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Covid-19 pandemic slams into profits of Australian airports

April 8, 2021 Airport, Headline News No Comments Email Email

Australia’s big city airports, once renowned as fabulously lucrative money-spinners, have seen their profits plunge spectacularly since the pandemic struck – and now the full extent of their profit collapse has been revealed.

Operating profits from aeronautical activities at Australia’s four largest airports dropped to a decade low after passenger numbers fell dramatically late in the 2019–20 financial year.

Yet while their overall profits fell, the four monitored airports continued to generate high car parking operating profit margins of between 48.5% and 60.5%.

Details are disclosed in the latest Airport Monitoring Report issued by the Australian Competition and Consumer Commission (ACCC).

While airports felt the full impact of the COVID-19 pandemic only in the last quarter of 2019-20, aggregate operating profit from aeronautical activities at the four monitored airports (Brisbane, Melbourne, Perth and Sydney) dropped by 55.4%.

The four airports collectively achieved operating profits of $390.7 million in 2019-20, which is partly a reflection of their prior strong financial positions,  the ACCC noted. However, the ACCC expects the 2020-21 monitoring period will show even greater impacts from the pandemic.

Passenger numbers across the airports fell by 26.5% compared to the previous year. As a result, aeronautical revenue for the full year dropped by between 15.5% and 21.6%.

“The pandemic has devastated the aviation sector and airports are no exception,” ACCC Chair Rod Sims said.

“While the 2019–20 year only included the beginning of the pandemic, its impact was so sharp that it led to substantial falls in airports’ yearly results. The ACCC is conscious of the hardship that COVID-19 has caused aviation businesses and their employees but we will watch the sector closely during the recovery phase.

“Through our airports monitoring, and our more recent airlines monitoring role, we will observe how industry participants interact as the sector recovers,” Sims said.

“Given the airports’ existing market power, it will be critical that legitimate attempts to return to a sustainable financial position do not stray into anti‑competitive behaviour, or result in unreasonable price increases.”

While most of the monitored airports continued to implement medium-term investments such as construction of new runways, the impact of the pandemic caused some discretionary capital expenditure to be deferred, the report reveals.

Daily car parking numbers across the four airports fell by between 21.2% and 28.8%, which caused combined car parking revenue to drop by 24.4% to $343.2 million.

See ACCC infographic here.

Operating profit refers to earnings before interest, taxation and amortisation (EBITA). Operating profit margin refers to EBITA as a percentage of revenue.

The ACCC scaled back the 2019–20 Airport Monitoring Report in response to the Covid-19 pandemic. To reduce the burden on airports, the ACCC did not collect airline survey ratings and objective measures for quality of service this year.

Background

The ACCC monitors the performance of the four largest airports in relation to aeronautical and car parking activities, following a direction from the Australian government requiring us to consider prices, costs, profits and quality of service.

The ACCC’s monitoring role does not include the power to intervene in the airports’ setting of prices for parking and aeronautical activities. However, the ACCC is required to assess any proposal by Sydney Airport to raise charges for regional air services.

Price and quality comparisons between airports should be treated with some caution as different terminal configurations, domestic/international passenger mix, and approaches to valuing assets can affect results.

Edited by Peter Needham

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