Toll Group Submission to the Productivity Commission Inquiry – Economic Regulation of Airport Services April 2011
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Toll Group Submission to the Productivity Commission Inquiry – Economic Regulation of Airport Services April 2011 www.tollgroup.com Toll Group TollGroupistheAsianregion’sleadingproviderof integratedlogisticsservices.Withannualisedrevenuein excessofAU$8billion,weemployaround40,000people viaanetworkof1,200sitesin55countries.TollGroup’s substantialinternationalpresencemakesitperhapsthe mostgeographicallydiverseAustralianmultinational.In Australia,Tolldirectlyemploysaround20,000people. Toll’sfirstclasscollectionofandaccesstotransport andinfrastructureassets,includingroadfleets,airand marinecapacity,warehousing,portsandrailways,help thecompanyachieveworld’sbestpracticeinsupplychain management.Thecompany’sintegratedlogisticsstrategy combinedwithsmarttechnology,whichconnectsservices andinterfaceswithourcustomers,providesourmost powerfulpointofdifferentiationinthemarketplace. Toll Group recommends the introduction of: • Animprovedpricemonitoringregimethatrevealsthetrueextentofairportpricesettingswithaeronauticalandnon- aeronauticaltenants; • Anindependentarbitrationmechanismtoassistwithdisputeresolution; • Areportingmechanismthatrequiresairportstorevealhowaccessdecisionshavebeenreachedininstanceswherethey giveprioritytonon-aeronauticalbusinesses,orhavebeentothedetrimentofaeronauticalbusinessesoperatingonthe airfield;and • Aservicemonitoringmechanismthatincludesmeasurescommontobusinesseslikegroundhandlers,cargoterminal operatorsandmaintenanceandrepairorganisations. www.tollgroup.com Toll Group at Australian Airports ThreeTollGroupBusinessUnitsareprominentat operatingmodelongroundhasaturntimeofapprox45 Australianairports–TollDnataAirportServices,Toll minutes,thereforeisitsparamountTollAirExpressbein AirExpressandTollGlobalForwarding.TollDnata closeproximitytotheVirginBluerampoperationstoallow AirportServices istheonlygroundhandlingcompanyin timecriticalfreight,excessbaggage,travellingcustomers AustraliatoofferacompleterangeofservicesatSydney, petsetctobeplacedontoVirginBlueflights. Melbourne,Brisbane,Perth,AdelaideandDarwinAirports. TollGrouphasanextensivecommitmenttothe Servicesincludepassengerandcustomerservices,ramp provisionofsafe,secureandsustainableairservices activities,cargohandling,roadfeedertransportand andappreciatestheopportunitytocontributetothe aircraftservicing.NotablecustomersincludetheVirgin ProductivityCommission’sinquiry.Thecompanybelieves BlueGroupofAirlines,Emirates,SingaporeAirlines, airportsarekeypiecesofnationalinfrastructureandan CathayPacific,ThaiAirways,ChinaSouthernAirlinesand essentialpartofaninternationallycompetitivesupplychain. MalaysianAirlines,amongstothers. TollAirExpress(abusinessunitofTollPriority)operates TollGlobalForwardinghasasignificantpresenceat 50+aircraftperforming240scheduledfreightflights Australianairportsandprovidesairfreightservices perdaythroughoutAustraliausingawiderangeof forimportersandexportersfromSydney,Brisbane, aircrafttypes.Thebusinessservicestheentirefinancial Melbourne,Adelaide,PerthandDarwin.Thebusiness institutionsrequirementfortheovernightmoneymarket contributessignificantlytothehighvalueairfreightsector (carryingcheques/vouchers)throughtwoservicesdailyto andisresponsibleforfacilitatingAustralianexportsof eachbankwithinAustralia.Theseservicesalsocarrylife around5thousandtonnesandimportsofaround15 savingmedicationtoallcapitalcitiesandregionalareas, thousandtonnesperannum.FromSydneyAirportalone pathologysamples,timecriticaltelecommunications thebusinessmovesapproximately30tonnesofimports equipmentandmachinerypartstolistafew.Inaddition, and15tonnesofexportsdaily. TollAirExpressprovidesawiderangeofservicesforthe TomeettheneedsofcustomersTollGlobalForwarding aviationindustryincludingmaintenanceandrepair(MRO) workscloselywithCargoTerminalOperatorsincluding andadhocfreightcharteroperationstotheprivate, AustralianAirExpress,QantasFreightHandling,Menzies commercialandgovernmentsectorswithinAustraliaand AviationandTollDnataandnumerousairlinesincluding thePacificRegion. QantasandSingaporeAirlines.TollGlobalForwardingalso TollAirExpresshasa10yearFreightServicesAgreement providesspecialistservicesincludingProjectServices, withVirginBlueAirlineswhichprovidestheairlineswitha AircraftCharterandSpecialHandling. significantcontributiontoitsprofitability.TheVirginBlue www.tollgroup.com Executive Summary Airportsformanintegralpartoftheaviationlandscape TollGroupunderstandsthattheexistingeconomic andarekeypiecesofAustralianinfrastructure.Itis regulationofcertainAustralianairportswasintendedto essentialthattheyarewellrunanddeliverthenecessary promoteeconomicallyefficientoperationsatAustralian infrastructuretosupportthebusinessesoperatingonthe airportsandfacilitatecommerciallynegotiatedoutcomes airfieldandairportusersmoregenerally. betweenairportmanagersandairportusers. TollGroupstronglybelievesairportusersthatsupportthe However,intheexperienceofTollGroupBusinesses aeronauticalfunctionsonaerodromes,suchasairlines, basedonAustralianairportsthelight-handedapproach cargoterminaloperatorsandgroundhandlersshouldbe adoptedbytheAustralianGovernment: acknowledgedandrespectedastheprimaryusersofthe •Hasnotbeenaneffectiveconstraintonmonopoly facilities. pricing; •Doesnotadequatelyprotectairportusersfromabuses It is essential that regulators and airport managers ofmarketpowerinatimelyandcost-effectivemanner; alike realise that Toll Group businesses like Toll Dnata •Limitstheopportunitiesforgenuinecommercial and Toll Air Express provide aeronautical services that negotiationanddisputeresolution;and, are vital for the community and necessary to ensure •Hasnotledtoacceptableimprovementsinlevelsof the profitability of airline operators. servicetoairportusers. Wehavebecomeincreasinglyconcernedbytheactions OnthisbasisTollGroupencouragestheAustralian ofsomeairportoperatorswhoshowlittleregardforthe Governmenttoadoptmethodsbywhichthescrutiny needsofbusinesses,suchasTollDnataandTollAir andoversightofairportownershipandoperationswith Express,andgiveprioritytonon-aeronauticalbusinesses respecttopricingandservicequalitystandardscouldbe suchasretailoutlets,motelsandotherindustrialuses. strengthened. Toll Group firmly believes the primary function of We would strongly argue against the removal of airport managers should be to manage their facility regulatory oversight and scrutiny currently applied to as an airport and promote aeronautical operations for airport owners by the Productivity Commission and the benefit of Australia’s economy and population; Australian Competition and Consumer Commission. unfortunately we see substantial evidence to the contrary. www.tollgroup.com List of Recommendations We recommend the introduction of: • Animprovedpricemonitoringregimethatrevealsthetrueextentofairportpricesettingswithaeronauticalandnon- aeronauticaltenants; • Anindependentarbitrationmechanismtoassistwithdisputeresolution; • Areportingmechanismthatrequiresairportstorevealhowaccessdecisionshavebeenreachedininstanceswhere theygiveprioritytonon-aeronauticalbusinesses,orhavebeentothedetrimentofaeronauticalbusinessesoperating ontheairfield;and • Aservicemonitoringmechanismthatincludesmeasurescommontobusinesseslikegroundhandlers,cargoterminal operatorsandmaintenanceandrepairorganisations. www.tollgroup.com Air freight and logistics must be core business for airports Our businesses are sizeable customers of aeronautical aresituatedalongwayfromtheInternationalTerminal services; in some instances our staffing footprint far necessitatingtowsacrossactiverunwaysandtaxiwaysto exceeds the employee numbers of major international thedetrimentofproductivity,efficiencyandsafety.Brisbane airlines1. Airport’srecentdecisiontorelocateitsfreightandlogistics infrastructure20minutesfromterminalswithoutany Despitethis,wehavefoundthatlittleconsiderationis consultationwillresultindelaystoflightdeparturesaswell givenbyairportmanagersandGovernmentagenciesto asanadditional$1millioninfuelcostsperannumtooneToll theimpactoflighthandedeconomicregulationofairports BusinessUnitalone.TollDnatahassimilarexperienceswith onourbusinesses. spacewithintheInternationalTerminalatSydneyAirportfor itsAdministrationOffice. Inrealitythereareasubstantialnumberofnon-airlineusers ofaeronauticalfacilitiesatairportssuchasgroundhandlers, A‘takeitorleaveit’attitudeoftenaccompaniesaccess refuellers,cargoforwarders,aircraftmaintenanceandaircraft andpricingdecisionstothedetrimentofnotonlyTollGroup providersnotengagedinRegularPassengerTransport(RPT) businesses,butalsobusinesscustomerswhorelyonthe services.Thesenon-passengerairlinebusinessesrangein efficientmovementoffreight.AttemptsbyTollPriorityto sizefromsmalltolargeenterprisesandunlikedomesticand establishafacilityatCanberraAirportinordertoaccess internationalRPTproviders,donothaveademonstrated cargoarrivingonVirginBlueaircrafthavebeenunsuccessful abilitytocoordinateasan‘industry’.Suchbusinessesare withairportmanagementadamantthatneithersize,nor asdependentonairportservicedeliveryandcostefficiency pricingwasnegotiable.TollPriorityhasdeclinedtheairport’s asairlines,butrarelyengagedbythoseprovidingadviceto offerandcontinuestoutilisetheirexistingfacilitieslocatedin Governmentontheimpactofairportprivatisationandthe Queanbeyan,NSW,butconsequentlyisdenieddirectaccess economicregulationofairportservices.Itispossiblybecause totheairfieldandaircraft,necessitatingdoublehandlingof ofthisthatsomeairportmanagershavelittletonoregard thefreightbeingcarried. fortheirinterestsandgenuinecommercialnegotiationsare limitedornon-existent. Therearenumerousexamplestosupportthis,forexample, SydneyAirportdoesnotprovideenoughspaceforefficient CargoTerminalOperations,noraretheexistingsitesin