A decision by Australia's Competition and Consumer Commission (ACCC) on Sydney Airport's controversial proposed fee hike could cut the airport's price when it is sold later this year.

The fee dispute, which started when Sydney Airport first proposed a rate increase in 1999, took on new meaning after the federal government decided in December to shelve a new Badgerys Creek airport and to sell Sydney airport this year. The government hopes to offer Sydney's main Kingsford Smith airport separately from three smaller airports around the city, including Bankstown, which will handle extra regional flights. Transport analysts estimate a A$4 billion ($2 billion) to A$5 billion price for all of them.

It is widely accepted that the fee dispute could make a difference. The ACCC, which has rate authority over all airports, has gained a hard-nosed reputation on airport fees. Last year it slashed a proposed fee hike at Canberra because it disagreed with the airport's rate of return computation. It also allowed a post-tax rate of return of 14%, rather than the higher return sought by the airport. More recently, the ACCC ordered Melbourne Airport to cut overall fees, despite claims that it lacked authority over the dispute. This was to offset a new levy the airport had imposed on taxis.

With airlines protesting that Sydney's fee proposal was excessive, analysts wondered what the ACCC would do and how that might hit their price projections. The commission's draft decision allows Sydney to boost fees a hefty 79%, but it only gives the airport 60% of what it was seeking, causing a A$45 million shortfall in its revenue projections.

Because the rate increase was less than expected, Standard & Poor's has put Sydney airport on "credit watch". Analysts are not sure by how much, but they agree that the ACCC's decision will have the effect of suppressing the airport's price.

Source: Airline Business