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What you need to know about the escalating conflict between Qantas Airways and Perth Airport

Picking a fight with the Perth Airport has not hurt the Qantas Airways Limited (ASX: QAN) share price as the airline shares gained altitude along with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

The Qantas share price jumped 0.7% to $5.96 in after lunch trade as the ASX 200 gained 0.5% even as tension between Qantas and the airport operator in our fourth largest city escalates.

The airline accused the airport of trying to extract “monopoly super profits” in a letter to the Productivity Commission, according to the Australian Financial Review.

Fight, not flight

The tiff between the parties revolve around aeronautical fees that Perth Airport is trying to levy on Qantas.

Perth Airport launched legal proceedings against Qantas in the West Australian Supreme court last month as it accuses Qantas of paying only $16.5 million of a $27.8 million bill.

Qantas is resisting paying the balance as it said Perth Airport had increased the cost of using the airport by 38% over the past seven years to the benefit of a few private investors who own the airport, including a group of superannuation and investment funds like the Future Fund.

The letter to the Productivity Commission comes at a sensitive time for airport operators as the commission is reviewing airport regulations across the country and could impose new rules to limit the market power of airports.

Regulatory risks

The Productivity Commission review is hanging over the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price although airports aren’t the only ones facing regulatory risks as large financial institutions like AMP Limited (ASX: AMP) and Commonwealth Bank of Australia (ASX: CBA) are anxiously awaiting the final report from the Hayne Royal Commission due next month.

The AFR alleges that the dispute between Qantas and Perth Airport may be tied to the airport wanting to move Qantas flights to Terminal 1 (T1) from its current base in T3 and T4.

The West Australian state government is also keen for Qantas to move as it has invested billions in a new road and rail infrastructure to link T1 with Perth’s CBD.

However, Qantas is dragging its feet because moving to T1 could open its international-domestic business to greater competition.

Currently, Qantas passengers at Perth do not need to transfer terminals to catch a domestic or international connecting flight.

Other airlines including Virgin Australia Holdings Ltd (ASX: VAH) operate from T1 and a move to that terminal will make it easy for Qantas passengers to choose another airline for their connection.

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Motley Fool contributor Brendon Lau owns shares of Commonwealth Bank of Australia. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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