Greg, Luke, Sarah, Bronwyn and Nick recently advised Australia’s four major airports as part of the Productivity Commission’s inquiry into airport regulation. We analysed the extent to which the airports have market power in car parking and ground access, and whether they have used any such power.
Our analysis shows that, despite the ACCC’s repeated claims of “very high” profit margins (see here), the airports do not appear to be exercising market power in the provision of car parking or ground access services. Indeed, car parking prices appear to be explained to a significant extent by locational rents and convenience premiums, which are key elements of efficient pricing.
The airports are materially constrained in car parking by off-airport car parking operators and the availability of many other transport options with a diverse range of features and prices. The airports also have a strong incentive to maximise the number of visitors accessing the airport, since ground access revenues tend to represent only a small proportion of total airport revenue.