I think that a few substantive points have been missed during the many claims and counter claims of both Virgin Blue and SACL. I have no doubt at all that an in- principle agreement was reached between the parties way back in April. I think this agreement was reached because of the belief that airlines flew aircraft and should not own a property portfolio and the party that was best able to maximise the utilisation of the former Ansett terminal was the operator of the airport. During these discussions what effectively was agreed was that Virgin Blue would take 9 dedicated gates in pier A (the old pier) and roughly about 24 checkin counters. The agreed price was $18 million dollars or there abouts with some minor IT related details to be worked out in the futue. In return Virgin Blue gave the guarentee that they would not bid for the facillity. Now one must remember that Virgin blue were the only other party that was able to bid for the terminal. Qantas was ruled out due to ACCC monopoly concerns and the holder of the lease had to be and operating airline. This being so one could have certainly expected the price of the terminal to be signifigantly higher if two bidders have been bidding against each other. Virgin took the veiw that instead of bidding for the facility and pushing up the costs they let SACL get the terminal at the low price of $190 million and therefore the costs associated with using the teminal would be lower hence the agreement between the two parties before the bidding process.
Some people may ask why the deal was not signed way back in April. Firstly Virgin thought they could trust the airports CEO and Chairman and secondly SACL did not have ownership of the terminal so a contract would not have been able to be drawn up until June 1 when SACL took control of the Ansett facility . Interupting this whole process was the sale of the airport to Macquarie Airports and the government putting a hold on any contracts being signed until after the airport was sold.
Now if one looks at deal that Virgin agreed to it is still a very good deal for SACL. For a facility with 18 gates, Virgin were set to take 9 gates at a cost of $18 million. Say SACL had got another $18 million for the remaining gates you have a very substancial return on what was an investment of $190 millon and we are not even taking in account the leases of the shops and other concessions in the terminal. That is a 30% return on investment without the shops. If one works out what SACL wants now it's in the vicinity of 60% and if thats not an outragous use of monopoly power I don't know what is. One must remember that airlines will not carry these costs they will be passed on to the travelling public in the form of higher airfares. Yes you and I will end up paying again, on top of the Ansett levy which is not going to former Ansett employees, and the noise levy which is now going stright into the pockets of the government as all the issulation work has been completed.
Now some people may ask why can Qantas afford to take 6 gates and Virgin can't. The answer to that is to be found in the 30 year lease deal that Qantas and Ansett signed way back in 1990 for leases on there respective terminal spaces. I should think that these deals in todays prices would be very favourable and even though Qantas have invested heavily building the wonderful terminal they now have in Sydney , one must remember that once the lease on the land expires SACL must pay Qantas a comercial rate for the terminal facilities so they will eventually recoup much of that capital expenditure. At the end of the day the 6 gates that Qantas have leased are perfect for them as they will be branded gates that look like Qantas gates and they will only use them when they are needed which is during peak times. They will definately use there own facility to it's full capacity before putting aircraft through the Ansett facility where they will pay per passanger. SACL have also caved in to the signifigant issue of the bridge linking the QF and AN facilities. Originally SACL were holding out for QF pax to be checked in and walk through the shopping area of the AN terminal however I would suggest that as an act of deperation to get someone in their terminal they have set this demand aside. Perfect for QF. They dont have to rent checkin counters, they don't split their operation and passangers are moving through their shopping areas where I suspect they get a cut of the turnover. Virgin on the other hand would have to put every single passanger through the Ansett facility at a per passanger charge thus putting them at a distinct disadvantage to QF who would have much lower terminal costs. Add to this Virgin need signifigantly lower airfares to attract business and one can see why Virgin are taking such a stand on this issue.
As for the terminal being a common user facility, it should be. Qantas with 80% of the market and in a virtual monopoly position as far as domestic airport space goes in Sydney should relinquish their gates at AN should a third carrier be masochistic enough to start an operation in Australia at the moment. Virgin should have and a third carrier should reasonbly expect to have gates where they can base there operation. As much as SACL likes to put spin on the fact that this terminal should be totally common user and any airline should be able to use any gates, any person that knows anything about domestic aviation knows that this is inpractical as turn around times are shorter, aircraft are smaller and it would be a nightmare to move equipment from bay to bay all the time. Add to this the fact that regular business travellers like to check in late and have a good idea of where their flights are boarding ala QF CITIFLYER and you could see that this would cost Virgin business. SACL needs to learn that international operations are totally different from domestic and this sort of common user stupidity does not function anywhere else in the world. Airlines by all means share terminals but they almost always have tenancy over gates except when they are so small an operation that they lease gates for a set amount of time. This scenario may work in a small port like Canberra but in a station like SYD where throughput is high it would be a nightmare.
At the end of the day this will probably be worked out through the courts. In the mean time Virgin will continue to struggle at the domestic express and SACL will continue to lose substancial amounts of money from an empty Ansett terminal and Virgin being unable to expand there Sydney operation. This battle has been fought and won by other low fare carriers such as Southwest, Ryanair and Easyjet. It has been shown that these carriers do stimulate demand signifigantly and therefore the revenue of the airports. Unfortunately Macquarie are a monopoly in our town, but I have little doubt that as there share price continues to plumett over the medium term , Virgin looks to build its own terminal and a signifigant third carrier that is hoped for fails to materialise SACL will have to cut its losses and honor the agreement that was made.
What SACL are trying to do is shift costs from the traditional method of landing charges to a per pax charge. This is fine if its a level playing field and the charges are applied across the board but at the moment Virgin will lose out in a big way to Qantas who have a firm lease at a low rates on their terminal with a small overflow to the ansett terminal against Virgin who will be charged on every passanger as they move through Sydney. When you have an airline such as Qantas in close to a monopoly position the smaller carriers must always be protected to a certain extent. In the end it comes down to the government who has done the public disservice by selling out to the highest bidder instead of the best bidder for the airport. In the end the public ends up paying for a facility it used to own all over again and the tourism industry falls in a heap due to lack of competition in the aviation sector.
Just my thoughts.