Regulatory Report - Phase II Airports, 2000/01
REGULATORY REPORT
Phase II Airports 2000/01
March 2002
Level 35, 360 Elizabeth Street Telephone (03) 9290 1800 Melbourne VIC 3000 Facsimile (03) 9663 3699
Regulatory Report - Phase II Airports, 2000/01
Contents
Summary of Price Cap Compliance, Operating Financial Results and Quality of Service for Sydney Airport and Phase I and II Airports, 2000/01...... vii Price Cap Compliance...... vii Operating & Financial Performance...... viii Quality of service ...... viii Introduction ...... 11 The report ...... 11 Quality of service monitoring ...... 12 Price cap compliance ...... 13 Monitoring of aeronautically related services...... 14 Regulatory accounts reporting ...... 14 Regulatory changes - October 2001...... 15 1. Adelaide Airport ...... 17 1.1 Quality of Service Monitoring ...... 17 Quality of Service Results ...... 17 1.2 Price cap compliance...... 20 Revenues and expenditures for security functions for the year ended 30 June 2001...... 23 1.3 Monitoring of aeronautically related services ...... 25 1.4 Regulatory accounts reporting...... 27 Profit and loss account for the year ended 30 June 2001...... 28 Profit and loss account for the year ended 30 June 2000...... 29 Balance sheet as at 30 June 2001 ...... 30 Balance sheet as at 30 June 2000 ...... 31 Statement of Cash Flows for the year ended 30 June, 2000 and 2001 ...... 32 Adelaide Airport regulatory accounts — summary of significant accounting policies...... 33 1.5 Operational statistics ...... 38 2. Alice Springs Airport ...... 39 2.1 Quality of Service Monitoring ...... 39 Quality of Service Results ...... 39 2.2 Price cap compliance...... 41 Revenues and expenditures for security functions for the year ended 30 June 2001...... 43 2.2 Monitoring of aeronautically related services...... 44 2.3 Regulatory accounts reporting...... 46 Profit and loss account for the year ended 30 June 2001...... 48 Profit and loss account for the year ended 30 June 2000...... 49 Balance sheet as at 30 June 2001 ...... 50 Balance sheet as at 30 June 2000 ...... 51 Statement of cash flows for the years ended 30 June, 2000 and 2001 ...... 52 Alice Springs Airport regulatory accounts — summary of significant accounting policies...... 53 2.4 Operational statistics ...... 57 3. Canberra Airport...... 59 3.1 Quality of Service Monitoring ...... 59 Quality of Service Results ...... 59 3.2 Price cap compliance...... 60 3.3 Monitoring of aeronautically related services...... 64 3.4 Regulatory accounts reporting...... 66 Profit and loss account for the year ended 30 June 2001...... 68 Profit and loss account for the year ended 30 June 2000...... 69 Balance sheet as at 30 June 2001 ...... 70 Balance sheet as at 30 June 2000 ...... 71 Statement of cash flows for the years ended 30 June, 2000 and 2001 ...... 72 Canberra Airport regulatory accounts — summary of significant accounting policies...... 73 3.5 Operational statistics ...... 76
iii Regulatory Report – Phase II Airports 2000/01 4. Coolangatta Airport...... 77 4.1 Quality of Service Monitoring ...... 77 Quality of Service Results ...... 77 4.2 Price cap compliance...... 79 Table 4.3: General Aviation Charges, 2000 and 2001 ...... 82 Revenues and expenditures for security functions for the year ended 30 June 2001...... 82 4.2 Monitoring of aeronautically related services...... 84 4.3 Regulatory accounts reporting...... 85 Profit and loss account for the year ended 30 June 2001...... 88 Profit and loss account for the year ended 30 June 2000...... 89 Balance sheet as at 30 June 2001 ...... 90 Balance sheet as at 30 June 2000 ...... 91 Statement of cash flows for the years ended 30 June, 2000 and 2001 ...... 92 4.5 Operational statistics ...... 98 5. Darwin Airport...... 99 5.1 Quality of Service Monitoring ...... 99 Quality of Service Results ...... 99 5.2 Price cap compliance...... 101 Revenues and expenditures for security functions for the year ended 30 June 2001...... 104 5.3 Monitoring of aeronautically related services...... 106 5.4 Regulatory accounts reporting...... 107 Profit and loss account for the year ended 30 June 2001...... 108 Profit and loss account for the year ended 30 June 2000...... 109 Balance sheet as at 30 June 2001 ...... 110 Balance sheet as at 30 June 2000 ...... 111 Statement of cash flows for the year ended 30 June, 2000 and 2001...... 112 Darwin Airport regulatory accounts — summary of significant accounting policies...... 113 5.5 Operational statistics ...... 117 6. Hobart Airport...... 119 6.1 Quality of Service Monitoring ...... 119 Quality of Service Results ...... 119 6.2 Price cap compliance...... 120 6.3 Monitoring of aeronautically related services...... 121 6.4 Regulatory accounts reporting...... 123 Profit and loss account for the year ended 30 June 2001...... 124 Profit and loss account for the year ended 30 June 2000...... 125 Balance sheet as at 30 June 2001 ...... 126 Balance sheet as at 30 June 2000 ...... 127 Statement of cash flows for the year ended 30 June, 2000 and 2001...... 128 Hobart Airport regulatory accounts — summary of significant accounting policies ...... 129 6.5 Operational statistics ...... 133 7. Launceston Airport...... 135 7.1 Quality of Service Monitoring ...... 135 Quality of Service Results ...... 135 7.2 Price cap compliance...... 136 7.3 Monitoring of aeronautically related services...... 138 7.4 Regulatory accounts reporting...... 140 Profit and loss account for the year ended 30 June 2001...... 144 Profit and loss account for the year ended 30 June 2000...... 145 Balance sheet as at 30 June 2001 ...... 146 Balance sheet as at 30 June 2000 ...... 147 Statement of cash flows for the years ended 30 June, 2000 and 2001 ...... 148 Launceston Airport regulatory accounts — summary of significant accounting policies...... 149 Asset...... 151 7.5 Operational statistics ...... 155 8. Townsville Airport ...... 157 8.1 Quality of Service Monitoring ...... 157 Quality of Service Results ...... 157
iv Regulatory Report – Phase II Airports, 2000/01 8.2 Price cap compliance...... 159 8.2 Monitoring of aeronautically related services ...... 162 8.3 Regulatory accounts reporting...... 164 Profit and loss account for the year ended 30 June 2001...... 166 Profit and loss account for the year ended 30 June 2000...... 167 Balance sheet as at 30 June 2001 ...... 168 Balance sheet as at 30 June 2000 ...... 169 Townsville Airport regulatory accounts — summary of significant accounting policies...... 171 8.4 Operational statistics ...... 177 Appendix 1: Quality of service information requirements ...... i Table A!: Quality of service indicators...... i
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Regulatory Report – Phase II Airports, 2000/01
Summary of Price Cap Compliance, Operating Financial Results and Quality of Service for Sydney Airport and Phase I and II Airports, 2000/01
Price Cap Compliance The Commission conducted price cap reconciliations for Phase I and Phase II Airports for the 2000/01 year. Table 1 summarises the price cap reconciliations for all of the Phase I and Phase II Airports for 2000/01. Sydney Airport is not subject to a price cap.
Table 1: Price Cap Compliance Phase I and Phase II Airports 2000/01 Airport CPI-X Past Required Actual Over/(under) (Over) reduction reduction recovery /Under- recovery Brisbane Airport -2.3% -2.72% -5.02% -1.71% 3.31%
Melbourne Airport -1.8% -0.04% -1.84% -1.51% 0.33%
Perth Airport -3.3% -1.98% -5.28% -3.35% 1.93%
Adelaide Airport -1.8% 0.00% -1.8% -1.43% 0.37%
Alice Springs Airport -0.8% 1.46% 0.66% -0.17% 0.83%
Canberra Airport 1.2% 0.28% 1.48% -6.56% 8.04%
-2.3% 0.71% -1.59% -2.78% (1.19%) Coolangatta Airport -0.8% 1.67% 0.87% 1.03% 0.16% Darwin Airport -0.8% 0.55% -0.25% 0.73% (0.48%) Hobart Airport -0.3% 0.20% -0.10% 0.00% 0.10% Launceston Airport 1.2% 0.64% 1.84% -0.67% (1.17%) Townsville Airport
Brisbane Airport has over-recovered for the past three financial years and now has a large revenue over-recovery. It is imperative that it lowers its charges so that by the end of the 2001/02 year it eliminates the over-recovery. Perth Airport lowered it charges to meet its CPI-X for the year but still has an over-recovery from prior years and must also lower charges in 2001/02 to eliminate its over-recovery. Melbourne Airport slightly over-recovered for the 2000/01 year but previously had a small under- recovery. For the Phase II airports, the declaration providing for prices surveillance was revoked in October 2001. Nevertheless the Commission is reporting on price cap compliance for the year to June 2001 during which time price caps were in place for the airports. For these airports, Adelaide Airport reduced charges by slightly less than required after not including reductions for savings under the New Tax System. Alice Springs, which had a past under-recovery could have increased charges, but actually reduced them. Canberra Airport similarly could have increased charges, but discounted landing
vii Regulatory Report – Phase II Airports 2000/01 charges and despite the inclusion of taxi access revenue, under-recovered revenue against the cap. Coolangatta Airport decreased charges by more than it required by the price cap and under-recovered revenue. Darwin Airport over-recovered but this was offset by previous under-recoveries. Hobart Airport reduced charges by more then required by the price cap. Launceston Airport maintained charges against a requirement to slightly decrease charges and the resulting over-recovery partially offset its past under-recovery against the price cap. Under the price cap, Townsville Airport could have increased charges but actually decreased charges and under- recovered revenue. Operating & Financial Performance
All of the Phase I and Phase II airport operators made positive earnings before interest and tax (EBIT) in 2000/01. However, all airports with the exceptions of Sydney, Townsville and Hobart made losses once interest and lease premiums are taken into account.
Table 2 summarises the operating financial results for the Phase I and Phase II Airports as well as that for Sydney Airport in 2000/01. Table 2: Summary of selected Financial Results of the Phase I and II Airports and Sydney Airport 2000/01 Airport EBIT Interest Amortisation Profit / Loss after $million $million $million interest and tax $million Brisbane $69.5 $73.9 $6.8 ($11.2) Melbourne $103.8 $135.7 $6.2 ($9.4) Perth $34.9 $55.3 $7.4 ($20.4) Sydney $131.0 $79.4 $0 $22.8 Adelaide $10.8 $24.6 $5.4 ($13.3) Alice Springs $0.5 $3.3 $0.1 ($2.8) Canberra $5.8 $6.4 $0 ($1.0) Coolangatta $3.3 $4.9 $1.2 ($1.6) Darwin $1.4 $11.6 $0.5 ($10.2) Hobart $2.5 $2.2 $0.3 $0 Launceston $1.4 $1.2 $0 $0 Townsville $1.5 $1.0 $0 $0.2
Quality of service Quality of service for the three Phase I airports and Sydney Airport are generally quite satisfactory. Brisbane Airport has continued to achieve a high quality of service. Perth International Airport generally achieved satisfactory results although some facilities continue not to be well rated by airlines. Melbourne Airport achieved improved results compared to the previous year and overall its results were quite good and more consistent with the results achieved during the first two years of monitoring. Sydney Airport also achieved improved results that seemed to reflect the completion of new infrastructure at the airport.
viii Regulatory Report – Phase II Airports, 2000/01
For the first time quality of service for the Phase II airports has been conducted.
Users generally rated the availability and standard of facilities as ‘satisfactory’.
Airport operators have responded to airline comments concerning service quality and these have been incorporated within the regulatory reports.
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Regulatory Report – Phase II Airports, 2000/01
Introduction
The Australian Competition and Consumer Commission (the Commission) has primary responsibility for implementing and administering the economic regulatory measures applying to privatised core regulated airports.
The regulatory regime for privatised ‘core regulated’ airports comprises measures under the Trade Practices Act 1974 (TPA), the Prices Surveillance Act 1983 (PS Act) and the Airports Act 1996 (Airports Act). It includes a price cap on aeronautical services and access arrangements. The regime also includes several formal reporting requirements designed to increase the transparency of the airport business.
To meet the transparency goals of the regulatory regime, the Commission reports for the Phase II airports on price cap compliance, accounts reporting, prices monitoring, and this year, for the first time, quality of service monitoring. The Commission is concerned to note that the operators of five of the airports did not provide information as required within the time stipulated, with the final submission from one airport not received until late March. These were the operators of Adelaide, Alice Springs, Coolangatta, Darwin and Hobart airports. In October 2001 the declaration providing for price surveillance of aeronautical services at the Phase II airports was revoked and replaced with a direction for price monitoring of Adelaide, Canberra and Darwin. Thus in future regulatory reports there will not be reporting of price cap compliance and prices monitoring will only be conducted at the three airports referred to. An overview of the changes is provided on page 15 below.
The report
This report is aimed at fulfilling the Commission’s regulatory reporting role under the aforementioned legislation for the Phase II airports, namely: Adelaide Airport; Alice Springs Airport; Canberra Airport; Coolangatta Airport; Darwin Airport; Hobart Airport; Launceston Airport and Townsville Airport.
This report is divided into nine sections. The first section provides information regarding the Commission’s reporting role and relevant legislation. Following sections are devoted to individual airports and provide information on:
• quality of service at each airport;
• price cap compliance at each airport;
• prices monitoring of aeronautically related services at each airport; and
• regulatory accounts reporting, including details of aeronautical and non- aeronautical services at each airport.
11 Regulatory Reports - Phase II Airports, 2000/01 Quality of service monitoring
Background
Quality of service monitoring is included in the 2000/01 regulatory reports for the Phase II airports for the first time. Quality of service monitoring is aimed towards providing transparency about airport performance.
The Commission is required for Phase II airports to conduct quality of service monitoring pursuant to Part 8 of the Airports Act.1 Airport operators must provide the Commission with information based on regulations to the Airports Act (the regulations).2 The information required is detailed in Appendix 1.
The Commission also conducted a survey of airlines and of Australian Customs Service (ACS). Airlines were requested to rate the availability and standard of particular facilities and services on a five-point scale ranging from ‘very poor’ to ‘excellent’. Under the availability category, the Commission sought information from airlines regarding the availability of infrastructure and equipment and the occurrence of delays in gaining access to it. Under the standard category, the Commission sought information on the ability of equipment to perform the function intended, the reliability of the equipment and the possibility of it breaking down. At most of the airports only two airlines were able to provide ratings.
ACS was asked to rate the quality of immigration facilities, baggage processing facilities, and airport operators’ consultation procedures.
Customer Perception Surveys are not conducted at the Phase II airports unlike the Phase I airports and Sydney Airport.
In reporting on the quality of service indicators, the Commission focused on the standard and availability of facilities and services provided by, or which could be influenced by, the airport operator. These facilities and services include airside facilities such as runways, taxiways and aprons; terminal facilities, such as departure lounges; baggage handling; and car parking. Domestic terminals owned and/or operated by airlines were not included as part of the quality monitoring report.
Considerations in assessing results In assessing the quality of service, it is recognised that survey results may be influenced by factors outside the control of an airport operator.
Firstly, the conduct of airlines (eg. scheduling), Airservices Australia and other service providers in carrying out their operations may have contributed to service quality outcomes particularly in relation to the availability of runways, aprons and taxiways.
In addition, there may be a time lag between increases in passenger and flight numbers and a corresponding increase in the capacity of terminal infrastructure. Thus, increased crowding in the lead up to such new investment being completed and
1 For a detailed description see Australian Competition and Consumer Commission, Quality of service monitoring for airports post-leasing, February 1997, available on the Commission’s website at
12 Regulatory Report – Phase II Airports, 2000/01 becoming operational could reflect adversely in the results of some quality of service indicators.
It is also recognised that, given low traffic volumes and passenger numbers at smaller Phase II airports, the costs of providing a level of quality that would exist at a larger airport are not justified (eg. automated baggage handling).
Results of quality of service monitoring for each of the Phase II airports are given below.
Price cap compliance
Declaration No. 88, pursuant to s. 21 of the PS Act, declares certain aeronautical services at the Phase II airports. The declaration covers aircraft movement areas (e.g. runways and aircraft parking areas) and passenger processing areas (e.g. aerobridges and departure lounges).3
Declaration of services requires airport operators to notify the Commission of a proposal to increase prices of the services covered by the declaration. The Commission is responsible for assessing proposed price increases and approving the increases before they come into effect. If the proposed price increases fall within the parameters set by the price cap, the Commission has limited discretion to object to their implementation.
At all privatised ‘core regulated’ airports, declared services are subject to CPI-X price caps. The X-factors are based on expected productivity improvements.4 Direction No. 20 sets out the details of the price cap formula and the X-values at each airport. It also includes information relevant to the Commission’s administration of the cap.5
Price cap compliance is calculated on a revenue weighted average price basis. According to this approach, increases in particular charges are weighted by that component’s proportion of revenue for the previous year. The Commission is responsible for conducting price cap compliance tests (reconciliations) at the privatised ‘core regulated’ airports. If an airport is found not to have reduced charges by the required CPI-X amount, the direction states that the airport operator has two years to pass back the over-recovered revenue to users in order to comply with its price cap.
Details of price cap compliance for each of the Phase II airports is provided in section 2 for each airport.
3 Minister for Financial Services and Regulation, Declaration No. 88, June 2000. Copies of all Declarations and Directions referred to in this report are available on the Commission website at
13 Regulatory Reports - Phase II Airports, 2000/01 Monitoring of aeronautically related services
In May 1998 the Treasurer directed that aeronautically related services be subject to formal prices monitoring pursuant to section 27A of the PS Act. The Commission’s role in prices monitoring includes reporting on the costs, revenues and profits of certain aeronautically related services at the Phase II airports6.
Aeronautically related services subject to prices monitoring include: • aircraft refuelling; • aircraft maintenance sites and buildings; • freight equipment storage sites; • freight facility sites and buildings; • ground support equipment sites; • check-in counters and related facilities; and • public and staff car parks.
The rationale behind monitoring is that airport operators may exert significant market power in relation to monitored services at individual airports. Prices monitoring provides information to the Commission regarding aeronautical-related costs and revenues over time for services that are associated with significant market power. Differences between revenues and costs may point to the use of market power by the airport operator in setting prices.
In exercising its role, the Commission may investigate particular pricing issues where users have raised concerns that the airport operator may have taken advantage of its market power. To date the Commission has investigated and made recommendations to the Treasurer regarding the imposition of fuel throughput levies at Brisbane and Perth airports.
In section 3 for each airport, details on prices monitoring for aeronautically related services is given.
Regulatory accounts reporting
Part 7 of the Airports Act requires Phase II airport operators to provide the Commission with annual financial accounts for the airport business. The financial accounts required by the Commission include a profit and loss statement, a balance sheet statement, and a statement of cash flows. Airport operators are also required to provide supporting account information such as notes explaining the accounting policies adopted and the cost disaggregations between aeronautical and non- aeronautical charges.
In providing the accounting information, airport operators are required to have all data audited. A director’s responsibility statement, signed by at least two Directors, must also be provided. This statement attests that the regulatory accounting information
6 In October 2001 changes were made to the coverage of monitoring of Phase II airports. These are outlined on page 15 below.
14 Regulatory Report – Phase II Airports, 2000/01 and supporting schedules are fairly presented and are in accordance with the guidelines, the Airports Act and the regulations made pursuant to that Act.
Financial accounts data is provided to the Commission for three main reasons. These are: 1. to assist in the review of regulatory arrangements to be held five years after the implementation of the economic regulatory regime; 2. to provide transparency by making information available to interested parties; and
3. to provide information on an airport operator’s performance. In section 4, each airport’s financial accounts are presented.
Regulatory changes - October 2001
In October 2001, Declaration 88 was revoked. Under the declaration aeronautical services at Adelaide, Alice Springs, Canberra, Coolangatta, Darwin, Hobart, Launceston and Townsville Airports were declared under section 21(1) of the PS Act. As a consequence of this revocation, the eight Phase II airports are no longer required to notify increases in charges for aeronautical services.
Prices surveillance of these services was conducted under price cap arrangements. One effect of the revocation is that, Phase II airports will now not be required to eliminate any over-recovery of revenue after five years (ie. 30 June 2002) as was previously required under the price cap arrangements.
In addition, Direction 21 - made under section 20 of the PS Act - was replaced by Directions 25 and 26. Direction 21 had directed the Commission to monitor the prices, costs and profits of aeronautical related services at the three Phase I airports, the eight Phase II airports and Sydney Airport. Under Direction 26, however, the Commission is directed to monitor the prices, costs and profits related to aeronautical and aeronautical related services at three of the Phase II airports: Adelaide, Canberra and Darwin.
Under Direction 25, the Commission is directed to monitor the prices, costs and profits of aeronautical related services at the three Phase I airports and Sydney Airport.
The effect of the changes for the Phase II airports is that in future regulatory reports:
• there will not be reporting under price cap compliance for any Phase II airport; and • prices monitoring reporting for aeronautical and aeronautical related services will be confined to Adelaide, Canberra and Darwin airports.
The Commission will, however, continue to report on regulatory accounts and service quality for each of the Phase II airports while the current legislative requirements and regulations under the Airports Act remain.
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16 Regulatory Report – Phase II Airports, 2000/01 1. Adelaide Airport
Adelaide Airport is owned and operated by Adelaide Airport Ltd (AAL) who took over its operation from the Federal Airports Corporation (FAC) in June 1998. It paid $365.2 million for a 50-year lease of Adelaide Airport and Parafield Airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Adelaide Airport. The Commission would like to acknowledge the cooperation received from AAL in providing data and responding to queries that assisted in the preparation of this report.
1.1 Quality of Service Monitoring
Adelaide Airport caters mainly for domestic aircraft and some international aircraft.
Quality of Service Results The assessment of quality of service is made having regard to airline surveys, a survey of the ACS and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Adelaide Airport as ‘satisfactory’, although notably there were some ratings of ‘poor’. Runways, aprons and taxiways
The availability of the runway and the standard of the runway were both rated from ‘satisfactory’ to ‘excellent’. No comments were received.
The availability of aprons was rated from ‘poor’ to ‘good’ with two airline expressing the view that the apron facilities are insufficient for the level of operations and that congestion occurs. The standard of aprons was rated ‘satisfactory’ to ‘excellent’. No comments were received.
Adelaide Airport had four Code E, or eight Code C, apron positions for international aircraft parking and 13 positions including one stand-off position for domestic aircraft parking at 30 June 2001.
The availability of taxiways was rated from ‘poor’ to ‘excellent’. One airline commented that congestion occurs in the early morning when aircraft are being pushed back.
The standard of taxiways was rated from ‘satisfactory’ to ‘excellent’. A comment was that the design of the taxiway adjacent to the terminal impinges on the airside road system. Gates
The quality of gates at Adelaide Airport was assessed using information obtained from airline surveys.
The availability of gates at Adelaide Airport was rated as ‘poor’ to ‘satisfactory’. Airlines commented that there are insufficient gates when there are more than two international aircraft. It was also noted that stand-off bays are used and it was considered that this was not satisfactory for a capital city airport.
17 Regulatory Reports - Phase II Airports, 2000/01 The standard of gates was rated from ‘poor’ to ‘good’. Airlines commented that for some international arrivals it is necessary for passengers to walk a long distance to the terminal and that there is a lack of aerobridges. Ground service equipment storage sites
The quality of ground service equipment storage sites at Adelaide Airport were assessed using airline surveys.
The availability of ground service equipment storage sites was rated as ‘satisfactory’ by airlines. One comment suggested that facilities are only just able to meet the current requirements.
The standard of the facilities was rated from ‘poor’ to ‘satisfactory’. It was commented that there is no provision for under cover storage of equipment. Freight equipment storage sites
The quality of freight equipment storage sites at Adelaide Airport were assessed using airline surveys.
Freight equipment storage sites were rated from ‘satisfactory’ to ‘excellent’. No comments were received.
The standard of the sites was rated from ‘poor’ to ‘satisfactory’ and it was also noted that there is a lack of under cover storage.
Aerobridges
The quality of aerobridges at Adelaide Airport was assessed using airline surveys and information provided by the airport operator.
Airlines rated the availability of the aerobridge as ‘very poor’ to ‘satisfactory’. It was commented the lack of availability leads to the need to park at a stand-off bay on a regular basis.
The standard of the aerobridge was rated as ‘satisfactory’ although the comment was made that the aerobridge is old and prone to breakdown. Adelaide Airport have noted that the aerobridge is scheduled for a 10 year service during 2001/02.
Adelaide Airport had one aerobridge at 30 June 2001. Over the year to 30 June 2001, 75 per cent of international passengers used the aerobridge for embarking or disembarking.
Check-in facilities
The quality of check-in facilities at Adelaide Airport was assessed using airline surveys and information provided by the airport operator.
The availability of check-in desks was rated by airlines as ‘poor’ to ‘satisfactory’. It was commented that the number of desks is insufficient for the level of operations and congestion is prone to occur particularly on Sundays and when flights are full.
The standard of check-in desks was also rated from ‘poor’ to ‘satisfactory’. No comments were received.
18 Regulatory Report – Phase II Airports, 2000/01 Adelaide Airport had 12 check-in desks for international departures at 30 June 2001.
Government inspection
The quality of Government inspection at Adelaide Airport was assessed using a survey of ACS and information provided by the airport operator.
ACS rated the availability of adequate areas for circulation and queuing at immigration (arrivals) as ‘very poor’ and commented that the area available is small. Congestion was also noted as a concern in the baggage inspection area and at immigration (departures) desks. ACS considered that the Multi User Integrated Terminal (MUIT) would in time address these problems.
Adelaide Airport consider that the congestion is largely due to the increased role of AQIS.
Security
The operator of Adelaide Airport provided two passenger security clearance systems at 30 June 2001. Gate lounges There were two gate lounges provided in the international terminal at 30 June 2001, compared to one at the end of the previous year. The additional lounge is to service Virgin Blue passengers. A total of 429 seats were available of which 96 were in the lounge for Virgin Blue passengers. Baggage processing facilities
The quality of baggage processing facilities was assessed using airline surveys, a survey of ACS and information provided by the airport operator.
At 30 June 2001 Adelaide Airport had a baggage system in the international terminal and also a system for Virgin Blue.
Airlines rated both the availability and standard of the baggage processing facilities as ‘poor’ to ‘satisfactory’. A comment was that the system for international flights is only adequate for one flight at a time and that congestion occurs with more than one arrival. Flight information displays There were seven flight information displays provided in the international terminal and terminal for Virgin Blue passengers at 30 June 2001. Car parking There were 536 car parking places for the international terminal and 630 places for the domestic terminal at 30 June 2001. Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys and a survey of ACS.
The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. The responses
19 Regulatory Reports - Phase II Airports, 2000/01 from airlines ranged from ‘poor’ to ‘good’. Several airlines commented that requests for additional facilities such as additional signs in the international terminal and installation of a light pole took too long. ACS rated the responsiveness of the airport operator as ‘satisfactory’ and commented that immediate needs are addressed.
Overall, Adelaide Airport consider that airline concerns should be noted in the context that the need for new facilities has been recognised and that there has been long and detailed negotiations regarding the provision of the new MUIT.
1.2 Price cap compliance
This section reports on Adelaide Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Adelaide Airport are subject to a price cap of CPI less an X- factor of 4.0 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent and, given that Adelaide Airport had no carry forward under or over-recovery, it was required to reduce average aeronautical charges by 1.8 per cent.
Using data provided, the Commission assessed whether aeronautical charges at Adelaide Airport were reduced by the required amount for the 2000/01 year. A summary of movements in charges subject to the cap is provided in Table 1.1.
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Table 1.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis 30/6/00 Price change 30/6/01 (incl. GST) Landing Charges: Domestic and international Per landing $/tonne MTOW $4.72 On 1 July 2000, $5.05 (aircraft over 10,000 kg) charges were reduced by 1.8% for CPI-X before being increased by 9.01% for the NTS. Regional and general aviation Per landing $/tonne MTOW $4.72 As above $5.05 (aircraft under 10,000 kg) Regional and general aviation $27.50 On 1 July 2000, $30.00 minimum charge the charge was increased for the NTS. Rotary wing minimum charge $13.75 On 1 July 2000, $15.00 the charge was increased for the NTS. International terminal $/tonne MTOW in addition to $1.05 On 1 July 2000, $1.14 charges general landing charge the charge was increased by 8.5% for the NTS.
Parking charges $/day $11.00 On 1 July 2000, $12.00 the charge was increased for the NTS.
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Table 1.2 provides details of Adelaide Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
Table 1.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base charge Revenue Average Rate Revenue Compliance of units 00/01 charge variation share 00/01 99/00 $8,821,376 $ % % % Landing charges: Domestic and 1,596,149 $4.72 per $7,390,170 $4.63 -1.91% 82.58% -1.57% international 1000 kg MTOW
Regional and 130,617 $4.72 per $605,683 $4.63 -1.91% 6.62% -0.13% general aviation 1000 kg MTOW
Regional and 15,558 $27.50 $424,265 $27.27 -0.84% 5.91% -0.05% general aviation minimum charge
Rotary wing 1,853 $13.75 $25,275 $13.64 -0.80% 0.31% 0.00% minimum charge
International 248,128 $1.05 per $260,535 $1.05 0.00% 3.05% 0.00% terminal 1000 kg charges MTOW
Parking 10,582 $9 $115,448 $10.91 21.22% 1.53% 0.32% charges Actual movement in charges -1.43%
Reduction required to comply with cap CPI-X, 2.2-4.0 -1.8% 0.0% Past Over/Under-recovery -1.8% Over-recovery, 2000/01 0.37%
Total Revenue Over-recovery, 1999/2000 $860
Over-recovery of revenue 2000/01 $32,639
Total Revenue Over-recovery, 2000/01 $33,499 (end)
22 Regulatory Report – Phase II Airports, 2000/01 Based on the above reconciliation, Adelaide Airport reduced charges by 1.43 per cent over the 2000/01 year, against a required reduction of 1.80 percent to comply with the cap. This gave an over-recovery of 0.37 per cent or $32,639. Including the past over- recovery of $860 gave a cumulative over-recovery of $33,499 at the end of the 2000/01 year. Revenues and expenditures for security functions for the year ended 30 June 2001 The price cap regime allows airport operators to ‘pass-through’ to users 100 per cent of the costs related to Government mandated airport security requirements, without those increases affecting compliance with the price cap. Under Direction 20, pursuant to Section 20 of the PS Act, the Commission is directed to allow the airport operator to charge sufficient to recover the direct costs for providing mandated security requirements. Any over or under-recovery of the costs incurred in providing these security functions in a particular year is factored into future charges.
The requirements cover Australian Protective Services, Checked Baggage Screening and Passenger Screening. The sections below show the costs and revenues over the year in the provision of these requirements. Australian Protective Services
Adelaide Airport provided revenue and expenses aggregates for the year showing that it had a net under-recovery of costs $40,112 for Australian Protective Services (APS), as shown in Table 1.3 below. Adelaide Airport set a charge for APS of $0.85 (incl. GST) per tonne over the year.
Table 1.3: Australian Protective Services revenues and costs, 2000/01
Description Amount $
APS revenue, 2000/01 $1,249,808
APS costs, 2000/01 $1,290,500
Under-recovery of costs, 2000/01 $40,692
Over-recovery brought forward $290
Under-recovery, 2001 (end) $40,402
Based on the data provided the Commission was satisfied that Adelaide Airport complied with the APS provisions of the price cap for the 2000/01 financial year.
Passenger Screening
Adelaide Airport under-recovered costs for Passenger Screening over the year by $92,690. A summary is given in Table 1.4 below.
A charge for Passenger Screening of $1.46 (incl. GST) per (international departing) passenger was set over the year.
23 Regulatory Reports - Phase II Airports, 2000/01 Table 1.4: Passenger screening revenues and costs, 2000/01
Description Amount $
Revenue, 2000/01 $308,867
Costs, 2000/01 $401,557
Under-recovery of costs, 2000/01 $92,690
Over/Under-recovery brought forward $0
Under-recovery, 2001 (end) $92,690
Based on the data provided, the Commission is satisfied that Adelaide Airport complied with the provisions of the direction for the 2000/01 financial year.
Checked Baggage Screening
Adelaide Airport over-recovered costs for Checked Baggage Screening over the year by $33,945. A summary is given in Table 1.5 below.
A charge for Checked Baggage Screening of $1.10 (incl. GST) per (international departing) passenger was set over the year.
Table 1.5: Checked baggage screening revenues and costs, 2000/01 (including June 2000)
Description Amount $
Revenue, 2000/01 $142,963
Costs, 2000/01 $109,018
Over-recovery of costs, 2000/01 $33,945
Over-recovery brought forward $0
Over-recovery, 2001 (end) $33,945
Based on the data provided, the Commission is satisfied that Adelaide Airport complied with the provisions of the direction for the 2000/01 financial year.
24 Regulatory Report – Phase II Airports, 2000/01
1.3 Monitoring of aeronautically related services
This section covers the Commission’s role in the monitoring of aeronautically related services at Adelaide Airport for the 2000/01 year.
Adelaide Airport provided cost and revenue data for aeronautically related services for the year ended 30 June 2001. The data is summarised in Tables 1.6 and 1.7.
Car parking rates are provided in Table 1.8.
Table 1.6: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001 Description 2000 2001 ($’000) ($’000)
Refuelling services 1.8 2.4 Aircraft maintenance sites and buildings 238.6 235.3 Cargo facility sites and buildings 57.5 67.1 Ground support equipment sites 1.5 1.5 Check-in counters and related facilities 29.7 19.2 Public car parking 1,460.7 1,336.8 Staff car parking 98.4 99.8 Total aero-related costs 1,888.2 1,762.1
25 Regulatory Reports - Phase II Airports, 2000/01
Table 1.7: Monitored services: aero-related revenues for the year ended 30 June, 2000 and 2001
Description Basis of Charge(s) 2000 2001 ($000) ($000)
Refuelling services $7.03 per square metre 98 98
Aircraft maintenance sites and buildings Sites $11.91 per square metre 306 295 Buildings $40.12 per square metre 472 472
Cargo facility sites and buildings Sites $14.15 per square metre 443 428 Buildings $57.18 per square metre 138 139 Ground support equipment sites $3.53 per square metre 35 35 Check-in counters and related facilities $95.81 per square metre 54 56 Public car parking See Table 1.8 below 4,881 4,962 Staff car parking Permits $36/mth, exclusive bays 377 391 $60/mth Total aero-related revenue 6,805 6,876
Table 1.8: Car Parking Rates at 30 June, 2000 and 2001 Period 2000 2001 (incl. GST) 0–30 mins $ 2.30 $ 2.50 30–60 mins $ 3.70 $ 4.00 60–90 mins $ 5.00 $ 5.50 90–120 mins $ 5.50 $ 6.00 2–3 hours $ 6.50 $ 7.00 3–4 hours $ 7.50 $ 8.20 4–5 hours $ 8.50 $ 9.20 5–6 hours $ 9.50 $ 10.40 6–7 hours $10.50 $11.40 7–8 hours $11.50 $12.60 8–9 hours $12.50 $13.60 9–10 hours $14.00 $15.40 10–24 hours $14.00 $15.40
While revenues tended to exceed costs, it is important to note that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the cost of the lease premium was included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
26 Regulatory Report – Phase II Airports, 2000/01 The Commission has considered the cost and revenue data for aeronautically related services at Adelaide Airport and, at this stage, has seen no need to investigate further.
1.4 Regulatory accounts reporting
This section reports on Adelaide Airport’s financial accounts for the 2000/01 year.
Adelaide Airport lodged its audited regulatory accounts with the Commission on 28 February 2002, outside the required 90 days following the end of the financial year. In other respects, the information provided by Adelaide Airport complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission’s guidelines.
Adelaide Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a loss after tax of $13.3 million was reported. This result was significantly affected by interest expense of $24.6 million.
As at 30 June 2001 Adelaide Airport’s total assets were valued at $454.5 million.
Adelaide Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Adelaide Airport used four main methods of breaking down costs into aeronautical and non-aeronautical. • Area — Adelaide Airport stated that under this allocation costs were distributed to services based on the physical area occupied by the service. • Direct — costs were allocated to the aero related service because of a direct connection between the service and the incurring of the cost. • Value — costs were allocated where the value of income or assets was considered to be the driver. For example, insurance costs were allocated on the replacement value of buildings or credit card merchants costs allocated on the value of credit card income. • Overhead — indirect (overhead) costs were allocated in the proportion that these costs bear to the total of direct costs and costs allocated on area or value.
A summary of the regulatory accounts for Adelaide Airport is provided below.
27 Regulatory Reports - Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 20017
Table 1.9.
Description Audited Aero services Non-aero financial services statements
$’000 $’000 $’000
Revenue Aeronautical revenue 10,355 10,355 Non-aeronautical revenue 28,092 28,092
Total revenue 38,447 10,355 28,092
Expenditure Salaries and wages 4,585 2,671 1,914 Services and utilities 4,764 652 4,112 Consultants and advisors 2,549 1,598 951 General administration 1,693 789 904 Leasing 112 52 60 Property maintenance 890 531 359 Depreciation 6,369 3,481 2,888 Amortisation of land 1,193 766 425 Amortisation of intangibles 4,256 Australian Protective Services costs 1,293 1,293 0
Total expenditure 27,704 11,385 11,613
Operating profit/(loss) 10,743 (1,480) 16,479
Profit or (loss) on disposal of assets 30 14 16
Earnings before interest and tax (EBIT) 10,773 (1,466) 16,495
Interest expense 24,650
Profit before tax (EBT) (13,877)
Tax charge (537)
Profit/(loss) after tax (13,340)
Dividends paid 0 Retained earnings (13,340)
7 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
28 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 20008
Table 1.9a.
Description Audited Aero services Non-aero financial services statements
$’000 $’000 $’000
Revenue Aeronautical revenue 9,867 9,867 Non-aeronautical revenue 39,442 39,442
Total revenue 49,309 9,867 39,442
Expenditure Salaries and wages 1,970 1,001 969 Services and utilities 2,541 383 2,158 Consultants and advisors 1,017 738 279 General administration 1,223 576 649 Leasing 7 3 4 Property maintenance 527 249 278 Depreciation 4,464 2,301 2,163 Amortisation of land 868 559 309 Amortisation of intangibles 2,920 Australian Protective Services costs 1,240 1,240 0 Other costs 6,779 2,190 4,589
Total expenditure 23,556 9,240 11,396
Operating profit/(loss) 25,753 (627) 28,046
Profit or (loss) on disposal of assets (318) (30) (288) Profit or (loss) on disposal of investments 0
Earnings before interest and tax (EBIT) 25,435 597 27,758
Interest expense 32,886
Profit before tax (EBT) (7,451)
Tax charge (320)
Profit/(loss) after tax (7,131)
Dividends paid 0 Retained earnings (7,131)
8 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
29 Regulatory Reports - Phase II Airports, 2000/01
Balance sheet as at 30 June 2001
Table 1.10.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Current assets Cash 3,740 Receivables 1,685 1,087 598 Inter-company current accounts 22,581 Accrued revenue 194 132 62 Other 353 187 166 Total current assets 28,553 1,406 826
Non-current assets Property, plant and equipment 215,179 132,943 82,236 Intangibles 210,753 Other Total non-current assets 454,485 132,943 82,236
Total assets 454,485 134,349 83,062
Current liabilities Creditors 2,123 1,115 1,008 Interest payable 664 Provisions 6 5 1 Other 97 0 97
Total current liabilities 2,890 1,120 1,106
Non-current liabilities Borrowings 430,137
Total non-current liabilities 430,137
Total liabilities 433,027
Net assets/(liabilities) 21,458
Shareholder’s equity Share capital 1,905 Reserves 51,924 Accumulated profits/(losses) (32,371)
Total shareholder’s equity(deficiency) 21,458
Accumulated profit/loss at start of the year (19,031) Movements: Profit/loss for the year (13,340) Accumulated profit/(loss) at the end of the year (32,371)
30 Regulatory Report – Phase II Airports, 2000/01
Balance sheet as at 30 June 2000
Table 1.10a.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Current assets Cash 31,918 Receivables 1,504 Inter-company current accounts 22,979 Accrued revenue 848 1 847 Other 227 0 227 Total current assets 57,476 1 1,074
Non-current assets Property, plant and equipment 212,263 130,897 81,366 Intangibles 206,068
Total non-current assets 367,882 99,046 59,830
Total assets 475,807 130,898 82,440
Current liabilities Creditors 1,439 695 744 Provisions 4 4 0 Other 2,445 1,015 1,430
Total current liabilities 3,888 1,714 2,174
Non-current liabilities Borrowings 437,055
Total non-current liabilities 437,055
Total liabilities 440,943
Net assets/(liabilities) 34,864
Shareholder’s equity Share capital 1,905 Reserves 51,991 Accumulated profits/(losses) (19,032)
Total shareholder’s equity(deficiency) 34,864
Accumulated profit/loss at start of the year (11,901) Movements: Profit/loss for the year (7,131) Accumulated profit/(loss) at the end of the year (19,032)
31 Regulatory Reports - Phase II Airports, 2000/01
Statement of Cash Flows for the year ended 30 June, 2000 and 2001
Table 1.11. Description 2000 2001
Cash flows from operating activities $’000 $‘000 Inflows: Receipts from customers 35,696 37,548 Interest received 1,401 1,216 Outflows: Payments to suppliers and employees 16,966 17,576 Interest paid 17,417 30,667
Net cash flows provided by operating activities 2,714 (9,499)
Cash flows from investing activities Inflows: Proceeds from sale of property, plant and equipment 0 94 Repayment of loans to associated companies 570 228 Outflows: Acquisition of property, plant and equipment 6,931 10,755 Other 08 Net cash flows used in investing activities (6,361) (10,441)
Cash flows from financing activities Inflows: Loans from associated companies 0 221,763 Outflows: Repayment of borrowings 0 230,000 Net cash flows provided by financing activities 0 (8,237)
Cash at beginning of reporting period 35,565 31,918 Net increase/(decrease) in cash held (3,647) (28,177)
Cash at end of reporting period 31,918 3,741
32 Regulatory Report – Phase II Airports, 2000/01
Adelaide Airport regulatory accounts — summary of significant accounting policies This general purpose financial report prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. It is prepared in accordance with the historical cost convention, except for certain items which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. As a result of applying the revised Accounting Standard AASB 1018 Statement of Financial performance, revised AASB Financial Report Presentation and Disclosures and AASB Statement of Financial Position for the first time, a number of comparative amounts were presented or reclassified to ensure comparability with the current accounting period. The transitional provisions of AASB 1041 Revaluation of Non- Current assets have been applied to the property, plant and equipment revalued as at 30 June 2000. These assets are now deemed to be carried at cost. (a) Basis of accounting The financial statements have been prepared on the basis that the Company will continue to operate as a going concern. The Company expects to achieve positive cash flows over the term of the lease but will incur accounting losses for a number of years. The financial statements have been prepared on the basis of historic costs and do not take account of changes in either the general purchasing power of the dollar or in the prices of specific assets. (b) Principles of consolidation The consolidated financial statements include the financial statements of the parent entity, Adelaide Airport Limited, and its controlled entities, referred to collectively throughout these financial statements as the “Economic Entity”. All inter-entity balances and transactions have been eliminated. (c) Stapled securities and loan notes The economic entity and the Company have issued stapled securities comprising a $99 loan note and a $1 ordinary share. The two components of the stapled security cannot be traded separately. The rights of the loan notes are subordinated to all other creditors and distributions to security holders may comprise interest paid on the loan notes and repayment of loan note principal. Under the terms of the Loan Note Deed Poll, the principal of the loan notes is to be repaid at predetermined rates beginning 2033 with full maturity by 2048. Repayments of principal can be made prior to these dates provided there is Net Available Cash after the relevant interest payments are made. The loan notes are classified in the balance sheet as non-current liabilities, because they are a debt instrument. However, as loan notes cannot be traded separately, the balance sheet also discloses the combined amount of equity and loan notes. Distributions to security holders may comprise interest paid on the loan notes, repayment of loan note principal, return of capital and dividends.
The interest rate payable on the loan rates is set out in the Loan Note Deed Poll, however the payment of interest is subject to sufficient cash being
33 Regulatory Reports - Phase II Airports, 2000/01 available to make payment. If the cash is not available, the directors can reduce the interest rate for the payment period. If interest is not paid in the relevant payment period because there is insufficient net cash available, it is permanently foregone under the terms of the Loan Note Deed Poll.
(d) Receivables and borrowings Receivables and borrowings are recorded at their net fair values. A provision is raised for any doubtful debts based on a review of all outstanding amounts at year-end. Bad debts are written off in the year which they are identified. Borrowings are recognised when issued at the amount of the net proceeds received and carried at this amount. Interest on the borrowings is recognised as an expense on an accruals basis. Balances arising from lending and borrowing activities between the company and related entities are repayable on demand. (e) Capitalisation of establishment expenses Establishment expenses, including consultancy costs, formation expenses and establishment costs, incurred as part of obtaining the lease right from the Commonwealth to operate the airports prior to commencement of operations have been capitalised as an intangible asset. The capitalised establishment expenses are subsequently amortised on a straight-line basis over the period which the benefit from the capitalised establishment expenses is expected to arise. Capitalised establishment expenses are carried at the lower of cost and recoverable amount. (f) Income tax Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss account is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is considered to be virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse. The benefit arising from estimated carry forward tax losses is recorded as a future income tax benefit where realisation of such benefit is considered to be virtually certain. (g) Cash For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible into cash on hand and are subject to an insignificant risk of change in value, net of outstanding bank overdrafts. (h) Comparative figures Comparative figures where necessary, have been adjusted to conform to changes in presentation in the current year. (i) Recoverable amount of non-current assets All non-current assets are reviewed at least annually to determine whether their carrying amounts require write down to recoverable amount.
34 Regulatory Report – Phase II Airports, 2000/01 The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values. (j) Revenue recognition Revenue is recognised on an accrual basis. Revenue received in advance is recorded as a liability in the balance sheet and bought to account in the profit and loss account over the period in which the benefit will be derived. Aeronautical revenues comprise landing fees and international terminal charges, based on the maximum take-off weight (MTOW) of aircraft and a recovery of Government mandated security charges. Commercial trading revenues comprise concessionaire rent and other charges received including income from public car parks. Property revenue comprises rental income from airport terminals, buildings and other leased areas. (k) Leased non-current assets A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incident to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. The leased asset is amortised on a straight-line basis over the term of the lease, or where it is likely that the company will obtain ownership of the asset, the life of the asset. Lease assets held at the reporting date are being amortised from five to 15 years. (l) Property, plant and equipment Depreciation is calculated on a straight-line basis to write off the net cost or revalue amount of each item of property, plant and equipment (excluding land) over its expected useful life to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows:
Life Method Land under lease 4–99 years Straight line
Buildings 25 years Straight line
Leasehold improvements: Runways, taxiways and aprons 25 years Straight line existing at 28 May 1998 Runways, taxiways and aprons where completed post 28 May 1998 Base Balance of lease term Straight line Surface 15 years Straight line Roads and car parks 10 years Straight line Fences and gates 8 years Straight line Lighting and visual aids 10 years Straight line Main services 20 years Straight line
Plant and equipment 3–25 years Straight line Computer and other office equipment 2.5–5 years Straight line Furniture and fittings 10–16 years Straight line
35 Regulatory Reports - Phase II Airports, 2000/01
As a result of obtaining the lease right to operate the airport from the Commonwealth, the economic entity obtained the right to use of all property, plant and equipment associated with the airports. Under the lease arrangement with the Commonwealth, all airport land, structures and buildings revert back to the Commonwealth at the end of the 99-year lease term. As a result, all land, structures and buildings are amortised by the economic entity over a period not exceeding 99 years.
(m) Intangible lease right
The agreed purchase price paid to the Commonwealth to obtain the right to operate the airports was in excess of the net fair values of the assets and liabilities acquired at completion date. As a result, the excess of the purchase price over the net fair value of the assets and liabilities on completion date has been recorded as an intangible lease right, representing the premium paid by the economic entity to obtain the right to operate the airports. The directors believe that the expected future cash flows of the airport are sufficient to warrant the recognition of this intangible lease right and it will be amortised on a straight line basis over the 99 year lease right period. The unauthorised balance of the lease right is reviewed each balance date and charged to the profit and loss account to the extent that future benefits from the lease right are no longer probable.
(n) Employee entitlements
Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave and long service leave. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be paid. All on-costs, including payroll tax, workers’ compensation premiums and superannuation are included in the determination of provisions. Long service leave liability is recorded for all employees in excess of five years service and annual leave and long service leave are recorded at their nominal values. (o) Derivative financial instruments The consolidated entity enters into interest rate swap agreements. The net amount receivable or payable under interest rate swap agreements is progressively brought to account over the period to settlement. The amount recognised is accounted for as an adjustment to interest and finance charges during the period and included in other debtors or creditors at each reporting date. When an interest rate swap is terminated early and the underlying hedged transactions are no longer expected to occur as designated, the gains or losses arising on the swap upon its early termination are recognised in the statement on financial performance as at the date of the termination.
36 Regulatory Report – Phase II Airports, 2000/01
(p) Trade and other creditors These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (q) Borrowing costs Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include: • Interest on borrowings; • Amortisation of deferred establishment costs; and • Ancillary costs.
37 Regulatory Reports - Phase II Airports, 2000/01
1.5 Operational statistics
Table 1.12: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers: Domestic 3,613,844 3,876,565 International (excluding transit) 263,098 275,948 International transit 28,446 39,028 Domestic on-carriage 10,000 7,361 Regional 369,532 336,396 Total passengers 4,284,920 4,535,298
Aircraft movements: Regular public transport aircraft movements 76,392 76,450 General aviation aircraft movements 25,774 24,850 Total aircraft movements 102,166 101,300
Total landed tonnes 1,693,913 1,789,851
Average staff equivalents Aeronautical services 35 48 Non- aeronautical services 40 39 Total average staff equivalents 75 87
Area (hectares) Aeronautical services 468 506 Non-aeronautical services 317 279 Total area (hectares) 785 785
38 Regulatory Report – Phase II Airports, 2000/01
2. Alice Springs Airport
Alice Springs Airport is owned and operated by Alice Springs Airport Pty Ltd (ASA), a subsidiary of Northern Territory Airports Pty Ltd (NTA). NTA took over its operation from the Federal Airports Corporation (FAC) in June 1998. NTA paid $110.2 million for a 50-year lease of Alice Springs Airport, Darwin Airport and Tennant Creek Airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Alice Springs Airport. The Commission would like to acknowledge the cooperation received from NTA in providing data and responding to queries that assisted in the preparation of this report.
2.1 Quality of Service Monitoring
Alice Springs Airport caters for domestic, regional and general aviation. Quality of Service Results
The assessment of quality of service results is made having regard to airline surveys, a survey of ACS and additional comments and information made by the airport operator.
Overall, users rated the availability and standard of facilities provided at Alice Springs Airport as ‘satisfactory’. Runways, aprons and taxiways
The quality of runways, aprons and taxiways at Alice Springs Airport were assessed using the results obtained from the airline surveys.
The availability of the runway was rated from ‘satisfactory’ to ‘good’. A comment was that congestion can occur late morning due to delays in inbound traffic.
The standard of the runway was rated as ‘good’.
Aprons were rated as ‘satisfactory’ both in terms of availability and standard. One airline noted congestion can occur at the peak time, late morning, and another noted that the airport is used as a “hub” which leads to the congestion.
Alice Springs Airport had 10 RPT apron positions and an apron area of 37,875 square metres for RPT aircraft parking at 30 June 2001.
Taxiways were rated as ‘satisfactory’ to ‘good’ both in terms of availability and standard. The only comment was that congestion can occur late morning. Gates
The quality of gates at Alice Springs Airport was assessed using information obtained from airline surveys.
The availability of gates at Alice Springs Airport was rated as ‘poor’ to ‘satisfactory’ for availability with congestion late in the morning. The standard of gates was rated
39 Regulatory Reports - Phase II Airports, 2000/01 as ‘satisfactory’ although one airline commented on the length of the walk for passengers from Bay 10 being 370 metres. Ground service equipment storage sites
The quality of ground service equipment storage sites at Alice Springs Airport were assessed using airline surveys.
Ground service equipment storage sites were rated from ‘satisfactory’ to ‘excellent’ both in terms of availability and standard. A comment was that there is presently no room for further expansion.
Security
The airport operator provided one security clearance facility at 30 June 2001. The security clearance facility and remaining facilities noted below were not covered in any survey.
Gate lounges Alice Springs Airport had two gate lounges managed by the airport operator with a total of 292 seats at 30 June 2001. In addition the airport operator provided a further 60 seats in other waiting areas. Baggage processing facilities
The airport operator does not manage the baggage processing facilities but provides an area of 1,273 square metres for these facilities. Flight information displays The airport operator provided 20 public screens at 30 June 2001, one more than at the same time in the previous year.
Car parking
The car park had a total of 138 spaces at 30 June 2001. Of these, 113 were short term, 20 long term and five disabled.
Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. Airlines rated the responsiveness as ‘excellent’ and commented on the improvement under the new management.
40 Regulatory Report – Phase II Airports, 2000/01
2.2 Price cap compliance
This section reports on Alice Springs Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Alice Springs Airport are subject to a price cap of CPI less an X-factor of 3.0 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent, and Alice Springs Airport had a previous under-recovery of 1.46 per cent meaning that it could increase average aeronautical charges by 0.66 per cent.
Using data provided by Alice Springs Airport, the Commission assessed whether aeronautical charges were reduced by the required CPI-X amount over the 2000/01 year. A summary of movements in charges subject to the cap is provided in Table 2.1.
Table 2.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30/6/00 30/6/01 (incl. GST) Landing charges Per landing $/tonne MTOW $5.55 On I July 2000, a CPI-X $6.06 (aircraft over 10 000 kg) reduction of 0.8% was applied plus 10% for the NTS General Aviation Per landing $/tonne MTOW $4.35 On 1 July the itinerant $4.33 charges charge was reduced by CPI-X.
Table 2.2 provides details of Alice Springs Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
41 Regulatory Reports - Phase II Airports, 2000/01
Table 2.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base charge Revenue Average Rate Revenue Compliance of units 00/01 charge variation share 00/01 1999/2000 99/00 $1,566,861 $ % % % Landing charges: Domestic 253,772 $5.54/tonne $1,404,438 $5.53 -0.18% 92.78% -0.17%
General aviation 31,352 $4.35 $162,423 $4.33 -0.05% 7.22% -0.00% charges
Actual movement in average charge (%) -0.17% Increase Allowed to comply with cap CPI – X, 2.2-3.0 -0.80% Past Under-recovery 1.46% 0.66% Under-Recovery 00/01 (%) 0.83%
Total revenue Under-recovery 99/00 $11,563 Under-recovery of revenue 00/01 $13,005 Total Revenue Under-recovery 00/01 (end) $24,568
The above reconciliation is based on revenue and unit data provided by Alice Springs Airport. For 2000/01, Alice Springs Airport decreased charges by 0.17% against being allowed to increase average charges by 0.66%. The allowed increase is after carrying forward a past under-recovery.
At the end of 2000/01 Alice Springs had a cumulative under-recovery of $24,568 after allowing for the carry forward of an under-recovery of $11,563 at the end of the previous year.
Alice Springs Airport has therefore complied with its price cap.
The change in general aviation charges was calculated using the same approach as was adopted in previous years. GA aircraft are defined as up to 10 tonnes maximum take-off weight as non-regular passenger transport aircraft.
Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the airport operator does not have accurate data on the breakdown of the different charging options, assumptions have been made to calculate an average charge for GA users.
To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
42 Regulatory Report – Phase II Airports, 2000/01 Landing charges for the past two years are shown in Table 2.3 below.
Table 2.3: General Aviation Charges, 2000 and 2001
Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Charge ($/Tonne/day) $5.55 $5.51
Monthly ($/tonne) (no licence) $145 $145
Six Months ($/tonne) (no $870 $870 licence)
12 Months ($/tonne) (no $970 $970 licence)
Monthly ($/tonne) (licence) (1) $108.75 $108.75
Six Months ($/tonne) (licence) $652.50 $652.50
12 Months ($/tonne) (licence) $727.5 $727.5
(1) Licence refers to aircraft operators that lease a parking position.
The approach outlined above gave average charges for GA landings of $4.35 in 1999/2000 and $3.94 in 2000/01 (after excluding increases associated with the NTS).
Revenues and expenditures for security functions for the year ended 30 June 2001 The price cap regime allows airport operators to ‘pass-through’ to users 100 per cent of the costs related to Government mandated airport security requirements, without those increases affecting compliance with the price cap. Under Direction 20, pursuant to Section 20 of the PS Act, the Commission is directed to allow the airport operator to charge sufficient to recover the direct costs for providing mandated security requirements. Any over-recovery, or under-recovery, of the costs incurred in providing these security functions in a particular year is factored into future charges. The requirements cover Passenger Screening. The sections below show the costs and revenues over the year in the provision of these requirements. Passenger Screening Passenger screening charges were levied from 1 April 2000. Alice Springs Airport states that refunds for over-recoveries or invoices for under-recoveries are generated on reconciliation of charges and passenger statistics provided by airlines.
Revenues and costs are given in Table 2.4 below.
43 Regulatory Reports - Phase II Airports, 2000/01
Table 2.4: Passenger Screening revenues and costs, 2000/01
Description Amount ($)
Passenger Screening revenue, 2000/01 $369,810
Passenger Screening costs, 2000/01 $369,810
Under/Over-recovery of costs $0
Under/Over-recovery brought forward $0
Under/Over-recovery, 2001 (end) $0
Based on the data provided the Commission is satisfied that Alice Springs Airport complied with the requirements for the 2000/01 financial year.
2.2 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Alice Springs Airport for the 2000/01 year.
Alice Springs Airport provided price, cost and revenue data for aeronautically related services for the year ended 30 June 2001. The data is summarised in Tables 2.5 and 2.6.
Car parking rates for 2000/01 are provided in Table 2.7. Table 2.5: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001 Description 2000 2001 ($) ($)
Aero-related services Refuelling services 71,127 68,531 Aircraft maintenance sites and buildings 182,324 199,832 Ground support equipment sites 71,617 79,010 Freight equipment storage sites 11,372 10,957 Cargo facility sites and buildings 0 0 Check-in counters and related facilities 1,460,321 1,411,478 Public/staff car parking 140,381 137,194
Total aero-related costs 1,937,142 1,907,002
44 Regulatory Report – Phase II Airports, 2000/01 Table 2.6: Monitored services: aero-related revenues for the year ended 30 June, 2000 and 2001
Description Basis of Charge(s) 2000 2001 ($) ($) Aero-related services Refuelling services ($ per square metre) 61,919 61,919
Aircraft maintenance sites and ($ per square metre) 158,720 180,551 buildings
Ground support equipment sites ($ per square metre) 62,346 71,387
Freight equipment storage sites ($ per square metre) 9,900 9,900
Cargo facility sites and buildings ($ per square metre) 0 0
Check-in counters and related facilities ($ per square metre) 1,271,266 1,275,294
Public/staff car parking Per car/per parking bay 122,207 123,957
Total aero-related revenue 1,686,357 1,723,008
Table 2.7: Car parking rates (incl. GST) at 30 June 2001 Short-term car park $2.20 per three hours Period parking 3 hour: $ 33 per six months / vehicle 3 hour: $ 55 per year / vehicle 3 hour: $165 per year for Corporate (includes up to 10 vehicles) Overnight $ 5.50 per night $ 11.00 per weekend $ 33.00 per week $ 55.00 per fortnight $ 82.50 per month $ 11.00 each additional month $ 88.00 per six months /vehicle $132.00 per year/vehicle
Alice Springs Airport increased car parking rates during the 2000/01 financial year for the NTS. It is important to note when viewing monitoring results that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the costs of the lease premium were included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
45 Regulatory Reports - Phase II Airports, 2000/01
2.3 Regulatory accounts reporting This section reports on Alice Springs Airport’s financial accounts for the 2000/01 year.
Alice Springs Airport lodged its audited regulatory accounts with the Commission on 26 February 2002, outside the requirement to lodge within 90 days of the end of the financial year. In other respects, the information provided complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission guidelines.
Alice Springs Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a loss after tax of approximately $2.8 million was reported. This result was significantly affected by interest expense of $3.3 million.
As at 30 June 2001 Alice Springs Airport’s total assets were valued at $25.2 million.
Alice Springs Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Some of the more prominent account items and ‘drivers’ were as follows:
• the allocation of salaries and related on-costs was determined by calculating an overall costing between aeronautical and non aeronautical related service based on employee activity.
• services and utilities were allocated on a proportionate usage function; and
• depreciation (straight line upon estimated useful life) expenses were derived from the function of each asset and allocated to aeronautical or non-aeronautical categories.
A summary of the regulatory accounts for Alice Springs Airport is provided on the following pages.
46 Regulatory Report – Phase II Airports, 2000/01
47 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 20019 Table 2.8.
Description Audited Aero services Non-aero financial services statements
$$ $
Revenue Aeronautical revenue 1,942,053 1,942,053 Non-aeronautical revenue 2,737,956 2,737,956
Total revenue 4,680,009 1,942,053 2,737,956
Expenditure Salaries and wages 853,703 423,608 430,095 Depreciation 1,466,248 1,102,538 363,710 Amortisation 85,516 Service and utilities 477,354 348,396 128,958 Passenger Screening 369,810 369,810 Maintenance 454,406 288,983 165,423 Other costs 476,663 276,961 199,702 Total expenditure 4,183,700
Operating profit/(loss) 496,309
Abnormal items 0
Earnings before interest and tax (EBIT) 496,309
Interest expense 3,284,076 Loss before tax 2,787,767
Income tax charge 0
Loss after tax 2,787,767
Dividends paid 0
Accumulated (loss) 2,787,767
9 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
48 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 200010 Table 2.8a.
Description Audited Aero services Non-aero financial services statements
$$ $
Revenue Aeronautical revenue 1,812,025 1,812,025 Non-aeronautical revenue 2,794,526 2,794,526
Total revenue 4,606,551 1,812,025 2,794,526
Expenditure Salaries and wages 991,138 491,803 499,335 Depreciation 1,436,821 1,094,849 341,972 Amortisation 85,551 Service and utilities 508,115 388,114 140,001 Maintenance 378,978 256,574 122,404 Passenger Screening 161,221 161,221 Other costs 714,401 351,632 362,769 Total expenditure 4,276,225
Operating profit/(loss) 330,325
Abnormal items
Earnings before interest and tax (EBIT) 330,325
Interest expense 3,022,592
Profit/(loss) before tax (2,692,267)
Income tax charge 0
Profit/(loss) after tax (2,692,267)
Dividends paid 0
Accumulated profit/(loss) (2,692,267)
10 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
49 Regulatory Report – Phase II Airports, 2000/01
Balance sheet as at 30 June 2001
Table 2.9.
Description Audited Aero services Non-aero financial services statements $$ $ Current assets
Cash 1,528,262 Receivables 431,893 337,070 94,823 Accrued Revenue 119,977 53,157 66,820 Other 10,000 10,000
Total current assets 2,090,132
Non-current assets Property, plant and equipment 20,049,850 13,590,001 6,459,849 Intangibles 3,083,445
Total non-current assets 23,133,295
Total assets 25,223,427
Current liabilities Creditors 736,272 Provisions 293,765 179,184 114,581
Total current liabilities 1,030,037
Non-current liabilities Borrowings 32,246,514 Provisions 41,735 20,709 21,026
Total non-current liabilities 32,288,249
Total liabilities 33,318,286
Net assets/(liabilities) 8,094,859
Shareholder’s equity Share capital 12 Accumulated profits/(losses) 8,094,871
Total shareholder’s equity 8,094,859
50 Regulatory Report – Phase II Airports, 2000/01
Balance sheet as at 30 June 2000
Table 2.9a.
Description Audited Aero services Non-aero financial services statements $$ $ Current assets
Cash 787,385 Receivables 644,149 220,091 424,058
Total current assets 1,431,534
Non-current assets Property, plant and equipment 21,326,289 14,587,379 6,738,910 Intangibles 3,168,961
Total non-current assets 24,495,251
Total assets 25,926,785
Current liabilities Creditors 462,346 Provisions 332,107 178,676 153,431
Total current liabilities 794,453
Non-current liabilities Borrowings 30,419,447 Provisions 19,977 9,913 10,064
Total non-current liabilities 30,439,424
Total liabilities 31,233,877
Net assets/(liabilities) (5,307,092)
Shareholder’s equity Share capital 12 Accumulated profits/(losses) (5,307,104)
Total shareholder’s equity (5,307,092)
51 Regulatory Report – Phase II Airports, 2000/01
Statement of cash flows for the years ended 30 June, 2000 and 2001 Table 2.10. Description 2000 2001 ($) ($) Cash flows from operating activities
4,263,962 4,794,117 Receipts from customers (2,924,308) (2,379,280 Payments to supplies and employees (3,022,592) (990,669) Borrowing costs 0 (18,742) GST Paid
(1,682,938) 1,405,426 Net cash flows from/used in operating activities
Cash flows from investing activities (136,796) (194,691) Acquisition of property, plant and equipment 7,273 0 Proceeds from property, plant and equipment
(136,796) (187,418) Net cash flows used in investing activities
Cash flows from financing activities 0 (477,131) Proceeds from loan to related parties 1,645,924 0 Proceeds from loan from parent undertaking
1,645, 924 (477,131) Net cash flows provided by financing activities
(173,810) 740,877 Net increase/(decrease) in cash held 961,195 787,385 Cash at beginning of the financial period
Cash at end of financial period 787, 385 1,528,262
52 Regulatory Report – Phase II Airports, 2000/01
Alice Springs Airport regulatory accounts — summary of significant accounting policies This special purpose financial report has been prepared in accordance with the regulatory information requirements. (a) Income tax The economic entity adopts the liability method of tax effect accounting procedures whereby the income tax expense shown in the profit and loss statement is based on the operating profit before income tax adjusted for any permanent differences. The future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse. (b) Foreign currency translation Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date of the transaction. At balance date, amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are brought to account in determining the profit and loss for the year. (c) Revenue Recognition Revenue is recognised when it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Aeronautical Charges Comprises landing fees, based on the maximum take-off weight (MTOW) of the aircraft, and a security charge for the recovery of charges imposed by security contractors. Trading Income Comprises concessionaire rent, overages, outgoings and other charges received including income from public car parks. Property Comprises rent, outgoings and other income from Company owned terminals, buildings and other leased areas. (d) Receivables Trade receivable are recognised and carried at original invoice amount. Recoverability of trade debtors is reviewed on an ongoing basis. Debts, which are known to be unrecoverable, are written off. A general provision for doubtful debts is raised together with a specific provision for debts where recoverability is deemed to be doubtful. Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis.
53 Regulatory Report – Phase II Airports, 2000/01 (e) Acquisition of assets The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental to the acquisition. Where shares are issued on acquisition, the value of the share is determined by reference to the fair value of the asset acquired, including goodwill and other intangible assets where applicable. (f) Recoverable amounts The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is revalued to its recoverable amount. The decrement in the carrying amount is recognised as an expense in the reporting period in which the recoverable amount write-down occurs. The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values using a market determined, risk-adjusted discount rate. (g) Land and buildings and infrastructure, plant and equipment (i) Cost and valuation The cost base assigned to land and buildings and infrastructure, plant and equipment is set out in statement 1.2 and 1.3 (provided to the Commission). (ii) Depreciation and amortisation Infrastructure, plant and equipment (including infrastructure assets under lease) have been depreciated using the straight line method based upon the estimated useful life of the assets to Alice Springs Airport Pty Ltd. Depreciation and amortisation rates used are as follows:
Asset 2000 2001 Runways, taxiways and aprons 4.3% 4.3% Roads and carparks 8.7% 8.7% Fences and gates 12.0% 12.0% Lighting and visual aids 10.0% 10.0% Passenger terminal 4.0-10.0% 4.0-10.0% Buildings 4.0-10.0% 4.0-10.0% Plant and equipment 15.0-20.0% 15.0-20.0% Vehicles 15.0-18.0% 15.0-18.0% Computer equipment 33.3% 33.3%
54 Regulatory Report – Phase II Airports, 2000/01 (iii) Leasehold improvements Leasehold improvements have been amortised over the shorter of the unexpired period of the lease and estimated useful life of the improvements.
(h) Trade and other creditors These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (i) Borrowing costs Borrowing costs are recognised as expenses in the period which they are incurred. Borrowing costs include: • Interest on bank overdraft and loans; • senior and junior debt agents fees; and • ancillary costs incurred in connection with the ongoing conduct of borrowings. (j) Maintenance and repairs Maintenance, repair costs and minor renewals, are charged as expenses as incurred. (k) Employee entitlements Provision has been made for long service leave and annual leave payable to employees on the basis of statutory and contractual requirements. A liability for long service leave is recognised based on employees’ current pay rates and associated on costs in respect of services provided by employees up to the reporting date. When assessing the adequacy of the provision, consideration is given to the present value of these payments after assessing expected future wage and salary levels, experience of employee departure and period of service. In respect of the consolidated entity’s defined benefits superannuation plan, any contributions made to the superannuation funds by entities within the consolidated entity are charged against profits when due. (l) Cash For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of change, net of outstanding bank overdrafts. (m) Deferred expenditure Bid costs The direct costs in the purchase of the airport leases have been capitalised in the period and are being amortised over the 99-year life of the lease. Finance costs The fees incurred in the underwriting of the senior and junior debt have been capitalised in the period and are amortised over 5 years.
55 Regulatory Report – Phase II Airports, 2000/01 The balances of intangible assets are reviewed annually and any balance representing future benefits – the realisation of which is considered to be no longer probable – are written off. (n) Economic Dependency A continuing material dependency exists with the parent entity. The nature of this support is in the form of not calling loans due to the parent by Alice Springs Airport Pty Ltd. (o) Goods and services tax Revenues, expenses and assets are recognised net of the amounts of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
56 Regulatory Report – Phase II Airports, 2000/01
2.4 Operational statistics
Table 2.11: Operational statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers: Domestic N/A N/A
Total passengers11 N/A N/A
Aircraft movements: Regular public transport aircraft movements 13,140 11,820 General aviation aircraft movements 20,050 22,380 Total aircraft movements 33,190 34,200
Total landed tonnes 299,693 285,124
Average staff equivalents Aeronautical services 6.7 6.5 Non- aeronautical services 6.8 6.5 Total average staff equivalents 13.5 13.0
Area (hectares) Aeronautical services 416 1,577 Non-aeronautical services 3,134 1,967 Total area (hectares) 3,550 3,544
11 Passenger numbers have not been provided due to non-provision by airlines and confidentiality requirements.
57 Regulatory Report – Phase II Airports, 2000/01
58 Regulatory Report – Phase II Airports, 2000/01
3. Canberra Airport
Canberra Airport is owned by Canberra International Airport and managed by Capital Airport Group Pty Limited (CAG) who took over its operation from the Federal Airports Corporation (FAC) in May 1998. It paid $66.5 million for a 50-year lease of Canberra Airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Canberra Airport. The Commission would like to acknowledge the cooperation received from CAG in providing data and responding to queries that assisted in the preparation of this report.
3.1 Quality of Service Monitoring
Canberra Airport caters to domestic and regional RPT aircraft. It has a common user domestic terminal catering for new entrants. Quality of Service Results
The assessment of quality of service is made having regard to airline surveys and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Canberra Airport as ‘satisfactory’. Runways, aprons and taxiways
The availability of the runway was rated from ‘satisfactory’ to ‘good’ and as ‘satisfactory’ in terms of standard. CAG commenced an upgrade of the runway during the year.
Canberra Airport had 12 apron positions over an area of 41,732 square metres for aircraft parking at 30 June 2001. Aprons were rated as ‘poor’ to ‘good’ for availability. CAG commented that there were problems with availability prior to an apron extension being provided but that with the extension requirements can be met. It acknowledged that availability may also have been affected during terminal works.
The standard of aprons was rated as ‘satisfactory’.
Taxiways were rated from ‘satisfactory’ to ‘good’ for both availability and standard. A comment was made that the proximity of taxiways to the main apron can lead to delays when aircraft are being pushed back although it should be acknowledged this existed prior to CAG managing the airport. CAG commented that Qantas has an alternative departure route from the RPT apron which would avoid waiting for push- back of other aircraft. Gates
The quality of gates at Canberra Airport was assessed using information obtained from airline surveys.
The availability and standard of gates at Canberra Airport was rated as ‘satisfactory’ to ‘good’. No comments were received from airlines. CAG notes that the number of gates it provided was increased during 2000/01 from four to seven.
59 Regulatory Report – Phase II Airports, 2000/01 Ground service equipment storage sites
The quality of ground service equipment storage sites at Canberra Airport were assessed using airline surveys.
Ground service equipment storage sites were rated from ‘poor’ to ‘good’ by airlines for availability and as ‘satisfactory’ for standard. While an airline commented that with works occurring the location of the sites was not convenient, CAG which leases sites, states that sites needed to be relocated during apron extension works. In addition, CAG states it has not rejected a request for additional area by any airline. Gate lounges
The operator of Canberra Airport provided one gate lounge with 44 seats at 30 June 2001. A further 20 seats were provided in other waiting areas. Under expansion works commenced in 2000/01, seating capacity will be significantly increased. Flight information displays The operator of Canberra Airport provided five flight information display systems in three separate locations at 30 June 2001. It was in the process of implementing a new system at 30 June 2001. Car parking The operator of Canberra Airport provided a total of 936 car parking spaces at 30 June 2001 and during the year constructed covered walkways in the car park area. Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. Airlines gave a rating of ‘satisfactory’ but commented that there was no processes to follow. CAG states that it has not, with the exception of new entrants regarding terminal facilities, been approached by an airline regarding deficiency in the availability of airport infrastructure. Further, it has initiated a formal consultation process with airlines that cover both new projects and to update airlines on planning and operational issues.
3.2 Price cap compliance
This section reports on Canberra Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Canberra Airport are subject to a price cap of CPI less an X- factor of 1.0 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent, and Canberra Airport had a previous under-recovery of 0.28 per cent meaning that it could increase average aeronautical charges by 1.48 per cent.
Using data provided by Canberra Airport, the Commission assessed whether aeronautical charges were reduced in line with the CPI-X price cap over the 2000/01
60 Regulatory Report – Phase II Airports, 2000/01 year. A summary of movements in charges subject to the cap over the 2000/01 year is provided in Table 3.1.
Table 3.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30/6/00 30/6/01 (incl. GST)
Landing charges Per landing per passenger $2.27 per Landing charges $2.49 per (domestic) (aircraft over 10 000 kg) passenger increased from 1 passenger July for the New Tax System. No CPI-X adjustment made General Aviation Per landing $/tonne MTOW $6.05 Charges were $6.62 charges (1) increased on 1 July 2000 for the New Tax System Taxi access Rate per vehicle for $2 No change in $2 parking. charge, the GST from 1 July 2000 was absorbed. Vehicle access $5,000 per Charge $0 vehicle per discontinued. year
(1) See below for discussion of calculation of average charge for General Aviation landings. Table 3.2 provides details of Canberra Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
61 Regulatory Report – Phase II Airports, 2000/01
Table 3.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001 Revenue Description Number Base Average Rate Revenue Compliance 00/01 of units charge charge variation share % $4,886,528 99/00 99/00
Landing charges: Domestic 2,114,173 $2.27 per $4,456,764 $2.11 -7.05% 92.02% -6.48% passenger (1)
General Aviation $6.05 per $429,764 $6.61 10.25% 7.41% 0.49% 1000 kg MTOW Vehicle access 5 $5,000 per $0 $0 -100% 0.57% -0.57% charges space Taxi Parking $2 $416,952(2) $1.81 Charge Actual movement in charges 00/01 -6.56% Increase allowed to comply with cap 1.20% CPI-X, 2.2-1.0 0.28% Past Under-recovery 1.48%
Under-recovery, 2000/01 8.04% Total Revenue Under-recovery 1999/00 $15,559 Under-recovery of revenue, 2000/01 $392,877 Total Revenue Under-recovery 2000/01 (end) $408,436 (1) Revenue from landing charge is after including an allocation of taxi revenue of $380,307 but after the deduction of discounts totalling $723,289. (2) Taxi revenue of $416,952 (excl. GST) has been pro rata allocated to other revenue items.
Based on the above reconciliation Canberra Airport made reduced charges during 2000/01 by an average 6.56% against an allowed increase of 1.48% including past under recoveries. Canberra Airport has therefore complied with the cap.
Taxi revenue has been included for the first time in the calculation of compliance. The amount of taxi revenue has been pro rata allocated to the other components of revenue. This item has been more than offset by discounts to landing charges and meant that, with landing and general aviation charges remaining unchanged except for the NTS adjustments, Canberra Airport under-recovered revenue over the year.
The change in general aviation charges was calculated using the same approach as was adopted in previous years. GA aircraft up to 10 tonnes maximum take-off weight are defined as non-regular passenger transport aircraft.
Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the airport operator does not have accurate data on the breakdown of the different charging options, assumptions have been made to calculate an average charge for GA users.
62 Regulatory Report – Phase II Airports, 2000/01 To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
Landing charges for the past two years are shown in Table 3.3 below.
Table 3.3: General Aviation Charges, 2000 and 2001
Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Landings ($/tonne) $5.34 $5.87
Itinerant Access fees less than 2,500kg $6.00 $6.60 2,500-4,000 kg $7.50 $8.25 4,000-5,700 kg $8.77 $9.65 Over 5,700 kg $10.50 $11.55
The approach outlined above gave average charges for GA landings of $6.05 in 1999/2000 and $6.05 in 2000/01 (after excluding increases associated with the NTS).
63 Regulatory Report – Phase II Airports, 2000/01
3.3 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Canberra Airport for the 2000/01 year.
Canberra Airport provided price, cost and revenue data for aeronautically related services for the year ended 30 June 2001. The data is summarised in Tables 3.4 and 3.5. Canberra Airport also provided the Commission with data relating to the break down of costs for aeronautically related services. The allocation rules supporting this data are referred to in s.3.4 on regulatory accounts reporting.
Car parking rates are provided in Table 3.6. The prices for most car parking at Canberra Airport have not changed since 1997/98, apart from reductions in the rates for parking greater than 3 days (from $10 to $5) and for weekend parking (from $30 to $15). However, the Commission understands that CAG is increasing car parking rates in the 2000/01 financial year. Table 3.4: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001 Description 2000 2001
$ $ Aero-related services Refuelling services 274,660 284,928 Aircraft maintenance sites and buildings 16,190 18,690 Ground support equipment sites 121,056 129,336 Freight equipment storage sites 81,140 88,709 Cargo facility sites and buildings N/A N/A Check-in counters and related facilities N/A N/A Public car parking 377,002 399,502 Staff car parking 40,990 43,761
Total aero-related costs 911,038 964,926
64 Regulatory Report – Phase II Airports, 2000/01 Table 3.5: Monitored services: aero-related revenues for the year ended 30 June, 2000 and 2001 Description Basis of charge(s) 2000 2001
$ $
Aero-related services Refuelling services ($25.44 per square metre) 106,308 142,000 Aircraft maintenance sites and buildings ($15.00 per square metre) 42,849 97,000 Ground support equipment sites ($20.00 per square metre) 39,336 42,000 Freight equipment storage sites ($5.13 per square metre) 37,102 55,000 Cargo facility sites and buildings N/A - - Check-in counters and related facilities N/A - - Public car parking See below 1,784,369 2,182,000 Staff car parking $3.50/day/space 180,305 235,000
Total aero-related revenue 2,190,269 2,753,000
Table 3.6: Car parking rates at 30 June, 2000 and 2001 First Day 2000 2001 0–1 hour $ 1.00 $ 1.00 1–1.5 hours $ 2.00 $ 2.20 1.5–2 hours $ 3.00 $ 3.30 2–4 hours $ 5.00 $ 5.50 4–24 hours $10.00 $13.00 28-48 hours $20.00 $26.00 > 3 days $ 5.00/day $ 6.50/day Weekend Special $15.00 $19.00
While revenues tended to exceed costs, it is important to note that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the costs of the lease premium were included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
65 Regulatory Report – Phase II Airports, 2000/01
3.4 Regulatory accounts reporting
This section reports on Canberra Airport’s financial accounts for the 2000/01 year.
Canberra Airport lodged its audited regulatory accounts with the Commission in the required 90 days following the end of the financial year. The information provided complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission guidelines.
Canberra Airport reported on a year of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a loss after tax of $0.9 million was reported. This result was significantly affected by interest expense of $6.4 million.
As at 30 June 2001 Canberra Airport’s total assets were valued at $192.9 million.
Canberra Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Some of the more prominent account items and ‘drivers’ were as follows:
• labour was allocated according to management estimates of time spent by employees;
• the cost of land excludes an allocation of the purchase price of the land. The costs comprises those costs attached to servicing the land: infrastructure such as water pipes, electricity, cabling, etc. and the cost of maintaining the infrastructure; and
• airport master plan was allocated on a ‘management view of activity’ basis.
A summary of the regulatory accounts for Canberra Airport is provided on the following pages.
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67 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 200112 Table 3.7. Description Audited Aero Non-aero financial services services statements $ ’000 $ ’000 $ ’000
Revenue Aeronautical revenue 5,367 5,367 Non-aeronautical revenue 8,118 8,118
Total revenue 13,485 5,367 8,118
Expenditure Salaries and wages 1,558 1,144 414 Depreciation 2,553 2,155 398 Amortisation 0 Service and utilities 413 311 102 Maintenance 735 689 46 Other costs 2,028 1,328 700
Total expenditure 7,287 5,627 1,660
Operating profit/(loss) 6,198 (260) 6,458
Loss on disposal of assets 429 146 283
Earnings before interest and 5,769 (406) 6,175 tax (EBIT)
Interest expense 6,405
Earnings before tax (636)
Income tax charge 351 Profit/loss after tax (987)
Dividends paid 0
Retained earnings (987)
12 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Profit and loss account for the year ended 30 June 200013
Table 3.7a. Description Audited Aero Non-aero financial services services statements $ ’000 $ ’000 $ ’000
Revenue Aeronautical revenue 4,372 4,372 Non-aeronautical revenue 6,255 6,255 Total revenue 10,627 4,372 6,255
Expenditure Salaries and wages 1,493 1,099 394 Depreciation 2,211 1,928 283 Amortisation of intangibles 0 Service and utilities 303 224 79 Maintenance 529 493 36 Other costs 2,061 1,434 627 Total expenditure 6,597 5,178 1, 419
Operating profit/(loss) 4,030 (806) 4,836
Loss on disposal of assets 310 245 65
Earnings before interest and 3,720 (1,050) 4,771 tax (EBIT)
Interest expense 5,167
Earnings/(loss) before tax (1,447)
Tax charge (749) Profit/(loss) after tax (2,196)
Dividends paid 0
Retained earnings/(loss) (2,196)
13 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Balance sheet as at 30 June 2001
Table 3.8.
Description Audited Aero services Non-aero financial services statements $ ’000 $ ’000 $ ’000 Current assets Cash 7,625 6,753 872 Receivables 1,597 366 1,231 Accrued revenue (74) 0 (74)
Total current assets 9,148 7,119 2,029
Non-current assets Receivables 3,273 0 3,273 Property, plant and equipment 180,088 95,136 84,952 Future Income Tax Benefit 94 14 80 Other 257 231 26
Total non-current assets 183,712 95,381 88,331
Total assets 192,860 102,500 90,360
Current liabilities Creditors 3,840 Borrowings 101,480 Provisions 177 133 44 Deferred Income Tax Liability 297 0 297 Other 5,877 5,877 0
Total current liabilities 111,671
Non-current liabilities Provisions 31 23 8 Total non-current liabilities 31
Total liabilities 111,702
Net assets/(liabilities) 81,158
Shareholder’s equity Share capital 10,000 Reserves 75,111 Accumulated profits/(losses) (3,953)
Total shareholder’s equity 81,158
Accumulated profit/(loss) at the start of the (2,966) year Movements: Profit/(loss) for the year (987) Accumulated profit/(loss) at the end of the year (3,953)
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Balance sheet as at 30 June 2000
Table 3.8a.
Description Audited Aero services Non-aero financial services statements $ ’000 $ ’000 $ ’000 Current assets Cash (250) (161) (89) Receivables 700 419 281 Total current assets 450 258 192
Non-current assets Property, plant and equipment 83,919 56,434 27,485 Future income tax benefits 53 23 30 Other 498 480 18
Total non-current assets 84,470 56,937 27,533
Total assets 84,920 57,195 27,725
Current liabilities Creditors 3,697 Borrowings 967 Provisions 234 215 19 Deferred income tax liability 48 0 48 Other 54 22 32
Total current liabilities 5,000
Non-current liabilities Borrowings 64,844 Provisions 16 12 4 Total non-current liabilities 64,860 Total liabilities 69,860
Net assets/(liabilities) 15,060
Shareholder’s equity Share capital 10,000 Reserves 8,026 Accumulated profits/(losses) (2,966)
Total shareholder’s equity 15,060
Accumulated profit/(loss) at the start of (770) the year Movements: Profit/(loss) for the year (2,196)
Accumulated profit/(loss) at the end (2,966) of the year
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Statement of cash flows for the years ended 30 June, 2000 and 2001
Table 3.9. Description 2000 2001
Cash flows from operating activities ($’000) ($’000) Inflows: Receipts from customers 10,786 18,795 Interest received 65 85 Outflows: Payments to suppliers and employees (4,711) (5,470) Interest paid (5,167) (6,405) Income tax paid (371) (190) Net cash flows from/used in operating activities 602 6,815
Cash flows from investing activities Inflows: Proceeds from sale of property, plant and equipment 16 37 Outflows: Acquisition of property, plant and equipment (5,262) (31,373) Other 0 (3,273)
Net cash flows used in investing activities (5,246) (34,609)
Cash flows from financing activities Inflows: Proceeds from borrowing related entities 3,968 35,669 Other - - Outflows: Net cash flows provided by financing activities 3,968 35,669
Net increase / (decrease) in cash held (675) 7,875 Cash at beginning of the financial period 425 (250)
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Canberra Airport regulatory accounts — summary of significant accounting policies The significant policies which have been adopted in the preparation of Canberra Airport’s Regulatory Accounting Statement are: (a) Basis of accounting The special purpose financial report has been prepared in accordance with the requirements of the regulatory information requirements under Part 7 of the Airports Act and Sections 21 and 27A of the PS Act – Guidelines Version No. 2 – September 1998. This special purpose financial report has been prepared on the basis of historical cost and except where stated, does not take into account changing money values or current valuations of non-current assets. The Canberra International Airport commenced operations on 28 May 1998. The Regulatory Accounting Statements is for the year ended 30 June 2001. (b) Changes in accounting policies The accounting policies adopted are consistent with those of the previous year except for the accounting policies with respect to the revaluation of non- current assets. The consolidated entity has adopted accounting Standards AASB 1041 “Revaluation of Non-Current Assets” and the revised AASB 1010 “Recoverable Amounts of Non-Current Assets”. Under the transitional provisions of these standards, the directors have made the following elections: • Other assets and commercial buildings will continue to be revalued, though this has necessitated a change in the group’s revaluation policy. • Airport buildings and infrastructure which were previously measured at revalued amount will be carried at deemed cost, being the carrying value of these assets at the beginning of the period. Other financial assets, which have previously been revalued, have been adjusted to reflect their original cost of acquisition. Previous increments have been debited to the asset revaluation reserve. (c) Principles of consolidation The special-purpose financial report comprises Canberra Airport Group Pty Limited and Canberra International Airport Pty Limited. The consolidated accounts include the information contained in the financial statements of these entities. All intercompany balances and unrealised surpluses from intraeconomic entity transactions have been eliminated in full. (d) Cash For the purposes of this statement of cash flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. (e) Income tax The Canberra International Airport adopts the liability method of tax effect accounting. Income tax expense is calculated on net profit adjusted for permanent differences between taxable and accounting income. The tax effect of timing
73 Regulatory Report – Phase II Airports, 2000/01 differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the balance sheet as a future income tax benefit or a provision for deferred income tax. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits related to tax losses are not brought to account unless realisation is virtually certain. The tax effect of capital losses is not reduced unless realisation is virtually certain. (f) Recoverable amount Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount, assets are written down. In determining recoverable amount the expected cash flows have not been discounted to their present value using a market determined risk adjusted discount rate. (g) Property, plant and equipment – cost and valuation Other assets and commercial buildings are measured on a fair value basis. At each balance date, the value of each asset in these classes is reviewed to ensure it does not differ materially from the asset’s fair value at that date. Where necessary, the asset is revalued to reflect its fair value. The gain or loss on disposal of all property, plant and equipment, including revalued assets, is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal, and is included in the results of the economic entity in the year of disposal. Certain land and buildings have been subject to revaluation. The revaluation has not taken account of the potential capital gains tax on assets acquired after the introduction of the capital gains tax. (h) Property, Plant and Equipment-Revaluation Other assets and commercial buildings were revalued by the directors as at 30 June 2001. (i) Property, plant and equipment — depreciation Depreciation and amortisation are provided on non-current assets, other than other assets, by charges against income at rates based on the estimated useful life of the respective assets using both the prime cost and reducing balance methods. Asset Depreciation Periods Asset Period Buildings and infrastructure 30–40 years Motor vehicles 4–5 years Plant and equipment 10 years Furniture and fittings 5 years Computer equipment 3 years
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(j) Employees’ entitlements Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used. Employee entitlement expenses and revenues arising in respect of the following categories: • Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and • Other types of employee entitlements are charged against surpluses on a net basis in their respective categories. (k) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Sale of goods Control of the goods has passed to the buyer. Rendering of services Revenue is recognised to the extent that costs have been incurred. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. Dividends Control of a right to receive consideration for the investment in asset is attained, usually evidenced by approval of the dividend at a meeting of the shareholders.
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3.5 Operational statistics
Table 3.10: Operational statistics for the year ended 30 June, 2000 and 2001
Description Number Number 2000 2001
Passengers: Domestic passengers 1,979,872 2,114,173 International Passengers (excluding transit) N/A N/A International transit passengers N/A N/A Domestic on-carriage (1) (1)
Total passengers N/A N/A
Aircraft movements: Regular public transport aircraft movements 38,870 47,924 General aviation aircraft movements N/A 52,530 Total aircraft movements N/A 100,454
Total landed tonnes N/A N/A
Average staff equivalents Aeronautical services 15 21 Non-aeronautical services 7 6 Total average staff equivalents 22 27
Area (hectares) Aeronautical services 264 210 Non-aeronautical services 173 227 Total area (hectares) 437 437
(1) Not disclosed by airlines
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4. Coolangatta Airport Coolangatta Airport is owned and operated by Gold Coast Airport Limited (GCAL) who took over its operation from the Federal Airports Corporation (FAC) in June 1998. GCAL paid $103.6 million for a 50-year lease of the airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Coolangatta Airport and for the first time includes quality of service monitoring. The Commission would like to acknowledge the cooperation received from GCAL in providing data and responding to queries that assisted in the preparation of this report.
4.1 Quality of Service Monitoring
Coolangatta Airport caters for domestic, regional and some international aircraft. Quality of Service Results
The assessment of quality of service is made having regard to airline surveys, a survey of ACS and information made available by the airport operator.
Overall, users generally rated the availability and standard of facilities provided at Coolangatta Airport as ‘poor’ to ‘satisfactory’, although the runway system rated ‘satisfactory’ or above. Runways, aprons and taxiways
The availability and standard of the one runway was rated as ‘good’. It is planned to lengthen the runway to cater for heavier aircraft when weather conditions require take-off to the north.
Aprons were rated as ‘satisfactory’ to ‘good’ by airlines, although a comment was that the international apron not adequate. Coolangatta Airport had 12 apron positions over an area of 69,000 square metres for aircraft parking at 30 June 2001. The airport operator commented that it has plans to perform overlay works on the international apron in the near future,
Taxiways were rated as either ‘poor’ or ‘good’ by airlines with one considering that an alternate exit was required from the southern end. The standard was rated as ‘satisfactory’ or ‘good’. According to the airport operator, maintenance has been conducted on Taxiway Alpha which has required closures and a re-sheet of the taxiway is planned during the 2002/03 year. Future planning includes a taxiway loop at the south of the runway. Gates
The quality of gates at Coolangatta Airport was assessed using information obtained from airline surveys.
The availability and standard of gates at Coolangatta Airport was rated as ‘satisfactory’. A comment was that while the facilities are adequate for the current level of operations there can be congestion between 1000 and 1300 hours. The airport
77 Regulatory Report – Phase II Airports, 2000/01 operator commented that this is a consequence of scheduling by domestic airlines and that for international flights there are more than sufficient gates for current operations. Ground service equipment storage sites
The quality of ground service equipment storage sites at Coolangatta Airport were assessed using airline surveys.
Ground service equipment storage sites were rated as ‘satisfactory’ to ‘good’ by airlines for availability and standard. No comments were received. The airport operator considers the international storage sites satisfactory but will consider the area any its terminal redevelopment program.
Check-in facilities
The quality of check-in facilities at Coolangatta Airport was assessed using airline surveys and information provided by the airport operator.
The operator of Coolangatta Airport provided four check-in desks at 30 June 2001.
For the airline that used these facilities, a rating of ‘very poor’ was given for availability and a rating of ‘poor’ for standard. The airport operator commented that counters were available for use when required and there were no problems reported. It also noted that airlines will not pay for further facilities and that what is provided is considered in any case to be adequate.
Government inspection
The quality of Government inspection at Coolangatta Airport was assessed using a survey of ACS and information provided by the airport operator.
ACS rated the availability and standard of inbound immigration facilities as ‘satisfactory’ and comment they are just adequate for the current passenger numbers.
The outbound facilities were rated as ‘good’ for both availability and standard.
The availability of arrivals facilities, covering areas for circulation and queuing availability of lighting and signage, was rated as ‘satisfactory’ and the standard of the facilities as ‘good’.
The airport operator commented that the facilities were provided in consultation with ACS and that recent additional inspection requirements have imposed a need for additional facilities but that funding has not been provided to date at the airport.
Security The operator of Coolangatta Airport provided one passenger security clearance facility at 30 June 2001. Security clearance was not covered in a survey.
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Gate lounges The operator of Coolangatta Airport provided one gate lounge with 64 seats at 30 June 2001. Further seating for 50 people was also provided in other waiting areas. The availability and standard of these facilities was not covered in surveys.
Baggage processing facilities
The quality of baggage processing facilities was assessed using airline surveys, a survey of ACS and information provided by the airport operator.
A manual baggage system was provided by the operator of Coolangatta Airport at 30 June 2001.
An airline rated the availability and standard of the baggage processing facilities as ‘very poor’ and ‘poor’ respectively.
The airport operator commented that equipment used is new and that scheduled maintenance is being undertaken. Further, it has not received any complaints.
Car parking The operator of Coolangatta Airport provided 648 car parking spaces at 30 June 2001. Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys and a survey of ACS. Airlines rated the airport operator’s performance in addressing airline concerns on quality related issues as ‘good’. Comments were made that senior management responded in a timely way to concerns and that there was a good relationship.
4.2 Price cap compliance
This section reports on Coolangatta Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Coolangatta Airport are subject to a price cap set at CPI less an X-factor of 4.5 per cent per annum. The relevant CPI-X figure for the 2000/01 financial year was 2.2 per cent, and Coolangatta Airport had a previous under- recovery of 0.71 per cent meaning that it was required to reduce average aeronautical charges by 1.59 per cent.
Using data provided by Coolangatta Airport, the Commission assessed whether aeronautical charges were reduced in line with the CPI-X price cap over the 2000/01 year. A summary of movements in charges subject to the cap over the 2000/01 year is provided in Table 4.1.
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Table 4.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30/6/00 30/6/01 (incl. GST) Landing charges Per landing $/tonne MTOW $5.32 Charges increased from 1 $5.70 (domestic, RPT (aircraft over 10,000 kg) July 2000 for the New Tax and international) System after a CPI-X decrease of 2.3%. GAIT charges (1) $/tonne per 1,000 kg $4.05 Charges increased from 1 $4.05 MTOW under 10,000 kg July 2000 for the New Tax System
(1) See below for discussion of calculation of average charge for General Aviation landings. Table 4.2 provides details of Coolangatta Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
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Table 4.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base charge Revenue Average Rate Revenue Compliance of units 00/01 charge variation share % 00/01 99/00 $3,677,587 Landing charges: Domestic 638,187 $5.32 per 1000 $3,299,427 $5.17 -2.82% 92.08% -2.62% kg MTOW
International 11,126 $5.32 per 1000 $57,855 $5.20 -2.26% 1.02% -0.02% kg MTOW
General $4.05 per 1000 $145,928 $3.98 -1.73% 2.96% -0.05% aviation kg MTOW under 10 000 kg
RPT 31,611 $5.32 per 1000 $164,377 $5.20 -2.26% 3.94% -0.09% kg MTOW over 10,000 kg Actual movement in charges 00/01 -2.78% Reduction required to comply with cap CPI – X, 2.2-4.5 -2.3% Past Under-recovery 0.71% -1.59% Under-recovery, 2000/00 1.19% Total Revenue Over-recovery 1999/00 $88,931 Under-recovery of revenue 2000/01 $43,763 Total Revenue Over-recovery 2000/01 $45,168 (end)
In 2000/01 Coolangatta Airport lowered average charges by 2.78% against a required reduction of 1.59%. The under-recovered revenue amounted to $43,763 and the cumulative over-recovery was reduced to $45,168.
The above reconciliation is based on revenue and unit data provided by Coolangatta Airport. The change in General Aviation (GA) charges was calculated using the same approach as was adopted in previous years. GA aircraft up to 10 tonne maximum take-off weight are defined as non-regular passenger transport aircraft. Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the airport operator does not have accurate data on the breakdown of the different charging options, assumptions have been made to calculate an average charge for GA users.
To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily
81 Regulatory Report – Phase II Airports, 2000/01 average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
Landing charges for the past two years are shown in Table 4.3 below. Table 4.3: General Aviation Charges, 2000 and 2001 Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Charge ($/Tonne/day) $5.34 $5.86
Monthly ($/tonne) $112 $129
Six Months ($/tonne) $490 $537
12 Months ($/tonne) $702 $769
The approach outlined above gave average charges for GA landings of $4.05 in 1999/2000 and $4.05 in 2000/01 (after excluding increases associated with the NTS). Revenues and expenditures for security functions for the year ended 30 June 2001 The price cap regime allows airport operators to ‘pass-through’ to users 100 per cent of the costs related to Government mandated airport security requirements, without those increases affecting compliance with the price cap. Under Direction 20 pursuant to Section 20 of the PS Act, the Commission is directed to allow the airport operator to charge sufficient to recover the direct costs for providing mandated security requirements. Any over-recovery, or under-recovery, of the costs incurred in providing these security functions in a particular year is factored into future charges. The requirements cover Australian Protective Services. The sections below show the costs and revenues over the year in the provision of these requirements.
Australian Protective Service revenue and expenditure reconciliation for the year ended 30 June 2001
Coolangatta Airport supplied the following information in Table 4.4 relating to the recovery of revenue from APS charges for the 2000/01 year: Table 4.4. Australian Protective Services revenues and costs, 2000/01
Description Amount $
APS revenue, 2000/01 $643,149
APS costs, 2000/01 $738,000
Under-recovery of revenue, 2000/01 $94,851
Over-recovery brought forward $2,473
Under-recovery, 2001 (end) $92,378
82 Regulatory Report – Phase II Airports, 2000/01 Based on the data provided, the Commission is satisfied that Coolangatta Airport complied with the provisions of the direction for the 2000/01 financial year.
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4.2 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Coolangatta Airport for the 2000/01 year.
Coolangatta Airport provided price, cost and revenue data to the Commission for the year ended 30 June 2001. This data is summarised in Tables 4.5 and 4.6.
Car parking rates are provided in Table 4.7. Table 4.5: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001.
Description 2000 2001 ($’000) ($’000) Refuelling services 36.0 26.0 Aircraft maintenance sites and buildings 488.4 418.0 Cargo facility sites and buildings 0 0 Ground support equipment sites 0 0 Check-in counters and related facilities 0 0 Public car parking 216.0 0 Staff car parking
Total aero-related costs 740.4 444.0
Table 4.6: Monitored services: aero-related revenues for the year ended 30 June, 2000 and 2001.
Description Basis of charge(s) 2000 2001 ($’000) ($’000) Refuelling services ($ per square metre) 33.8 24.6 Aircraft maintenance sites and buildings ($ per square metre) 458.5 393.2 Cargo facility sites and buildings ($ per square metre) 0 0 Ground support equipment sites ($ per square metre) 0 0 Check-in counters and related facilities ($ per square metre) 0 0 Public car parking * ($ per hour) 1,016.6 960.7 Staff car parking $per week/$per sq metre
Total aero-related revenue 1,508.9 1,378.5 * Car Parking rates in Table 4.7 below
Table 4.7: Car parking rates at 30 June, 2000 and 2001
Period 2000 2001 Short term 0–30 mins $ 1.50 $2.20 30 mins–1 hour $ 1.00 $3.30 1–2 hours $ 1.00 $4.40 Thereafter $ 1.00 per hour $1.10 per hour Long term 1st day $10.00 $13.20 2 nd day $10.00 $13.20 Extra days $ 5.00 $9.00
84 Regulatory Report – Phase II Airports, 2000/01 4.3 Regulatory accounts reporting This section reports on Coolangatta Airport’s financial accounts for the 2000/01 year.
The information was provided on 8 November, outside the 90 days after the end of the financial year. In other respects, the information provided by Coolangatta Airport in its audited regulatory accounts complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission’s guidelines.
Coolangatta Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport a loss after interest and tax of $1.6 million was reported.
As at 30 June 2001 Coolangatta Airport’s total assets were valued at $129.9 million.
Coolangatta Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Some of the more prominent account items and ‘drivers’ were as follows: • allocation of costs relating to land and intangible assets were based on area; and
• costs for other assets were based on position or majority usage factors.
A summary of the regulatory accounts for Coolangatta Airport is provided on the following pages.
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Profit and loss account for the year ended 30 June 200114
Table 4.7.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Revenue Aeronautical revenue 5,258 5,258 Non-aeronautical revenue 6,592 3,108 3,484
Total revenue 11 850 8,366 3,484
Expenditure
Salaries and wages 1,315 785 530 Depreciation 2,317 1,457 860 Services and utilities 757 93 664 Australian Protective Service costs 738 733 5 Other costs 2,988 1,478 1,510
Total expenditure 8,548 4,758 3, 790
Earnings before interest and tax (EBIT) 3,302 3,608 (306)
Interest received 850 Interest expense (5,716)
Earnings before tax (1,564)
Tax charge 0
Profit/(loss) after tax (1,564)
Dividends paid 0
Retained earnings (1 564)
14 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Profit and loss account for the year ended 30 June 200015
Table 4.7a.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Revenue Aeronautical revenue 6,820 5,804 0 Non-aeronautical revenue 5,573 3,593 2,996
Total revenue 12,393 9,397 2 996
Expenditure Salaries and wages 1,287 792 495 Depreciation and amortisation 2,695 1,618 1,077 Services and utilities 682 111 571 Australian Protective Service costs 725 725 0 Property maintenance 695 599 96 Other costs 3,066 1,602 1,464
Total expenditure 9,150 5,447 3,703
Earnings before interest and tax (EBIT) 3,243 3,950 (707)
Interest received 882 Interest expense (6,134)
Earnings/(loss) before tax (2,009)
Tax charge 0
Profit/(loss) after tax (2,009)
Dividends paid 0
Retained earnings/(loss) (2,009)
15 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Balance sheet as at 30 June 2001
Table 4.8.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 14,632 Inventories 1 0 1 Receivables 794 554 240 Accrued revenue 381 109 272 Other 164 57 107
Total current assets 15,972 720 620
Non-current assets Property, Plant and Equipment 113,968 61,374 52,594
Total non-current assets 113,968 61,374 52,594
Total assets 129,940 62,094 53,214
Current liabilities Creditors 1,024 Borrowings Other Unearned revenue 1,118 Provisions 24
Total current liabilities 2,166
Non-current liabilities Borrowings 133,513
Total non-current liabilities 133,513
Total liabilities 135 679
Net assets/(liabilities) (5,739)
Shareholder’s equity Share capital 615 Reserves Accumulated profits/(losses) (6,354)
Total shareholder’s equity (5,739)
Accumulated profit/loss at the start of the year (4,790) Movements: Profit/loss for the year (1,564)
Accumulated profit/loss at the end of the (6,354) year
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Balance sheet as at 30 June 2000
Table 4.8a.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 15,825 Receivables 750 517 233 Accrued revenue 442 220 222 Other 123 52 71
Total current assets 17,140 789 526
Non-current assets Property, Plant and Equipment 114,941 62,038 52,903
Total non-current assets 114,941 62,038 52,903
Total assets 132,081 62,827 53,429
Current liabilities Creditors 2,179 Other Unearned revenue 1,198 Provisions 14
Total current liabilities 3,391
Non-current liabilities Borrowings 132,865
Total non-current liabilities 132,865
Total liabilities 136,256
Net assets/(liabilities) (4,175)
Shareholder’s equity Share capital 615 Reserves 0 Accumulated profits/(losses) (4,790)
Total shareholder’s equity (4,175)
Accumulated profit/(loss) at the start of the (2,781) year Movements:
Profit/(loss) for the year (2,009)
Accumulated profit/(loss) at the end of the (4,790) year
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Statement of cash flows for the years ended 30 June, 2000 and 2001
Table 4.9. Description 2000 2001
Cash flows from operating activities $‘000 $‘000 Inflows: Receipts from customers 12,235 11,202 Interest received 4,647 4,972 Outflows: Payments to suppliers and employees (5,887) (6,050) Interest paid (9,130) (10,608)
Net cash flows from/used in operating activities 1,865 (484)
Cash flows from investing activities Outflows: Acquisition of property, plant and equipment (3,096) (1,064) Other 0 (294)
Net cash flows used in investing activities (3,096) (1,358)
Cash flows from financing activities Inflows: Proceeds from borrowings 0 648 Net cash flows provided by financing activities 648 Net increase / (decrease) in cash held (1,231) (1,194)
Cash at beginning of financial period 17,056 15,825
Cash at end of financial period 15,825 14,631
92 Regulatory Report – Phase II Airports, 2000/01
Coolangatta Airport regulatory accounts — summary of significant accounting policies This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. As a result of applying the revised Accounting Standard AASB 1018 Statement of Financial Performance, revised AASB 1034 Financial Report Presentation and Disclosures and AASB 1040 Statement of Financial Position for the first time, a number of comparative amounts were presented or reclassified to ensure comparability with the current reporting period.
(a) Stapled securities GCAL has issued stapled securities, which comprise a $99 loan note and a $1 ordinary share. The two components of the stapled security cannot be traded separately. The loan notes are classified in the balance sheet as non-current liabilities, because they are principally a debt instrument. However as loan notes cannot be traded separately, the balance sheet also discloses the combined amount of equity and loan notes. Distributions to security holders may comprise interest paid on loan notes, repayment of loan note principle, return of capital and dividends. (b) Receivables All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition. Collectability of trade debtors is reviewed on an ongoing basis. Debts known to be uncollectable are written off. A provision for doubtful debts is raised when some doubt as to collection exists and in any event when the debt is more than 90 days overdue. (c) Capitalisation of preliminary expenses Preliminary expenses, including consultancy costs, formation expenses and establishment costs, incurred as part of obtaining the lease right from the Commonwealth to operate the airports prior to commencement of operations have been capitalised as an intangible asset. The capitalised expenses are subsequently amortised on a straight-line basis over the period over which the benefit from the capitalised preliminary expenses is expected to arise. Capitalised preliminary expenses are carried at the lower of cost and recoverable amount. (d) Loan notes The loan notes are described in the Loan Note Deed Poll as unsecured as defined under section 1045 of the Corporations Act 2001. Interest on the loan
93 Regulatory Report – Phase II Airports, 2000/01 notes will be paid only if there is sufficient net available cash as defined in the Loan Note Deed Poll to the fund distribution. Under the terms of the Loan Note Deed Poll, the principal on the loan notes is to be repaid at predetermined rates beginning in 2033 with full maturity by 2048. Repayments of principal can be made prior to these dates provided there is net available cash after the relevant interest payments are made. (e) Income tax Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss statement is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. (f) Cash flows For the purposes of the statements of cash flows, cash includes cash on hand, deposits held at call with banks and investments in money market instruments, net of bank overdrafts. (g) Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period. (h) Recoverable amounts of non-current assets The recoverable amount of an asset is the net amount expected to be recover through the cash inflows and outflows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write-down occurs. The expected net cashflows included in determining recoverable amounts of non-current assets have not been discounted. (i) Revenue recognition Amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised on an accrual basis. Revenue received in advance is recorded as a liability in the balance sheet and brought to account in the profit and loss over the period which the benefit will be derived. Aeronautical revenues comprise landing fees and international terminal charges, based on the maximum take-off weight (MTOW) of aircraft and a security charge for the recovery of charges imposed by Australian Protective Services. Commercial trading revenue comprises concessionaire rent and other charges received including income from public car parks and car rental agencies. Property revenue comprises revenue from airport terminals, buildings and other leased assets.
94 Regulatory Report – Phase II Airports, 2000/01 (j) Property, plant and equipment Land held under lease and leasehold improvements are carried at cost or Directors’ valuation. As a result of obtaining the lease right to operate the airports from the Commonwealth, the Company obtained the right to use of all property, plant and equipment associated with the airport. Upon acquisition, this property, plant and equipment has been recorded by the Company at the previous written down values recorded by the Commonwealth on completion date. The Directors believed that the written down value of the property, plant and equipment at that date reflected the recoverable value of those non-current assets. Under the lease arrangement with the Commonwealth, all airport land, structures and building revert back to the Commonwealth at the end of the 99 year lease term. As a result, all leasehold land is amortised by the company over a period not exceeding 99 years. Buildings, structures, property, plant and equipment are depreciated over their useful economic lives as follows:
Asset Life Method Land under Lease 99 years Prime Cost
Leasehold improvements: Runways, taxiways and aprons 25 years Prime Cost Roads and car parks 10 years Prime Cost Fences and gates 5 - 40 years Prime Cost Lighting and visual aids 6.7 – 20 years Prime Cost Other permanent buildings 6.7 – 25 years Prime Cost Main services 6.7 – 20 years Prime Cost Plant and equipment 5 – 20 years Prime Cost Motor vehicles 6.7 years Prime Cost Computer equipment 3 – 5 years Prime Cost Furniture and fittings 3 – 10 years Prime Cost
(k) Revaluation of non-current assets The revised AASB 1041: Revaluation of Non-Current assets issued in July 2001, has been adopted early for the year ended 30 June 2001 in accordance with a written election by the directors under subsection 334 of the Corporations act 2001. (l) Borrowing Costs Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets.
Borrowing costs include: • interest on long-term borrowings; • amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and • finance lease charges.
95 Regulatory Report – Phase II Airports, 2000/01 (m) Intangible lease asset The agreed purchase price paid to the Commonwealth to obtain the right to operate the airport was in excess of the net fair values of the assets and liabilities acquired at completion date. As a result, the excess of the purchase price over the net fair value of the assets and liabilities on completion date has been recorded as an intangible Lease Right, representing the premium paid by the economic entity to obtain the right to operate the airport. The Directors believe that the expected future cash flows of the airport are sufficient to warrant the recognition of this Intangible Lease Right and it will be amortised on a straight-line basis over the 99 year lease right period. The unamortised balance of the lease right is reviewed each balance date and charged to the profit and loss account to the extent that future benefits from the lease right are no longer probable. (n) Employee entitlements Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave and long service leave. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be paid. The Company directly employs only three staff members, with the balance of staff members employed by the operations service provider, Serco Australia Pty Limited, which on-charges GCAL for employee entitlement costs. Long service leave liability is recorded for all direct employees in excess of five years service and annual leave and long service leave are recorded at their nominal values. (o) Derivatives The Company is potentially exposed to changes in interest rates from their activities although it uses interest rate swaps to hedge credit risks. Derivative financial instruments are not held for speculative purposes. Interest payments and receipts under interest rate swap contracts are recognised on an accruals basis and included in interest expense during the period. (p) Trade and other creditors These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (q) Maintenance and repairs Plant and other assets of the company are required to be overhauled or refurbished on a regular basis. This is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in accordance with note (j). Other routine operating maintenance, repair costs and minor renewals are charged as expenses as incurred. (r) Rounding of amounts The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the “rounding
96 Regulatory Report – Phase II Airports, 2000/01 off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. (s) Investments Interest in common controlled entities are recorded as non-current assets and are stated at the lower of cost and recoverable amount. Since the Company’s share of the results of common controlled entities is not material, a supplementary equity statement is not included.
97 Regulatory Report – Phase II Airports, 2000/01
4.5 Operational statistics
Table 4.10: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers: Domestic 1,931,709 1,862,410 International passengers (excluding transit) 21,462 33,760 International transit passengers 0 0 Domestic on-carriage 0 0 Total passengers 1,953171 1,896,170
Aircraft movements: Regular public transport aircraft movements 20,930 20,206 General aviation aircraft movements 65,346 48,392 Total aircraft movements 86,276 68,598
Total landed tonnes 777,174 726,060
Average staff equivalents Aeronautical services 16 17 Non-aeronautical services 10 13 Total average staff equivalents 26 30
Area (hectares) Aeronautical services 186.2 186.2 Non-aeronautical services 197.4 197.4
Total area (hectares) 383.6 383.6
98 Regulatory Report – Phase II Airports, 2000/01
5. Darwin Airport
Darwin Airport is owned and operated by Darwin International Airport Pty Ltd (DIA) a subsidiary of Northern Territory Airports Pty Ltd (NTA). NTA took over operation of Darwin Airport from the Federal Airports Corporation (FAC) in June 1998. It paid $110.2 million for a 50-year lease of Darwin Airport, Alice Springs Airport and Tennant Creek Airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Darwin Airport. The Commission would like to acknowledge the cooperation received from NTA in providing data and responding to queries that assisted in the preparation of this report.
5.1 Quality of Service Monitoring
Darwin Airport caters for domestic and international aircraft. Quality of Service Results
The assessment of quality of service is made having regard to airline surveys, a survey of ACS and additional comments and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Darwin Airport as ‘satisfactory’. Runways, aprons and taxiways
The availability of runways was rated from ‘good’ to ‘excellent’ and the standard from ‘satisfactory’ to ‘excellent’.
A comment was that there were few delays and standards were maintained.
The availability of aprons was rated as ‘satisfactory’. A comment was that there is congestion due to mix of RPT and GA aircraft but that the airport operator is developing plan to alleviate the problem. The standard of aprons was rated as ‘good’.
Darwin Airport had 10 apron positions for RPT aircraft parking covering an area of 5,394 square metres at 30 June 2001.
Taxiways were rated as ‘good’ for both availability and for standard. No comments were received from airlines. Gates
The quality of gates at Darwin Airport was assessed using information obtained from airline surveys.
The availability of gates at Darwin Airport was rated as ‘poor’ to ‘satisfactory’. The standard of gates was rated ‘satisfactory’ to ‘good’. Ground service equipment storage sites
The quality of ground service equipment storage sites at Darwin Airport were assessed using airline surveys.
99 Regulatory Report – Phase II Airports, 2000/01 Ground service equipment storage sites were rated from ‘poor’ to ‘satisfactory’ for both availability and standard. It was commented that the sites had not been designed for the type of wide-bodied aircraft now using the airport and that generally there is a lack of space. Freight equipment storage sites
The quality of freight equipment storage sites were assessed using airline surveys. Freight equipment storage sites were rated from ‘poor’ to ‘good’ airlines for availability and from ‘satisfactory’ to ‘good’ in terms of standard. No comments were received. Aerobridges
The quality of aerobridges at Darwin Airport was assessed using airline surveys and information provided by the airport operator.
Airlines rated both the availability and standard of aerobridges from ‘very poor’ to ‘satisfactory’. Comments were that that there simply are insufficient aerobridges although it was acknowledged that this will be addressed through an upgrade of the terminal. Darwin Airport had three aerobridges at 30 June 2001. Data was not available on the number passengers who used an aerobridge for embarking or disembarking. Government inspection
The quality of Government inspection at Darwin Airport was assessed using a survey of ACS and information provided by the airport operator.
ACS rated the availability of adequate areas for circulation and queuing at immigration (arrivals) as ‘poor’. The standard of facilities was rated as ‘satisfactory’. ACS commented that the airport limited capacity in relation to the recent growth in passenger numbers.
ACS also rated the availability of lighting, signage, desks and passenger facilities for immigration (arrivals) as ‘poor’ both in terms of availability and standard. It commented that there are problems with congestion with a lack of passenger privacy. The airport operator commented that on its observation the facilities do not appear to be fully staffed and that with increased staffing queues would reduce. The availability and standard of outbound immigration facilities was also rated as ‘poor’. Security
Darwin Airport had two passenger security clearance systems at 30 June 2001. Gate lounges Darwin Airport had two airport operator managed gate lounges with a total of 832 seats comprising 244 international, 300 domestic and 288 bar and café seats. One airline commented that the lounges are not large enough to handle multi international departures.
100 Regulatory Report – Phase II Airports, 2000/01 Baggage processing facilities
The quality of baggage processing facilities was assessed using airline surveys, a survey of ACS and information provided by the airport operator.
Airlines rated the availability and standard of the baggage processing facilities as ‘satisfactory’ for both availability and standard. The comment was made that there are very few cases of mishandled baggage.
At 30 June 2001 Darwin Airport had an automated baggage system. Flight information displays Darwin Airport 22 flight information displays in 14 locations at the airport at 30 June 2001.
Car parking and kerbside access Darwin Airport had 585 car spaces comprising 564 short term, 12 long term and nine disabled at 30 June 2001. Consultation with airlines
The Quality of the airport operator’s consultation procedures were assessed through airline surveys and a survey of ACS. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. The responses from airlines ranged from ‘satisfactory’ to ‘excellent’. One airline and also ACS commented that under new management from February 2001 there has been an improvement in consultation. Another commented that the new owner and management are trying to address problems.
5.2 Price cap compliance
This section reports on Darwin Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Darwin Airport are subject to a price cap of CPI less an X- factor of 3.0 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent, and Darwin Airport had a previous under-recovery of 1.67 per cent meaning that average aeronautical charges at Darwin Airport could be increased by 0.87 per cent.
Using data provided by Darwin Airport, the Commission assessed aeronautical charges were reduced in line with the CPI-X price cap over the 2000/01 year. A summary of movements in charges subject to the cap is provided in Table 5.1.
101 Regulatory Report – Phase II Airports, 2000/01
Table 5.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30/6/00 30/6/01 (incl. GST) Landing charges: - Domestic Per landing / $ per tonne $5.55 On 1 July a CPI-X reduction MTOW was applied before adding $6.06 10% for the NTS. -International Per landing/ $ per tonne $5.55 On 1 July a CPI-X reduction $6.06 MTOW was applied before adding 10% for the NTS. -General aviation Per landing $/tonne MTOW $4.35 On 1 July the itinerant $4.33 charge was reduced by CPI-X. International Per landing $/tonne MTOW $1.02 On 1 July the charge was $1.11 Terminal Charge adjusted for the NTS.
Table 5.2 provides details of Darwin Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
102 Regulatory Report – Phase II Airports, 2000/01
Table 5.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base charge Revenue Average Rate Revenue Compliance of units 00/01 charge variation share 00/01 99/00 $4,746,658 % Landing charges: Domestic 351,756 $5.55 per 1,000 $1,970,682 $5.60 0.90% 45.47% 0.41% kg MTOW
International 361,833 $5.50 per 1,000 $2,016,545 $5.57 1.27% 39.87% 0.51% kg MTOW
General aviation 88,117 $4.35 per 1,000 $404,011 $4.33 -0.05% 8.11% -0.00% kg MTOW
International 352,524 $0.99 per 1,000 $355,421 $1.01 1.71% 6.55% 0.11% terminal kg MTOW charges Actual increase in average charges 1.03% Increase allowed to comply with cap CPI-X, 2.2-3.0 -0.8% Past Under-recovery 1.67% 0.87% Over-recovery, 2000/01 0.16%
Total Revenue Under-recovery 1999/00 $32,092 Over-recovery of revenue, 2000/01 $7,595 Total Revenue Under-recovery, 2000/01 $24,497 (end)
Based on the above reconciliation Darwin Airport increased average charges over 2000/01 by 1.03% against an allowed increase, allowing for past under recoveries, of 0.87%. That is it over-recovered revenue over the year by 0.16%.
The over-recovery amounted to $7,595 but when added to the carry forward under- recovery balance at the end of the previous year, Darwin Airport had an under- recovery of $24,497.
As such, Darwin Airport has complied with its price cap.
The above reconciliation is based on revenue and unit data provided by Darwin Airport.
The change in general aviation charges was calculated using the same approach as was adopted in previous years. GA aircraft are defined as up to 10 tonnes maximum take-off weight as non-regular passenger transport aircraft.
Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the
103 Regulatory Report – Phase II Airports, 2000/01 airport operator does not have accurate data on the breakdown of the different charging options, assumptions have been made to calculate an average charge for GA users.
To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
Landing charges for the past two years are shown in Table 5.3 below.
Table 5.3: General Aviation Charges, 2000 and 2001
Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Charge ($/Tonne/day) $5.55 $6.06
Monthly (no licence)($/tonne) $145 $145
Six Months (no licence) $870 $870 ($/tonne)
12 Months (no licence) $970 $970 ($/tonne)
Monthly (licence) ($/tonne) (1) $108.75 $108.75
Six Months (licence) ($/tonne) $652.50 $652.50
12 Months (licence) ($/tonne) $727.50 $727.50
(1) Licence refers to aircraft operators that lease a parking position.
The approach outlined above gave average charges for GA landings of $4.35 in 1999/2000 and $3.94 in 2000/01 (after excluding increases associated with the NTS).
Revenues and expenditures for security functions for the year ended 30 June 2001 The price cap regime allows airport operators to ‘pass-through’ to users 100 per cent of the costs related to Government mandated airport security requirements, without those increases affecting compliance with the price cap. Under Direction 20 pursuant to Section 20 of the PS Act, the Commission is directed to allow the airport operator to charge sufficient to recover the direct costs for providing mandated security requirements. Any over-recovery, or under-recovery, of the costs incurred in providing these security functions in a particular year is factored into future charges. The requirements cover Australian Protective Services, Checked Baggage Screening and Passenger Screening. The sections below show the costs and revenues over the year in the provision of these requirements.
Australian Protective Services
During the 2000/01 year Darwin Airport derived revenue from the provision of security services provided by the Australian Protective Service (APS). A charge of
104 Regulatory Report – Phase II Airports, 2000/01 $1.90/tonne (incl. GST) was charged on aircraft over 20,000kg. Details of the costs and revenues associated with the provision of APS for the 2000/01 year are provided in Table 5.4. According to Darwin Airport, refunds for over-recovery or invoices for under-recovery are generated on reconciliation of charges on provision of passenger statistics by airlines.
Table 5.4: Australian Protective Services revenues and costs, 2000/01
Description Amount $
APS revenue, 2000/01 $1,021,955
APS costs, 2000/01 $1,021,955
Over/Under-recovery of revenue, 2000/01 $0
Over/Under-recovery brought forward $0
Over/Under-recovery, 2001 (end) $0
Based on the data provided, the Commission is satisfied that Darwin Airport complied with the APS provisions of the price cap for the 2000/01 financial year.
Passenger Screening and Checked Baggage Screening
During the 2000/01 year Darwin Airport charged $1.71/passenger (excl.. GST) for international passenger screening and $2.97/passenger (excl. GST) for Checked Baggage Screening. Details of the costs and revenues associated with the provision of passenger screening for the year are provided in Table 5.5. According to Darwin Airport, refunds for over-recovery or invoices for under-recovery are generated on reconciliation of charges on provision of passenger statistics by airlines.
Table 5.5: Passenger and Checked Baggage Screening revenue and costs, 2000/01
Description Amount $
Revenue, 2000/01 $944,593
Costs, 2000/01 $944,593
Over/Under-recovery of costs, 2000/01 $0
Over/Under-recovery brought forward $0
Over/Under-recovery, 2001 (end) $0
Based on the data provided, the Commission is satisfied that Darwin Airport complied with the passenger screening provisions of the price cap for the 2000/01 financial year.
105 Regulatory Report – Phase II Airports, 2000/01 5.3 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Darwin Airport for the 2000/01 financial year. Darwin Airport provided price, cost and revenue data for aeronautically related services for the year ended 30 June 2001. The data is summarised in Tables 5.6 and 5.7.
Table 5.6: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001. Description 2000 2001 ($) ($) Aero-related services Refuelling services 32,971 36,142 Aircraft maintenance sites and buildings 150,859 165,375 Ground support equipment sites 66,100 75,054 Cargo facility sites & buildings 34,253 37,344 Check-in counters and related facilities 433,647 306,245 Public/Staff car parking 126,437 144,375 Total aero-related costs 844,267 764,534
Table 5.7: Monitored services: aero-related revenue for the year ended 30 June, 2000 and 2001.
Description Basis of charge(s) 2000 2001 ($) ($)
Aero-related services Refuelling services ($ per square metre) 127,672 135,717 Aircraft maintenance sites and ($ per square metre) 584,172 621,005 buildings Ground support equipment sites ($ per square metre) 255,959 281,838 Cargo facility sites and buildings ($ per square metre) 132,636 140,232 Check-in counters and related ($ per square metre) 1,679,212 1,149,990 facilities Public/staff car parking* Per car/per parking bay 489,601 542,146 Total aero-related revenue 3,269,252 2,870,928 * Car parking rates in Table 5.8 below
Table 5.8: Car parking rates at 30 June 2001 (incl. GST) Short term car park Long term car park Per entry $2.40 $10.00 per night
While revenues tended to exceed costs, it is important to note that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their
106 Regulatory Report – Phase II Airports, 2000/01 allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the cost of the lease premium were included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
The Commission has considered the cost and revenue data for aeronautically related services at Darwin Airport and, at this stage, has seen no need to investigate further.
5.4 Regulatory accounts reporting
This section reports on Darwin Airport’s financial accounts for the 2000/01 year. Darwin Airport lodged its audited regulatory accounts with the Commission on 28 February 2002, outside the required 90 days following the end of the financial year. In other respects, the information provided complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission’s guidelines.
Darwin Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a loss after tax of $10.2 million was reported. This result was significantly affected by interest expense of $11.6 million.
As at 30 June 2001 Darwin Airport’s total assets were valued at $89.9 million. Darwin Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Darwin Airport stated that aeronautical costs are determined by a review of each individual cost item and those which are directly identifiable as aeronautical are allocated immediately while those which contain elements of both are split according to the following rules:
• the allocation of salaries and related on-costs was conducted at the individual employee level, based on interviews with the employee’s immediate supervisor; • services and utilities were allocated on a proportionate usage function; and
• depreciation expenses were derived from the function of each asset and allocated to aeronautical or non-aeronautical categories.
A summary of the regulatory accounts for Darwin Airport is provided on the following pages.
107 Regulatory Report – Phase II Airports 2000/01
Profit and loss account for the year ended 30 June 200116
Table 5.9.
Description Audited Aero services Non-aero financial services statements
$$$
Revenue Aeronautical revenue 6,713,206 6,713,206 Non-aeronautical revenue 6,932,122 6,932,122
Total revenue 13,645,328 6,713,206 6,932,122
Expenditure Salaries and wages 2,128,147 1,213,044 915,103 Depreciation 3,848,158 3,424,123 424,036 Amortisation 472,591 Service and utilities 1,041,218 884,560 156,657 Australian Protective Services 1,021,955 1,021,955 Maintenance 631,586 478,248 153,337 Other costs 2,111,627 1,303,603 808,024 Total expenditure 12,199,875
Operating profit/(loss) 1,445,453
Abnormal items 0
Earnings before interest and tax (EBIT) 1,445,453
Interest expense 11,613,494 Profit / (loss) Before Tax (10,168,041)
Income tax credit 0
Profit / (loss) after tax (10,168,041)
Dividends paid 0
Accumulated (loss) (10,168,041)
16 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
108 Regulatory Report – Phase II Airports 2000/01
Profit and loss account for the year ended 30 June 200017
Table 5.9a.
Description Audited Aero services Non-aero financial services statements
$$$
Revenue Aeronautical revenue 5,333,903 5,333,903 Non-aeronautical revenue 6,340,993 6,340,993
Total revenue 11,674,896 5,333,903 6,340,993
Expenditure Salaries and wages 1,969,462 1,122,593 846,869 Depreciation 3,639,721 3,328,577 311,144 Amortisation 472,591 Service and utilities 1,299,691 1,052,484 247,207 Australian Protective Services 879,086 879,086 Maintenance 845,873 706,870 139,003 Passenger Screening 278,653 278,653 Other costs 1,708,784 988,267 720,527 Total expenditure 11,093,861
Operating profit/(loss) 581,035
Abnormal items 0 0 0
Earnings before interest and tax (EBIT) 581,035
Interest expense 10,711,415 Profit / (loss) Before Tax (10,130,380)
Income tax credit 0
Profit / (loss) after tax (10,130,380)
Dividends paid 0
Accumulated Profit / (loss) (10,130,380)
17 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
109 Regulatory Report – Phase II Airports 2000/01
Balance sheet as at 30 June 2001
Table 5.10.
Description Audited Aero services Non-aero financial services statements $$ $ Current assets Cash 1,012 Receivables 1,405,854 652,907 753,490 Accrued Revenue 885,060 670,907 214,153 Other 10,000 10,000
Total current assets 2,301,926 Non-current assets Property, plant and equipment 60,471,044 49,153,131 11,317,913 Intangibles 16,157,629 Deferred Assets 10,925,275 Total non-current assets 87,553,948
Total assets 89,855,874
Current liabilities Creditors 2,856,652 Borrowings 203,392 Provisions 629,640 367,355 262,285
Total current liabilities 3,689,684
Non-current liabilities Borrowings 116,876,357 Provisions 84,478 49,288 35,190
Total non-current liabilities 116,960,835
Total liabilities 120,650,519
Net assets/(liabilities) (30,794,645)
Shareholder’s equity Share capital 12 Accumulated profits/(losses) (30,794,657)
Total shareholder’s equity (30,794,645)
110 Regulatory Report – Phase II Airports 2000/01
Balance sheet as at 30 June 2000
Table 5.10a.
Description Audited Aero services Non-aero financial services statements $$ $ Current assets Cash 1,162 Receivables 2,096,490 866,485 1,230,005 Other 28,440
Total current assets 2,126,092 Non-current assets Property, plant and equipment 63,485,703 52,202,724 11,282,979 Intangibles 27,555,496
Total non-current assets 91,041,199
Total assets 93,167,291
Current liabilities Creditors 1,255,521 Borrowings 1,831,253 Provisions 655,592 371,100 284,492 Total current liabilities 3,742,366
Non-current liabilities Borrowings 110,051,529
Total non-current liabilities 110,051,529
Total liabilities 113 793 895
Net assets/(liabilities) (20,626,604)
Shareholder’s equity Share capital 12 Accumulated profits/(losses) (20,626,616)
Total shareholder’s equity (20,626,604)
111 Regulatory Report – Phase II Airports 2000/01
Statement of cash flows for the year ended 30 June, 2000 and 2001
Table 5.11.
Description 2000 2001 $ $ Cash flows from operating activities
Receipts from customers 10,005,089 12,731,703 Payments to suppliers (5,832,652) (5,435,358) Borrowing costs (10,711,314) (3,370,395) GST Paid 0 (83,430)
Net cash flows from/used in operating activities (6,538,877) 3,842,520
Cash flows from investing activities
Acquisition of property, plant and equipment (1,625,613) (853,042) Advances to related parties 67,737 18,740
Net cash flows used in investing activities (1,557,876) (834,302)
Cash flows from financing activities
Repayment of loan to related parties 0 (1,308,507) Proceeds from loan from parent undertaking 6,649,302 0
Net cash flows provided by financing activities 6,649,302 (1,308,507)
Net increase / (decrease) in cash held (1,447,451) 1,627,711
(382 640) Cash at beginning of the financial period (1,830,091)
Cash at 30 June 2001 (1,830,091) (202,380)
112 Regulatory Report – Phase II Airports 2000/01
Darwin Airport regulatory accounts — summary of significant accounting policies This special purpose financial report has been prepared in accordance with the Regulatory Information Requirements under Part 7 of the Airports Act 1996, Section 21 and 27A of the Prices Surveillance Act 1983, Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Law. It is prepared in accordance with the historical cost convention, except for certain assets which are at valuation.
(a) Income Tax
The economic entity adopts the liability method of tax-effect accounting whereby the income tax expense shown in the profit and loss statement is based on the operating profit before income tax adjusted for any permanent differences.
The future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation.
Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.
(b) Foreign Currency Translation
Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date of the transaction. At balance date, amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are brought to account in determining the profit and loss for the year.
(c) Revenue Recognition
Revenue is recognised when it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Aeronautical Charges : Comprises landing fees and international terminal charges, based on the maximum take-off weight (MTOW) of the aircraft, and a security charge for the recovery of charges imposed by Australian Protective Services and other security contractors. Trading Income : Comprises Concessionaire rent, overages, outgoings and other charges received including income from public car parks. Property : Comprises rent, outgoings and other income from Company owned terminals, buildings and other leased areas.
113 Regulatory Report – Phase II Airports 2000/01 (d) Receivables
Trade receivables are recognised and carried at original invoice amount.
Recoverability of trade debtors is reviewed on an ongoing basis. Debts, which are known to be unrecoverable, are written off. A general provision for doubtful debts is raised together with a specific provision for debts where recoverability is deemed to be doubtful.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis.
(e) Acquisition of Assets
The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental to the acquisition. Where shares are issued on acquisition, the value of the shares is determined by reference to the fair value of the assets acquired, including goodwill and other intangible assets where applicable.
(f) Recoverable Amounts
The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal.
Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is revalued to its recoverable amount. The decrement in the carrying amount is recognised as an expense in the reporting period in which the recoverable amount write-down occurs.
The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values using a market determined, risk-adjusted discount rate.
(g) Land and Buildings and Infrastructure, Plant and Equipment
(i) Cost and Valuation
The cost base assigned to land and buildings and infrastructure, plant and equipment is set out in statement 1.2 and 1.3.
(ii) Depreciation and Amortisation
Infrastructure, plant and equipment (including infrastructure assets under lease) have been depreciated using the straight-line method based upon the estimated useful life of the assets to DIAPL.
(iii) Leasehold Improvements
114 Regulatory Report – Phase II Airports 2000/01 Leasehold improvements have been amortised over the shorter of the unexpired period of the lease and estimated useful life of the improvements.
(h) Trade and Other Creditors
These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(i) Borrowing Costs
Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:
• interest on bank overdraft and loans; • senior and junior debt agents fees; and • ancillary costs incurred in connection with the ongoing conduct of borrowings.
(j) Maintenance and Repairs
Maintenance, repair costs and minor renewals, are charged as expenses as incurred.
(k) Employee Entitlements
Provision has been made for long service leave and annual leave payable to employees on the basis of statutory and contractual requirements.
A liability for long service leave is recognised based on employees’ current pay rates and associated on costs in respect of services provided by employees up to the reporting date. When assessing the adequacy of the provision, consideration is given to the present value of these payments after assessing expected future wage and salary levels, experience of employee departure and period of service.
In respect of the consolidated entity’s defined benefits superannuation plan, any contributions made to the superannuation funds by entities within the consolidated entity are charged against profits when due.
(l) Cash
For the purposes of the statement of cashflows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of change in value, net of outstanding bank overdrafts.
(m) Intangible Assets
The premium that arose on the purchase of the airport leases from the Federal Government represents the difference between the purchase price for the lease and the fair value attributed to the net tangible assets at date of acquisition. This premium is being amortised over the 99-year life of the lease.
115 Regulatory Report – Phase II Airports 2000/01
(n) Deferred Expenditure
Bid costs
The direct costs incurred in the purchase of the airport leases have been capitalised and are being amortised over the 99-year life of the lease.
Finance costs
The fees incurred in the underwriting of the senior and junior debt have been capitalised and are amortised over 5 years.
The balances of intangible assets are reviewed annually and any balance representing future benefits - the realisation of which is considered to be no longer probable - are written off.
(o) Economic Dependency
A continuing material dependency exists with the parent entity. The nature of this support is in the form of not calling in the loans due to the parent by DIAPL.
(p) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amounts of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
116 Regulatory Report – Phase II Airports 2000/01
5.5 Operational statistics
Table 5.12: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers (1): Domestic NA NA International (excluding transit) NA NA International transit passengers NA NA Domestic on-carriage NA NA Total passengers NA NA
Aircraft movements: Regular public transport aircraft movements 26,860 25,830 General aviation aircraft movements 57,760 59,664 Total aircraft movements 84,620 85,494
Total landed tonnes 720,333 801,706
Average staff equivalents Aeronautical services 17.4 17.7 Non-aeronautical services 13.1 13.3 Total average staff equivalents 30.5 31.0
Area (hectares) Aeronautical services 128.7 128.7 Non-aeronautical services 182.2 182.2 Total area (hectares) 310.9 310.9
(1) Darwin Airport notes that passenger numbers have not been provided due to non-provision by the airlines and confidentiality requirements.
.
117 Regulatory Report – Phase II Airports 2000/01
118 Regulatory Report – Phase II Airports 2000/01 6. Hobart Airport
Hobart Airport is owned and operated by Hobart International Airport Pty Ltd (HIA) who took over its operation from the Federal Airports Corporation (FAC) in June 1998. It paid $35.9 million for a 50-year lease of the airport with an option to extend that lease for a further 49 years. This is the third regulatory report for Hobart Airport.
6.1 Quality of Service Monitoring
Hobart Airport caters for domestic and regional aircraft.
Quality of Service Results
The assessment of quality of service made having regard to airline surveys, a survey of ACS and additional comments and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Hobart Airport as ‘satisfactory’ to ‘good’. Runways, aprons and taxiways
The availability of the runway was rated from ‘satisfactory’ to excellent’ and the standard as ‘satisfactory’ to ‘good’.
The availability of aprons was rated from ‘satisfactory’ to ‘excellent’ and the standard from ‘satisfactory’ to ‘good’.
Taxiways were rated from ‘satisfactory’ to ‘excellent’ for availability and as ‘satisfactory’ to ‘good’ for standard.
No comments were received on the runway, apron and taxiway system. Gates
The quality of gates at Hobart Airport was assessed using information obtained from airline surveys.
The availability of gates at Hobart Airport was rated as ‘poor’. Airlines commented that availability had become a problem when three aircraft are on the ground at the same time. The standard of gates was rates as ‘satisfactory’. Ground service equipment storage sites
The quality of ground service equipment storage sites at Hobart Airport were assessed using airline surveys.
Ground service equipment storage sites were rated as ‘satisfactory’ both in terms of availability and standard. No comments were received from airlines.
119 Regulatory Report – Phase II Airports 2000/01 Freight equipment storage sites
The quality of freight equipment storage sites at Hobart Airport were assessed using airline surveys.
Freight equipment storage sites were rated as ‘satisfactory’ for both availability and standard.
Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys and a survey of ACS. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. The responses from airlines ranged from ‘satisfactory’ to ‘excellent’. A comment was received that the airport management is very co-operative.
6.2 Price cap compliance
This section reports on Hobart Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Hobart Airport are subject to a price cap set at CPI less an X- factor of 3.0 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent and, given that Hobart Airport had an under-recovery of 0.55 per cent, it was required to reduce average aeronautical charges by 0.25 per cent.
Using data provided, the Commission assessed whether aeronautical charges at Hobart Airport were reduced by the required amount for the 2000/01 year. A summary of movements in charges subject to the cap is provided in Table 6.1.
Table 6.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis 30/6/00 Price change 30/6/01 (incl. GST)
Landing charges:
Charge adjusted on 1 July Domestic $ Per landing per tonne (aircraft $5.55 $6.04 over 10,000 kg) 2000 for CPI-X and the NTS. International $ Per landing per tonne. $6.60 Charge adjusted on 1 July $7.20 2000 for CPI-X and the NTS. General aviation $ Per landing per tonne $5.72 Charge adjusted on 1 July $6.24 2000 for CPI-X and the NTS. Parking Per aircraft per day $11 $11
Table 6.2 provides details of Hobart Airport’s price cap reconciliation for the 2000/01 period. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
120 Regulatory Report – Phase II Airports 2000/01 Table 6.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base Revenue Average Rate Revenue Compliance of units charge charge variation share 00/01 % 00/01 99/00 $1,884,634 Landing charges: Domestic 335,567 $5.55 per $1,848,974 $5.51 -0.72% 98.43% -0.71% 1000 kg MTOW International 758 $6.60 per $4,963 $6.55 -0.76% 0.21% 0.00% (including 1000 kg international MTOW terminal charge)
General aviation 4,057 $5.72 per $22,887 $5.64 -1.40% 1.36% -0.02% (including 1000 kg minimum charge) MTOW
Parking charges 710 $11 per $7,810 $11.00 0.00% 0.00% 0.00% aircraft per day Actual movement in average charges (%) -0.73% Reduction required to comply with cap CPI-X, 2.2-3.0 -0.80% Past Under-recovery 0.55% -0.25% Under-recovery of revenue 0.48% Total Revenue over-recovery 1999/2000 $14,447 Under-recovery, 2000/01 $9,046 Total Revenue Over-recovery 2000/01 $5,401
Based on the above reconciliation, Hobart Airport under-recovered revenue for the 2000/01 year by 0.48 per cent against a required reduction of 0.25% to comply with its price cap. Taken with the over-recovery of revenue in 1999/20000 of $14,447, this has meant an overall over-recovery of $5,401.
6.3 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Hobart Airport for the 2000/01 period.
Hobart Airport provided cost and revenue data for aeronautically related services for the year ending 30 June 2001. The data is summarised in Tables 6.3 and 6.4.
Car parking rates are provided in Table 6.5.
121 Regulatory Report – Phase II Airports 2000/01 Table 6.3: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001 Description 2000 2001 $ $ Aero-related services Refuelling services 0 0 Cargo facility sites and buildings 9,604 7,385 Check-in counters and related facilities 0 0 Public car parking 247,818 160,497 Staff car parking 0 0 Total aero-related costs 257,422 167,882
Table 6.4: Monitored services: aero-related revenue for the year ended 30 June, 2000 and 2001
Description Basis of Charge(s) 2000 2001 $ $ Aero-related services Refuelling services $ per square metre 27,162 30,000 Cargo facility sites and buildings $ per square metre 85,700 145,556 Check-in counters and related facilities $ per square metre 1,000 1,250 Public car parking $ per hour/day 819,073 979,901 Staff car parking $35 per month 1,680 2,725 Taxi car park – wash bay $1 per visit 10,200 12,511 Total aero-related revenue 944,815 1,171,943
122 Regulatory Report – Phase II Airports 2000/01 Table 6.5: Car parking rates at 30 June, 2000 and 2001 Hour 2000 2001 Day 2000 2001 (incl. GST) (incl. GST) Up to 1 hour $2.20 $2.80 1 day $ 7.00 $7.70 1 Hour $3.00 $3.40 2 days $14.00 $15.40 2 Hours $3.80 $4.00 3 days $21.00 $23.10 3 Hours $4.60 $5.00 4 days $28.00 $30.80 4 Hours $5.40 $6.00 5 days $35.00 $38.50 5 Hours $6.20 $7.00 6 days $42.00 $46.20 over 6 days $45.00 $49.50
While revenues tended to exceed costs, it is important to note that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the cost of the lease premium were included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis. The Commission has considered the cost and revenue data for aeronautically related services at Hobart Airport and, at this stage, has seen no need to investigate further.
6.4 Regulatory accounts reporting
This section reports on Hobart Airport’s financial accounts for the 2000/01 period.
Hobart Airport lodged its audited regulatory accounts with the Commission on 28 March 2002, outside the required 90 days following the end of the financial year. In other respects, the information provided by Hobart Airport complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission’s guidelines.
Hobart Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a profit after tax of $42,000 was reported. This result was significantly affected by interest expense of $2.2 million. As at 30 June 2001 Hobart Airport’s total assets were valued at $40.9 million. A summary of Hobart Airport’s accounts for the 2000/01 period is provided below.
123 Regulatory Reports – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 200118
Table 6.6.
Description Audited Aero Non-aero financial services services statement s $’000 $’000 $’000 Revenue Aeronautical revenue 1,904 1,904 Non-aeronautical revenue 4,145 4,145
Total revenue 6,049 1,904 4,145
Expenditure Salaries and wages 1,200 908 292 Depreciation 550 426 124 Amortisation of intangibles 311 Services and utilities 374 166 208 Property maintenance Other costs 870 588 282
Total expenditure 3,558 2,277 970
Operating profit/(loss) 2,491 (373) 3,175
Abnormal items 9 7 2
Earnings before interest and tax 2,482 (380) 3,173 (EBIT)
Interest expense 2,155
Earnings before tax 327
Tax charge 285
Profit after tax 42
Dividends paid 0
Retained earnings 42
18 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
124 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 200019
Table 6.6a.
Description Audited Aero Non-aero financial services services statement s $’000 $’000 $’000 Revenue Aeronautical revenue 1,836 1,836 Non-aeronautical revenue 3,659 1,475 2,184
Total revenue 5,495 3,311 2,184
Expenditure Salaries and wages 1,654 1,125 529 Depreciation 483 385 98 Amortisation of intangibles 332 Services and utilities 310 181 129 Property maintenance 244 187 57 Other costs 722 497 225
Total expenditure 3,745 2,375 1,038
Operating profit/(loss) 1,750 936 1,146
Abnormal items — Profit: sale assets 3 2 1 — Loss: sale assets (1) (1) 0
Earnings before interest and tax 1,752 937 1,147 (EBIT)
Interest expense 1,891
Earnings/(loss) before tax (EBT) (139)
Taxation expense 77
Profit/(Loss) after tax (216)
Dividends paid -
Retained earnings/(loss) (216)
19 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
125 Regulatory Reports – Phase II Airports, 2000/01
Balance sheet as at 30 June 2001
Table 6.7.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 1,340 Receivables 615 373 242 Accrued revenue 321 225 96 Stock 3 2 1 Other 0
Total current assets 2,279 600 339
Non-current assets Investments 467 327 140 Intangibles 27,431 Property, Plant and Equipment 10,497 9,542 955 Future Income Tax Benefit 223
Total non-current assets 38,619 9,869 1,095
Total assets 40,898 10,469 1,434
Current liabilities Creditors 856 Provisions 431 301 130
Total current liabilities 1,287
Non-current liabilities Borrowings 38,048 Provisions (LSL) 402 281 121 Provisions for deferred income tax 250 175 75
Total non-current liabilities 38,700
Total liabilities 39,987
Net assets/(liabilities) 911
Shareholder’s equity Share capital 1,205 Reserves 0 Accumulated profits/(losses) (294)
Total shareholder’s equity 911
Accumulated profit/loss at the start of the year (336) Movements: Profit/loss for the year 42
Accumulated profit/loss at the end of the year (294)
126 Regulatory Report – Phase II Airports, 2000/01
Balance sheet as at 30 June 2000
Table 6.7a.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 935 Receivables 585 291 294 Accrued revenue 189 119 70 Stock 32 24 8 Other
Total current assets 1,741 434 372
Non-current assets Receivables - - Investments 443 310 133 Intangibles 27,683 Property, Plant and Equipment 10,794 9,911 883 Future Income Tax Benefit 204
Total non-current assets 39,124 10,221 1,016
Total assets 40,865 10,655 1,388
Current liabilities Creditors 847 Provisions 560 392 168
Total current liabilities 1,407
Non-current liabilities Borrowings 38,348 Provisions (LSL) 22 16 6 Provisions for deferred income tax 223 156 67
Total non-current liabilities 38,593
Total liabilities 40,000
Net assets/(liabilities) 865
Shareholder’s equity Issued capital 1,200 Reserves - Unappropriated profit/(loss) (335)
Total shareholder’s equity 865
Accumulated profit/(loss) at the start of the (119) year Movements: Profit/(loss) for the year (216)
Accumulated profit/(loss) at the end of the (335) year
127 Regulatory Reports – Phase II Airports, 2000/01
Statement of cash flows for the year ended 30 June, 2000 and 2001
Table 6.8. Description 2000 2001
Cash flows from operating activities $ $
Receipts from customers 5,428,835 6,478,519 Payments to suppliers and employees (2,803,278) (2,914,301) Interest received 91,751 77,533 Interest paid (1,792,241) (2,143,450) Income Tax Paid 0 (60,261) GST Paid 0 (392,210)
Net cash flows from/used in operating activities 925,067 1,045,830
Cash flows from investing activities
Proceeds from sale of plant and equipment 28,511 45,155 Payment for property plant and equipment (190,456) (366,143)
Payment for debt servicing account (23,045) (24,070)
Loan – Associated Company 0 (2,767,500)
Net cash flows used in investing activities (184,990) (3,112,558) Cash flows from Financing Activities Proceeds from issue of shares 0 5,000 Proceeds from borrowings – Bank 0 2,767,500 Proceeds from shareholder loan 0 600,00 Payment for shareholders loans (750,000) (900,000) Net cash flows from Financing activities (750,000) 2,472,500
Net increase / (decrease) in cash held (9,923) 405,772 Cash at beginning of year 944,509 934,586
Cash at end of year 934,586 1,340,358
128 Regulatory Report – Phase II Airports, 2000/01
Hobart Airport regulatory accounts — summary of significant accounting policies The financial report is a general purpose financial report that has been prepared in accordance with the Corporations Act which includes applicable Accounting Standards, Urgent Issues Group consensus views and other authoritative pronouncements of the Australian Accounting Standards Board professional reporting requirements. The financial report is prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Costs are based on the fair values of the consideration given in exchange for assets. The accounting policies have been consistently applied unless otherwise stated.
The following is a summary of the material accounting policies adopted by the company in the preparation of the financial report.
(a) Income tax The Company adopts the liability method of tax-effect accounting whereby the income tax expense shown in the profit and loss account is based on the operating profit before income tax adjusted for any permanent differences.
Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income, are brought to account as either provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income tax legislation and the anticipation that the company will derive sufficient future assessable income and comply with the conditions of deductibility imposed by the law. The income tax expense for the year is calculated using 34% tax rate, however the deferred tax balances have been adjusted for the decreased corporate rate of 30% for the tax year 2001/02 and thereafter. The adjustment recognises that reversal of timing differences will occur during income tax years, at which time will be attributed at a lower rate. The corresponding adjustment has been charged to income tax expense. (b) Inventories
Inventories are measured at the lower of cost and net realisable value. Costs are assigned on a first-in-first-out basis and include direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenses.
129 Regulatory Reports – Phase II Airports, 2000/01 (c) Property, plant and equipment Property, plant and equipment are carried at cost or at independent or Directors’ valuation, less, where applicable, any accumulated depreciation or amortisation. The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to present values in determining recoverable amount. The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, are depreciated on a straight line basis over their useful lives to the company commencing from the time the asset is held ready for use. Properties held for investment purposes are not subject to a depreciation charge. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation/amortisation rates used for each class of depreciable asset are:
Buildings 2.5% Plant and equipment 5-33.3% Airport lease 1-2%
The valuations of freehold land and buildings have not taken account of the potential capital gains tax on assets acquired after the introduction of capital gains tax. (d) Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not legal ownership, are transferred to the company are classified as finance leases. Finance leases are capitalised recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual value. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the economic entity will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. (e) Investments
Investments are carried at cost. The carrying amount of investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the current market value. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.
130 Regulatory Report – Phase II Airports, 2000/01 (f) Employee entitlements Provision is made for the company’s liability for entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements.
Contributions are made by the company to employees’ superannuation funds and are charged as expenses when incurred. (g) Cash
For the purposes of the statement of cash flows, cash includes cash on hand and in at call deposits with banks or financial institutions and investments in money market instruments maturing within less than two months, net of bank overdrafts. (h) Revenue
Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.
(i) Foreign Currency Transactions in foreign currencies are converted to local currency at the rate of exchange ruling at the date of transaction. (j) Interest rate swaps The company enters into interest rate swaps that are used to convert variable interest rates to fixed interest rates. The swaps are entered into with the objective of reducing risk to rising interest rates. (k) Trade and other Receivables Trade and other receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An estimate for doubtful debts is made when collection of the full amount is no longer possible. Bad debts are written off as incurred. (l) Goodwill Goodwill represents the excess of the purchase consideration over fair value of identifiable net assets acquired at the time of acquisition of a business an a controlled entity. (m) Trade and other payables Liabilities for trade creditors and other amounts are carried at cost which is fair value of the consideration to be paid in the future for goods and services received whether or not billed to the consolidated entity.
131 Regulatory Reports – Phase II Airports, 2000/01 (n) Loans and borrowings All loans are measured at the principal amount. Interest is charged as an expense as it occurs. (o) Share Capital Ordinary share capital is recognised at fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary se recognised directly in equity as a reduction of the share proceeds.
132 Regulatory Report – Phase II Airports, 2000/01
6.5 Operational statistics
Table 6.9: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001
Passengers Domestic passengers 896,466 987,457 International passengers (excluding transit) 1,432 1,900 International transit passengers 0 0 Domestic on-carriage 0 0 Total passengers 897,898 989,357
Aircraft movements Regular public transport aircraft movements 10,055 15,728 General aviation aircraft movements 2,584 1,508 Total aircraft movements 12,639 17,238
Total tonnes landed 325,868 340,382
Average staff equivalents Aeronautical services 13.6 13.6 Non-aeronautical Services 4.4 4.4 Total average staff equivalents 18.0 18.0
Area (hectares) Aeronautical services 350 350 Non-aeronautical services 150 150 Total area (hectares) 500 500
133 Regulatory Report – Phase II Airports, 2000/01
134 Regulatory Report – Phase II Airports, 2000/01
7. Launceston Airport
Launceston Airport is leased and operated by Australia Pacific Airports (Launceston) Pty Ltd (APAL) who took over its operation from the Federal Airports Corporation (FAC) in June 1998. It paid $17.3 million for a 50-year lease of the airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Launceston Airport and for the first time includes quality of service monitoring. The Commission would like to acknowledge the cooperation received from APAL in providing data and responding to queries that assisted in the preparation of this report.
7.1 Quality of Service Monitoring
Launceston Airport caters for domestic and regional aviation. Airlines provide their own check-in and baggage handling facilities. Quality of Service Results
The assessment of quality of service is made having regard to airline surveys and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Launceston Airport as ‘satisfactory’ to ‘good’. Runways, aprons and taxiways
The availability and the standard of the runway were rated from ‘satisfactory’ to ‘good’. No concerns were raised and the comment was made that the runway is well maintained.
Aprons were also rated from ‘satisfactory’ to ‘good’ in terms of availability and standard. It was also commented that they are well maintained. Launceston Airport had nine apron positions for aircraft parking at 30 June 2001. Of these, six were for RPT aircraft, one for Freight aircraft and the other two for Regional RPT aircraft.
Taxiways were rated as ‘satisfactory’ to ‘good’ for availability and for standard. No comments were received from airlines. Gates
The quality of gates at Launceston Airport was assessed using information obtained from airline surveys.
The availability of gates at Launceston Airport was rated as ‘satisfactory’ although the comment was made that congestion may occur when there is more than one aircraft on the ground. The standard of gates was rated as ‘poor’ to ‘satisfactory’ with a comment made that passengers from Bay 1 need to walk 150 metres across exposed tarmac to the terminal.
135 Regulatory Report – Phase II Airports, 2000/01 Ground service equipment storage sites
The quality of ground service equipment storage sites at Launceston Airport were assessed using airline surveys.
Ground service equipment storage sites were rated as ‘satisfactory’ to ‘good’ for availability and as ‘good’ for standard. Freight equipment storage sites
The quality of freight equipment storage sites at Launceston Airport were assessed using airline surveys.
Freight equipment storage sites were rated as ‘good’ for both availability and standard. No comments were received. Car parking and kerbside access The airport operator provided 380 car parking spaces at 30 June 2001 Consultation with airlines
The quality of the airport operator’s consultation procedures were assessed through airline surveys. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. The responses from airlines ranged from ‘good’ to ‘excellent’. It was commented that the airport operator responds quickly and efficiently to issues raised and that there is a close and co-operative relationship.
7.2 Price cap compliance
This section reports on Launceston Airport’s price cap compliance for the 2000/01 financial year. Aeronautical services at Launceston Airport are subject to a price cap of CPI less an X-factor of 2.5 per cent per annum. The relevant CPI-figure for the 2000/01 financial year was 2.2 per cent, and Launceston Airport had a previous under-recovery of 0.2per cent, meaning that it was required to reduce average aeronautical charges by 0.1 per cent over the 2000/01 year.
Using data provided by Launceston Airport, the Commission assessed whether aeronautical charges were reduced in line with its CPI-X price cap over the 2000/01 year. A summary of movements in charges subject to the cap is provided in Table 7.1.
136 Regulatory Report – Phase II Airports, 2000/01
Table 7.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30/6/00 30/6/01 (incl. GST)
Landing charges: The landing charge was Domestic and Per landing $/tonne MTOW $5.61 adjusted from 1 July for the $6.16 RPT (aircraft over 10,000 kg) New Tax System changes. General Aviation Per landing/$ per tonne $3.75 (1) MTOW (< 10,000 kg)
(1) See below for discussion of calculation of average charge for General Aviation landings.
Table 7.2 provides details of Launceston Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis. The reconciliation is based on revenue and unit data provided by Launceston Airport.
Table 7.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base charge Revenue Average Rate Revenue Compliance of units 00/01 charge variation share 00/01 00/01 99/00 % $1,570,009
Landing charges: Domestic 276,877 $5.61 per 1,000 $1,553,280 $5.61 0.00% 98.90% 0.00% kg MTOW Minimum 503 $10.00 per $5,005 $9.95 -0.50% 0.32% 0.00% (Fixed Wing) aircraft Minimum 89 $5.00 per $441 $4.95 -1.00% 0.03% 0.00% (Rotary Wing) aircraft
General 3,009 $3.75 per 1,000 $11,283 $3.75 0.00% 0.75% 0.00% Aviation (under kg MTOW 10,000kg)
Actual reduction in charges 00/01 0.00% Required reduction to comply with cap CPI- X, 2.2-2.5 -0.30% Past Under-recovery 0.20% -0.10% Over-recovery, 2000/01 0.10% Total Revenue under-recovery 1999/00 $4 ,918 Over-recovery of revenue 2000/01 $1,601 Total revenue Under-recovery 2000/01 $3,317 (end)
137 Regulatory Report – Phase II Airports, 2000/01 Based on the above reconciliation, average charges at Launceston Airport remained unchanged against the 0.10 per cent required reduction. This amounts to an over- recovery of revenue in 2000/01 of $1,601. In net terms Launceston Airport has under-recovered revenue by $3,317 for the three year period 1998/99 to 2000/01.
These figures indicate that Launceston Airport complied with its CPI-X price cap for the 2000/01 year. General Aviation charges
The change in general aviation (GA) charges was calculated using the same approach as was adopted in previous years. GA aircraft as up to 10 tonnes maximum take-off weight are defined as non-regular passenger transport aircraft.
Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the airport operator does not have accurate data on the breakdown of the different charging options, assumptions have been made to calculate an average charge for GA users.
To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
Landing charges for the past two years are shown in Table 7.3 below.
Table 7.3: General Aviation Charges, 2000 and 2001
Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Charge ($/tonne/day) $5.66 $6.16
Monthly ($/tonne) $58 $64
Six Months ($/tonne) $350 $384
12 Months ($/tonne) $702 $769
The approach outlined above gave average charges for GA landings of $4.04 in 1999/2000 and $3.75 in 2000/01 (after excluding increases associated with the NTS).
7.3 Monitoring of aeronautically related services.
This section covers the Commission’s role in the monitoring of aeronautically related services at Launceston Airport for the 2000/01 financial year.
Launceston Airport provided price, cost and revenue data for aeronautically related services at Launceston Airport for the year ended 30 June 2001. The data is summarised in Tables 7.4 and 7.5.
Car parking rates are provided in Table 7.6.
138 Regulatory Report – Phase II Airports, 2000/01 Table 7.4: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001. Description 2000 2001 $’000 $’000
Refuelling services N/A N/A Aircraft maintenance sites and buildings 22 N/A Ground support equipment sites N/A N/A Cargo facility sites and buildings 47 68 Check-in counters and related facilities N/A N/A Public and staff car parking 378 429 Total aero-related costs 447 497
Table 7.5: Monitored services: aero-related revenues for the year ended 30 June, 2000 and 2001.
Description Basis of charge(s) 2000 2001 ($’000) ($’000)
Refuelling services N/A N/A
Aircraft maintenance sites and buildings $ per square metre 11 N/A
Ground support equipment sites N/A N/A
Cargo facility sites and buildings $ per square metre 112 127
Check-in counters and related facilities N/A N/A
Public and staff car parking See Table 7.6 below 498 507
Total aero-related revenue 621 634
139 Regulatory Report – Phase II Airports, 2000/01 Table 7.6: Car parking rates at 30 June, 2000 and 2001 2000 Hours Rate Days Rate 30 mins $ 2.00 2 $16.00 1.30 $ 3.00 3 $24.00 2.30 $ 4.00 4 $32.00 3.30 $ 5.00 5 $40.00 4.30 $ 6.00 6 $48.00 5.30 $ 7.00 Over 6 days $50.00 2001 Hours Rate Days Rate 30 mins $ 2.00 2 $18.00 1.00 $ 3.00 3 $27.00 1.30 $ 4.00 4 $36.00 2.00 $ 5.00 5 $45.00 3.00 $ 7.00 Over 6 days $50.00 4 hrs to 24 hrs $ 9.00 While revenues tended to exceed costs, it is important to note that the costs did not include amortisation of intangible assets or interest. The Commission asked that these items be excluded for the purposes of the monitoring reports because (a) their allocation to services would have involved a degree of subjectivity, and (b) there would be risk of circularity if an allocation of the cost of the lease premium were included. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
7.4 Regulatory accounts reporting
This section reports on Launceston Airport’s financial accounts for the 2000/01 year.
Launceston Airport lodged its audited regulatory accounts with the Commission in the required 90 days following the end of the financial year. The information provided complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission guidelines.
Launceston Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a profit after tax of $20,000 was reported. This result was significantly affected by interest expense of $1.2 million.
As at 30 June 2001, Launceston Airport’s total assets were valued at $20.0 million.
Launceston Airport’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Some of the more prominent account items and ‘drivers’ were as follows: • salary costs are based on analysis by the airport of labour hours worked; • depreciation expenses are allocated to a segment and then by various indirect allocation rules; and
• services and utilities are allocated by floor area, labour hours and kilowatts used.
140 Regulatory Report – Phase II Airports, 2000/01 A summary of the regulatory accounts for Launceston Airport is provided on the following pages.
141 Regulatory Report – Phase II Airports, 2000/01
142 Regulatory Report – Phase II Airports, 2000/01
143 Regulatory Report – Phase II Airports, 2000/01
Profit and loss account for the year ended 30 June 200120 Table 7.7.
Description Audited Aero services Non-aero financial services statements
$ ’000 $ ’000 $ ’000
Revenue Aeronautical revenue 1,559 1,559 Non-aeronautical revenue 2,818 2,818 Interest Revenue 22 22 Total revenue 4,399 1,559 2,840
Expenditure Salaries and wages 1,181 596 585 Depreciation 776 530 246 Amortisation 13 0 13 Service and utilities 276 84 192 Property maintenance 252 130 122 Other costs 496 270 226
Total expenditure 2,994 1,610 1,384
Operating profit/(loss) 1,405 (51) 1,456
Earnings before interest and tax 1,405 (51) 1,456 (EBIT)
Interest expense 1,192 Earnings / (loss) before tax 213
Tax expense attributable to profit 193
Profit after tax 20
Accumulated profit/(losses) at beginning (188) of the year
Accumulated profit/(losses) at end of (168) year
20 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Profit and loss account for the year ended 30 June 200021
Table 7.7a.
Description Audited Aero services Non-aero financial services statements
$ ’000 $ ’000 $ ’000
Revenue Aeronautical revenue 1,525 1,525 Non-aeronautical revenue 2,900 2,900 Interest income 14 14 Total revenue 4,439 1,525 2,914
Expenditure Salaries and wages 1,222 536 686 Depreciation 788 535 253 Amortisation 111 0 111 Service and utilities 294 90 204 Property maintenance 323 162 161 Other costs 548 294 254
Total expenditure 3,286 1,617 1,669
Operating profit/(loss) 1,153 (92) 1,245
Earnings before interest and tax 1,153 (92) 1,245 (EBIT)
Interest expense 1,099 Earnings / (loss) before tax 54
Tax expense attributable to profit 161
Profit/(loss) after tax (107)
Accumulated profit/(losses) at beginning (81) of the year
Accumulated profit/(losses) at end of (188) year
21 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Balance sheet as at 30 June 2001 Table 7.8.
Description Audited Aero services Non-aero financial services statements $ ’000 $ ’000 $ ’000 Current assets Cash 410 Receivables 327 132 195 Inventories 1 0 1 Other 7 6 1
Total current assets 745 138 197
Non-current assets
Property, plant and equipment 17,776 10,913 6,863 Intangibles 1,347 1,347 Future income tax benefits 171 86 85
Total non-current assets 19,294 10,999 8,295
Total assets 20,039 11,137 8,492
Current liabilities Creditors 185 Borrowings 390 Provisions 550 276 274
Total current liabilities 1,125
Non-current liabilities Borrowings 16,410 Provisions 354 217 137
Total non-current liabilities 16,764
Total liabilities 17,889
Net assets/(liabilities) 2,150
Shareholder’s equity Share capital 2,318 Accumulated profits/(losses) (168)
Total shareholder’s equity 2,150
Accumulated profit/loss at start of year: (188) Movements: Profit/loss for the year 20 Accumulated profit/loss at end of year (168)
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Balance sheet as at 30 June 2000 Table 7.8a.
Description Audited Aero services Non-aero financial services statements $ ’000 $ ’000 $ ’000 Current assets Cash 197 Receivables 343 117 226 Inventories 3 2 1
Total current assets 543
Non-current assets
Property, plant and equipment 16,452 11,424 5,028 Intangibles 1,457 1,457 Future income tax benefits 196 86 110 Total non-current assets 18,105 11,510 6,595
Total assets 18,648 11,629 6,822
Current liabilities Creditors 234 Borrowings 362 Provisions 521 228 293 Total current liabilities 1,117
Non-current liabilities Borrowings 15,210 Provisions 191 121 70 Total non-current liabilities 15,401
Total liabilities 16,518
Net assets/(liabilities) 2,130
Shareholder’s equity Share capital 2,318 Accumulated profits/(losses) (188)
Total shareholder’s equity 2,130
Accumulated profit/(loss) at start of year: (81) Movements: Profit/(loss) for the year (107) Accumulated profit/(loss) at end of year (188)
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Statement of cash flows for the years ended 30 June, 2000 and 2001
Table 7.9. Description 1999/00 2000/01 Cash flows from operating activities $’000 $’000 Inflows: Receipts from customers 4,321 4,721 Interest received 14 22 Outflows: Payments to suppliers and employees (2,421) (2,466) Interest paid (1,099) (1,086) GST Received 0 57 GST Paid 0 (135) Net cash flows from/used in operating activities 815 1,113
Cash flows from investing activities Outflows: Acquisition of property, plant and equipment (163) (2,100)
Net cash flows used in investing activities (163) (2,100)
Cash flows from financing activities Inflows: Proceeds from borrowings 0 1,500 Outflows: Repayment of borrowings (600) (300) Net cash flows provided by financing activities (600) 1,200
Net increase / (decrease) in cash held 52 213 Cash at beginning of financial period 145 197 Cash at end of reporting period 197 410
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Launceston Airport regulatory accounts — summary of significant accounting policies
This special purpose financial report has been prepared in accordance with the Regulatory Information requirements under Part 7 of the Airports Act 1196, Section 21 and 27A of the prices Surveillance Act 1983, Accounting Standards, other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Act 2001. It is prepared in accordance with the historical cost convention.
(a) Basis of Preparation of Financial Report This special purpose financial purpose financial report has been prepared in accordance with the requirements of the Regulatory Information Requirements under Part 7 of the Airports Act 1996 and Sections 21 and 27A of the Prices Surveillance Act 1983 – Guideline Version Number 2 – September 1998.
This is a special purpose financial report that has been prepared on the basis of historical costs except where stated, does not take into account changing money values or current valuations of non-current assets. The reporting period extends from 1 July 2000 to 30 June 2001.
(b) Income tax Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences.
The future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or future income tax benefit accounts at the rates which they are expected to apply when those timing differences reverse.
(c) Acquisition of assets The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market value at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is demonstrable commitment to a restructuring of the acquired entity and a reliable estimate of the amount of the liability can be made.
149 Regulatory Report – Phase II Airports, 2000/01 Where an entity or operation is acquired and the fair value of the identifiable net assets acquired, including any liability for restructuring costs, exceeds the costs of the acquisition, is accounted for by reducing proportionately the fair values of the non-monetary assets acquired until the discount is eliminated. Where, after reducing to zero the recorded amounts of the non-monetary assets acquired, a discount remains it is recognised as revenue in the profit and loss statement.
(d) Revenue recognition
Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue is recognised for the major business activities as follows:
(i) Aeronautical Revenue
Revenue is recognised within the month the activity occurred. Aircraft landings are recorded daily within the Aeronautical Charges System database and transferred into the financial system at the end of each month. Passenger head charges are recognised within the month incurred upon receipt of the passenger movements from the respective airline operator.
(ii) Non Aeronautical revenue (Trading and Property)
Revenue derived from leases is invoiced one month in advance through the Property Management System. However only the current month’s revenue is recorded in the financial system for that particular period. Revenue derived from carparking is recognised immediately.
(iii) Other Revenue
Revenue derived from other activities such as work performed on behalf of airport tenants is invoiced once the work has been completed. Revenue is brought to account in the month the work was undertaken on an accrual basis if the invoice has not yet been finalised.
(e) Receivables All trade debtors are recognised at the amounts receivable, as they are due for settlement no more than 30 days from the date of recognition. Collectability is reviewed on an ongoing basis. Debts which are known to be uncollectable, are written off, subject to Board approval. A general provision for doubtful debts is raised (3% of the balance outstanding) together with a specific provision for debts where recovery is deemed to be doubtful. (f) Recoverable amount of non-current assets
The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.
150 Regulatory Report – Phase II Airports, 2000/01 Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, the recoverable amount is determined on the basis of the relevant group of assets. The decrement on the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write down occurs. The expected net cash inflows included in determining recoverable amounts of non-current assets are discounted using a market-determined, risk adjusted discount rate. (g) Revaluations of non-current assets Subsequent to initial recognition as assets, land and buildings are measured at fair value being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction. Revaluations are made with sufficient regularity to ensure that the carrying amount of each piece of land and each building does not differ materially from its fair value at the reporting date. Annual assessments will be made by the Directors, supplemented by independent assessments at least every three years. The above policy was adopted with effect from 1 July 2000. The previous policy was to revalue land and buildings at fair value at three yearly intervals. The changed policy has not had a material in the current or previous financial year, nor is it expected to have a material effect in subsequent financial years. Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that a revaluation reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in net profit or loss, the increment is recognised immediately as revenue in net profit or loss. Revaluation decrements are recognised immediately as expenses in net profit or loss, except that, to the extent that a credit balance exists in the asset revaluation reserve in respect of the same class of assets, they are debited directly to the asset revaluation reserve. Revaluation increments and decrements are offset against one another within a class of non-current assets, but not otherwise. Potential capital gains tax is not taken into account in determining revaluation amounts unless it is expected that a liability for such tax will crystallise. Revaluations do not result in the carrying value of land or buildings exceeding their recoverable amount.
(h) Depreciation of property, plant and equipment Depreciation is calculated on a reducing balance basis to write off the net cost or revalued amount of each item of property, plant and equipment (excluding land) over its expected useful life to the Company. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The depreciation and amortisation rates used are as follows:
Asset Rate (%) Buildings 2.5-6.3% Plant and Equipment 15.0%
151 Regulatory Report – Phase II Airports, 2000/01 Fixed Plant and Equipment 10-15.0% Runways, Taxiways and Aprons 4.0% Other Infrastructure 10-20.0%
Where items of plant and equipment have separately identifiable components, which are subject to regular replacement, those components are assigned useful lives distinct from the item of plant and equipment to which they relate. Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate.
(i) Leased non-current assets A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all risks and benefits incident to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all the risks and benefits. At present the Company does not hold any operating leases in which the lease payments would be charged to the statement of financial performance in the periods in which they are incurred. Finance leases are capitalised. A lease asset and liability are established at the present value of the minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the interest expense. The lease is amortised on a reducing balance basis over the term of the lease, or where it is likely the company will obtain ownership of the asset, the life of an asset. Lease assets held at the reporting date are being amortised over a four year period.
(j) Non-current assets constructed by the Company The cost of non-current assets constructed by the Company includes the cost of all materials used in construction, direct labour on the project, borrowing costs incurred during construction and an appropriate proportion of variable and fixed overhead. Borrowing costs included in the cost of non-current assets are those costs that would have been avoided if the expenditure on the construction of the assets had not been made. Borrowing costs incurred while active construction is interrupted for extended periods are recognised as expenses.
(k) Trade and Other Creditors Trade creditors represent liabilities for goods and services provided to the Company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (l) Interest bearing liabilities Loans are carried at their principal amounts less loan repayments made within the given financial year. The carrying value of the loans represents the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.
152 Regulatory Report – Phase II Airports, 2000/01 (m) Maintenance and repairs
The Company’s plant is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in accordance with note 1(h). Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred.
(n) Goods and services tax system changes Costs incurred to update existing systems or to design, develop and implement new systems to deal with the GST are charged as expenses as incurred, except where they result in an enhancement of future economic benefits and are recognised as an asset. (o) Web site costs Costs in relation to web sites controlled by the Company are charged as expenses in the period in which they are incurred unless they relate to the acquisition of an asset, in which case they are capitalised and amortised over their period of expected of expected benefit. Generally, costs in relation to feasibility studies during the planning phase of a web site, and ongoing costs of maintenance during the operating phase are considered to be expenses. Costs incurred in building or enhancing a web site, to the extent that they represent probable future economic benefits controlled by the Company that can be reliably measured, are capitalised as an asset and amortised over the period of the expected benefits which vary from two to five years. (p) Employee entitlements
(i) Wages and salaries and annual leave
Liabilities for wages and salaries and annual leave are recognised, and are measured as the amount unpaid at the reporting date at current rates in respect of employees’ services up to that date.
(ii) Long service leave
A liability for long service leave is recognised and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.
(iii) Superannuation
Superannuation contributions made on behalf of the employee to the nominated superannuation fund, namely National All In One
153 Regulatory Report – Phase II Airports, 2000/01 Superannuation Fund are recognised as expenses in the period in which the contributions are incurred.
The Fund is administered externally and therefore the Company does not recognise any liabilities or assets with respect to the present value of the employees’ accrued benefits as at a particular reporting date.
The cost to the Company for those employees who were existing members of the FAC Fund prior to privatisation is 15% of the individual’s salary as defined in the Fund’s Trust Deed. For all new employees the level sponsored by the Company is in accordance with the Superannuation Guarantee Levy.
(q) Borrowing costs Borrowing costs are recognised as expenses in the period in which they are incurred. The capitalisation rate used to determine the amount of borrowing costs to be capitalised as the weighted average interest rate applicable to the Company’s outstanding borrowings during the year, in this case 7.7% (2000 – 6.33%). Borrowing costs include: • Interest on bank overdrafts, short-term and long term borrowings; • Amortisation of discounts or premiums relating to borrowings; and • Amortisation of ancillary costs incurred in connection with the arrangement of borrowings.
(r) Cash For purposes of the statement of cash flows, cash includes deposits at call, which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. (s) Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investment Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss statement is matched with the accounting profit after allowing for permanent differences.
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7.5 Operational statistics
Table 7.10: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers: Domestic passengers 542,207 524,962 International passengers (excluding transit) N/A N/A International transit passengers N/A N/A Domestic on-carriage N/A N/A Total passengers 542 207 524,962
Aircraft movements: Regular public transport aircraft movements 10,802 13,278 General aviation aircraft movements 16,822 13,156 Total aircraft movements 27,624 26,434
Tonnes landed: Domestic and GA (non-minimum charged) 274,743 277,226 Other (minimum charged) 382 3,226 Total landed tonnes 275,125 280,452
Average staff equivalents Aeronautical services 10 10 Non-aeronautical services 10 10 Total average staff equivalents 20 20
Area (hectares) Aeronautical services 156.6 156.6 Non-aeronautical services 23.4 23.4 Total area (hectares) 180 180
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156 Regulatory Report – Phase II Airports, 2000/01
8. Townsville Airport
Townsville Airport is owned and operated by Australian Airports (Townsville) Pty Limited (AAL) who took over its operation from the Federal Airports Corporation (FAC) in June 1998. AAL paid $15.9 million for a 50-year lease of the airport with an option to extend that lease for a further 49 years.
This is the third regulatory report for Townsville Airport. The Commission would like to acknowledge the cooperation received from AAL in providing data and responding to queries that assisted in the preparation of this report.
8.1 Quality of Service Monitoring
Townsville Airport caters for regional, domestic and some international aircraft. Quality of Service Results
The assessment of quality of service is made having regard to airline surveys, a survey of ACS and additional comments and information made available by the airport operator.
Overall, users rated the availability and standard of facilities provided at Townsville Airport as ‘satisfactory’ to ‘good’. Runways, aprons and taxiways
The availability and standard of the runway were rated both from ‘good’ to ‘excellent’. No comments were received.
The availability of aprons was rated as ‘satisfactory’, although it was noted congestion can occur with off-schedule operations. The standard of aprons was rated as ‘satisfactory’ to ‘good’. Townsville Airport had 17 apron positions covering 56,388 square metres for aircraft parking at 30 June 2001. Townsville Airport is proposing to redesign aprons to allow nose-in push-back operations and is consulting airlines on the most appropriate design.
The availability and standard of taxiways were both rated as ‘good’. No comments were received. Gates
The quality of gates at Townsville Airport was assessed using information obtained from airline surveys.
The availability of gates at Townsville Airport was rated from ‘poor’ to ‘satisfactory’ and the standard from ‘satisfactory’ to ‘good’. A comment was that there are limitations on the number of gates for main line traffic. Townsville Airport is proposing a terminal redevelopment which in part will address the concern raised. Ground service equipment storage sites
The quality of ground service equipment storage sites was assessed using airline surveys.
157 Regulatory Report – Phase II Airports, 2000/01 Ground service equipment storage sites were rated from satisfactory’ to ‘good’ for both availability and standard. No comments were received.
Aerobridges
The quality of aerobridges at Townsville Airport was assessed using airline surveys and information provided by the airport operator.
One airline rated the facility as ‘poor’ both in terms of availability and standard.
Townsville Airport had one aerobridge at 30 June 2001 which is located at the international end of the terminal. Data was not available for the number of passengers using the aerobridge for embarking or disembarking.
The terminal redevelopment will include aerobridges and elevated walkways. Gate lounges The airport operator provided six gate lounges with a total of 422 seats at 30 June 2001. A further 84 seats were provided in other waiting areas. Lounges will also be included in the terminal redevelopment. Baggage processing facilities
The quality of baggage processing facilities was assessed using airline surveys, a survey of ACS and information provided by the airport operator.
Airlines rated the availability and standard of the baggage processing facilities as ‘good’.
At 30 June 2001 Townsville Airport had an automatic baggage system with a capacity of 720 bags per hour (outbound). Flight information displays The airport operator provided 12 flight information displays in six locations at 30 June 2001.
Car parking The airport operator provided 525 car parking spaces at 30 June 2001. Consultation with airlines
The quality of the airport operator’s consultation procedures was assessed through airline surveys. The Commission asked airlines to rate and comment on the airport operator’s performance in addressing airline concerns on quality related issues. The responses from airlines ranged from ‘satisfactory’ to ‘good’.
As noted above a redevelopment of the terminal is proposed and the airport operator is consulting with stakeholders.
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8.2 Price cap compliance
This section reports on Townsville Airport’s price cap compliance for the 2000/01 financial year.
Aeronautical services at Townsville Airport are subject to a price cap set at CPI less an X factor of 1 per cent per annum. The relevant CPI-figure for the period was 2.2 per cent, and Townsville Airport had a previous under-recovery of 0.64 per cent meaning that average aeronautical charges at Townsville Airport could increase by 1.84 per cent.
Using data provided by Townsville Airport, the Commission assessed whether aeronautical charges were adjusted in line with the CPI-X price cap over the 2000/01 year. A summary of movements in charges subject to the cap over the 2000/01 year is provided in Table 8.1.
Table 8.1: Changes in charges subject to price cap for the year ended 30 June 2001 Charge Basis Charges Price change Charges 30.6.00 30.6.01 (incl. GST) Landing charges: The charge was increased $6.44 Domestic Per landing $/tonne MTOW $5.75 for the New Tax System (aircraft over 10,000 kg) from 1 July and again on 1 February International Per landing $/tonne MTOW $5.75 As above $6.44 General aviation Per landing $/tonne MTOW $5.75 As above $6.44 >10 000 kg General aviation Various $4.58 As above <10 000 kg (1)
International Per landing $/tonne MTOW $1.05 The charge was increased $1.15 Terminal charge for the New Tax System from 1 July 2000.
(1) See below for discussion of calculation of average charge for General Aviation landings.
Table 8.2 provides details of Townsville Airport’s price cap reconciliation for the 2000/01 year. Average charges for 2000/01 exclude adjustments made for the New Tax System (NTS) and are given on a GST exclusive basis.
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Table 8.2: Aeronautical revenue and price cap compliance for the year ended 30 June 2001
Description Number Base Revenue Average Rate Revenue Compliance of units charge 00/01 charge variation share 00/01 30/6/00 99/00 % $2,105,000 Landing charges: Domestic 321,472 $5.75 per $1,856,000 $5.77 $0.41 87.82% 0.36% 1000 kg MTOW International 1,380 $5.75 per $8,000 $5.80 $0.85 0.45% 0.00% 1000 kg MTOW General aviation 15,063 $5.75 per $87,000 $5.78 $0.05 3.79% 0.00% >10,000 kg 1000 kg MTOW
General aviation 51,381 $4.44 per $206,000 $4.62 $3.96 7.87% 0.31% <10,000 kg 1000 kg MTOW International 3,803 $1.05 per $4,000 $1.05 $0.00 0.07% 0.00% terminal charges 1000 kg MTOW Actual increase in charges 00/01 0.67% Increase allowed to comply with cap CPI-X, 2.2-1 1.2% Past under-recovery 0.64% 1.84% Under-recovery, 2000/01 1.17% Total Revenue Under-recovery 1999/00 $15,712
Under-recovery of revenue 2000/01 $24,505 Total revenue Under-recovery 2000/01 (end) $40,217
Based on the above reconciliation, Townsville Airport increased charges by 0.67 per cent in 2000/01 against an allowed increase, including a past under-recovery of 0.64%, of 1.84%. It thus has carry forward under-recovery of 1.17 per cent. The under-recovery amounts to $40,217 at the end of 2000/01.
The average charges calculated were on an exclusive of GST basis. In calculating the change in charges from the previous year, savings that arose from implementation of the NTS were excluded from the change in charges for assessing price cap compliance. The change in general aviation (GA) charges was calculated using the same approach as was adopted in previous years. GA aircraft are defined as up to 10 tonne maximum take-off weight (MTOW) as non-regular passenger transport aircraft. Charging for the landing and parking of GA aircraft is covered by a variety of charges from a daily itinerant charge to annual discounted charges for regular users. As the airport operator does not have accurate data on the breakdown of the different
160 Regulatory Report – Phase II Airports, 2000/01 charging options, assumptions have been made to calculate an average charge for GA users.
To calculate the average charge for price cap compliance, a simple average has been used. The monthly, six monthly and 12 month charges have been converted to a daily average and a 50/50 split has then been assumed between the average of these charges and the itinerant charge. This methodology has been consistently adopted since 1998/99.
Landing charges for the past two years are shown in Table 8.3 below. Table 8.3: General Aviation Charges, 2000 and 2001 Charge Options At 30 June 2000 At 30 June 2001 (incl. GST)
Itinerant Charge ($/Tonne/day) $5.75 $6.44
Monthly ($/tonne) (no apron $140 $155.45 licence)
Six Months ($/tonne) (no apron $750 $832.76 licence)
12 Months ($/tonne) (no apron $1,170 $1,299.09 licence)
Monthly ($/tonne) (with apron $112 $127.69 licence)
Six Months ($/tonne) (with $490 $555.17 apron licence)
12 Months ($/tonne) (with apron $702 $799.44 licence)
The approach outlined above gave average charges for GA landings of $4.44 in 1999/2000 which was calculated by weighting the average charge from 1 July to 31 January by 7/12 and average charge from 1 February to 30 June by 5/12. The average charge for 2000/01, during which charges were also increased from 1 February, was $4.62 (after excluding increases associated with the NTS).
Based on the above reconciliation, the Commission concludes that Townsville Airport has complied with the requirements of its price cap in 2000/01.
161 Regulatory Report – Phase II Airports, 2000/01
8.2 Monitoring of aeronautically related services
This section covers the Commission’s role in the monitoring of aeronautically related services at Townsville Airport for the 2000/01 year.
Townsville Airport provided price, cost and revenue data for aeronautically related services for the year ended 30 June 2001. The data is summarised in Tables 8.4 and 8.5.
Car parking rates are provided in Table 8.6.
Table 8.4: Monitored services: aero-related costs for the year ended 30 June, 2000 and 2001 Description 2000 2001 $’000 $’000 Refuelling services 14 14 Aircraft maintenance sites and buildings 73 77 Cargo facility sites and buildings 16 16 Ground support equipment sites 6 7 Check-in counters and related facilities 351 397 Public car parking 121 133 Staff car parking 9 9 Total aero-related costs 590 653
Table 8.5: Monitored services: aero-related revenue for the year ended 30 June, 2000 and 2001
Description Basis of charge(s) 2000 2001 ($’000) ($’000) Refuelling services ($ per square metre) 55 54 Aircraft maintenance sites and ($ per square metre) 280 292 buildings Cargo facility sites and buildings ($ per square metre) 61 60 Ground support equipment sites ($ per square metre) 22 28 Check-in counters and related ($ per square metre) 1,354 1,500 facilities Public car parking Number of cars 467 503 Staff car parking Number of bays 34 32 Total aero-related revenue 2,273 2,469
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Table 8.6: Car Parking Rates Hours Short Term Car Park Short Term Car Park 30/06/2000 30/06/2001 First 2 hours $1.50 $1.50 Every hour thereafter $1.50 $1.50
Days Long Term Car Park Long Term Car Park 30/06/2000 30/06/2001 1 $ 8.00 $8.00 2 $16.00 $16.00 3 $24.00 $24.00 4 $32.00 $32.00 5 $40.00 $40.00 6 $48.00 $48.00 7 $42.00 $42.00 8 $48.00 $48.00 9 $54.00 $54.00 10 $60.00 $60.00 11 $66.00 $66.00 12 $72.00 $72.00 13 $78.00 $78.00 14 $84.00 $84.00 15 $90.00 $90.00 16 $96.00 $96.00 17 $102.00 $102.00 18 $108.00 $108.00 19 $114.00 $114.00 20 $120.00 $120.00 21-30 days $125.00 $125.00 While revenues tended to exceed costs, it is important to note that the costs did not include interest. The Commission asked that these costs be excluded for the purposes of the monitoring reports because their allocation to services would have involved a degree of subjectivity. However, the Commission acknowledges that an allocation that recognises a cost of capital would be appropriate in any detailed analysis.
The cost and revenue data for aeronautically related services at Townsville Airport for 2000/01 showed an increase in revenue that exceeded the increase in costs.
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8.3 Regulatory accounts reporting
This section reports on Townsville Airport’s financial accounts for the 2000/01 year. Townsville Airport lodged its audited regulatory accounts with the Commission in the required 90 days following the end of the financial year. The information provided complied with the requirements of the Airports Act, the regulations under the Airports Act and the Commission guidelines.
Townsville Airport reported on a period of activity from 1 July 2000 to 30 June 2001. Over the entire airport, a profit after tax of $190,000 was reported.
As at 30 June 2001 Townsville Airport’s total assets were valued at $15.3 million.
AAL’s independent auditors attested to the appropriateness of its systems and records which enabled it to comply with the requirement to separate accounting information between aeronautical and non-aeronautical activities.
Some of the more prominent account items and ‘drivers’ were as follows: • salaries and wages were based on an allocation of total time to aeronautical or non-aeronautical activities for each individual staff member. In order to obtain this information, interviews with employees and supervisors were held to determine the activities which best described the individual’s role. A review of timesheets, group work statements and job costing systems was also conducted to identify key activities and appropriate time allocation; • depreciation expenses were calculated on an individual basis. Assets that were not clearly identifiable as either aeronautical or non-aeronautical were apportioned based on function and the necessity of the asset in question; and
• services and utilities were allocated on the basis of their relationship to aeronautical and non-aeronautical activities based on usage and location of each service/utility. A summary of the regulatory accounts for Townsville Airport is attached on the following pages.
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Profit and loss account for the year ended 30 June 200122 Table 8.7.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Revenue Aeronautical revenue 2,326 2,326 Non-aeronautical revenue 3,720 3,720
Total revenue 6,046 2,326 3,720
Expenditure Salaries and wages 1,307 779 528 Depreciation 1,080 832 248 Services and utilities 632 476 156 Property Maintenance 593 465 128 Other costs 783 492 291
Total expenditure 4,395 3, 044 1,351
Operating profit/(loss) 1,651 (718) 2,369
Abnormal items 150 121 29
Earnings before interest and tax (EBIT) 1,501 (839) 2,340
Interest expense 984
Profit before tax 517
Tax charge 327
Profit after tax 190
Dividends paid 0
Retained earnings 190
22 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Profit and loss account for the year ended 30 June 200023
Table 8.7a.
Description Audited Aero services Non-aero financial services statements $’000 $’000 $’000 Revenue Aeronautical revenue 2,188 2,188 Non-aeronautical revenue 3,611 3,611
Total revenue 5,799 2,188 3,611
Expenditure Salaries and wages 1,179 569 610 Depreciation 1,122 856 266 Services and utilities 565 431 134 Property Maintenance 546 440 106 Other 844 451 393
Total expenditure 4,256 2,747 1,509
Operating profit/(loss) 1,543 (559) 2,102
Abnormal items 184 122 62
Earnings before interest and tax (EBIT) 1,359 (681) 2,040
Interest expense 1,029
Earnings before tax (EBT) 330
Tax charge 213
Profit/(Loss) after tax 117
Dividends paid 0
Retained earnings/(loss) 117
23 The Commission does not require an allocation of costs related to amortisation or interest expense because any allocation between aeronautical and non-aeronautical services is likely to be arbitrary.
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Balance sheet as at 30 June 2001
Table 8.8.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 797 Receivables 419 373 46 Accrued revenue 25 0 25 Other 17 13 4
Total current assets 1,258 386 75
Non-current assets Property, plant and equipment 13,472 10,627 2,845 Other 538
Total non-current assets 14,010 10,627 2,845
Total assets 15,267 11,013 2,920
Current liabilities Creditors 369 Provisions 819 415 404
Total current liabilities 1,188
Non-current liabilities Borrowings 11,725 Provisions 117 58 59
Total non-current Liabilities 11,842
Total liabilities 13,031
Net assets/(liabilities) 2,236
Shareholder’s equity Share capital 2,250 Reserves 0 Accumulated profits/(losses) (14)
Total shareholder’s equity 2,236
Accumulated profit/loss at the start of the year 2
Movements: Profit/loss for the year 190 Other (206)
Accumulated profit/loss at the end of the year (14)
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Balance sheet as at 30 June 2000
Table 8.8a.
Description Audited Aero Non-aero financial services services statements $’000 $’000 $’000 Current assets Cash 1,003 Receivables 444 375 70 Accrued revenue 24 0 24 Other 89 70 19
Total current assets 1,560 445 113
Non-current assets Property, plant and equipment 13,975 11,055 2,920 Other 128
Total non-current assets 14,103 11,055 2,920
Total assets 15,664 11, 500 3,033
Current liabilities Creditors 145 Borrowings - Provisions 371 179 192
Total current liabilities 516
Non-current liabilities Borrowings 12,760 Provisions 135 65 70
Total non-current Liabilities 12,895
Total liabilities 13,411
Net assets/(liabilities) 2,252
Shareholder’s equity Share capital 2,250 Reserves 0 Accumulated profits/(losses) 2
Total shareholder’s equity 2,252
Accumulated profit/(loss) at 30/6/99 (115)
Movements: Profit/(loss) for the year 117
Accumulated profit/(loss) at 30/6/99 2
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Statement of cash flows for the year ended 30 June 2000 and 2001
Table 8.9.
Description 2000 2001
Cash flows from operating activities $’000 $’000 Inflows Receipts from trade and other debtors 6,564 7,358 Interest received 76 91 6,440 7,449 Outflows Payments to trade and other suppliers (4,533) (4,348) Borrowing costs (1,094) (1,133) Income taxes paid (81) (152) Net cash inflow from operating activities 932 1,816
Cash flows from investing activities Inflows: Proceeds from sale of property, plant and equipment 27 0 Outflows: Payments for property, plant and equipment (398) (596) Loans to related parties 0 (500) Repayment of loans by related parties 0 90 Net cash outflow from investing activities (371) (1,006)
Cash flows from financing activities Outflows: Repayment of borrowings (784) (1,010) Repayment of finance leases 0 (6)
Net cash inflow (outflow) from financing activities (784) (1,016)
Net increase (decrease) in cash held (223) (206) Cash at the beginning of the period 1,226 1,003 Cash at end of the period 1,003 797
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Townsville Airport regulatory accounts — summary of significant accounting policies This special purpose financial report has been prepared in accordance with the regulatory information requirements under Part 7 of the Airports Act, Section 21 and 27A of the PS Act, Accounting Standards, other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Act 2001. It is prepared in accordance with the historical cost convention. Basis of preparation of financial report This special purpose financial report has been prepared in accordance with the requirements of the Regulatory Information Requirements under Part 7 of the Airports Act 1996 and Sections 21 and 27A of the Prices Surveillance Act 19883-Guideline Version Number 2-September 1998. This is a special purpose financial report that has been prepared on the basis of historical costs and except where stated, does not take into account changing money values or current valuations of non-current assets. The reporting period extends from 1 July 2000 to 30 June 2001. (a) Income Tax Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss statement is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse. (b) Acquisition of Assets The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their fair value as at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the incremental borrowing rate being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is a demonstrable commitment to a restructuring of the acquired entity and a reliable estimate of the amount of the liability can be made. Where an entity or operation is acquired and the fair value of the identifiable net assets acquired, including any liability for restructuring costs, exceeds the cost of acquisition, the difference, representing a discount on acquisition, is
171 Regulatory Report – Phase II Airports, 2000/01 accounted for by reducing proportionately the fair values of the non-monetary assets acquired until the discount is eliminated. Where, after reducing to zero the recorded amounts of the non-monetary assets acquired, a discount balance remains it is recognised as revenue in the profit and loss statement. (c) Revenue recognition Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue is recognised for the major business activities as follows: (i) Aeronautical Revenue Revenue is recognised within the month the activity occurred. Aircraft landings are recorded daily within the Aeronautical Charges System database and transferred into the financial system at the end of each month. Passenger head charges are recognised within the month incurred upon receipt of the passenger movements from the respective airline operator. (ii) Non Aeronautical Revenue (Trading and Property) Revenue derived from leases is invoiced one month in advance through the Property Management System, however only the current month’s revenue is recorded in the financial system for that particular period. Revenue derived from car parking is recognised immediately. (iii) Other Revenue Revenue derived from other activities such as work performed on behalf of airport tenants is invoiced once the work has been completed. Revenue is brought to account in the month the work was undertaken on an accrual basis if the invoice has not yet been finalised. (d) Receivables All trade debtors are recognised at the amounts receivable, as they are due for settlement no more than 30 days from the date of recognition. Collectibility of trade debtors is reviewed on an ongoing basis. Debts, which are known to be unrecoverable, are written off, subject to Board approval. A general provision for doubtful debts is raised (3% of the balance outstanding) together with a specific provision for debts where recoverability is deemed to be doubtful. (e) Recoverable amount of non-current assets The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is revalued to its recoverable amount. Where net cash inflows are derived from a group of assets working together, the recoverable amount is determined on the basis of the relevant group of assets. The decrement on the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write-down occurs. The expected net cash flows included in determining recoverable amount of non-current assets are discounted to their present values using a market- determined, risk adjusted discount rate.
172 Regulatory Report – Phase II Airports, 2000/01 (f) Revaluations of non-current assets Subsequent to initial recognition of assets, land and buildings are measured at fair value being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction. Revaluations are made with sufficient regularity to ensure that the carrying amount of each piece of land and each building does not differ materially from its fair value at the reporting date. Annual assessments will be made by the directors, supplemented by independent assessments at least every three years. The above policy was adopted with effect from 1 July 2000. The previous policy was to revalue land and buildings at fair values at three yearly intervals. The changed policy has not had a material effect in the current of prior financial year, nor is it expected to have a material effect in subsequent financial years. Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in net profit and loss, the increment is recognised immediately as revenue in net profit and loss. Revaluation decrements are recognised immediately as expenses in net profit and loss, except that to the extent that a credit balance exists in the asset revaluation reserve in respect of that same class of assets, they are debited directly to the asset revaluation reserve. Revaluation increments and decrements are offset against one another within a class of non-current assets, but not otherwise. Potential capital gains tax is not taken into account in determining revaluation amounts unless it is expected that a liability for such tax will crystallise. Revaluations do not result in the carrying value of land or buildings exceeding their recoverable amount. (g) Depreciation of property, plant and equipment Depreciation is calculated on a reducing balance basis to write off the net cost or revalued amount of each item of property, plant and equipment (excluding land) over its expected useful life to the company. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The depreciation and amortisation rates used are as follows: Asset Rate (%) Buildings 2.5–6.3% Plant and Equipment 15.0% Fixed Plant and Equipment 10–15.0% Runways, Taxiways and Aprons 4.0% Other Infrastructure 10–20%
173 Regulatory Report – Phase II Airports, 2000/01 Where items of plant and equipment have separately identifiable components, which are subject to regular replacement, those components are assigned useful lives distinct from the item of plant and equipment to which they relate. Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate. (h) Leased non-current assets A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. At present the company does not hold any operating leases in which lease payments would be charged to the statement of financial performance in the periods in which they are incurred. Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the interest expense. The lease is amortised on a straight-line basis over the term of the lease or, where it is likely that the company will obtain ownership of the asset, the life of the asset. Lease assets held at reporting date are being amortised over a four year period. (i) Non-current assets constructed by the company The cost of non-current assets constructed by the company includes the cost of all materials used in construction, direct labour on the project, borrowing costs incurred during construction and an appropriate proportion of variable and fixed overhead. Borrowing costs included in the cost of non-current assets are those costs that would have been avoided if the expenditure on the construction of the assets had not been made. Borrowing costs incurred while active construction is interrupted for extended periods are recognised as expenses. (j) Trade and other creditors Trade creditors represent liabilities for goods and services provided to the company prior to the reporting date and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (k) Interest bearing liabilities Loans are carried at their principal amounts less loan repayments within the given financial year. The carrying value of the loans represents the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.
(l) Maintenance and repairs The company’s plant is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the
174 Regulatory Report – Phase II Airports, 2000/01 costs are capitalised and depreciated. Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred. (m) Goods and Services Tax systems changes Costs incurred to update existing systems or to design, develop and implement new systems to deal with the GST are charged as expenses as incurred, except where they result in an enhancement of future economic benefits and are recognised as an asset. (n) Web site costs Costs in relation to web sites controlled by the company are charged as an expense in the period in which they are incurred unless they relate to the acquisition of an asset, in which case they are capitalised and amortised over their period of expected benefit. Generally, costs in relation to feasibility studies during the planning phase of a web site, and ongoing costs of maintenance during the operating phase are considered to be expenses. Costs incurred in building or enhancing a web site, to the extent that they represent probable future economic benefits controlled by the company that can be reliably measured, are capitalised as an asset and amortised over the period of the expected benefits which vary from two to five years. (o) Employee entitlements (i) Wages and salaries and annual leave Liabilities for wages and salaries and annual leave are recognised, and are measured as the amount unpaid at the reporting date at current pay rates in respect of employees’ services up to that date.
(ii) Long service leave A liability for long service leave is recognised and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary level, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iii) Superannuation Superannuation contributions made on behalf of the employee to the nominated superannuation fund, namely the National All In One Superannuation Fund are recognised as expenses in the period in which the contributions are incurred. The Fund is administered externally and therefore the Company does not recognise any liabilities or assets with respect to the present value of employee’s accrued benefits as at a particular reporting date. The cost to the Company for those employees who were existing members of the FAC Fund prior to privatisation is 15% of the individual’s salary as defined in Fund’s Trust Deed. For all new employees the level sponsored by the company is in accordance with the Superannuation Guarantee Levy.
175 Regulatory Report – Phase II Airports, 2000/01 (p) Borrowing costs Borrowing costs are recognised as expenses in the period in which they are incurred. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the Company’s outstanding borrowings during the year, in this case 7.17% (1999 – 6.33%). Borrowing costs include: - interest on bank overdrafts, short-term and long-term borrowings - amortisation of discounts or premiums relating to borrowings, and - amortisation of ancillary costs incurred in connection with the arrangements of borrowings. (q) Cash For purposes of the statement of cash flows, cash includes deposits at call, which are readily convertible to cash on hand and are subject to a insignificant risk of changes in value, net of outstanding bank overdrafts. (r) Rounding Amounts The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investment Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss statement is matched with the accounting profit after allowing for permanent differences.
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8.4 Operational statistics
Table 8.10: Operational Statistics for the year ended 30 June, 2000 and 2001
Description 2000 2001 Passengers: Domestic 716,057 790,216 Charter passengers (fly in fly out — mining) 65,632 50,958 International (excluding transit) 0 2,461 International transit passengers 0 0 Domestic on-carriage 0 0 Total passengers 781,689 843,635
Aircraft movements: Regular public transport aircraft movements 22,466 22,286 General aviation aircraft movements 36,846 26,658 Total aircraft movements 59,312 48,944
Total landed tonnes 371,607 389,381
Average staff equivalents Aeronautical services 4 6 Non-aeronautical services 13 11 Total average staff equivalents 17 17
Area (hectares) Aeronautical services 61 61 Non-aeronautical services 20 20 Total area (hectares) 81 81
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Regulatory Report - Phase II Airports, 2000/01
Appendix 1: Quality of service information requirements The regulations to the Airports Act specify information to be provided by Phase II airport operators for quality of service monitoring. These cover a range of services and infrastructure for which the airport operator has some, or complete, influence over. An outline of the indicators is given in Table A1 below. Table A!: Quality of service indicators Facility Information required Aircraft Parking The number of parking bays at 30 June. Total area of the parking area at 30 June. Aerobridges Number of aerobridges at 30 June. Number of passengers using airport operator managed aerobridges for embarkation and disembarkation for the year to 30 June. Check-in Number of check-in desks on 30 June. Security clearance Type of baggage security clearance facilities on 30 June. Number of passenger security clearance facilities at 30 June. Number of baggage security clearance facilities at 30 June. Gate Lounges Number of gate lounges at 30 June. Number of seats in gate lounges. Seating other than in gate lounges Number of seats in waiting areas other than gate lounges on 30 June. Baggage System (outbound) Type (manual or automatic) of any baggage handling equipment at 30 June. Total number of bags handled in year to 30 June. Total number of hours the equipment was in use in the year to 30 June. Baggage System (inbound) Type (manual or automatic) of any baggage handling equipment at 30 June. Total number of bags handled in year to 30 June. Total area for baggage reclaim at 30 June. Flight Information Display Type and number of flight information displays at 30 June. Car Parking Distance between the nearest public car park and the terminal entrance nearest the car park. Number of parking spaces available to the public at 30 June.