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Qantas claims Sydney Airport is ‘too profitable’

Given the fact shares of Qantas Airways Limited (ASX: QAN) hit a new 52-week high today, it might be a strange time to be complaining about other companies’ high profits. But that’s exactly what the Australian Financial Review (AFR) is reporting today.

According to the AFR, Qantas chief executive Alan Joyce – together with Paul Scurrah, Chief Executive of Qantas’ arch-rival Virgin Australia Holdings Ltd (ASX: VAH) – today addressed the National Press Club in Canberra. In this address, the two airline CEOs asserted that the nation’s collection of airport gateways – primarily Sydney Airport Holdings Pty Ltd (ASX: SYD) – are gouging both airlines and consumers with excessive prices using their ‘monopoly’ on the skies. If this situation was not as monopolistic, the airlines believe that they would be able to charge their customers far less.

Mr Joyce is quoted as saying:

Clearly, the status quo isn’t working. Fees and charges from monopoly airports are excessive and damaging the economy, and airports continue to reap super profits because there is no real threat of intervention to moderate their behaviour. As a business person, I’m not suggesting for a minute that airports don’t deserve to turn a profit. Of course they do. But with margins like theirs, there is clearly something out of kilter. The difference between Qantas and the airports is that we actually face real competition… and it’s this competition which ultimately sets airfares. So, if there is a cost advantage, history shows that airlines will use it to sharpen fares. That’s why they’ve dropped so much over the past 10 years.

But the Australian Airports Association has countered that it is Qantas and the other airlines that are being greedy and enjoying “bumper profits that outstrip what the biggest four gateways made collectively last year.”

Qantas does have a history of using its ‘bully pulpit’ to cry foul. In 2013, the airline asked the federal government for a bailout, claiming that its international competitors were being propped up by various governments and it could not compete on an even playing field. The bailout was refused, but Qantas has since gone from strength to strength – as has its share price, which has climbed from $1.10 in 2013 to a new 52-week high of $6.57 just this morning.

Foolish takeaway

From where I’m standing, both Sydney Airport and Qantas are both currently enjoying massive profits and paying out record dividends, so I can’t see who (if anyone) is ‘beggaring thy neighbour’, as it were. It sounds more like some classic sibling rivalry to me.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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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