commercial and property development.
In 1994, policy thinking shifted in favour of privatisation, and the Keating government announced that all airports operated by the FAC would be privatised in several phases. This move was primarily aimed at reducing government debt without raising taxes. The government sold 17 of the FAC's 22 airports, receiving US$2.6 billion. Melbourne Airport, for instance, was leased to a private company for $1.3 billion. Sydney Airport also agreed to pay $69 million to the Australian Taxation Office in 2013.
The privatisation of airports in Australia has been criticised by airlines, which point to the lack of regulation over fees. On the other hand, airports and industry experts argue that privatisation has been a success, attracting significant private investment and resulting in world-class infrastructure.
The impact of privatisation on debt levels is complex. While privatisation can reduce government debt, it can also lead to increased liabilities and debt for the new private owners. Additionally, understanding historical debt trends is essential, as debt levels fluctuate with the economic cycle and budget position.
In conclusion, the privatisation of airports in Australia has had mixed outcomes. While it has successfully reduced government debt, it has also led to concerns over fee regulation and increased debt levels for private owners.
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Planning approvals regime
The planning approvals regime for airports in Australia is governed by the Airports Act 1996 and associated regulations. The Act sets out the requirements for airport lessee companies in developing and submitting Master Plans and Major Development Plans (MDPs) for approval by the Minister for Infrastructure, Transport, and Regional Development.
The Master Plan outlines the overall development strategy for the airport, including the provision of public spaces, amenities for visitors and workers, and alignment with federal and state government planning objectives. All leased federal airports, except for Tennant Creek and Mount Isa Airports, are required to develop an MDP for major airport developments on the site.
The MDPs are subject to public consultation and must be submitted to the Minister for approval. The Airports (Major Airport Developments) Determination 2021 clarifies the monetary thresholds for construction costs included in the MDPs. Airport developments must be consistent with the approved Master Plans.
Airport lessee companies must also comply with the Airport Management Agreements (AMAs), which allow them to enter into agreements with qualified companies for controlling substantial parts of airport land. Subleases to a trustee of a trust require appropriate approval.
Additionally, specific regulations apply to construction works at airports. For example, the Airports (Building Control) Regulations mandate that construction projects at Sydney Airport must obtain a Building Approval from the Airport Building Controller (ABC) and written consent from the airport authority. Melbourne Airport also has its own planning and design approval process, managed by the airport's planning team, which ensures the appropriate use and development of land within and around the airport.
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Frequently asked questions
Yes, airports in Australia are privately owned. The Australian government privatised airports in the late 1990s.
The Australian government privatised airports to reduce government debt without raising taxes.
The Australian government privatised around 20 airports.
Airport ownership in Australia is varied, with some airports owned by pension funds and infrastructure investors, while others are owned by Airport Lessee Companies and Airport Management Companies, which are regulated by the Australian government.
