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Tuesday, 31 August 1993
Page: 693

(Question No. 340)


Senator Newman asked the Minister for Transport and Communications, upon notice, on 1 June 1993:

  (1) Does the Federal Airports Corporation enter into different financial arrangements with car rental companies operating at the same airport.

  (2) Without disclosing the names of individual companies, what are the details of formulae applying and different arrangements entered into with those companies operating at both the Launceston and Hobart airports.


Senator Collins —The answer to the honourable senator's question, based on information provided by the Federal Airports Corporation (FAC), is as follows:

  (1) Yes, whereas under previous financial arrangements with car rental companies, operators either had desk space within a terminal or the right to meet pre-booked customers. Under the FAC's new arrangements, operators can now choose between four options for their commercial arrangements with the Corporation. The arrangements were designed to give operators the flexibility to choose which option best suits their business needs.

  As part of the implementation process, the FAC had envisaged a review of the fee structure after the new arrangements had been operative for a reasonable period. The FAC considers that review now timely, because of the comments received from various parties on the fee structure.

  (2) The following comments apply to the fee structure and options currently applicable:

  The first option is for desk space within a terminal which gives operators access to both pre-booked and walk-up customers. In exchange for this level of access to airport business, operators are required to pay an airport access fee (which is higher than for the other options), a per square metre fee according to the size of the desk space (which goes to the operator of the terminal—either the FAC, Ansett or Australian) and 5 per cent of airport related turnover. This option is primarily designed for operators with 20 per cent or more of airport car rental business.

  The second option is for the right to meet pre-booked customers within a terminal. In exchange for this level of access, operators are required to pay a lower airport access fee than for option one,

either a desk space fee or a designated meeting place fee (which goes to the operator of the terminal) and 7 per cent of airport related turnover. This option is primarily designed for operators with 10-19 per cent market share.

  The third option is for the same rights as the second option but offers operators a different mix of fixed and variable fees. Under this option, operators pay a lower still airport access fee but a higher 9 per cent of airport related turnover. This option is primarily designed for operators with 0-9 per cent market share.

  The fourth option (also known as Alternative A) is for the right to meet pre-booked customers at the airport (but not in a terminal). In exchange for this level of access, operators pay the same airport access fee as in the third option and a flat $5 per contract, regardless of the length of the contract. This option is primarily designed for smaller operators with less than 2 per cent market share.

  All operators pay equally for parking spaces according to their own needs or they can make use of the public car parks.

  The airport access fees, the desk space fee and the designated meeting place fee may vary by airport. Consequently, the following example is provided for Hobart Airport which compares the fees payable by four different (hypothetical) operators.

  The total turnover of car rental business at Hobart Airport in 1991/92 was around $6,300,000. To facilitate this example, assume Option 1 operator has 20 per cent share of this market ($1,260,000), Option 2 operator has 10 per cent share ($630,000), Option 3 operator has a 5 per cent share ($315,000) and Option 4 operator has a 1 per cent ($63,000) share. For the Option 4 operator, it is also necessary to calculate the number of contracts entered into to get its $63,000. On the basis of a $50 a day average car hire cost and an average hire period of 5 days (in other words, the average contract is for $250), the number of contracts entered into is 252. Only Option 1 operator seeks desk space. The average size allocated for desk space is 10 square metres. On this basis, it is possible to calculate some examples of payments to the Corporation.

EXAMPLE OF PAYMENT OPTIONS

Option 1 Option 2 Option 3 Option 4

Operator Operator Operator Operator

Access Fee 22,000 5,500 220 220

Desk Space Fee 9,550 — — —

Meeting Place Fee — 955 955 —

% of turnover in $ 63,000 44,100 28,350 1,260

Total Outlay* 94,550 50,555 29,525 1,480

Outlay as % of turnover 7.5% 8.0% 9.45% 2.3%

* Excluding parking spaces or public car park charges

  In this analysis, small operators pay the least to the Corporation, although this calculation is sensitive to the assumption about the length of each contract. If the average length of contract in the above example was assumed to be only one day, then the Option 4 operators outlay as a percentage of turnover would increase to 10.3 per cent. If the average length of contract on the other hand was assumed to be 10 days, the percentage would fall to 1.3 per cent.