The Australian Competition and Consumer Commission (ACCC) will decide this week whether Sydney-based fund manager Palisade Investment can control over 50% of bulk trade in Victoria through the $1.2 billion acquisition of the Port of Geelong.
The acquisition is one of three key decisions before the competition regulator that could have a big impact on the transport and trade sectors.
The central focus will be on monopoly assets, including ports and airports, which have been the centre of much talk from the ACCC but it remains to be seen whether this translates into action by the new regime.
Palisade acquired the Port of Geelong earlier this year from Brookfield and State Super in a joint acquisition with Tasmanian-based industry fund Spirit Super. It already controls 100% of the nearby Port of Portland.
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The involvement of several superannuation funds in the deal underlines how they will increasingly be drawn into competition investigations as they take on more assets directly.
The decision due on Thursday comes as Virgin is seeking urgent approval from the competition regulator for authorisation of its charter services agreement with Alliance Aviation.
Their existing five-year deal is due to expire this week and the late notification of the application to continue the charter deal signals, as expected, that Virgin will oppose Qantas’ attempt to take control of 100% of Alliance.
Virgin also has a separate market-sharing deal with Alliance, which is due to expire in March next year.
Three years ago, Qantas acquired a 20% stake in Alliance, which provides charter services for Virgin in regional Australia particularly on mining routes, like Perth to the Pilbara and Brisbane to Moranbah.
Qantas would be unlikely to offer similar services to Virgin, which may affect its ability to service those centres, hitting big companies like BHP, Incitec and Rio, but also the smaller contractors and other businesses relying on fly-in-fly-out staff.
Airport profits in focus
Separately the ACCC on Monday released its latest airport monitoring report, which surprisingly showed Melbourne was the only one of the big four airports to lose money in the 2021 financial year, amid the peak of the COVID-19 lockdowns.
Sydney, Brisbane and Perth all reported profits albeit at just 5% of pre-COVID levels. However, given the collapse of passenger numbers, this highlights the monopoly airports’ economic resilience.
Some car parks remained open, as did commercial office space at the airports and costs were slashed.
In its report, the ACCC warned it would “carefully monitor” the airports closely in recovery phase to ensure they don’t overcharge to make up for their lost profits (as opposed to past losses).
The regulator noted that “despite severely reduced aeronautical revenues, Sydney, Brisbane and Perth airports were still able to turn a profit last financial year as a result of reduced operating costs. This is a surprising result given the impact of the pandemic on the aviation industry, and it demonstrates the resilience of the airports.”
However, “many retailers at the four airports had to close their operations”, said the ACCC.
The airlines are reporting passenger numbers are now back to or close to normal, with Qantas and Jetstar reporting 120% increases in passenger numbers at peak times. Qantas reported $5.1 billion in losses in the two years to June 2021.
Transport operators were effectively knocked down by the airports during COVID-19 as part of the cost savings and small operators are now fearing massive increases in charges.
Geelong decision to affect importers and exporters
The port mergers in Victoria will directly affect the grain, timber, fertiliser and windfarm sectors, as there are large overlaps between the Ports of Geelong and Portland.
Ironically the deal comes as the benefits of competition between the ports in Victoria were made clear with the Tasmanian government’s decision to move its Spirit of Tasmania passenger and freight service from Melbourne to Geelong from October this year.
Under the proposed acquisition, the Port of Geelong will be 51% owned by Spirit Super and 49% owned by Palisade. Spirit Super was created last year with the merger of Tasmania’s largest industry fund Tas Plan and MTAA.
The formerly Brookfield-controlled Port of Geelong has signalled major expansions, including the construction of a $100 million hydrogen hub at the port.
In its statement of issues on the deal, the ACCC expressed concern the joint ownership by the Palisade consortiums would minimise competition between the two regional ports, resulting in less investment and increased charges.
This would affect all businesses importing or exporting from the ports and related services.
Geelong is 70 kilometres from Melbourne, which is home to the biggest container terminal in Australia.
Geelong and Portland both serve regional Victoria, which means the lack of competition will flow through to small businesses serving the farm community and allied industries.
Former ACCC boss Rod Sims talked big on regulation of monopoly assets and it remains to be seen whether the new guard will translate the talk into action.