Severe airport capacity constraints are a major obstacle to plans by Virgin Australia, Impulse Airlines and Spirit Airlines to take on Australia's established carriers.
Their problems date back to 1988, when Australia still operated its tightly-regulated Two Airline Policy. At that time Canberra granted Ansett and Australian Airlines (later acquired by Qantas) 30-year leases to domestic terminals at all major airports. That locked up all domestic gates at Melbourne and left Sydney with only a small separate terminal for other carriers.
Among Australia's three busiest airports, only Brisbane, which opened its new terminal after deregulation, has kept an entire common user wing.
As a result Virgin Australia is looking favourably at Brisbane as the site for its headquarters and has threatened to cut a proposed service to Melbourne. Brett Godfrey, Virgin Australia's chief executive, complains that Melbourne's lack of gates could force Virgin to bus passengers to its jets.
"If we have to bus people on a rainy day it means we can't compete and we can't turn the aircraft around fast enough," Godfrey says.
Melbourne hopes to build a common user terminal and in December it engaged a design firm but financing it is a problem. Terry Morgan, the airport's chief executive, said last year that he would expect the airlines to pay for any common user terminal.
Impulse Airlines, which wants to convert from turboprops to jets and compete on trunk routes, faces the same dilemma as Virgin. Among newcomers, only Spirit Air-lines has found a way around Mel-bourne's bottleneck. It plans to use a private airport nearby.
Sydney is doing what it can to accommodate new airlines, but it has limited space. Six years ago the federal government budgeted A$100 million ($65 million) for a new common user terminal, but shelved those plans after the demise of Compass II, Australia's last major startup.
Sydney's recent plan to raise airport charges ahead of privatisation has drawn fire from incumbents and startups alike. Tony Stuart, Sydney airport's chief executive, insists he must improve its rate of return. New charges will lift that rate from 2.6% to about 5%.
Defending these hikes on the grounds that Sydney's charges have been artificially low, Stuart estimates new charges will more than double Sydney's earnings from such charges. Airlines have promised a fight.
Source: Airline Business
