The consumer watchdog has warned Australian airports not to increase its charges for airlines in an attempt to recover lost income due to COVID shutdowns.
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The Australian Competition and Consumer Commission said it was closely monitoring how airports would respond following the reopening of the sector, after concern was raised from airlines.
"Such increases in airport charges could damage the vulnerable airline sector's ability to recover, at the expense of both consumers and the economy," the commission said.
"Should airports increase their aeronautical charges to recover their losses from COVID-19, this would be a clear example of airports systematically taking advantage of their market power."
While the commission noted airports had seen substantial falls in revenue of domestic and international flights, pricing principles dictated that access fees airports impose on airlines don't allow for the recovery of lost profits.
"Unlike airlines, the large airports face minimal constraints on their pricing because they are effectively unregulated regional monopolies with significant market power," the commission said.
It comes off the back of the commission's latest report on competition in the airline sector, revealing passenger numbers fell in July to 23 per cent of pre-pandemic levels due to Delta outbreaks.
The fall in passenger numbers came just as the sector was showing signs of recovery after the outbreak of the pandemic in 2020.
The report found that airlines were forced to cancel one in three flights in July 2021, a level only surpassed by April 2020.
It's expected passenger numbers for August and September this year will be even lower.
The COVID lockdowns in NSW led to Sydney not being among the top 10 busiest routes in the country for the first time, with routes in Queensland and Western Australia dominating the list.
Despite the dramatic drop in passengers, driven by Delta outbreaks, the commission said it was confident demand would pick up again towards the end of the year, as domestic travel restrictions ease.
"Airlines are optimistic demand will bounce back quickly once border restrictions can be eased," the report said.
Qantas has already announced it would be flying at 110 per cent of pre-pandemic levels during the first half of next year, while Virgin also said it would lease additional aircraft, which would be in the air by February.
Australian Associated Press
