By Derek Royal
Australia’s airports have in the past decade been forced to adapt to an ever-changing landscape. Derek Royal spoke to a handful of the nation’s airport executives: Julieanne Alroe (Brisbane Airport CEO/MD); Kim Ellis (outgoing Sydney Metro Airports Bankstown and Camden CEO); Justin Giddings (Avalon Airport CEO); Paul Hughes (Newcastle Airport CEO) and Ian Kew (Darwin Airport CEO) to get their take on the state of Australian airports.
WHAT ARE THE MAJOR ISSUES FACING AUSTRALIAN AIRPORTS?
Julieanne: The major issues facing Australian airports are safeguarding operations, ensuring airports are given the space and protection from inappropriate development needed for sustainable growth, and that communities are in turn protected from unacceptable noise and other environmental impacts.
Sustainability and community expectations are also very important, as are the increasing planning and regulatory complexities that threaten to create barriers to investment. Financing of infrastructure is also a major challenge, along with the ongoing global financial turmoil.
Kim: It’s not one size fits all for airports. One thing that’s glaringly obvious is what works for one airport doesn’t work for ‘all’ airports.
Justin: The biggest issue for Avalon Airport is the fact that we compete with Melbourne Tullamarine. That’s pretty unique in Australia but in some ways it’s a good thing. In the White Paper the federal government mentions allowing competitive environments and to try to bring their prices down. But they need to get some of their policies more aligned with that. For example Airservices Australia is looking at introducing a new pricing structure that we hope will foster competition amongst airports. But at the moment Airservices charges more at Avalon than they do at Tullamarine. Same service, same passenger. This isn’t fair and makes it really difficult to compete. That’s probably the biggest issue that we have.
Paul: Increased security, land use planning, and airports into the broader transport planning regime are key issues.
Ian: There are three major issues currently facing Australian airports: the securing of appropriate, long-term commercial agreements with airlines to allow us to continue to invest in infrastructure; the ability to diversify revenue streams, specifically non-aviation developments (the political landscape has changed making it more difficult for us to gain approvals); and the availability of adequate debt and equity funding to meet the longer-term needs of the airport.
WHAT IS THE CURRENT STATE OF AUSTRALIAN AIRPORTS?
Julieanne: We are cautiously optimistic about the industry’s health, despite recent international setbacks. Passenger numbers remain relatively strong, given the past year’s events, although international inbound is weak (reflecting the dollar) and traditional markets are struggling. The upside is the potential in emerging markets, especially in Asia.
Kim: The major capital city airports are generally doing well and traffic numbers have stayed up in spite of some dips in relation to the GFC (Global Financial Crisis).
Council airports are struggling because airports are very expensive to maintain. To meet the standards required for constant operations you need a minimum of good quality runways, good lighting, access roads into the airport and depending on the airport, some sort of security fencing. They’re all expensive issues to maintain. For the local councils, that’s a hard gig to match when rate payers who are paying for the airport don’t necessarily have an interest in flying. People often don’t see the relationship between the council, the airport and the wealth in their region, which makes councils reluctant to spend money on airports. If you go somewhere like the larger regional airports they recognise in a broad sense the value of airports, but the cost of the airport maintenance remains very high.
I think the GAAP airports like Bankstown, Jandakot, Moorabbin, Archerfield and Parafield, have got some of the greatest opportunities and some of the greatest challenges. GAAP airports are caught in a complex area where they fall within a lot of the regulatory requirements of the capital city airports so they have to meet master planning requirements. Airports like Jandakot or Bankstown have to do the same master plan as Perth or Sydney. The difference is airports like Bankstown make $15 million a year, whereas airports like Sydney make $400 million (a year). The security requirements are the same. The interface of the community and regulatory obligations are the same. And all of that costs money.
We consider our revenue base as general aviation and GA doesn’t always have the capacity to pay the money that’s needed to operate in capital cities. It’s a conflict that doesn’t have an easy resolution. Airports need to be looked at separately because they’re not all the same. You’ve got to look at how each one is matching its operating costs versus its revenue stream. That’s what drives a successful airport.
Justin: The airports have been through a big transformation. Before privatisation many were losing a lot of money, they were unattractive, inefficient, there were a lot of problems. But since privatisation – and I’m a big fan of privatisation – they’ve become very efficient.
Airports are working on different ways of adding services to customers. They’re expanding away from just pure airport bases into other services, creating a lot more additional revenue which can be pumped into aviation services. At the moment the airport industry has slowed because of the amount of regulation and the change in policy by the new government. Hopefully that will change.
Paul: The current state of airports is a well positioned one, with cautious optimism, subject to changing regulatory policy and economic environments.
Ian: The current state of our industry is relatively healthy considering the global economic instability of the last 12 months. The last decade was good to airports and aviation. We had planning certainty within a more light-handed regulatory environment. Funding was readily available for projects that delivered capacity increases and passenger numbers increased consistently (with the exception being around events such as 9/11 and the Ansett demise).
WHAT’S YOUR TAKE ON AIRPORT SECURITY?
Julieanne: The critical areas in security include balancing needs with efficiencies; using technology to reduce passenger inconvenience and to produce better security outcomes; managing cost; utilising intelligence and inter-government and inter-agency cooperation better – a risk-based approach.
Kim: I think airport security is pretty damned good but it’s an easy target for the media. Something’s reported in the media every six months or so but the standards are high.
The biggest problem with airport security is the cost. I was very pleased to see in the White Paper that there was money allocated towards the implementation of aviation security because it’s expensive for the average airport operator to meet security requirements.
In my opinion, aviation security isn’t an industry problem, it’s a national security issue. My belief is the bulk of costs that are regulated by the government are national security issues and should be met on a national level. I accept there has to be some cost met by the industry. But every time something happens, the government introduces another layer of security and unfortunately, the industry doesn’t have an infinite capacity to pay for that. So if the government’s going to introduce new regulations, the government’s got to put its hand in its pocket to cover it.
Justin: Airport security is a big one. Most government departments would have more people and more staff than Avalon Airport. There’s always new reviews. There’s constant changes in policy and it’s almost a full time job trying to keep up.
One of the problems I have with security is the next step in the regional areas and how we manage those areas. We really need to establish a system where the cost doesn’t influence security measures. At the moment I would imagine there are airports in regional areas that are reluctant to install certain security measures because of price. That’s not acceptable so we need to get to a network pricing system where everything’s even. Why should someone in Melbourne pay less than someone in Dubbo? It needs to be fair.
But I think the government is generally doing a good job. They had to react very quickly after September 11th. Obviously there are some things they’ve done that people have questioned. But recently there’ve been some sensible changes to the system. They have to realise it’s a big cost burden for the smaller airports to keep up with the required standards.
I think security in Australia has increased dramatically and I’m comfortable where it’s at.
Paul: Security is an ever-growing and costly issue. Risk-based security regimes are necessary to justify costs. The greatest risk is potentially pricing smaller airports out of business to the detriment of rural or remote communities.
Ian: We accept and fully support the security measures mandated by the federal government and understand our role in ensuring the safety of our airport customers. Unfortunately, the cost of providing these services in remote and regional locations is far greater than it is to provide in a much larger airport. These costs are becoming a real impost for developing demand in our destinations of Darwin and Alice Springs. In relative terms, it makes our destinations more expensive to visit.
WHAT IMPACT WILL THE WHITE PAPER HAVE ON AIRPORTS?
Julieanne: It will have a significant impact - a new regime of planning and process. We (Brisbane) welcomed the stated aim to deliver certainty of investment and we are waiting to see the detail of the legislative changes. We are still uncertain as to how the outcomes of the White Paper will impact on the types of developments that can occur on airports, the process for approvals and the impact on time frames that the new regulations will deliver.”
Kim: I think it will have a big impact. It will be more difficult for Bankstown to deliver developments both aviation and non-aviation, on the airport. We recently built the Toll air freight facility, but under the White Paper, it would be much more challenging to get such a project across the line because the government’s putting more steps into the approval process.
The other side that will make life difficult for the aviators is the fact that the White Paper has enhanced the community’s role in the aviation side of business. Things like aircraft noise, aircraft flight paths, aircraft operations. I’ve been in this job nine years and I’ve seen an increasing level of noise complaints; resistance to flight paths for small aircraft – we’re not talking about 747s or 737s here – we’re talking about singles and twins and helicopters operating out of Bankstown and Camden. The White Paper will give the community a much bigger role in controlling those issues so that’s eventually going to fall back onto the guys who are flying daily in and out of the airport.
The other big thing about the White Paper is it didn’t deliver much for the industry. It doesn’t give the aviation industry or the airports much certainty or much in the way of clarity. It provides some broad guidelines which seem to simply add more controls and regulations.
Ian: Increasing regulation has two effects on Darwin Airport’s business – an increase in the cost and time to add capacity to our operations, and the ability to develop non-aviation related business opportunities.
The National Aviation Policy White Paper is a ‘one size fits all’ policy document and does not reflect the real differences between larger and smaller airports in Australia. The policy makes a number of recommendations that are relevant for airports such as Sydney, but far less relevant for airports such as Darwin and Alice Springs. As a consequence, it may become more difficult to develop our business moving forward.
WHAT’S THE FUTURE FOR AUSTRALIAN AIRPORTS?
Kim: There has to be a continuing level of balance between aviation and non-aviation development. We’ve got to keep doing non-aviation development on the peripheral parts of the airport to ensure we have money to maintain the airports.
We also need to sort out the Sydney Basin. There are four airports that have capacity in the area: Sydney, Bankstown, Richmond (RAAF Base) and Camden. If managed well, that’s enough to manage Sydney’s aviation growth over the next 20 years. If however, we opt for a second Sydney airport outside the area, that’s 20 years of work and $10 billion worth of roads and construction for an airport that might not even be needed. We need an answer in the next five to 15 years.
GA secondary airports in the capital cities have the biggest challenges. They have the least revenue, the highest regulation, probably the most number of tenants and they handle the vast majority of aircraft movements per year. Yet they’re the least able to afford the regulatory environment, least able to afford change or new security levels. Thats going to be a big challenge for the government because eventually that will create problems for the industry and airport owners alike.
Justin: I think the future’s bright and we need to protect airports and we need to ensure there are no more curfews. Curfews at airports are catastrophic.
We need to get the land planning around airports right. We need to introduce systems of regulation which do not impose unnecessary costs but when they do impose costs they’re evenly distributed and that one airport’s not left paying more per passenger than other airports because that just reduces competition.
The future is bright and people are looking to embrace the LCC phenomenon. Avalon is certainly doing that.
Paul: Well positioned, with cautious optimism. Subject to a changing regulatory, policy and economic environments.
Ian: I think the future is bright. The aviation tourism market will continue to grow as long as the cost of air travel remains accessible for most of the population. And I don’t believe improvements in communication technology will dim businesses’ preference for doing business face-to-face.
Involvement in the community will be important, particularly from an environmental perspective. Airports will continue to evolve and be much more than just a passenger terminal, but we need to continue frequent dialogue with the federal government to ensure growth is not hampered by a “broad brush” aviation policy.
And finally, a few words from the man who represents the entire infrastructure: John McArdle, National Chairman, Australian Airports Association
What are the major issues currently facing Australian airports?
Depending on where you sit in the airport size portfolio will depend on what major issues you will be addressing - application and interpretaion of some of the policy initiatives out of the White Paper will be a focus for the larger end of town and while these issues will also be of interest to the regional and rural airports, it’s the inequitable cost associated with policy implementation that will be causing most concern. The environment, fuel sources, world economies and politics will also have influences that will need to be managed as they occur. Until the Super Profits tax is more clearly explained and understood the likely impacts on the mining industries and support services (including aviation) are issues that require monitoring.
What is the current state of the Australian airports industry?
In our view it is generally very healthy particularly at the top end where significant infrastructure and essential development - including high end maintenance programs - have turned what were tired and run-down assets, when handed over, into very attractive and service-oriented facilties that continue to be improved and to meet the expectations of other industry partners and communities alike. This infrastructure development has also been witnessed at some of the more attractive regional ports. However, at the smaller end of the scale the current and future demands of new fleets of aircraft, growth in the resource industry, together with eco toursim and defence, is creating a need for additional assistance. Where that assistance is to come from remains an interesting debate.
What’s your take on airport security?
The safe and secure carrraige of passengers into and from our airports is paramount. However, as the industry continues to grow and there are more innovative route pairs being developed, particularly by the low cost carriers, the cost burden of ensuring the industry remains safe and secure is putting some members of the industry in very difficult circumstances whereby this cost is inequitable, and compromising of future business development opportunity. Consideration of a fairer sharing of this burden will need to be investigated if the intent of the White Paper to grow and protect aviation as an economic driver of the nation is to be achieved.
What impact will the National Aviation Policy White Paper have on your airport?
As an Association we applaud the great work that the government and staff put into the final document which provides a degree of certainty for the future of the whole of industry. However, as the policies are developed and where regulation is to be changed or written we would urge government to involve industry participants in these processes. While we concede that there was a significant level of consultation during the issues and Green Paper process there are are quite significant differences between identifying issues and suggested remedies and the application of actual law that governs them.
What is the future for Australian airports?
As governments and the community alike come to realise that aviation is the transport mode for the ‘now’ society and no longer the exclusive realm of the wealthy, then airports will be seen as the sea ports or rail heads of past generations. They are and will continue to be major social and economic drivers to the communities they serve, providing urgent essential services as well as business and recreational opportunities. As a city never sleeps, then neither can it afford to have its airport sleep - opinions and prejudices will change and airports will become as common as a sea port, rail head or bus depot.
Quotes:
‘People often don’t see the relationship between the council, the airport and the wealth in their region’
‘Why should someone in Melbourne pay less than someone in Dubbo?’
‘As a city never sleeps, then neither can it afford to have its airport sleep’
