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. Read the rest of this entry »


What can Sydney teach us about airport rail lines?

Mode share (prepared by ACCC)

There is little doubt that Melbourne Airport needs action to improve land-side access for passengers arriving and departing from the airport.

Many observers argue the solution is a rail line from the CBD to the airport. I think there’s a much bigger picture they’re missing. They would be well advised to look at the Airport Monitoring Report 2009-10, just released by the ACCC (see chart).

It shows that only 39% of trips to Sydney Airport are made by private car (on-airport parking, rentals and kerbside drop-off), compared to 69% for Melbourne Airport. Since Sydney has a train and Melbourne doesn’t, it’s tempting to conclude that a train is the answer to Melbourne’s woes.

However the ACCC’s report says that more people travel to Melbourne Airport by public transport (14% – all by bus) than is the case for Sydney Airport (12% – train and bus).

A key difference between the two airports is that taxis (incl ‘mini buses’) are far more popular in Sydney, where they account for 49% of all airport trips. The comparable figure for Melbourne is just 17%.

Part of the reason for this difference is taxis are more competitive in Sydney against cars and against the train – Kingsford Smith is 8 km from the CBD and hence is relatively central.  In contrast, Melbourne is 22 km from the CBD so taxis are not as competitive with either buses or cars (other reasons for the difference include more tourists at Sydney, as well as higher parking charges).

As I discussed last week, Brisbane’s airport – like Melbourne’s – is also located a considerable distance from the city centre. It might be that the location of both airports on the edge of their respective metropolitan areas – well away from the centre of gravity of population in both cities – is a key reason for their high private car use (and low taxi use).

Yet distance can’t be the whole explanation. The Brisbane airport train only captures 5% of trips and all up, public transport carries 8% of airport journeys. That’s considerably less than either Sydney or train-free Melbourne.

Given the experience of Sydney and Brisbane, it cannot simply be assumed that constructing a rail line from the CBD to Melbourne Airport will inevitably lead to a significant increase in public transport use – at the expense of cars – over and above the already substantial mode share enjoyed by buses. Read the rest of this entry »


Will a rail line stop high airport parking prices?

Passenger mode share for access to Brisbane and Melbourne airports (ACCC)

The ACCC has fingered Melbourne Airport for its monopolistic approach to parking. In its latest Airport Monitoring report, it accuses the operator of imposing excessive levies on private buses and limiting the service offering of off-airport parking establishments:

Excessive access levies could have the effect of shifting demand to on-airport parking and, consequently, allow the airport to increase car parking prices. These factors point to Melbourne Airport earning monopoly profits from its car parking operations.

The comments section of The Age’s story about the report is bubbling over with calls from outraged punters calling for a rail line to be built from the CBD in order to bust the monopoly power of the airport operator, Australia Pacific Airports Corporation.

Irrespective of the overall merits of building an airport rail link, I can’t see that it would have any more than a marginal impact on the airport’s parking policies. It might (or might not) be justified on other grounds, but a train is not really a substitute for parking.

Travellers who park at the airport are by definition residents of Melbourne and have access to a car. A rail line from the CBD is not going to be attractive when most trips made by residents – including business trips – either originate or terminate at home (or both). When you’re catching a 7:00 am flight you don’t usually catch the train into the office first. Likewise if your flight gets you back into town at 7:00 pm or later, most travellers go straight home.

Rail is not going to be an attractive alternative for the great bulk of the 99% of residents who live outside the CBD or the 92% who live outside the inner city. Rather than walk to their local station, take a train and then change onto the airport line, they’ll drive.

In many cases their employer (or the taxpayer!) is in any event paying for their airport parking. Read the rest of this entry »


More on rail link to airport

The Age is continuing its campaign for a new rail line to be built from the city centre to Melbourne Airport (I discussed this previously on March 2 – Possible rail link to Melbourne airport). There are also a couple of follow-up letters this morning supporting the idea of a rail link.

In a story yesterday, Airport ‘exploiting’ public on parking fees, The Age reported on a new analysis by the ACCC of airport performance in Australia, noting that parking charges account for 20% of Melbourne Airport’s revenue but just 8% of Sydney Airport’s.

The Age’s reporter, Ari Sharp, said the figures, “could add to calls for a rail link to Melbourne Airport to help overcome the growing problems – and costs – of getting there by car or bus”.

However contrary to The Ages’s apparent inference, the difference in the Sydney and Melbourne figures does not appear to be caused by a rapacious parking operator ripping off travellers who lack an alternative to driving.

What the story didn’t say was that Sydney Airport’s revenue from charges to airlines is $446 million, compared to Melbourne Airport’s comparatively modest $197 million. Parking revenues are much the same ($88m and $95m respectively), hence it’s not at all surprising that parking makes up a much larger proportion of total revenue in Melbourne than Sydney. Read the rest of this entry »