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AIRPORTS AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 193
EXPLANATORY STATEMENTStatutory Rules 2000 No. 193
Issued by the authority of the Minister for Transport and Regional Services
Airports Act 1996
Airports Amendment Regulations 2000 (No. 1)
Section 252 of the Airports Act 1996 (the Act) provides that the Governor-General may make regulations prescribing matters that are required or permitted by the Act to be prescribed, or that are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Section 7B(2) of the Act provides that regulations may declare that for the purposes of the Act, Canberra Airport ceases to be a joint-user airport at a specified time.
Section 153 of the Act provides that regulations may specify, or specify methods of ascertaining, performance indicators to be used in monitoring and evaluating quality of airport services and facilities.
Section 156(1) of the Act provides that regulations may require an airport-operator company (or a person who provides airport services or facilities under an agreement with that airportoperator company) to keep and retain records, where the records are relevant to a quality of service matter.
The amendments to the Airports Regulations 1997:
(i) revoke the joint-user status of Canberra Airport to recognise that, in effect, the standard regulatory arrangements apply because the whole airport site has been leased to the airport operator;
(ii) extend the existing performance indicators and the records that airports must keep, in relation to quality of service matters, that currently apply to Brisbane, Melbourne and Perth Airports, to Sydney (Kingsford-Smith) Airport;
(iii) introduce a set of slightly modified performance indicators (utilising a less burdensome collection mechanism) to apply to Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports; and
(iv) include transitional provisions to avoid retrospective record keeping and reporting from the date of commencement of the Regulations.
Further details of the amendments to the Regulations appear in the Attachment.
The Regulations commenced on gazettal.
ATTACHMENT
Airports Amendment Regulations 2000 (No. 1)
Item 1 - Name of Regulations
Item 1 provides for the name of the Regulations.
Item 2 - Commencement
Item 2 provides that the Regulations commenced on gazettal.
Item 3 - Amendment
Item 3 provides that Schedule 1 of the Regulations amends the Airports Regulations 1997.
Item 4 - Transitional
Item 4 inserts a transitional provision that has the following consequences:
(i) Sydney (Kingsford-Smith), Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports are required to keep a record of certain matters listed in Schedule 3 of the Regulations as at 31 July 2000. These matters relate only to information listed in Schedule 3 that will be available to the airport-operator companies on this date; and
(ii) The same airport-operator companies are required to keep a record of all relevant matters listed in Schedule 3 for the period 1 August 2000 to 30 June 2001.
Schedule 1 - Amendments to Airports Regulations 1997
Item 1 -Insertion of Regulation 1.04
Item 1 provides that for the purposes of the Airports Act 1996 Canberra Airport ceases to be a joint user airport when the Regulations commence.
Item 2 - Amendment to subregulation 8.01
Item 2 amends subregulation 8.01 so that it applies section 153 of the Airports Act 1996 to Sydney (Kingsford-Smith), Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports.
Item 3 - Amendment to subregulation 8.02 (1)
Item 3 amends subregulation 8.02 (1) so that it creates two separate classes of information. Subregulation 8.02(1) specifies the information, as listed in Part 1 of Schedule 3, that must be provided by the relevant airport-operator company for Sydney (Kingsford-Smith), Brisbane, Melbourne and Perth Airports. Subregulation 8.02(2) specifies the information, as listed by Part 2 of Schedule 3, that must be provided by the relevant airport-operator company for Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports.
Item 4 - Amendment to subregulation 8.02(3)
Item 4 clarifies the requirements for a third party to provide information. Where a service or facility is provided on behalf of the airport, the provider of that service or facility is only required to comply with subregulations 8.02(1) and 8.02(2) in relation to the actual service or facility that it provides.
Item 5 - Amendment to Schedule 2
Item 5 inserts a heading above the list of performance indicators to make it clear that they apply to Sydney (Kingsford-Smith), Brisbane, Melbourne and Perth Airports only. These indicators rely in part on obtaining information from customer perception surveys.
Item 6 - Amendment to Schedule 2
Item 6 inserts a second part to Schedule 2 that specifies the performance indicators that apply to Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports. They recognise the different circumstances of these airports (principally their size and resource base) by replacing the requirement to obtain information through customer perception surveys with requests for factual information concerning activity undertaken at the airports.
Item 7 - Amendment to Schedule 3
Item 7 inserts a heading above the list of matters about which airport-operator companies must keep records, to make it clear that they apply to Sydney (Kingsford-Smith), Brisbane, Melbourne and Perth Airports only.
Item 8-Amendment to Schedule 3
Item 8 inserts a second part to Schedule 3 that specifies the list of matters about which airportoperator companies must keep records, to apply to Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports. They recognise the different circumstances of these airports (principally their size and resource base).
REGULATION IMPACT STATEMENT: PROPOSED REGULATIONS UNDER THE AIRPORTS ACT 1996, PART 8 (QUALITY OF SERVICE MONITORING AND REPORTING)
BACKGROUND
During 1997 and 1998, long-term leases (50 years with an option to renew for a further 49 years) were sold over seventeen Federal airports in two phases. The first phase (completed in July 1997) sold leases to Melbourne, Brisbane and Perth airports (Phase 1 airports) and the second phase (completed in June 1998) sold leases to the remaining fourteen airports, comprising:
* 8 larger, regular public transport airports - Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston, and Townsville. (These airports, along with Brisbane, Melbourne, Sydney (Kingsford-Smith) and Perth airports, are referred to in the Airports Act 1996 as 'core regulated' airports); and
* 6 smaller, mostly general aviation, airports - Archerfield, Jandaket, Moorabbin, Mt Isa, Parafield. and Tennant Creek.
In addition, a Commonwealth owned company, Sydney Airport Corporation Limited (SACL), was established in July 1998 and the Commonwealth granted it a lease to Sydney (Kingsford Smith) Airport on the same terms as the other privatised Federal airports. SACL was established to ensure that Sydney Airport operated as a standalone business within a commercial environment similar to the other major privatised airports.
In December 1997 Regulations were made under Part 8 of the Airports Act 1996 to put in place a quality of service (QoS) monitoring regime for the Phase 1 airports. That regime:
* complements the airport prices oversight arrangements (which have been established by Ministerial direction under the Prices Surveillance Act 1983) by permitting an objective assessment of whether there has been any offsetting change in QoS as a result of imposing a price. cap on aeronautical charges;
* enables an assessment by the Australian Competition and Consumer Commission (ACCC) of an airport operator's market conduct; and
* provides benchmark information on airport service performance.
Part 8 of the Airports Act 1996 established the broad legal framework for QoS monitoring of the leased Federal airports. Part 8 provides for:
* regulations to be made specifying performance indicators to be used in monitoring and evaluating QoS (section 153);
* the ACCC to have the monitoring function (section 155);
* regulations to be made requiring QoS information to be kept and provided to the ACCC (section 156); and
* the ACCC to publish reports about airport QoS (section 157).
The performance indicators that have been provided for under Part 8 of the Airports Act 1996 are designed to measure the capacity and utilisation of airport facilities and the adequacy of, and customer satisfaction with, services provided at the three airports.
ISSUES
The pricing framework for larger leased airports currently includes a price cap on aeronautical services' and monitoring of 'aeronautically related' charges. Under the price cap arrangements airport operators at the larger airports must reduce prices for 5 years (following leasing) on charges for 'aeronautical services'. The price cap takes the form of 'CPI - X' where:
* CPI is the Australian consumer price index; and
* the X values were set by the Government (5.5% for Perth, 4.5% for Brisbane and Coolangatta, 4% for Melbourne and Adelaide; 3.0% for Darwin, Hobart and Alice Springs; 2.5% for Launceston; and 1.0% for Canberra and Townsville) based on expected productivity improvements.
This cap is monitored by the ACCC and will operate until 1 July 2002 for Brisbane, Melbourne and Perth airports and 1 July 2003 for the 8 larger, regular public transport, airports sold in Phase 2 of the airport sales.
Under the pricing framework and associated QoS regulatory regime, the ACCC reports annually on Phase 1 airport operations in the complementary areas of.
* prices monitoring and price cap compliance;
* airport financials (from information supplied by airport operators); and
* QoS (drawn from information supplied by the airports, Government agencies and airline and passenger surveys).
This reporting regime is designed to improve the transparency of airport operations and assists users in assessing airport financial performance and economic efficiency. Making airport operations open to industry and user scrutiny also facilitates and encourages competitive benchmark assessment and weighs against an airport attempting to take advantage of any market power.
UNDERLYING OBJECTIVES
The objective of QoS monitoring - identified in Part 8 of the Airports Act 1996 - is to establish a system to measure the changes to capacity and utilisation of airport facilities and the adequacy of, and customer satisfaction with, services provided at the core regulated airports.
The services provided at the (core regulated) leased Federal airports are a significant part of the national economy. Without monitoring the QoS provided at these airports, it is not possible to ascertain whether the sharing of benefits from the application of the price cap arrangements with industry users is being eroded from a diminishing QoS. Hence the overall objective of these regulations is to:
* establish a systematic means for monitoring the QoS provided by airport operators as a complementary function to the prices oversight arrangements; and
* ensure a broadly consistent approach across all regular public transport (core regulated) leased Federal airports in QoS monitoring for transparency and to facilitate performance comparisons.
IDENTIFICATION OF OPTIONS
Option 1 - To introduce modified performance indicators for the relevant Phase 2 airports and apply the existing Regulations to Sydney (Kingsford-Smith) Airport.
Option 2 - To extend the existing Regulations to all the regular public transport (core regulated) airports.
Option 3 - To adopt a different set of indicators (alternative or simplified) to those proposed in Option 1 for Sydney (Kingsford-Smith) Airport.
Option 4 - To adopt a different set of indicators (alternative or simplified) to those proposed in Option 1 for the relevant Phase 2 airports.
Option 5 - To not monitor QoS at Sydney (Kingsford-Smith) or the relevant Phase 2 airports.
ASSESSMENT OF OPTIONS
General Assumptions
The main parties to be directly affected by the proposed QoS monitoring are the companies operating the relevant leased Federal airports and the airlines. The airport operators, however, will be most affected by QoS monitoring, bearing the majority of the compliance cost from monitoring. In the absence of QoS monitoring it would be difficult to ascertain whether airport operators were circumventing the price oversight arrangements by reducing the quality of airport services. Lower service quality would incur costs for all users of airport services, including the airlines and air freight companies, depending upon the severity of the diminution in service quality.
Should QoS not be publicly monitored (through the collection of adequate or appropriate data) a strong risk arises that airport lessees may attempt to improve their financial returns through diminished QoS. This could potentially create additional congestion and other costs for airport users that easily could outweigh the minimal compliance costs arising from QoS monitoring. Similarly, the benefits flowing to the airlines and other airport users from the information provided in QoS monitoring is considered to be significantly greater than the cost that may be incurred by the provision of the proposed information to the ACCC. The Australian Airports Association (AAA) has indicated that the proposed QoS performance indicators are what could be regarded as fundamental to understanding an airport's business and accords with what would customarily be expected as part of an operator's information base to run the business effectively.
Option 1 - To use the proposed modified performance indicators for the relevant Phase 2 airports and apply the existing Regulations to Sydney (Kingsford-Smith) Airport.
This option would allow the essence of the reporting regime currently in place for Phase 1 airports to also be implemented for the relevant Phase 2 airports. The reporting regime is part of the comprehensive regulatory framework envisaged by the Commonwealth when it placed the airports on the market. All prospective acquirers of the regular public transport airports in both Phase 1 and Phase 2 of the sales process were informed of the proposed framework and were aware of the intention to implement the regime. Their acceptance of it has been reflected in the constructive comments received when the Commonwealth circulated the draft of the proposed performance indicators for comment.
(i) Extend the existing Regulations to Sydney (Kingsford-Smith) Airport
When the current Regulations were promulgated, Sydney Airport had not been leased. For Sydney (Kingsford-Smith) Airport to be treated in a consistent manner with Brisbane, Melbourne and Perth airports, the existing QoS monitoring regime should be extended to include Sydney (Kingsford-Smith) Airport.
Schedules 2 and 3 to the current Regulations set out the performance indicators to be used by the ACCC in evaluating QoS at Brisbane, Melbourne, and Perth airports and the records those airports must keep, respectively. The same indicators are considered appropriate to apply to Sydney (Kingsford-Smith) Airport as this will facilitate comparisons in performance between the four largest airports in Australia.
SACL voluntarily provided this information to the ACCC for the 1998/99 financial year. Notwithstanding, the proposed regulations contain a transitional provision to avoid a legal obligation on Sydney (Kingsford-Smith) Airport to have (retrospectively) kept records prior to gazettal of the regulations. The reporting period usually comprises the period 1 July to 30 June of the following year and the transitional arrangement will permit Sydney Airport to provide information that it has in its possession as at 30 June 2000 for the current reporting period. For all subsequent reporting periods, the Airport will be required to provide the same information as must currently be provided by Brisbane, Melbourne and Perth airports.
(ii) Establish a slightly modified form of QoS indicators to apply to the 8 larger, regular public transport, airports sold in Phase 2.
The performance indicators for the larger, regular public transport, airports sold in Phase 2 have been modelled on the existing Schedules 2 and 3. Since these airports are not, however, of the same size or importance as the four majors and do not have as large a resource base, some allowance has been made in the type of performance indicators to be collected and means for obtaining relevant information.
Customer Perception Survey's (CPS) are currently utilised by Brisbane, Melbourne Perth and Sydney (Kingsford-Smith) airports as an important tool in the collection of QoS information. It is recognised, however, that not all the remaining airports would necessarily have the resources to undertake these surveys. Hence it is proposed that information that might normally be provided through a CPS be obtained via surrogate means for these smaller airports - generally through static indicators provided in information from airport operators or from the airline surveys conducted by the ACCC.
The reporting period for the relevant Phase 2 airports will commence from 30 June 2000 and only in relation to information that is in their possession for the current reporting period. For all subsequent reporting periods, the airports will be required to provide the information set out in the new Part 2 of Schedule 3 of the Regulations. These new requirements will commence upon the gazettal of the Regulations.
The proposed performance indicators reflect existing industry practice and reporting standards and were developed following close consultation with the ACCC and the airport industry. The ACCC has a statutory mandate for prices oversight and QoS monitoring, and holds expertise in this area. The industry, and in particular the airport operators, have been consulted in preparing the indicators and are comfortable with the approach being taken for measuring QoS performance and collection of relevant information. Several airports, including Sydney, have initiated their own QoS assessments to provide an information base to assist in monitoring their business performance and as an adjunct to the proposed monitoring arrangements. Hence the importance of such assessments is being recognised by airport operators.
This option is favoured as it permits the statutory obligations on the Commonwealth to be properly met, while not imposing too great a regulatory burden on the relevant Phase 2 airports. The level of additional cost for Phase 2 airports under the proposed monitoring regime is considered minimal with the additional effort in the main being the consolidation and on forwarding of data generally already available to airport operators.
Option 2 - To extend the existing Regulations to all the regular public transport (core regulated) airports.
The proposal that the existing regulations be extended to Sydney (Kingsford-Smith) Airport without amendment would facilitate meaningful comparisons of performance between and by the four major airports (Brisbane, Melbourne, Perth and Sydney) over time. As part of their normal business operations, the four major airports conduct customer perception surveys and they provide a readily available means for sourcing relevant QoS information.
To impose these survey requirements (estimated at $15 per person interviewed plus establishment costs) on the smaller regular public transport airports is, however, considered an unreasonable regulatory burden when those airports operate with smaller staffing resources and have a much lower revenue base to fund such activities. The majority of the Phase 2 airports do not currently undertake customer perception surveys due, in the main, to the associated administrative costs. For these reasons this option is not favoured.
Option 3 - To adopt a different set of indicators (alternative or simplified) to those proposed in Option 1 for Sydney (Kingsford-Smith) Airport.
Sydney (Kingsford-Smith) Airport is already conducting customer perception surveys for its own purposes and for the financial year 1999 voluntarily provided to the ACCC the full set of information supplied by the other Phase 1 airports. There is, therefore, no additional regulatory cost associated with formalising the procedure.
Moreover to apply a different set of QoS indicators to Sydney (Kingsford-Smith) Airport would corrupt meaningful comparisons between the four major Australian airports. To comply with the statutory requirement to facilitate the comparison of airport performance in a transparent manner, it is important the QoS indicators be substantially the same across similar airports (by size and market operations). For these reasons this option is not favoured.
Option 4 - To adopt a different set of indicators (alternative or simplified) to those proposed in Option 1 for Phase 2 airports.
The indicators proposed for Option l have been developed from the performance indicators currently in place for Phase 1 airports but with allowances to accommodate the reduced resource base of these airports. The Phase 1 indicators were developed by the ACCC after extensive research into the international experience in monitoring airport QoS, and extensive consultation with key representatives of the Australian aviation industry (including the airport operators).
The proposed modified set of indicators for Phase 2 airports represent the minimum information requirements to allow useful and meaningful monitoring of QoS. Adopting a further simplified set of indicators for Phase 2 airports would require radical changes to significantly reduce respondent burden beyond what has already achieved in developing the modified form. Taking that step would, however, negate inter-airport comparability and seriously erode the effective measurement of QoS - thus potentially undermining the complementarity of the pricing framework and associated QoS regulatory regime.
Adopting an alternative set of QoS performance indicators would not meet with industry expectations. Stakeholders have advised that the proposed indicators are an appropriate industry standard for measuring the various aspects of aeronautical capital provision, utilisation and service. For these reasons this option is not favoured.
Option 5 - To not monitor QoS at Sydney (Kingsford-Smith) or the relevant Phase 2 airports.
The services provided at the (core-regulated) leased Federal airports are a significant part of the national economy. Without monitoring the QoS provided at these airports, it is not possible to ascertain whether the sharing of benefits from the application of the price cap arrangements with industry users is being eroded from a diminishing QOS.
An important regulatory principle underpinning the administration of the leased Federal airports is that all airports will be treated consistently and equitably as far as practicable. As noted above, airport lessees expect the larger regular public transport (core regulated) airports will be subject to QoS monitoring. Moreover, to not monitor these airports would potentially undermine the prices oversight framework currently in place and the Commonwealth would not be able to comply with its duty under the Airports Act 1996 - 'to facilitate the comparison of airport performance in a transparent manner'. Adopting this Option would mean that the Commonwealth was failing to comply with its own legislation. For these reasons this option is not favoured.
CONSULTATION
In preparing the proposed indicators, the Department consulted with the airports, major airlines and the ACCC. The airport operators, being the parties most affected, have been consulted on the proposed regulatory regime at two stages. Firstly, information on the proposed regulatory regime, including QoS monitoring, was made available to them before they submitted their final bids for the purchase of the airport leases. Secondly, officials of the Department of Transport and Regional Services (DoTRS) consulted the new airport operators on a number of occasions over the past 15 months on the detail of the proposed QoS performance indicators.
The initial advice to bidders proposed that the QoS performance indicators applying to the Phase 1 airports would also apply to Phase 2 airports. Notwithstanding, Phase 2 airport operators raised concerns regarding this approach in consultations subsequent to the sale of the airport leases. The most important and consistent concern expressed was the costs associated with the collection of data and particularly the requirement for customer perception surveys to be undertaken.
In response to those concerns officers of the DoTRS (in consultation with ACCC, AAA and the major airlines) developed a revised approach along the lines now proposed. Details on this approach were circulated to airport operators and major airlines earlier this year. Overall this approach was supported, and the need for the proposed Regulations (which are integral to the regulatory framework) well recognised and accepted. Individual responses have been generally positive with a number stating that the information now being sought was better understood and was readily available.
Other concerns were mainly on issues of detail and were addressed in developing the final draft regulations.
CONCLUSION AND RECOMMENDED OPTION
In order to meet its statutory obligation under the Airports Act 1996 to facilitate the comparison of airport performance in a transparent manner' the Airports Regulations dealing with the monitoring of QoS to airport users need to be extended to all of the leased regular public transport airports.
The preferred option (Option 1) is to extend the existing Regulations to Sydney (Kingsford-Smith) Airport and to put in place a modified form of the same to apply to the smaller regular public transport (core regulated) airports. This approach has the benefit of obtaining a satisfactory coverage of information for QoS monitoring with reduced respondent burden on those airports less financially capable of conducting public perception surveys.
The proposed arrangements will:
(i) extend the current QoS regulations that apply to Brisbane, Melbourne and Perth airports to Sydney (Kingsford-Smith) Airport; and
(ii) provide for a set of slightly modified QoS indicators (utilising a less burdensome collection mechanism) to apply to the 8 larger, regular public transport, airports sold in Phase 2.
It is not proposed that QoS monitoring apply to the smaller general aviation airports, principally because those airports are not subject to the prices oversight arrangements and the perceived benefits of monitoring are not seen to outweigh the associated regulatory burden.
IMPLEMENTATION AND REVIEW
The Department of Transport and Regional Services is charged with the administration of the Airports Act 1996. This requires the Department to further the objects of the Act. One of those objects is to facilitate a comparison of airport performance in a transparent manner. This is achieved by the operation of Part 8, section 153, which enables the making of Regulations to specify the performance indicators to be used in monitoring and evaluating the quality of airport services and facilities.
Part 8 of the Airports Act and the proposed regulations under it provide for the airport operators and persons under agreements with them to provide information on QoS matters to the ACCC. The Act provides for penalties for failing to provide such information.
The ACCC will monitor the information for trends in the QoS at Sydney (Kingsford-Smith) Airport and each of the Phase 2 airports. The results will be published annually and taken into account as part of the review of the prices oversight regime in 2002. At that time the QoS performance indicators will also be reviewed to ensure they remain relevant and appropriate.