sydney airport - ipart · sydney airport welcomes the tribunal's recognition of the "need...

22 October 2008

Dr Michael Keating, AC Chairman Independent Pricing and Regulatory Tribunal of NSW PO Box Q290 QVB Post Office NSW 2000

Dear Dr Keating

Submission Review of CityRail Fares 2009-2012

Sydney Airport Corporation Limited (SACL) welcomes the opportunity to make a submission in response to the Independent Pricing and Regulatory Tribunal (IPART) Review of CifyRail Fares 2009-2012.

Sydney Airport welcomes the Tribunal's recognition of the "need to implement a more equitable distance based fare structure'" and the need for the fare structure to be "simpler and more transparent and consistent.,,2

Sydney Airport believes that these needs are nowhere more evident than on CityRail 's Airport and East Hills Line and, in particular, on that part of the line served by Airport Link stations. As the Tribunal would be aware, Airport Link is the private operator of the Green Square, Mascot, Domestic Airport and International Airport stations on CityRail's Airport and East Hills line.

• Green Square Station serves the suburbs of Alexandria, Zetiand, Beaconsfield and Waterloo. It serves an important employment and retail centre that has been designated by the NSW Government for significant future growth.

• Mascot Station serves the suburbs of Mascot and Rosebery. It is in close proximity to a significant residential catchment and serves a substantial and growing commercial and employment area.

• Domestic Airport Station serves the Domestic Common User Terminal (T2) used by Jetstar, Virgin Blue, QantasLink and Rex and the Qantas Domestic Terminal (T3) used by Qantas. These terminals serve more than 20 million passengers a year and are major employment areas for the airport and airlines that require staff for the aviation, security, retail, cleaning and other services that are provided to passengers.

• International Airport Station serves the International Terminal (T1 ) that serves 38 international airlines that transport more than 10 million passengers to and from Australia. It is a major employment site for the airport, airlines and government agencies such as the Australian Customs Service and Australian Quarantine and Inspection Service.

, Independent Pricing and Regulatory Tribunal , IPART Releases Draft Derermillation 0 11 CityRaif Fares, Sydney, 3 OClober 2008. 2 Independenl Pricing and Regulatory Tribunal , RevielV of CiryRail f ares. 2009-2012, OClober 2008, p 110.

Sydney Airport

Sydney Airport

Corporation Limited

ABN 62 082 578 809

Locked Bag 5000

Sydney International

Airport NSW 2020

The Ulm Building

1 Link Road

Sydney International

Airport NSW 2020

Australia

Telephone:

61 296679111

www,sydneyairporLco

Dr Michael Keating, AC Chairman Independent Pricing and Regulatory Tribunal of NSW

The fare structure for passengers using the four Airport Link stations is, compared to the fare structure for passengers using CityRail's overall network, clearly anomalous. It is inequitable and price discriminates against those workers and residents who choose to use rail transport in this part of Sydney.

In contrast, Sydney Airport understands that with respect to the new stations that will soon be opened on the Epping to Chatswood Line, this anomaly will not be replicated because the fare structure for passengers using the new stations on this line will be integrated into the overall City Rail fare structure.

The Current Situation is Inequitable

Passengers who use the Airport Link stations pay significantly more for their journey than do other passengers travelling across the CityRail network. This is unfair because it penalises passengers who journey to just four of the hundreds of other stations in the rail network. It also serves to discourage rail patronage in a part of Sydney that is experiencing strong employment and population growth.

The extent of the price discrimination is shown in the table below. This clearly demonstrates that the fares paid by Airport Link passengers do not bear a consistent or reasonable relationship to the distance travelled.

Central to: Distance (kilometres) Off-Peak Return Fare International Airport 8.2 $20.00 Arncliffe 8.4 $4.20 WoyWoy 65.1 $11.80 WollonQonQ 82.9 $13.20 Katoomba 109.9 $16.80

Cleary, the current arrangements do not provide a consistent or equitable distance based fare structure, with passengers travelling a significantly greater distance paying a considerably smaller fare than passengers who use the Airport Rail Line.

The pricing situation is also unfair for commuters who purchase the 7 Day Rail Pass to travel to and from work. The table below provides some examples which demonstrate the inequality in the current arrangements applying to regular rail users.

Central to: Distance (kilometres) 7 Day Rail Pass International Airport 8.2 $41.60 Chatswood 12.8 $28.00 Pymble 20.0 $34.00 Wahroonqa 23.9 $34.00 Sutherland 24.7 $34.00 Parramatta 23.2 $34.00 Hornsby 26.4 $36.00 Waterfall 38.7 $41.00 Rooty Hill 40.9 $41.00

Dr Michael Keating, AC Chairman Independenl Pricing and Regulatory Tribunal of NSW

This is particularly relevant for the approximately 16,000 people employed at Sydney Airport who need to travel to and from the airport. The Airport Ground Travel Plan' indicates that only around 12 per cent of airport employees travel to and from work by train.

Therefore, far from providing an "equitable distance based fare structure" the current arrangements are deeply inequitable. They disadvantage the users of the four Airport Link stations as well as providing a major disincentive to public transport use in this part of Sydney which is experiencing, and will continue to experience , strong growth in employment, residential dwellings and population.

When considering the impact of prices, the IPART Report notes that :

" ... there is a negative relationship between demand for CityRail services and the level of CityRail fares (eg, demand tends to come down as fares go up) ..... a 10 per cent increase in fares would be associated with a fall in patronage of around 2-3 per cent (all other factors being equal).'"

The IPART Report contemplates the impact of a price differential of 10 per cent. In reality, however, passengers using the Airport Rail Line can face a price differential not of 10 per cent but in excess of 450 per cent (see above example of travel to the International Station compared to Arncliffe : $20 compared to $4.20 off-peak return).

This is clearly an extraordinary situation and, given its magnitude, it is not surprising that IPART has not attempted to accurately evaluate the impact on rail patronage that such large price differentials can have.

However, the work that is available suggests that the demand for rail services, and all the associated social and environmental benefits that accrue to the general community, are being blunted or foregone by the high prices that passengers are being asked to pay to travel to and from stations on the Airport Rail Line.

Given the analysis presented by IPART concerning the value of external benefits, it is logical to proceed with the assumption that reforming the fare structure for the Airport Rail Line will increase the number of people using the line and these stations. In turn, this will :

• produce significant equity benefits for rail users;

• reduce congestion on busy roads such as the M5, Botany Road , Q'Riordan Street and General Holmes Drive;

• improve ai r quality (especially important given that three road tunnels are in the vicinity of the airport) and reduce greenhouse gas emissions by reducing motor vehicle use;

• avoid the human and economic costs associated with road accidents and road damage; and

• ensure existing major transport infrastructure is used more efficiently than is the case now.

3 Sydney Ai rport Corporation Limited, Sydney Airport Grollnd Travel Plan (2006). 4 Above, note 2, pp. 88 - 89.

Dr Michael Keating, AC Chairman Independent Pricing and Regulatory Tribunal 01 NSW

Sydney Airport in Context

Sydney Airport is Australia's major gateway to the world. Servicing 43 airlines and with 46% of all Australia's international airline passengers arriving in Sydney, it is our nation's busiest airport. In 2007, Sydney Airport saw nearly 32 million passengers pass through its terminals, accommodated more than 286,000 aircraft movements and handled 470,000 tonnes of air freight. This level of aviation activity is forecast to grow in the coming years.

This aviation activity underpins Sydney Airport 's role as an employer and economic driver of national importance. Sydney Airport makes a direct contribution of $8 billion to NSW Gross State Product. With flow -on impacts taken into account, the airport's economic contribution increases to $16.5 billion. This is equivalent to 6% of the NSW economy and 2% of the Australian economy.s

This substantial economic contribution translates into jobs. It is estimated that Sydney Airport provides or generates more than 75,000 on and off-airport jobs directly and about 131,000 jobs indirectly, making a total of around 206,000 jobs. This year, it is estimated that these jobs will deliver around $286 million in payroll tax revenue to the NSW Government, or more than $1.2 billion over the next four years. Sydney Airport also makes annual contributions to local councils bordering the airport in lieu of rates. Last year, a total of nearly $1.9 million was paid to Botany Bay, Rockdale and Marrickville Councils. Since 2002, payments have totalled nearly $9 million.

Sydney Airport 's Preliminary Draft Master Plan forecasts that the number of passengers using the airport will increase to 78.9 million by 2029. Sydney Airport is committed to working with the NSW Government to develop secure, reliable , cost effective and sustainable transport options for the local community and travelling public. Sydney Airport has an established policy of support for a mode shift to public transport by five per cent by 2024 to be achieved by improving public transport facilities at the airport6

While Sydney Airport is a nationally significant piece of infrastructure , it must be looked at in the context of the NSW Government's long term plan to maintain Sydney's role in the global economy, the Sydney Metropolitan Strategy. This Strategy identifies a Global Economic Corridor stretching from Macquarie Park, through the Sydney CBO to Sydney Airport and Port Botany which it describes as the "" .powerhouse of Sydney and Australia's economy."?

The Airport Rail Line runs through the heart of the southern section of the Global Economic Corridor and therefore serves the broad region, not just Sydney Airport. Maximising the use of this existing rail infrastructure should therefore be seen in the context of the infrastructure needs generated by other significant development occurring elsewhere in the Global Economic Corridor, including:

• The expansion of the Port Botany Container Terminal: Port Botany is a crucial hub for more than $40 billion in trade each year. It currently handles the second largest container volumes in Australia and generates $1.5 billion a year in economic activity. Over $2 billion in infrastructure is in place at the port which is a vital asset and pivotal to the State's and the nation's international trade. Work has now commenced on expanding the terminal to enable this vitally important and nationally significant infrastructure to accommodate the expected doubling of trade through the port over

5 URS Austra lia Pty. Ltd., Th e Ecollolllic /lIIpacl o/Growlh 01 Sydlley Airport , 2008. ' Sydney Airport Corporation Limited, Preliminary Dra rt Mast Plan, 2008, p. 89. 7 NSW Government (Department of Pl anning), Cily oj Cilies: A Plall for Sydney's FUfIlre, 2005.


the next 10 to 15 years.s This expansion will increase the amount of freight that needs to be transported on the road system.

• Strong residential and employment growth: Draft NSW Government targets for 2031 proposing an additional 26,050 dwellings and 36, 100 jobs in the Botany Bay, Randwick, Marrickville and Rockdale local government areas9

• Existing major development approvals: The NSW Government has already granted development approval for major developments at Green Square and Cooks Cove, both of which are served by the Airport Rail Line.

Green Square is identified in the NSW Government's Sydney City Draft Subregional Strategy as a Planned Major Centre. Over 1,700 new dwellings have already been built and a further 11 ,000 are proposed over the next 20 years. Significant employment grow1h is also anticipated.

Cooks Cove is a 100 hectare site located immediately west of Sydney Airport. The NSW Government has established the Cooks Cove Development Corporation to develop 20 hectares of oHices, warehouses and retail services as well as 5,000 square metres of serviced apartments.

Sydney Airport believes that to ensure that the growth in population and employment in this region is sustainably managed into the future , use of the existing rail infrastructure must be increased. Pricing reforms to attract users from the road network to the rail system are therefore needed to help ensure that the benefits of growth in Sydney's designated Global Economic Corridor are secured for the people of Sydney, NSW and Australia.

It is important that such a fair fare system be put in place as soon as possible to ensure that this growth does not become car-dependent from the outset. Rather, the aim should be to ensure that rail is seen as a sensible and rational transport choice for the future residents and workers of this region.

Other Benefits of Fare Reform on the Airport Rail Line

A reformed rail fare structure that equalises fares on the Airport Line with the wider CityRail fares will support a range of other important goals and objectives. These include:

NSW Government Policy: The NSW Government has a number of policy goals and strategies in place to support an increased use of public transport.

Relevantly here, the State Plan identifies "a high quality transport system" as being a key goal, with Priority S6 being "increasing the share of peak hour journeys on a safe and reliable public transport system.', l0 To support this priority, the State Plan sets a target to increase the proportion of total journeys to work by public transport in the Sydney metropolitan region to 25 per cent by 2016 (20-22 per cent in 2006).

8 Sydney Ports Corporation, Porr Borany Coma ill er Termillal Expansion 2008, viewed 7 October 2008, <http ://www.syd neyp0rls.com.au/_ data/asse ts/pd Co Ic/OO 19/494 2/Porl_Botan y _ 0 verv ie w _J u I y _2008. pd f> 9 NSW Government (Department of Planni ng), East Subregion: Dmft Subregional Strategy (J ul y 2007 ) and South Subregiol1: Draft Subregional Strategy (December 2007). 10 NSW Government , Swre Plan: A New Direcrioll for Nelli SOUlIi Wales, (November 2006)


The Transport Strategy for Sydney aims to "influence travel choices to encourage more sustainable travel" and the Urban Transport Statement see that "increasing the number of daily trips on public transport is a priority. "" Targets such as those identified in the State Plan will never be achieved unless specific actions are undertaken. As suggested by IPART's work on the relationship between price and demand (noted above) , reducing the fares passengers are required to pay on the Airport Line will increase the number of passengers who elect to use the service. As such , it is one such specific action that can and will help to achieve the stated goals of the NSW Government.

Alleviating Congestion: Making it more attractive for people to use rail transport rather than the road network will also help to alleviate congestion across the region. The congestion is particularly experienced on the M5 South West Motorway, the M5 East and General Holmes Drive although other roads such as Botany Road and O'Riordan Street are also affected. By addressing the existing inequities in the present fare system and attracting commuters to the rail system, congestion on these key roads will be alleviated.

The Bureau of Infrastructure, Transport and Regional Economics (BITRE) has noted that the social and environmental costs of traffic congestion are significant. The nation-wide 'avoidable' cost of congestion is estimated by BITRE to increase from $9.4 billion (in 2005) to $20.4 billion (by 2020). The 2005 estimate comprises $3.5 billion in private time costs, $3.6 billion in business time costs, $1.2 billion in extra vehicle operating costs and $1.1 billion in extra air pollution costs. ' 2 It is also well known that congestion is a maj or contributor to vehicle emissions, and so to Australia's overall greenhouse gas emiSSions. '

It is important to note that fare reform is likely to be both a cheaper and faster option to counter congestion than the provision of new transport infrastructure that would cost many billions of dollars to construct, as well as take several years to complete.

Sydney Airport employees: As noted above 14, the Airport Ground Travel Plan indicates that around 16,000 people are employed within the Sydney Airport site, with a maximum daily employee population of around 12,000. Around 34 per cent of these employees live in the St George - Sutherland area, 10 per cent in the IIlawarra region, 6 per cent in the Inner Sydney Area and 4 per cent in the Outer South Western Sydney region. A majority of these employees - estimated to be around 70 per cent - travel to and from work by car. This is despite the fact that more than half of those employees live in areas where they have access to and could conveniently use the existing rail system if they so chose. One reason why the overwhelming majority of Sydney Airport employees choose not to travel to and from work by rail relates to the high fares that they have to pay to use the Airport Link's International Terminal and Domestic Terminal Stations.

Sydney Airport believes that a more equitable fare structure would therefore result in more employees choosing to use rail as a mode of travel to and from work.

II NSW Government, Urban Trallsporr Sraremeur: Responding fO rh e challenges oJtravel alld transport lI'illi;1I alld across Sydlley, Sydney, 2006, p. 4. 12 Ibid , at p xv.

13 Bureau of Infrastructure, Transport and Regional Economics, Urban COllgestioll: 71Ie IlIlplicatiollsfor Greenhouse Gas Emissions: / lljorlllafioll Sheet 16,2000. 1'* Above, note 3.


Reform Options

Sydney Airport believes that IPART's review has established the merits and logic of introducing a more equitable distance based fare structure.

This approach should be extended to the Green Square, Mascot, and Domestic Airport and International Airport Stations. Sydney Airport recommends that IPART should , in its current report , adopt an in-principle position of supporting this outcome.

To address the inequitable fare arrangements that have been established in this submission the NSW Government will need to investigate and consider a range of possible policy approaches. Further analytical work by IPART may be required to establish and test the available options to secure this sensible pricing reform and Sydney Airport is available to assist the Tribunal in this work.

Yours sincerely

Russell Balding, AO Chief Executive Officer

sydney airport - ipart · sydney airport welcomes the tribunal's recognition of the "need...

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