Qantas warns of much higher airfares after brutal court stoush with Perth Airport

The national flag carrier says some travellers are likely to be slapped with higher airfares after it was ordered to pay millions of dollars to Perth Airport.

Qantas warns of higher airfares following court action with Perth Airport. Picture: NCA NewsWire/Andrew Henshaw.

Qantas has been ordered by the West Australian Supreme Court to pay Perth Airport millions of dollars in aeronautical fees dating back to mid-2018, in a decision the airline says could lead to higher airfares.

Perth Airport took Qantas to court over $11m in unpaid fees accumulated over four months when an aeronautical services agreement lapsed and Qantas refused to accept a new deal.

In a judgment delivered by Justice Rene Le Miere on Friday, new per passenger charges were set that were slightly under what Perth Airport was seeking but above what Qantas wanted to pay.

Under his ruling, it was expected Qantas would have to pay the airport in excess of $9 million for a shortfall in fees over five-and-a-half months.

A statement issued by Qantas welcomed the decision but raised concern the assumed return on investment of almost 10 per cent for Perth Airport could “ultimately put significant upward pressure on fares”.

The decision by the Supreme Court of WA ends a long-running dispute between Qantas and Perth Airport. Picture: Paul Kane/Getty Images.

“The decision is positive because it upholds the building block model that is the established basis for setting prices. But it also sets a return on investment that we think is far too high for a low risk monopoly infrastructure asset.” said Qantas chief financial officer Vanessa Hudson.

“Excessive returns for monopolies usually result in over investment to chase returns, which customers ultimately end up paying for.”

She cited the example of electricity networks in New South Wales and Queensland that “over invested” leading to major price hikes for consumers until regulators stepped in.

“Perth Airport ultimately wants Qantas to move to their proposed new terminal but the price to use that facility would not be commercially viable for Qantas if the return on investment in this judgment was applied,” said Ms Hudson.

In an at times fiery trial late last year, the court heard Qantas was charging passengers $17.28 for airport services in 2018 but paying Perth only $10.61 per passenger.

In response Qantas accused Perth Airport of inflating fees with such add-ons as corporate marketing costs and Christmas and Easter decorations throughout the terminals.

It was also alleged Perth Airport was billing Qantas for the cost of donations and corporate hospitality as well as membership to the Australian Airports Association.

Much was made of the fact 25 of the 26 airlines that operated out of Perth Airport had signed new aeronautical agreements, with Qantas the only exception.

Perth Airport CEO Kevin Brown said they looked forward to resolving all outstanding payments and moving forward together to rebuild Western Australia’s aviation sector.

“We’ve already signalled to Qantas our willingness to work on returning the Perth-London service (currently flying out of Darwin), the new Perth-Rome service and additional routes such as Johannesburg and India,” Mr Brown said.

“Our focus remains on quickly reconnecting WA to the world.”

During the trial, Qantas claimed other airlines were not in the financial position to take legal action against the airport, one of Australia’s four biggest gateways.

Ms Hudson said the drawn out case highlighted the need to have an independent arbiter sought out such matters rather than have them dragged through the courts.

“Three years in court to determine five months of pricing shows why the industry needs an expert umpire to resolve stalemates quickly when they occur,” she said.

The 2019 Productivity Commission report on the market power of airports, found no evidence the big gateways were abusing their monopoly positions and rejected airlines’ request for an independent arbiter.