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Tuesday, 22 May 2001
Page: 26734

Mr Martin Ferguson asked the Minister representing the Acting Minster for Finance and Administration, upon notice, on 6 February 2001:

(1) In relation to the sale of Sydney Airport, what has been the commercial return on assets for each financial year of the Sydney Airports Corporation Limited (SACL)?

(2) Does the proposed increase in aeronautical charges of 130% include consideration for pre-existing investment?

(3) If the proposed increase in aeronautical charges is approved, what is the expected increase in SACL profits for the next full financial year?

(4) Do current aeronautical charges at Sydney Airport more than allow SACL to recover the costs of its pre-existing investment, if so, is this confirmed by (a) the high rates of return achieved by SACL in 1998-99 and 1999-2000, (b) Standard & Poors A+ long term and A-1 short term credit rating in 1998-99, (c) the Federal Airports Corporation's statements and representations in 1998 that no increase in charges was necessary to achieve a reasonable return on existing investment and (d) current aeronautical charges at Sydney Airport having been set together with those of the Phase 1 privatised airports, which subsequently sold at high earnings multiples?

Mr Costello (Treasurer) —The Acting Minister for Finance and Administration has supplied the following answer to the honourable member's question:

(1) Sydney Airports Corporation Ltd has earned the following returns on assets:





(2) SACL's draft proposal values non-land aeronautical assets using the Optimised Depreciated Replacement Cost (ODRC) methodology. This methodology was accepted by the ACCC in its draft decision, released 9 February 2001, as being appropriate.

(3) It is not possible to determine the impact any increase in aeronautical charges will have on SACL's profits next financial year, as SACL's profit reflects a number of factors including, but not limited to, aeronautical revenues.

(4) No. Current aeronautical charges at Sydney Airport are designed to recover 90% of operating costs.

(a) The rates of return earned by Sydney Airports Corporation Ltd were not high for 1998-99 and 1999-00, due largely to the negative return earned on aeronautical assets.

(b) I am not aware of the factors Standard & Poors took into consideration in determining SACL's 1998-99 credit rating.

(c) This issue is the subject of legal action between Sydney Airports Corporation Ltd and a number of its airline customers. Therefore, it is not a matter on which it is appropriate for me to comment.

(d) The current aeronautical charges at Sydney Airport are a legacy of the network pricing of the Federal Airports Corporation. The charges were not set with the Phase 1 privatised airports.