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 »

– Do governments spend too much on roads?

Total passenger travel by mode in Australia (billion passenger kilometres) Souce: BITRE

The Australian Conservation Foundation (ACF) got a lot of press recently with its claim that “governments across Australia are spending at least four times more on building roads and bridges than on public transport infrastructure“.

The claim is in a new ACF report, Australia’s public transport: investment for a clean transport future, which argues for a rebalancing of the transport capital works budget, recommending that “two thirds should be spent on public and active transport measures and one third should be spent on roads”.

I agree with the ACF that more needs to be spent on public transport, but I don’t think the “roads vs public transport“ logic does justice to the complexity of the situation. There are a number of reasons why more public funds are spent constructing roads than rails.

One is that people drive much more than they use public transport. According to the Bureau of Infrastructure, Transport and Regional Economics (BITRE), Australians travel almost eight times as many kilometres by car as they do by bus and rail-based public transport. The money is going where the demand is. If you accept the ACF’s numbers, public transport is actually getting a disproportionate share of public construction expenditure. Roads are needed even if travel is confined to foot and horse-drawn vehicles. The Hoddle grid in Melbourne and the avenues and streets of Manhattan were designed before cars were invented – land has limited value if it can’t be accessed.

Construction expenditure doesn’t in any event tell the whole story. Most funding for public transport comes via operating subsidies. Although getting comparable numbers is hard, Sydney University transport academic, Professor John Stanley, estimates that in states like NSW and Victoria, total public funding for public transport and roads is probably pretty nearly equal. In his 2008 report, Public transport’s role in reducing greenhouse gas emissions, Victoria’s Commissioner for Sustainability noted a significant shift in funding priority from roads to public transport at the State level.

Another reason roads are important is for the distribution of freight within the metropolitan area. According to BITRE, the number of tonne kilometres of urban freight transported by road within Australia’s eight capital cities in 2007/08 was more than five times higher than it was in 1971-72. There is simply no practical alternative to road for tasks like restocking those hundreds of supermarkets that supply suburban households with food and household goods.

But most importantly, roads are also extremely important for public transport. For example, in Melbourne, the Doncaster Area Rapid Transit (DART) system, the Airport-CBD Skybus service, and the city’s three new orbital Smartbus transit services, all use buses. Because they use the existing road network, these systems do not require significant new land acquisition and construction. Some trunk lines might in time justify conversion to light rail services as patronage increases, but they too can use existing roads rather than require a dedicated right of way.  Read the rest of this entry »

Should public transport fares to the airport be subsidised?

Yesterday’s discussion of an airport-CBD rail link prompts me to look further at the idea that airport users have a “right” to public transport priced at the standard Metlink tariff.

My first reaction is that the idea makes sense. After all, everywhere else in Melbourne is provided with public transport subsidised by the Government (no matter how inadequate it might be). Melbourne Airport is also one of the largest suburban activity centres in the metropolitan area, with around 12,000 workers.

If travel to and from the Airport were charged in accordance with the Metlink tariff, the fare to the CBD would be the standard Zone 1-2 fare of $5.80 one-way. But while it might be the equitable solution it doesn’t follow that it’s the sensible one, the necessary one, or the one that’s in the best interests of all Melburnians. Read the rest of this entry »