The quality of service monitoring forms a key element of the current light-handed regulation at Australian airports. The ACCC (Australian Competition and Consumer Commission) evaluates and publicly reports the quality of service levels of the four largest airports on a yearly basis to pressure airports to maintain an acceptable service performance. This article aims to provide an in-depth analysis of the methodology used by the ACCC. This analysis includes a critical review of the methodology based on secondary information in combination with primary research (i.e., data from 21 semi-structured interviews) that considers the current perception of the methodology among key stakeholder groups. The research finds that the methodology used by the ACCC is underpinned by some limitations, putting in question its effectiveness, reliability and validity. Particularly, its weak design does not allow for a comprehensive interpretation of the reported results or a reliable comparison across monitored airports, thus reduces transparency. Stakeholders pointed out that it is not possible to evaluate whether an airport undertakes infrastructure investments that ensure both the efficiency of ongoing airport operations and appropriate levels of service quality. These limitations add to the perception that the ACCC in its current function is not a ‘credible threat’ to airports with market power. Recommendations and future research directions are provided to address the identified limitations.

Introduction

One key element of the light-handed regulation (LHR), as currently in place at Australia’s top four airports (i.e., Brisbane, Melbourne, Perth, Sydney), is the monitoring of quality of service. The LHR does not involve formal price regulation or place any immediate constraints on aeronautical charges but instead monitors airport prices and quality of service levels (Littlechild, 2012). Also, it carries the threat of re-imposing stricter regulation in cases where an abuse of market power is evident (Gillen, 2011). A main objective of the LHR is to overcome the drawback of conventional regulation frameworks imposing few incentives for the regulated enterprise to pursue productive efficiency (Vogelsang, 2002). Specifically, in Australia, the LHR aims to a) foster commercial negotiations between airport operators and their customers; b) decrease the costs of administration; and c) encourage airports to undertake infrastructure investments that ensure both efficiency of ongoing airport operations and appropriate levels of service quality (Arblaster, 2014; Lohmann and Trischler, 2017). The present article focuses on airport quality of service, including its monitoring approach as used by the ACCC. In its latest report, the Productivity Commission (PC) did not reach any conclusions regarding the quality of service levels at Australia’s monitored airports, apart from the observation that the airports have performed ‘relative to each other’ (Productivity Commission, 2011). This lack of analysis is somewhat troublesome when considering that quality of service levels among the four airports has brought mixed results since the start of the monitoring regime in 2001 (ACCC, 2016). In addition, the monitoring of service quality forms a key aspect of the LHR because this regime encourages airports to increase profits. One possible way to do this is by allowing service levels to fall through underinvestment (Francis et al., 2002; Adler et al., 2015). The argument that revenues from concession services, such as retailing, car parking and catering, might deter an airport from decreasing quality of services or delay infrastructure investments is not sufficiently grounded (Fu et al., 2011). Based on the limited attention given to quality of service as a key element of the LHR framework, the purpose of the present research is to provide an in-depth analysis of the methodology used by the ACCC to monitor the quality of service at the four Australian airports. The analysis includes a critical review of the methodology with secondary information in combination with primary research that considers the current perception of the monitoring approach among key stakeholder groups.