Are parking prices at the airport a rip-off?

Mode share at five largest Australian airports - all users (%)

The new draft report by the Productivity Commission on Economic Regulation of Airport Services has sparked outrage among readers of The Age for its finding that parking fees at Tullamarine are “not a ripoff”. Last time I looked there were 110 comments on The Age Online, virtually every one of them dripping with vitriol.

Whether you’re happy with its conclusions or not, the thing about the Commission is that, relative to The Age’s readers, it’s put a lot of effort into this review, its assembled facts and figures, it’s made its assumptions transparent and its set down its line of reasoning. So far as I can see, none of that is true of the angry and furious readers who commented on The Age’s story.

The Commission examined lots more than parking but I’ve only had a chance to look at the chapter dealing with landside transport. It starts by acknowledging airports have the potential to raise parking prices above competitive levels and to control access to the airport by modes that compete with airport parking. It also notes the ACCC expressed concern the operator of Melbourne Airport seems to restrict entry by off-airport parking operators and private bus operators.

The Commission examined three sources of evidence for the possible existence of monopoly practices i.e. the ability of an airport to use its market power to restrict competition.

It looked first at whether there are effective substitutes for on-airport parking. The availability of alternative means of travel puts a ‘natural’ cap on what airport operators can charge. Hence all forms of transport must be taken into account. For example, at Melbourne Airport, travellers can use a private car (pick up and drop off; on-airport or off-airport parking), catch a taxi, take Skybus from the CBD, or use the 901 orbital SmartBus (which connects the Airport with Broadmeadows rail station) at standard Metlink fares (there are some other private bus operators too).

Off-airport parking is a particularly important substitute for those who drive. As the exhibit shows, this has a much larger role at Melbourne than at other airports. There are 14 private parking operators near the airport, providing 10,000 parking spaces in total. This is half the total number available on-airport. (The Airport operator is also examining a proposal for a new parking area where ‘meeters and greeters’ can wait until summoned by phone by the passenger they’re collecting).

The second issue the Commission addressed is the reasonableness of parking prices, noting that they are made up of a number of components. The obvious one is the cost of building and operating parking facilities (surface parking costs $2,000 per bay, multi-level parking stations $20,000 per bay). The total number needed is determined by peak demand (a few days at Christmas), meaning for most of the time some bays aren’t earning revenue.

Other components are the need to use price as a means of rationing demand (e.g. keeping long-term parkers out of scarcer and more valuable short-term spaces) and, finally, there’s the opportunity cost of the land used for parking – its value in an alternative use. The Commission cites a study of Sydney Airport’s international car park which found the parking charges were lower than the land could earn if developed commercially.

The third piece of evidence is more straightforward. Much as I did in this post 18 months ago, the Commission examined the claim that parking comprises a much larger proportion of Melbourne Airport’s total revenue than it does at other airports. This is taken by some as incontrovertible evidence that Melbourne Airport is engaging in monopolistic pricing.

Melbourne Airport has a lot of parking spaces (20,029). This is double the number of the next largest airport in terms of parking (Perth), so it’s not surprising it earns a lot more revenue from this source than other airports. However, Melbourne earns an average of $12.70 per bay, per day. This is the same as Adelaide ($12.20) but considerably lower than Brisbane ($16.60) and Sydney ($21.50). The importance of parking in Melbourne Airport’s revenue stream is also larger because it has the lowest aeronautical charges per passenger of any of the five airports examined.

So the Commission concludes there’s no evidence of monopolistic pricing of parking. Why then do motorists get so upset? Other than those who park in the CBD during office hours and pay out of their own pocket, most drivers aren’t used to paying directly for parking – in many cases parking is heavily subsidised by taxpayers (e.g. on-street parking) or the real cost is concealed in the cost of goods and services (e.g. malls). Parking at Melbourne Airport is operated as a business, like commercial parking stations in the CBD.

I wonder how valid is it to benchmark costs against other airports which themselves are effective monopolists. I also wonder how significant the notion of opportunity cost is in the case of Melbourne Airport. But probably the greater concern is the Commission’s findings on the access fees taxis and bus operators have to pay to the airport. It concludes that “at face value, the fees do not appear excessive” but cautions that “information about terms and conditions of access is less transparent”. For example, Skybus pays for premium access at the terminal but the Commission was unable to determine how much.

The thing that strikes me above all else about the whole issue of landside access is that drop-offs and pick-ups account for a whopping 35% of trips at Melbourne Airport, contributing enormously to the high level of congestion at the terminal. Yet they pay nothing.

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10 Comments on “Are parking prices at the airport a rip-off?”

  1. Andrew says:

    If we had a train service to the airport, parking at the airport would be much cheaper. Suburban shopping centres welcome your custom and provide free and good parking. Why is it not the same at the airport? Monopoly. $12 to park for fifty minutes in the short term carpark in the outer north west of Melbourne is usury.

  2. Dave says:

    ‘Free’ carparking at suburban shopping centres is not free, it’s paid for in the rent the merchants are charged by the centre operator, which is then passed on to the shoppers. Of course, those who didn’t drive to the shopping centre pay the same retail price, and hence subsidise the drivers.

  3. David Mulhall says:

    Having just returned from holidays, the Productivity Commissions announcment and your piece on the cost of parking at Melbourne airport was of interest to me. The cost of parking in the long term carpark for 9 days, 9 hours and 32 minutes was $199 incl GST. At around $20 a day, considering the ease of parking at the airport versus getting a taxi, I am reasonably comfortable with the charge. However, I’m also a semi-regular user of the short term carpark, and I find the costs to be very, very high……understandably because of the lack of competition – which building a rail link won’t change. I can’t see a competitor being allowed to build a carpark out at Tullamarine anytime soon making the whole argument about “rip-off” charges rather academic.

  4. Luke says:

    Andrew and David highlight an important point, I think: the alternatives to parking you list, Alan (busses, taxis) are alternatives mainly for people who are travelling themselves.

    Most of my (infrequent) trips to Tulla are pick-ups or drop-offs of people with large amounts of luggage and/or small children who appreciate a helping hand inside the terminal (OK, and I do like to wave off or greet them too!). There is no alternative to on-airport short-term parking for this – surely common – scenario.

    Tulla’s short-term parking never seems anywhere near capacity when I’ve been there so might they do better by encouraging more people to use it? I contend that if the charges for short-term parking were “reasonable” (free 10 mins for drop-off, $5 first hour, $10 2nd etc? – whatever) then it would go a long way to reducing congestion – make door drop-offs taxis and busses only – and obviate the need for “ring in” alternatives.

    • Alan Davies says:

      According to the Melbourne Airport parking calculator, parking is pretty cheap if you only want to wave goodbye. The prices is $3 for 20 minutes (but go beyond that and it starts to escalate fast).

      My feeling is the Airport will have to shift its “entry” a considerable distance from the existing terminal (like the long term car park) and find a way to move passengers en masse to the terminal – maybe with a train! Alternatively, the effective “entry” for meeting and greeting could be miles away as per this suggestion.

  5. T says:

    People complain about everything! They complain that car parking at the airport is so expensive, but if airport parking were relatively cheap everybody would drive to the airport instead of catching alternate forms of transportation (you often hear people saying taking a taxi to the airport is cheaper than driving and parking), then people would complain about the traffic (oh wait they already do that…) and how impossible it is to find a car space.

    I would prefer prices to stay high because i like the convenience of it all. I like that I can drive in, park close to the door, walk across that covered walk-way straight to the terminal. If they had cheap short term rates (like $5 for the first hour), finding a car park would become a nightmare! Not worth it for the one trip I might take to the airport in a year. And on that point, I wonder when the last time those complainers actually parked at the airport and how often do they really need to park at the airport?

  6. Andrew says:

    Yes Dave, quite correct. The airport is the shopping centre and the airport’s income pays for parking facilities, as does the shopping centre. Something is clearly wrong when an airport derives 20% of its income from parking charges.

    • Alan Davies says:

      Note though that relative to Sydney, Melbourne Airport (a) has double the number of car spaces (b), charges a little less for parking, and (c) has much lower aeronautical charges. So it’s not surprising parking makes up a much larger proportion of Melbourne Airport’s total revenue compared to Sydney.

  7. j says:

    Alan, perhaps I am losing my marbles. Didn’t you claim that Melbourne airport has the greatest proportion of public transport usage compared to other airports? How can more people be getting on public transport AND more people be parking at Melbourne?

    • Alan Davies says:

      I think I reproduced some figures from research by others showing that to be the case.
      IIRC they were “snapshot” figures not trend figures. Even so, with growth, it would be perfectly possible for both car and public transport use to be increasing.


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