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Hydrogen Blending With Transportation FuelSTANDARDS RESEARCHMarch 2024HYDROGEN BLENDING WITH TRANSPORTATION FUEL2csagroup.orgAuthorsBruno Bate,P.Eng.,Jenmar ConceptsMark Epp,P.Eng.,Jenmar ConceptsProject Advisory PanelJake Abes,DNVKevin Larmer,Canadian Gas AssociationRy Smith,Change Energy ServicesTed Williams,Natural Gas DirectVictor Fe,Fortis BCDragica Jeremic Nikolic,CSA GroupJulie Cairns,CSA Group(Project Manager)Financial SupportThis research report is made possible by a financial contribution from Natural Resources Canada.Disclaimer:This work has been produced by Jenmar Concepts and is owned by Canadian Standards Association.It is designed to provide general information in regards to the subject matter covered.The views expressed in this publication are those of the authors and interviewees.Jenmar Concepts and Canadian Standards Association are not responsible for any loss or damage which might occur as a result of your reliance or use of the content in this publication.HYDROGEN BLENDING WITH TRANSPORTATION FUEL3csagroup.orgTable of ContentsExecutive Summary 41 Introduction 5 1.1 Hydrogen Blending Motivations 5 1.1.1 Environmental Benefits 5 1.1.2 Economic Benefits 112 Methodology 123 Results 12 3.1 Key Blending Terminology 12 3.2 Hydrogen Blends Used in On-Road Transportation 14 3.2.1 Hydrogen Natural Gas Blends 14 3.2.2 Hydrogen Diesel Fuel Blends 18 3.2.3 Hydrogen Gasoline Fuel Blends 19 3.3 Blended Fuel Dispensing Systems 19 3.3.1 Hydrogen Natural Gas Blends 19 3.3.2 Hydrogen Liquid Fuel Blends 23 3.4 Codes and Standards 24 3.4.1 Standards for Vehicles using Hydrogen Blends as fuels 24 3.4.2 Standards for Dispensing Stations using Hydrogen Blends as fuels 304 Discussion 33 4.1 Blended Hydrogen Vehicle Considerations 33 4.2 Blended Hydrogen Codes and Standards 35 4.3 Standard Development Priorities 355 Conclusions 376 References 38Appendix A Canadian Transport Sector Considerations 48Appendix B Hydrogen Production and Carbon Intensity 48Appendix C Volume vs.Energy Blend Fractions 50HYDROGEN BLENDING WITH TRANSPORTATION FUEL4csagroup.orgExecutive SummaryThis report provides an overview of the trends and impacts of hydrogen blended fuels in the North American transport sector.In this context,“hydrogen blending”refers to the use of hydrogen in combination with hydrocarbon fuels in transportation.These hydrocarbon fuels include natural gas,diesel,and gasoline.A summary of key hydrogen blending definitions is covered in the report,providing the reader with clarity around terms.The motivations for the adoption of hydrogen blending in the North American transport sector are outlined.These motivations are broadly categorized under environmental benefits and economic benefits,the former being the primary consideration for hydrogen blending in the transport sector.An overview of the existing North American codes and standards highlights that some guidance on hydrogen blending for hydrogen-natural gas systems is present in these standards.Gaps which exist for some of these standards are provided for onboard vehicle fuel systems,as well as fuel dispensing stations.This report concludes that gaps and needs for standardization in the field of hydrogen blended fuel for transportation include:Harmonization on the hydrogen volume fraction upper limit for blends with natural gas as an automotive fuel.Discussion on the feasibility of hydrogen volume fraction limit harmonization between values set by transmission and distribution system operators,and the transportation fuel set by the transport sector.Harmonization on the hydrogen volume fraction limit in natural gas,below which system vehicle part design does not differ from the design for natural gas powered vehicles.A similar threshold covering vehicle components and piping,as well as dispensing station fuel delivery infrastructure,is recommended for consideration.Inclusion of requirements for hydrogen blended fuels in standards covering onboard vehicle fuel systems,dispensing stations,and repair and maintenance facilities.Such standards have been adopted for either natural gas or hydrogen separately.Explicit inclusion of blends to provide clear requirements is needed.Standards coverage for hydrogen deblending,referring to technologies that serve to separate hydrogen from natural gas-hydrogen blends at the dispensing station.Such technology would help address the gap between hydrogen blending in natural gas distribution systems and hydrogen intolerance for legacy natural gas vehicles and dispensing stations.HYDROGEN BLENDING WITH TRANSPORTATION FUEL5csagroup.org“Hydrogen blending is being investigated globally in many industries,including in the transport sector.”1 IntroductionThe objective of this research report is to canvas industry publications,research papers,vendor data,interested and affected parties within industry and other sources in order to survey the hydrogen fuel blends currently in use in the transport sector,establish key definitions,and highlight the onboard vehicle fuelling technologies in which the hydrogen blends are employed.In addition,this report also reviews infrastructure and equipment for the dispensing of hydrogen fuel blends to an engine.The information in this report is intended to provide industry and standards development organizations(SDO)a high-level assessment of hydrogen fuel blends for transportation.This assessment includes highlighting areas where potential safety concerns warrant further SDO focus,as well as areas where key terms need standardizing because of ambiguity.The report also includes proposed recommendations and next steps to update relevant codes and standards to address the findings of the report.This report focuses exclusively on hydrogen fuel blending in the transport sector;however,it is worth noting that hydrogen fuel blending is also actively being pursued in non-transport sectors,such as hydrogen blending in natural gas(NG)pipeline applications for heating and stationary power generation applications.Additional safety concerns arise when considering hydrogen-natural gas blended systems that may not be adequately addressed by systems developers or integrators primarily familiar with natural gas systems.The leakage and permeation of hydrogen is one such challenge to address.The low density of hydrogen may allow it to leak at a much higher rate than methane through the same size leak path,although at lower pressures this may not always be the case 1.Hydrogen also has a high mobility in elastomeric materials,allowing it to permeate through o-rings,diaphragms,and gaskets at a much faster rate than natural gas 2.Hydrogen gas permeation can also cause seal destruction upon sudden de-compression(i.e.,explosive de-compression failure)3.In addition,hydrogen embrittlement reduces the strength and ductility of many metallic materials 4.1.1 Hydrogen Blending MotivationsHydrogen blending is being investigated globally in many industries,including in the transport sector.The motivations for the use of hydrogen blends are primarily environmental 5,although there are also secondary,economic benefits that may potentially arise from hydrogen blend applications.1.1.1 Environmental BenefitsA major factor motivating hydrogen blending has been the requirements laid out by the United Nations Conference of the Parties(UN COP),and most recently embodied by the Paris Agreement in 2015.The Paris Agreements goal is to limit global temperature rising to well below 2C above pre-industrial levels 6.The UN HYDROGEN BLENDING WITH TRANSPORTATION FUEL6csagroup.orgIntergovernmental Panel on Climate Change(IPCC)asserts that to avert the worst impacts of climate change,including climate destabilization,and preserve a livable planet for humans,the global temperature increase needs to be limited to 1.5C above pre-industrial levels,i.e.,temperatures in 1850 and earlier 7.The published results of the IPCC indicate that anthropogenic emissions place the current warming at an estimated 1.1C above pre-industrial levels 8.To keep global temperatures from rising above 1.5C,the IPCC estimates that emission must be reduced to 45%of 2005 levels by 2030 and reach net zero by 2050 7.To achieve net zero,organizations such as the International Energy Agency(IEA)have advocated for a focus on the energy sector,the source of approximately 75%of greenhouse gas emissions globally today 9.The goal is to reduce GHG emissions by displacing fossil fuel-fired power with energy from renewable sources.Globally,the cohort of nations that have subscribed to net-zero targets by 2050,either through statement of intent or submission to the UN,represent 80%of the Earths population 10.As a signatory to the Paris Agreement,Canada has implemented legislation and published roadmaps to meet these targets.The Canadian Net-Zero Emissions Accountability Act(S.C.2021,c.22),which became law on June 29,2021,legislates Canadas commitment to reach net zero by 2050 11.A roadmap of the proposed measures to meet net zero is described in the 2030 Emissions Reduction Plan 12 and highlights a target GHG emission reduction in the transport sector from 186 Mt CO2 equivalent(CO2e)in 2019 to 143 Mt CO2 equivalent in 2030,a 23%reduction over 11 years and an 11%reduction from 2005 transportation GHG emissions of 160 Mt 13.For light-duty vehicles(LDVs)the plans call for mandates which gradually step up to 100%zero emissions vehicle(ZEVs)sales by 2035,paired with government funding for consumer purchase incentives.These ZEVs are anticipated to be largely electric vehicles(EVs),and government funding allocation includes ZEV charging stations 13.The strategy for medium-and heavy-duty vehicles(MHDVs)similarly proposes a ramp-up in ZEV sales mandates,although a 100%mandate for ZEVs by 2040 is proposed only for a subset of vehicle types.This mandate is constrained by the technical feasibility of current EV technology for medium-and heavy-duty applications 13.The 2040 ZEV mandate was established to address barriers to long-haul zero-emission trucking commercialization,and secured various government earmarked investments including 13:$547.5M allocated for purchase incentive programs for MHDVs;$199.6M allocated for retrofit of large trucks currently on the road,as estimated from conversion of 0.6%2.5%of the heavy-duty vehicles(HDVs)on the road in 2021 and conversion cost range of$13K-55K 51,74;and$33.8M for hydrogen trucking demonstration projects.These government financial incentives for MHDVs may potentially incentivize the adoption of hydrogen fuel blend vehicle technology for operators.The net-zero emissions targets enshrined in these initiatives are further detailed in the national Hydrogen Strategy for Canada 14,along with corresponding provincial hydrogen strategies.The topic of hydrogen blending in these strategies is primarily focused on injection of hydrogen in natural gas pipelines for heating and fuel,and there are discussions in the national strategy around hydrogen and natural gas blends for use in compressed natural gas(CNG)vehicles,initiated via fleet operators demand to use lower emitting renewable gas 14.This industry demand is also reflected in British Columbias efforts to recognize hydrogen as an eligible renewable gas under the CleanBC program that puts a GHG cap on natural gas utilities 15.This program of hydrogen enrichment of natural gas is relevant to the transport sector,since in many instances these natural gas utilities supply CNG vehicle dispensing stations.The GHG cap serves as a further incentive for blending hydrogen with NG to achieve the emissions targets laid out by policy.Further discussion on the distribution of GHG emissions in the transport sector is provided to inform the reader on why hydrogen blending is a particular focus for the heavy-duty vehicle segment.HYDROGEN BLENDING WITH TRANSPORTATION FUEL7csagroup.orgThe transportation GHG emissions profile,illustrated in Figure 1,demonstrates that the on-road sector comprises 84%of Canadas transportation related GHG emissions,and 25%of all Canadian GHG emissions across all sectors 17,18.Transportation emissions have increased over the 30-year period of data,with the driving factors cited as:an overall growth in passenger and freight activity;and a consumer shift towards more GHG-intensive transportation,including heavy-duty trucks and larger passenger vehicles such as SUVs and light trucks.Figure 1:Canadian transport sector GHG emissions in 2019 16.Figure 2:Canadian Transport GHG Emissions(1990-2020)18.HYDROGEN BLENDING WITH TRANSPORTATION FUEL8csagroup.orgGHG emissions in the on-road sector have grown by 18%from 2005 to 2019,despite the gains in distance travelled per unit fuel volume,across all vehicle classes during this period 16.This sectors GHG increase is led by a 34.9%increase in GHG emissions from on-road freight vehicles over that same period,i.e.,48 to 65 Mt of carbon dioxide equivalent(CO2e)16.The road freight activity,measured in tonne-kilometers,also increased by 35%.Similarly,GHG emissions from on-road passenger vehicles increased by 8.9%over that period(84 to 91 Mt CO2e)16,with a corresponding increase in road passenger activity by 17%.It is important to note that Canadian GHG emissions data for 2020,shown in Figure 2,illustrate the global changes in transportation patterns believed to be brought on by the COVID-19 pandemic.This data was omitted in the trend analysis under the assumption that it was not representative of the previous decade,and it is unclear whether the short-term changes in GHG emissions brought on by the global pandemic will endure to represent the trend for the next 10 years.Further contextual information regarding the make up and trends of MHDVs in Canada is available in Appendix A.The data shows that on-road freight is a transportation segment that has a considerable GHG emission contribution.However,it faces challenges in adopting ZEV technology that on-road passenger vehicles do not.Proponents of hydrogen fuel blending may argue that hydrogen blends may fill a niche in the heavy-duty(HD)vehicle segment of the market,potentially being a better market fit than HD ZEVs at present.Battery electric vehicle(BEV)technology faces many barriers in the heavy-duty vehicle market segment,including,but not limited to,vehicle capital cost,fast-charging infrastructure capital and operation cost,infrastructure availability,the impact of charge times on logistics,trade-offs between fast charging and battery lifetime,and range 19.Fuel cell electric vehicles(FCEV)that use hydrogen as a source of electric energy may be considered an alternative to BEVs.Commercialized light-duty FCEV models are available from automakers Toyota 20 and Hyundai 21.Heavy-duty FCEVs are being developed by most major long-haul truck manufacturers.The Canadian national and provincial hydrogen strategies point to FCEV technology to occupy the medium-and heavy-duty segments of on-road transportation.However,the higher capital costs of FCEVs at present and their nascent status in this market may also pose barriers to rapid adoption.Hydrogen fuel blending technologies,which often require retrofitting of existing internal combustion engines(ICEs),may provide a possible path for cost-conscious operators to realize some of the legislated GHG reductions while waiting for the higher vehicle volumes in the light-and medium-duty sectors to drive down capital costs on FCEVs.One potential risk for logistics operators considering the adoption of hydrogen fuel blending technology lies in attempting to estimate the time window for FCEV market capture as the average lifespans of long-haul trucks is typically 15 years 22.The 65 Mt CO2e emitted by the on-road freight sector is anticipated to be partially reduced by an increased number of FCE MHDV models in future,a trend driven by sales incentives and FCEV development.However,near-term barriers to fully realize ZEVs for this market segment still exist.Co-combustion technology utilizing hydrogen may provide the opportunity to address a segment of the on-road freight GHG emissions in the next 710 years.These technologies may provide the potential to reduce tailpipe carbon emissions by approximately 40%or more 23,while ZEVs and FCE MHDVs attain the market fit required to meet the 2050 net-zero obligations legislated in the Canadian Net-Zero Emissions Accountability Act and the UN Paris Agreement.Beyond policy incentives encouraging the use of hydrogen in the transport sector,there are academic studies and pilot projects that demonstrate the possible environmental advantages of hydrogen fuel blending when compared to fossil fuels alone.The results of studies on the CO2-emissions impact of hydrogen blending with natural gas indicate that introducing hydrogen into natural gas results in a HYDROGEN BLENDING WITH TRANSPORTATION FUEL9csagroup.orgreduction in CO2 emissions,as further discussed.However,the reduction in lifecycle emissions is generally not in direct proportion to the volume of H2 mixed in,as is commonly understood.Studies indicate that replacing 10%of natural gas with hydrogen by volume results in up to a 5%reduction in CO2 emissions at combustion source 24.Increasing the hydrogen volume to 50%results in a CO2 reduction of 30%at combustion source 24.Further erosion of these GHG emissions reductions occur when considering the GHG emissions of hydrogen production(i.e.,grey hydrogen vs.green hydrogen).Additional reference information on the impact of hydrogen production on carbon intensity is provided in Appendix B.If hydrogen produced from the steam methane reforming process without carbon capture is employed(referred to as“Baseline SMR”in Figure 3),increasing the hydrogen enrichment may serve to increase the carbon intensity of the resulting blend.The dotted line in Figure 3 represents the emissions of pure natural gas for reference.It is important to note that this is dependent on the carbon intensity reference for natural gas,which is estimated to be 51 gCO2e/MJ according to the IEA and US EPA 25,26 and used in Figure 3.The impact of hydrogen fugitive emissions,referring to unintentional and undesirable emission,leakage,or discharge of gases,may be an environmental concern.Hydrogen gas has a global warming potential(GWP100)of 11 27.The mass ratio of air to fuel is used when describing a combustion process.If the air provided for combustion is at equilibrium to completely burn all the fuel,this air-to-fuel ratio is referred to as a“stochiometric”mixture.If the fuel provided is in excess of the stochiometric ratio,the mixture is referred to as“rich.”Similarly,if the air provided is in excess of the stochiometric ratio,the mixture is referred to as“lean”28.Typically,lean mixtures are utilized in combustion processes because of their efficiency,but they may cause higher combustion chamber temperatures.These higher temperatures in the presence of excess air can lead to the formation of nitrogen oxides(NOx)29.Figure 3:Emissions intensity of blending hydrogen with natural gas at varying blend shares by volume 26.HYDROGEN BLENDING WITH TRANSPORTATION FUEL10csagroup.orgNOx may be a concern in urban areas as it can react with volatile organic compounds(VOCs)to form photochemical smog.This smog is believed to affect the respiratory systems of children,people with lung diseases such as asthma,and people who work outside 30,31.In addition,NOx may form nitric acid in the atmosphere,producing acid rain.Experimental work on hydrogen-natural gas blends performed by F.Lynch and J.Fulton for the National Renewable Energy Laboratory(NREL)in 1994,using Hythane as a proxy for hydrogen/methane blend,concluded that there were benefits in terms of COx and NOx emissions reductions and performance improvements relative to percent hydrogen energy substitution in methane 32.These observations included:leaner operation of engines enabled by hydrogen;rapid decrease in NOx when decreasing the equivalence ratio for equal temperatures(i.e.,actual air/fuel ratio to the stoichiometric air/fuel ratio,often denoted with the Greek letter lambda()with values 1 indicating“leaner”combustions);NOx reduction via leaner operation at partial engine load conditions,enabled by hydrogen;NOx reduction at equal full engine load conditions via leaner operation,spark retard,or exhaust gas recycle(not tested);increased NOx and torque at wide open throttle near the lean limit;and decreases in hydrocarbon(HC)and CO emissions.According to the same report 32,adding 1530%v/v hydrogen to natural gas in the lean burn range could provide the same performance and fuel economy as natural gas at any partial engine load condition,and burning a leaner mixture and a higher manifold air pressure resulted in lower NOx emissions up to the incomplete combustion limit.In addition,at wide open throttle,NOx reduction could also be achieved by leaning the mixture,meaning increasing the proportion of air to fuel in the combustion mixture,or retarding the spark 32.Although these figures are expressed in volumetric terms,this data interpretation is not unique.Descriptions of hydrogen enrichment on an energy basis are also encountered in the literature.An overview of the difference between volumetric and energetic fractions is provided in Appendix C.In addition to natural gas and hydrogen blends,the national Hydrogen Strategy also discusses diesel and hydrogen blends for the transport sector.The national Hydrogen Strategy refers to hydrogen-diesel co-combustion vehicles converted through retrofit of diesel engines,as a lower-entry cost for end users when compared to FCEV options.Diesel co-combustion options are cited to reduce tailpipe emissions up to the hydrogen percentage of the co-combustion,which the report states are anticipated to reach up to 30;however,as previously noted this may also depend on the hydrogen production method employed.The national Hydrogen Strategy report also cautions about the potential for higher nitrogen oxide(NOx)emissions.The literature indicates that the increased combustion temperature resulting from the addition of hydrogen to transport fuel may be the root cause 33.If the hydrogen content in a fuel blend is known,the engine performance may be optimized for that specific blend to achieve higher fuel efficiency,lower NOx,COx emissions,and a stable combustion process 33.Hydrogen-diesel co-combustion technology may generally be viewed by the national and provincial strategies as an intermediate step toward the transition to FCEVs for medium-and heavy-duty vehicles.The cited environmental benefits of diesel co-combustion include a reduction in GHG emissions for existing diesel MHDVs while end users wait for the commercialization of medium-and heavy-duty FCEVs to attain market fit.The federal and provincial hydrogen strategies indicate that the opportunities for hydrogen blending in the transport sector may lie primarily in co-combustion engines for heavy-duty applications 34,14,35,HYDROGEN BLENDING WITH TRANSPORTATION FUEL11csagroup.org36,including transport trucks,trains,and aviation equipment.The Canadian federal and provincial hydrogen strategies,and the legislations that embody them,intend to meet legally binding reduction targets for greenhouse gas emissions agreed upon in the UN Climate Summits Paris Agreement.They represent a strategy to avert the worst adverse effects of anthropogenic climate change on Earth 6.Beyond the primary environmental benefits of hydrogen blending,there are numerous secondary economic benefits to employing hydrogen blending technology in the transport sector.1.1.2 Economic BenefitsThe economic benefits of hydrogen blending for the transport sector in North America can be broadly categorized into:Potential for direct capital cost savings,when comparing retrofit of existing HDVs to replacement with ZEV alternatives.Research published in 2022 reported FCEV total cost of ownership(TCO)to be higher than that for a diesel-fuelled vehicle,with reported indications of reaching cost competitiveness with diesel trucks by as early as 2030 37.In examining capital expense,fuel cell electric HDV costs are closer to$665K 38,or 2.5x the cost of a diesel HDV.In contrast,a hydrogen-diesel co-combustion system conversion is estimated to cost$55K per vehicle 39,or approximately 2142%of a new diesel HDV cost range of$130K$260K 40.Potential for direct operation cost savings,when compared to 100%fossil fuel incumbents.One of the possible differentiating factors logistics operators could consider with vehicles is the total cost of fuel per unit distance travelled.To outcompete incumbent systems on an operating expense basis,hydrogen blended systems must provide improvements to fuel efficiency.One initiative that has arisen in the market is the concept of Hydrogen-as-a-Service(HaaS)for commercial fleets 39.In this business model,the hydrogen service provider supplies and installs a conversion kit,which includes a hydrogen injection system on the existing OEM engine,along with hydrogen tanks and gas handling components on the back of the cab of heavy-duty trucks,as well as fuelling infrastructure 39.Such systems claim to achieve 40%diesel replacement by energy,along with max 40%reduction in GHG emissions.Announced plans to increase diesel fuel replacement to 50%in 2023 aim to further increase GHG reductions 39.Indirect economic benefits driven by increased growth in clean technology,including cost efficiency,job creation,and contribution to gross domestic product.In addition to the direct economic benefits to operators,the deployment of hydrogen blend systems may provide the indirect benefit of supporting hydrogen demand in the near term and facilitates the build-out of hydrogen fuelling infrastructure compatible with future heavy-duty FCEVs.The increasing hydrogen demand may cascade into demand on supporting hydrogen production technologies.It is anticipated that an increase in hydrogen demand could serve to decrease hydrogen production equipment costs.Indirect economic benefits derived from improved health outcomes related to air pollution.It is challenging to provide an estimate of the indirect economic benefit of health outcomes specifically due to hydrogen blending technology.This is partially due to the difficulty in forecasting market segment growth for HDVs,given the relatively short window of opportunity before FCEVs are anticipated to reach parity with diesel HDVs.It is informative to contemplate the magnitude of such a cost on our society.In a 2021 report from Health Canada,the total economic cost of all health impacts associated with air pollution was estimated to be$120 billion for the year,in addition to 15,300 premature deaths per year 41.Air pollution considered in the Health Canada report consisted of fine particulate matter,ground level ozone,and nitrogen dioxide at levels above background levels 41.These pollutants are produced by fossil fuel ICEs,among other sources.HYDROGEN BLENDING WITH TRANSPORTATION FUEL12csagroup.orgThis figure highlights the economic importance of reducing emissions from the transport sector.As discussed in Section 1.1.1,the transition from fossil fuel HDVs to hydrogen blend HDVs could serve to reduce NOx emissions,as well as particulate matter(PM),by reducing the usage of PM-generating fuels such as diesel.These categories provide an economic context for the technologies discussed in Section 3.2 MethodologyThe literature search for the study consisted of a systematic process used to gather relevant information and academic resources related to the topic of this study.Keywords and search terms were identified that were relevant to the topic,most notably variants of the terms“hydrogen blending,”“HCNG,”and“Hythane.”Search engines such as Google and Google Scholar were used to find academic papers and industry studies involving the transport sector and hydrogen blends.In addition to the literature review,interviews were held with industry representatives to garner feedback on industry trends and concerns.Standards were searched on various SDO databases.In addition to these sources of information,Canadian government sites were searched for regulations and the hydrogen road maps,as well as statistical information from the Statistics Canadas STATCAN 42 public database.3 Results3.1 Key Blending TerminologyHydrogen fuel blending terminology in the transport sector may vary in definitions depending on the fuel blends and the technology utilizing the blends.The definitions adopted for this report are informed by a review of industry sources and serve as:a basis for clear communication in this report;and insight into terminology employed by industry.Definitions of terms often used in hydrogen blended transport fuel literature,as applicable in this report,are summarized as follows:Bi-Fuel System A vehicle that has two independent fuel systems and can run alternatively on either fuel,but only on one at a time 43.The term also applies to vehicles that run on both fuels simultaneously in limited amount or duration 43.For the topic of this study,one of the fuel systems is hydrogen.Co-combustion The burning of more than one fuel simultaneously to produce power Also referred to as co-firing or co-utilization 44.“Beyond the primary environmental benefits of hydrogen blending,there are numerous secondary economic benefits to employing hydrogen blending technology in the transport sector.”HYDROGEN BLENDING WITH TRANSPORTATION FUEL13csagroup.org Carbon Dioxide Equivalent(CO2e)A metric for comparison of emissions from various greenhouse gases based on global warming potential,by converting amounts of other gases to equivalent carbon dioxide amount with the same global warming potential 45.Carbon Intensity(CI)The amount of lifecycle greenhouse gas emissions,per unit of energy of fuel delivered,expressed in grams of carbon dioxide equivalent per megajoule(gCO2e/MJ)46.Dual-Fuel System A vehicle that has two independent fuel systems and can run on both fuels simultaneously 43.Dual-fuel systems may also be referred to as co-combustion systems.For the topic of this study,one of the fuel systems is hydrogen.Energy Fraction The energy content of a constituent,divided by the energy content of all constituents of the mixture,typically expressed as a percentage;sometimes referred to as energy ratio.Fuel Direct Induction A process whereby the hydrogen is injected at the cylinder port without pre-mixing along with another fuel,such as diesel,and aspirated in the cylinder during the intake stroke.Note:In the absence of a clear consensus in the literature,the term fuel direct induction is defined for the purpose of this report.Greenhouse Gas(GHG)Any gas that has the property of absorbing infrared radiation emitted from Earths surface and reradiating it back to Earths surface,leading to the greenhouse effect.GHGs include carbon dioxide(CO2),methane,and water vapour 47.Hydrogen Enrichment The process of combining hydrogen and a conventional hydrocarbon fuel.This is also referred to as Hydrogen Enhancement 48.Hydrogen Induction The process of introducing hydrogen to an internal combustion engine,including but not limited to fuel pre-mixing,oxidizer pre-mixing,and liquid additive mixing.(See Induction)28 Hythane A blend of natural gas containing 57%hydrogen by energy 49,or up to 20%v/v hydrogen 50.Hydrogen Compressed Natural Gas(HCNG)A gaseous blend typically composed of 2150%v/v hydrogen(H)and compressed natural gas(CNG)for use as fuel in transportation 50.Blends with 20%hydrogen are typically referred to as HythaneTM 51.Note:HCNG is also sometimes in the literature used to refer to blends with 20%hydrogen v/v.Such terminology is not used in this report.Induction Delivery of fuel and air into the combustion chamber 28.Internal Combustion Engine(ICE)An engine in which the reactants(oxidizer and fuel)and products of combustion are used as working fluids of the engine,which gains its energy from heat released during combustion of the non-reacted working fluids 52.The energy gained generates motive power by means of a crank mechanism 53.Net Zero Carbon A state in which a quanity of greenhouse gas(GHG)emissions is balanced by the same quantity of GHG removals.Where GHGs take the form of different gases,they can be converted to a common unit such as tonnes of CO2e using their global warming potential 54.HYDROGEN BLENDING WITH TRANSPORTATION FUEL14csagroup.org Oxidizer Direct Induction A process whereby the hydrogen is injected into the combustion chamber via the air inlet manifold along with atmospheric air.The mixture is subsequently combusted with the secondary fuel 55.This process is also referred to as oxidizer dilution or oxidizer fumigation.Volumetric Fraction The volume of a constituent,divided by the volume of all constituents of the mixture,typically expressed as a percentage 56.Also referred to as a volume ratio.3.2 Hydrogen Blends Used in On-Road Transportation Hydrogen use in on-road transportation has a long history going back centuries.As far back as 1806,Swiss engineer Francois Isaac de Rivaz was busy developing an ICE that utilized hydrogen and oxygen 57,58,although the engine was never commercially successful.Fast forward to the present day when several hydrogen fuel blends are available,at various stages of technological and commercial maturity.This report focuses on the main three hydrogen blends,namely,natural gas,diesel,and gasoline.3.2.1 Hydrogen Natural Gas BlendsNumerous pilot-scale projects of hydrogen-natural gas blends exist in the transport sector.The majority consist of systems where the hydrogen and CNG are pre-mixed before being dispensed into vehicle onboard storage.Hydrogen-natural gas mixtures have been researched by various government and private sector organizations from as far back as the 1920s 59.Hydrogen-natural gas engine tests were conducted by Eccleston and Fleming in the 1970s,investigating the proposed use of hydrogen-rich synthetic coal gas as an automotive fuel.Their study was one of the first to demonstrate that blending hydrogen into natural gas reduced hydrocarbon,carbon monoxide,and nitrogen oxide emissions relative to pure natural gas 60.Frank E.Lynch and Roger W.Marmaro patented the term HythaneTM on August 18,1992 61,described in the patent as:a fuel comprising natural gas modified by the addition of hydrogen in appropriate proportions to produce a mixture with a burn rate that matches the burn rate of gasoline is provided for burning in a gasoline engine without the need for modifications in engine timing,combustion chamber geometry,or other engine design parameters.Eden Innovations,who acquired the rights to HythaneTM technology in 2004,defines HythaneTM as a premium blend of 57%hydrogen by energy 49,or up to 20%v/v as referenced in Section 3.1,although some of the Hythane work published by Lynch investigated blends up to 302.Blends of natural gas containing hydrogen beyond 20%v/v are commonly referred to in the literature as hydrogen compressed natural gas,or by the acronym HCNG.The architecture for the Hythane and HCNG fuel systems is modeled after heavy-duty vehicle CNG systems.The HCNG system is illustrated in Figure 4.Gas is dispensed via fuel filler into gaseous fuel tanks that consist of cylinders pressurized to 250Bar(3625psi).Vehicle fuel gas cylinders are classified into four types,based on their construction:Type 1,2,3 or 4 63.One of the primary purposes for developing each subsequent type was to achieve a savings in cylinder weight for the same storage pressure.A definition of each is provided,along with a pictogram in Figure 5.Type 1:an all-metal cylinder made solely of steel.Type 2:a metal cylinder,constructed of steel or aluminum,with a wrapping around the cylinder.The wrapping typically consists of aramid,glass,or carbon fibre in an epoxy or polyester resin.Type 3:a cylinder fully wrapped in aramid,glass,or carbon fibre in an epoxy or polyester resin with a metal liner(typically aluminum).Type 4:a non-metallic cylinder fully wrapped in aramid,glass,or carbon fibre in an epoxy or polyester resin with a plastic liner.HYDROGEN BLENDING WITH TRANSPORTATION FUEL15csagroup.orgFigure 4:Heavy-Duty HCNG Vehicle Fuelling System(adapted from 62).The type of cylinder installed in a vehicle may be determined by the hydrogen blend fraction used.Legacy CNG vehicle fleets employing Type 1 steel cylinders may suffer from hydrogen embrittlement at higher fractions of hydrogen.Hydrogen content in CNG automotive fuel is limited by some regulations and standards,as in the case of the 2%hydrogen limit in European standard EN 16723-2 33,the 10%hydrogen limit in North American Standard ASTM D8487-23 64,and the 2%limit in ISO 11439 63 referenced by CSA B51 Part 2 65.Newer Type 4 cylinders are not subject to this same degree of embrittlement risk,lacking metal in the cylinder body,and can accommodate up to 100%hydrogen 66.In terms of the flow of gas,the manual shutoff valve for the cylinders is the next component to consider.The materials of construction of this component,its susceptibility to embrittlement,and its ability to contain hydrogen are key considerations.Hydrogen is the smallest size molecule that exists,and one that exhibits one of the fastest diffusion rates into materials 67.This property means that leakage is of particular concern,especially in transportation applications subject to shock and vibration.Product standards and regulations for hydrogen fuel gas components such as CSA/ANSI HGV 3.1 68,EC 79 69,UN R134 70,and UN GTR-13 71 address some of these challenges.These documents address the leak challenges of utilizing hydrogen gas in automotive applications by specifying leak tests over specified numbers of pressure cycles,as well as requiring the use of either hydrogen or helium as the leak test gas.The high-pressure fuel regulator and fuel filter bodies may both be considered subject to the material HYDROGEN BLENDING WITH TRANSPORTATION FUEL16csagroup.orgFigure 5:Vehicle Fuel Gas Cylinder Types.susceptibility to hydrogen considerations as the previously mentioned valve,depending on the body materials and soft seal materials used.For the fuel line,the literature cites a range of 1030%hydrogen volume fraction as being acceptable depending on whether a legacy CNG system was being considered or a newer system 33.However,it is noted that this potentially acceptable hydrogen content range was based on a single manufacturer and that further practical experience was required for confirmation of this limit 33.The fuel lines feed the fuel injection system that delivers the blended fuel into the internal combustion engine(ICE).Industry proponents have highlighted that among the highest areas of concern on spark-ignited engines fuelled by hydrogen blends may be the longevity of the spark plugs due to hydrogen embrittlement 72.The control of the fuel injection system is achieved by the electronic control module(ECM).For modern heavy-duty stoichiometric natural gas engines,the literature suggests that hydrogen volume blends of 1520%may be accommodated with the existing ECM natural gas engine mapping 33.Higher volume blend proportions may potentially require recalibration of engine mapping in the ECM.It is worth noting that Cummins,the heavy-duty commercial truck engine manufacturer in North America,limits the hydrogen content in their online fuel quality calculator to 0.03s.Cummins has announced that their new 15L fuel-agnostic engine platform,the X15,will be offered in a natural gas(X15N)and hydrogen(X15H)variant 74.It is unclear from announcements to date whether either will be hydrogen blend tolerant.The X15H may provide an alternative to FCEVs for owneroperators to achieve low-emissions targets.The literature reports hydrogen-natural gas blends with concentrations of hydrogen up to 20%v/v may be utilized in conventional ICEs without tuning.Gas blends beyond 20%v/v hydrogen concentration appear to require engine tuning and modification of intake design to operate optimally 75.With a 20%v/v hydrogen blend,fuel efficiency gains between 0%are reported in the literature for spark-ignited lean-burn engines.Fuel efficiency gains are reported as strongly dependent on the ECM parameter settings 33.With the same 20%v/v hydrogen,GHG emissions reductions between 8%and 20%are reported,corresponding to fuel efficiency gains of 0%to 133.In addition,improvements in combustion stability are cited in the literature,reducing the risk of misfire while extending the fuel lean limit 33.When utilizing the volumetric mixture of 20%hydrogen,a reduction in vehicle range varies from 24%if no fuel efficiency gains are realized to 14%when a 13%HYDROGEN BLENDING WITH TRANSPORTATION FUEL17csagroup.orgfuel efficiency gain is realized 33.This reduction is attributed to the lower volumetric energy density of hydrogen than of methane.The volumetric energy difference increases with pressure due to the higher compressibility factor of hydrogen compared to methane 33.The compressibility factor is a ratio of the molar volume of a gas to the molar volume of an ideal gas at the same temperature and pressure 76.Hydrogen and methane molecules exhibit differing behaviours at high pressures:dominant repulsive hydrogen forces result in compressibility factor greater than 1 and lower energy content by volume at higher pressures.Conversely,dominant attractive methane forces result in compressibility factors lower than 1 and higher energy content by volume at higher pressures 33.A generally reported increase in the combustion cylinder maximum pressure and temperature could affect engine wear and engine knock.Depending on the engine settings,an increase in peak pressure of 620%is reported with a 20%v/v hydrogen blend 33.The literature also highlights the importance of ECM parameters mapping for fuel blends,such as air factor and ignition timing.The mapping is a challenge where the blend fraction may change,as could be the case when fuelling from a blended natural gas network,in contrast to refuelling stations that blend at the point of dispensing.Adaptive ECM logic that is able to adjust engine ignition timing based on performance is cited as one possible solution to this challenge 33.Hydrogen-natural gas pre-mixed blend technology is assessed to be at a technology level readiness(TRL)9,based on several demonstrations that have been conducted in North America since the 1990s 77,along with international Hythane bus-conversion projects in India and China conducted in 20042016.TRL is a metric that quantifies the stage of development of a technology,with 1 being the least ready and 9 being ready for use in real-life conditions 78.Air-fuel mixture controls used to be a limitation to the deployment of hydrogen blends,as reported in 1994 32.This early work stated that to achieve ultra-low emissions,the ICE must operate at an optimum air/fuel ratio for three-way catalysis and requires a precise mixture control system and advanced oxygen sensors.There have been significant advances and cost-reductions in automotive sensors since then.Much of the earlier literature is based on studies conducted with lean-burn spark-ignited engine configurations,rather than the stoichiometric engine configurations that have become the industry trend for HD vehicles,particularly in Europe,to meet increasingly stringent emission regulations 33.A remaining highlighted challenge for hydrogen-natural gas blend transport technology is the potential for relatively low decreases in carbon footprint vs.cost of implementation.This is dependent on the carbon price.“A remaining highlighted challenge for hydrogen-natural gas blend transport technology is the potential for relatively low decreases in carbon footprint vs.cost of implementation.”HYDROGEN BLENDING WITH TRANSPORTATION FUEL18csagroup.orgA 2023 study by Davis et al.found that hydrogen-natural gas blending could eliminate 12%of GHG emissions 79,and that hydrogen-natural gas blends could increase energy costs unless the carbon price was over$300/tonne of GHG emissions.At the time of writing of this report,under the Canadian Greenhouse Gas Pricing Act(S.C.2018,c.12,s.186),the cost of greenhouse gas(GHG)emissions will rise$15/tonne per year from$65/tonne at present to$170/tonne by 2030.Commercial adoption of hydrogen-natural gas blend transport technology is another challenge.In the absence of targeted policy incentives for hydrogen blends in the transport sector,the rate of adoption of Hythane or HCNG systems may be limited when competing with hydrogen-diesel blend conversions,and even more so for FCEVs.An argument could be made that the primary candidates for Hythane and HCNG HD vehicle conversions are CNG HD vehicles unconverted HD diesel vehicles have the option of being converted to diesel-hydrogen co-combustion systems.3.2.2 Hydrogen-Diesel Fuel BlendsCombining hydrogen and natural gas fuels in storage is relatively straightforward,as both are in a gaseous state.Blending gaseous hydrogen with liquid hydrocarbons,such as diesel,poses challenges that prevent practical delivery and onboard storage of pre-mixed hydrogen-diesel blends.These challenges are discussed in Section 3.3.For these reasons,hydrogen-diesel blend ICE systems exclusively employ co-combustion systems where hydrogen is stored onboard in high-pressure cylinders,separate from the liquid diesel tank.Hydrogen-diesel co-combustion systems(also referred to as dual-fuel systems)utilize two types of fuel simultaneously in a mixture.These ICE systems can start up with one specific type of fuel and gradually introduce the secondary fuel source until the necessary stoichiometric ratio is achieved,which is a function of the engine load 80.The two fuels are mixed in the combustion chamber itself,with hydrogen induction occurring either by fuel direct induction or oxidizer direction induction 80.For fuel direct induction,the hydrogen is introduced into the intake diesel fuel stream prior to entering the combustion chamber.For oxidizer direct induction,the hydrogen is introduced via the intake air stream prior to entering the combustion chamber 80.The latter is also referred to as fumigation.The most common approach appears to be oxidizer direct induction(see terminology in section 3.1).In the absence of the secondary fuel source,many of these systems can continue to operate on the start-up fuel source 80.The use of hydrogen-diesel blends can be traced back to the first half of the 20th century.In the 19201930s,hydrogen-filled dirigible balloons,or airships,had quantities of hydrogen injected into their engines along with diesel fuel.During flight,the loss in airship weight due to diesel fuel consumption would normally be offset by releasing hydrogen to maintain neutral buoyancy.Rather than venting to atmosphere,Rudolf Erren proposed the hydrogen be fumigated into the engine,thereby extending the range of the airship by displacing the diesel fuel used 80.Commercial examples of diesel-natural gas and gasoline-natural gas co-combustion systems exist today 81.These technologies are almost exclusively employed in heavy-duty vehicles servicing the freight sector.Hydrogen-diesel dual-fuel systems employ a similar fuelling architecture to diesel-natural gas systems,and some of the high-pressure direct injection technology developed for natural gas-diesel systems is compatible with hydrogen applications 82.Diesel engines are compression-ignition engines that rely on the auto-ignition temperature of diesel as it is being compressed.There is a challenge when fuels have a large difference in auto-ignition temperatures,as is the case with hydrogen and diesel.Incidentally,the same is true for natural gas-diesel dual-fuel systems.To resolve the difference in auto-ignition temperatures,the diesel is blended with hydrogen in the combustion chamber;auto-ignition of the diesel results in compression followed by the ignition of the hydrogen 82.The timing of hydrogen fumigation is handled by the ECM in sequential fuel injection systems where one hydrogen injector supplies each combustion cylinder as understood from the information provided by interviewees.The material compatibility requirements for hydrogen components HYDROGEN BLENDING WITH TRANSPORTATION FUEL19csagroup.orgcited in the previous section discussing hydrogen-natural gas blends apply in the hydrogen-diesel blend systems as well,with the exception of the spark plugs,which are not present on diesel systems.In North America,approximately 76%of the estimated 15 million commercial trucks in the U.S.operate on diesel 83,highlighting the relatively large potential market for hydrogen-diesel blend systems.Companies offering conversions of diesel trucks to hydrogen-diesel cite CO2 emissions reductions of up to 409.Dual fuel engine OEMs argue that,unlike FCEVs that require hydrogen to operate 100%of the time,diesel-hydrogen systems provide an option to fuel selection that allows transition to hydrogen with the back-up of diesel fuel if hydrogen fuel availability or vehicle range is at risk 84.Another benefit lauded by technology proponents is that the vehicle may continue to operate on diesel when a hydrogen system shutdown occurs 84.The longer lifetime of diesel ICEs(typically 1.62.4M kms 85,86)vs.FCEVs(which are targeting lifetimes of 1.6M kms beyond 2030 87)is also brought up by proponents of hydrogen and hydrogen blend ICEs.However,longitudinal data on dual-fuel hydrogen blend systems was not available at the time of writing of this report.Industry representatives highlight that the success of any hydrogen fuel blend adoption in the HD vehicle segment hinges on the adoption of hydrogen-diesel dual-fuel technology by OEMs 88.3.2.3 Hydrogen Gasoline Fuel BlendsThe majority of heavy-duty transportation applications utilize diesel fuel;however,there is a smaller subset of heavy-duty vehicles that utilize gasoline ICEs.In contrast to diesel ICEs,which are classified as compression-ignition engines,gasoline ICEs employ spark ignition.Spark-ignition engines provide the potential of implementing either dual-fuel systems or bi-fuel systems.Academic investigations into the blending of hydrogen with gasoline via direct injection are a mix of theoretical models and experimental investigation of engine performance 89.These academic studies on the mixture of gasoline and hydrogen cite hydrogen blending benefits such as:improving fuel vapourization and mixture;increasing the speed of combustion;decreasing cold wall quenching andcyclic variations;andbringing the engine closer to the ideal constantvolume combustion,increasing fuel efficiency.Experimental research exploring the influence of hydrogen on the combustion of gasoline engines 90 reported that 5.28%v/v hydrogen resulted in:fuel consumption rate decrease by 12%;thermal efficiency improvement by 18%;andhydrocarbon emissions decrease by 13%.Research also warns about an increase in NOx emissions when employing hydrogen-gasoline blending on spark-ignition ICEs.To resolve this challenge,researchers have investigated exhaust gas recirculation along with varying hydrogen injection flow rate 33.Similar to the case with hydrogen-diesel blend ICEs,the ECM on a gasoline-hydrogen blend ICE must be tuned for optimal operation,balancing combustion performance with an environmentally conscious emissions profile.The architecture for bi-fuel hydrogen-gasoline light-and medium-duty vehicles is illustrated in Figure 6.Absence of readily available information on commercial ventures of hydrogen-gasoline vehicles suggests that the technology is at TRL 6,i.e.,a model or prototype has been demonstrated in a simulated environment.3.3 Blended Fuel Dispensing SystemsBlended fuel dispensing systems depend largely on whether they involve gaseous or liquid hydrocarbon fuels.As was discussed in Sections 3.2.2 and 3.2.3,hydrogen is not readily soluble in either diesel or gasoline fuels,limiting the options for dispensing and the types of induction employed on the downstream ICEs.For gaseous hydrogen fuel blends,such as hydrogen-natural gas,the options for blended fuel dispensing are greater.HYDROGEN BLENDING WITH TRANSPORTATION FUEL20csagroup.orgFigure 6:Light/Medium-Duty Bi-Fuel Hydrogen/Gasoline Vehicle Fuelling System(adapted from 91).3.3.1 Hydrogen-Natural Gas BlendsHCNG systems benefit from more fuel dispensing options than their liquid hydrocarbon counterparts.For dispensing systems requiring enriched HCNG onboard,there are a few systems architectures that are considered in this section.3.3.1.1 Hydrogen Blended Natural Gas Grid StationIn the future,existing automotive CNG dispensing stations may receive blended fuel from a local natural gas distribution line at a low pressure.A compressor is used on-site to compress that gas to a high pressure and store it on-site.Introduction of hydrogen to the existing natural gas transmission pipeline or distribution system upstream of the CNG dispensing station provides an opportunity for automotive CNG dispensing stations to dispense HCNG.The introduction of HCNG to a legacy CNG dispensing station could,at minimum,require an assessment of all the pressure equipment employed in the station,including piping,valves and fittings,compressors,and storage vessels to ensure suitability for hydrogen service.In addition,hydrogen gas detection,air ventilation strategies,and hazardous location areas would require re-assessment.This assessment should be performed at the maximum hydrogen blend ratio anticipated for use.This is a safety-critical aspect,as the introduction of hydrogen at sufficiently high fractions poses several risks to equipment and personnel 33.Risks such as hydrogen embrittlement of metals,which can result in rupture,can occur with pure hydrogen.Equipment material selection for hydrogen service is a requirement defined in the Canadian Hydrogen Installation Code(CAN/BNQ 1784-000)92 and is adopted in several Canadian jurisdictions.In the U.S.,the Hydrogen Technologies Code(NFPA 2),which covers the production,storage,transfer,and use of hydrogen 93,is referenced in Title 49 of the CFR Transportation 94.HYDROGEN BLENDING WITH TRANSPORTATION FUEL21csagroup.orgHydrogens smaller molecular size when compared to other gases such as natural gas provides challenges for gas containment.Tighter component tolerances and sealing,additional testing requirements,hydrogen compatible materials,and the lower volume of components manufactured may lead to higher equipment costs.For blended applications,the minimum hydrogen threshold requirement has not been defined in the reviewed codes and regulations.This is discussed further in Section 3.4 Codes and Standards Development.A high-level schematic outlining the process architecture for vehicle dispensing stations fed by hydrogen-natural gas distribution systems is illustrated in Figure 7.The dotted line in the Figures 710 represents the border between the gas distribution system and the dispensing station.Literature review and interviews with experts revealed that pilot projects involving the blending of hydrogen in the natural gas distribution system in North America have not yet involved distribution systems which serve CNG vehicle dispensing stations 95.No contemporary examples of an HCNG dispensing station being serviced by a blended natural gas distribution system were found.Interviewees acknowledged that excluding HCNG dispensing stations from blended fuel pilot projects has been a conservative measure of limiting uncertainty to the pilot projects,whose focuses have been the pipelines and end-use appliance impacts.3.3.1.2 Dual CNG and Hydrogen Dispenser StationAn alternative fuelling architecture is illustrated in Figure 8,based on the HCNG transit bus demonstration project for the Port Coquitlam Transit Centre in Vancouver,BC in 2007 96.In this arrangement,natural gas from the utility distribution system is blended with hydrogen within the station at the dispenser.In addition,natural gas,or hydrogen may be dispensed separately,providing the opportunity to service a wider range of vehicles,including:natural gas vehicles;Hythane or HCNG vehicles;hydrogen ICE vehicles;andFCEVs.Also,in presence of separately delivered gasoline and diesel,this architecture allows for service of blended hydrogen-diesel vehicles and blended hydrogen-gasoline vehicles.The hydrogen dispensed for FCEVs must be of sufficient purity to meet FCEV hydrogen specifications,as outlined in SAE J2719 97.Figure 7:Hydrogen-natural gas distribution system based fuelling architecture.HYDROGEN BLENDING WITH TRANSPORTATION FUEL22csagroup.orgThe primary challenges for the fuelling scheme illustrated in Figure 8 appear to lie in the cost of equipment required,including a hydrogen compressor along with the dispenser capable of hydrogen blending.In addition to the higher costs of separately handling natural gas and hydrogen at the dispensing station,another consideration for such a multi-fuel dispenser is distinguishing between Hythane or HCNG and natural gas at the dispensing nozzle for the end user.The hydrogen nozzle is already sufficiently differentiated from a natural gas nozzle;however,the Hythane and HCNG nozzle will require a form of differentiation to avoid confusion with the natural gas nozzle.Similarly,the resemblance of diesel and gasoline dispensers has been overcome by colour coding of the nozzle assembly at liquid fuel stations.This nozzle differentiation is already described in an existing standard,discussed further in Section 3.4.As hydrogen separation technology matures and more hydrogen is present in the NG distribution system,dispensing stations with dual-fuel sources CNG and hydrogen may be expected to allow for fuels separation at the point of use for vehicles that require pure hydrogen(such as fuel cells),as well as low hydrogen(such as legacy natural gas vehicles)14.At present,the equipment required to perform this de-blending is niche and comparable in complexity and cost to hydrogen electrolyser systems.In potential future cases of hydrogen blends being the only available fuel,hydrogen separation technology may be required to remove hydrogen from NG distribution pipelines for end-use customers who cannot tolerate hydrogen at the distribution blend concentrations.Examples of such customers could include legacy CNG fleet fuelling customers whose vehicle warranty may be voided by hydrogen content in natural gas beyond specified limits,which may be as low as 0.03s.3.3.1.3 Hydrogen Blends Dispenser StationHythane dispensers are a variant of the discussed fuel dispensing systems that are designed to distribute Hythane as a fuel for vehicles.These dispensers are currently limited to demonstration or pilot projects in North America.However,these dispensers have gained attention in India as a potential solution to address environmental concerns and reduce carbon emissions in the transport sector 98.The primary distinction between these dispensers and those discussed in Section 3.3.1.2 lies in the location of blending.A high-level overview of the Hythane dispensing architecture is illustrated in Figure 9 49.In this configuration hydrogen blending occurs at a lower pressure,as compared to the hydrogen blending at the dispenser in Figure 8.Throught industry consultations we learnt that the primary reason for blending at low pressure is a reduction in system cost,as only one compressor is required.The major limitation for this architecture is the singular output of hydrogen-natural Figure 8:On-site hydrogen,natural gas blending fuelling architecture.HYDROGEN BLENDING WITH TRANSPORTATION FUEL23csagroup.orggas blend at the dispenser;such a system cannot service FCEVs,which require pure hydrogen,or legacy CNG vehicles,which require natural gas.3.3.2 Hydrogen Liquid Fuel BlendsFor HDV,utilizing hydrogen along with traditional liquid hydrocarbon fuels(such as diesel or gasoline),dispensing architecture is more standard.The gas dispensing imparts only transfer of hydrogen to the vehicles onboard hydrogen storage.Hydrogen dispensing follows standards already established for hydrogen fuel cell vehicles.The liquid fuels are dispensed using standard dispensing equipment.Hydrogen has a very low density when compared to other gases,such as natural gas,at the same pressure and temperature(8x less density in the case of typical natural gas at 1 bar,20C).As such,hydrogen is typically stored at high pressure to account for its lower energy density.At present,there are three pressure classes defined in CSA HGV 4.9 99 that vehicles use for hydrogen storage,namely,250 bar,350 bar,and 700 bar.A high-level overview of the hydrogen-dispensing architecture is provided in Figure 10.When compared to the hydrogen-natural gas dispensing architectures,this standard hydrogen-dispensing architecture suffers primarily from the challenges of cost for hydrogen compatible components,storage,compressor,and dispenser.In contrast,a dispensing system dealing with a blended fuel distribution network with 20%v/v hydrogen is believed to present similar risks to those already Figure 9:Hythane-dispensing Architecture.Figure 10:Hydrogen-dispensing Architecture.HYDROGEN BLENDING WITH TRANSPORTATION FUEL24csagroup.orgassociated with natural gas delivery 100,101,102,although further research and development is being conducted in this regard,and results are preliminary at present.In addition,stations which have regular deliveries often store hydrogen either as bulk gas(CH2)or cryogenic liquid hydrogen(LH2).LH2 has the benefit of requiring a smaller footprint storage,but it comes with the challenges of time-sensitive storage duration.If the hydrogen demand is lower than anticipated,unavoidable heat leak into the cryogenic hydrogen storage requires controlled venting of hydrogen into the atmosphere to avoid over-pressurizing the storage vessel 92.This not only represents a cost to the station operator,but also results in an indirect source of global warming,with a GWP100 for hydrogen of 11.6 27,compared to a GWP100 for methane of 34 103.3.4 Codes and Standards There are limited standalone codes and standards in North America that specifically outline requirements for hydrogen fuel blends in the transport sector,i.e.,vehicular systems and the vehicular fuelling infrastructure consisting of dispensers,storage,and compressors.However,with the increased interest in hydrogen blends,there are several codes and standards which are being adapted to include requirements for hydrogen blend systems.For HCNG,vehicle and dispensing system designs employing blends with 95%purity hydrogen.Both of these categories of gaps point to a need for harmonized,prescriptive guidance on hydrogen volume fraction acceptable for natural gas,specifically in the context of material compatibility.Upper limits published in standards vary from 2%to 20%.4 Discussion4.1 Blended Hydrogen Vehicle ConsiderationsCanadian vehicle registration data indicates there are few hydrogen blended vehicles in Canada 132,and the industry experts agree.The Canadian national hydrogen strategy,along with many of the provincial hydrogen strategies,has highlighted a potential gap in terms of available ZEVs with suitable HDV market fit supplying the freight transport sector.Some proponents of HCNG argue that HCNG could serve as a bridging technology to promote hydrogen fuelling infrastructure build-out prior to the widespread availability of ZEVs such as FCEVs.The decisions made by gas distribution utilities could potentially have an impact on the types of blended fuels products that get developed for the North American market.Industry experts believe that the gas distribution sector will move to a 20%v/v hydrogen blend in the North American gas network to align with current considerations of blending for fuel supply to homes“The decisions made by gas distribution utilities could potentially have an impact on the types of blended fuels products that get developed for the North American market.”HYDROGEN BLENDING WITH TRANSPORTATION FUEL34csagroup.organd industrial facilities.This is evidenced by current projects such as the Fort Saskatchewan ATCO gas blending,which is beginning with a 5%blend and plans to increase to 203.The speed with which this change will happen may be largely influenced by government regulations stipulating a reduction in the emissions intensity of natural gas,or more specifically the emissions intensity of home heating and space heating.What this will mean for the industrial side is more complicated.Depending on their customer profiles,gas utilities may need to create separate systems that deliver a particular methane specification to a customer(as may be the case for legacy fleet fuelling stations),or a 100%hydrogen specification to a customer.The allowable hydrogen specification in the current generation of natural gas vehicles is very low.The fuel quality calculator for Cummins natural gas engines allows for no more than 0.03%mole hydrogen 73.For many fleet operators,a vehicle life of 10 years is considered.Those who are part-way through the life of a fleet vehicle may not consider an update to a modern,hydrogen-compliant engine model.Engine and vehicle OEMs who are prepared to offer new hydrogen-compliant engines may not be incentivized to de-rate hydrogen restrictions on existing,natural gas engines in the field due to the warranty risk exposure this would bring them.This gap between legacy vehicle hydrogen-compliance and new vehicles may be at least partially mitigated by improving the clarity in the standards on requirements for material specifications as a function of hydrogen blend fractions.As outlined in Section 3.4,hydrogen volume fraction limits in the standards for natural gas vary from 2%to 20%.Understanding the basis of ISO 11114-4 requirements for the 5 MPa partial pressure of hydrogen limit for embrittlement consideration for steel cylinders could determine whether this threshold could be expanded to other steel portions of legacy NGV vehicle components and harmonization on natural gas hydrogen volume fraction limit requirements among the standards.Depending on the direction that natural gas vehicle and engine OEMs take regarding hydrogen blending,these new blended fuel compliant vehicles have the potential to provide a transitional fuelling solution for heavy-duty vehicles while medium-term alternatives such as fuel cells and hydrogen ICEs mature.This maturation for medium-term alternatives includes competitive costs and performance when compared to incumbent systems.In addition to material compatibility concerns when introducing hydrogen into natural gas fuels,feedback from industry experts also highlights the impact of this blending on the quality of the mixture as an engine fuel.As highlighted in Section 3.4.1,the ASTM D8487 64 standard limits hydrogen volume fraction to 10%for adherence to the fuel energy specifications outlined in ASTM D8080 114.With natural gas distribution utilities considering hydrogen blend volume fractions up to 20%or higher,the operation of natural gas dispensing stations could be at risk of no longer meeting vehicle fuel specifications.Therefore,a discussion on the roadmap for natural gas vehicles and dispensing stations should include whether a sunset timeline needs to be defined for natural gas vehicles.Alternatively,hydrogen deblending technologies,which remove hydrogen from gas mixtures,could be examined for maturity and technical capability for utility needs.Various groups in Europe are investigating this option 134 135 136.These deblending technologies have the benefit of serving legacy natural gas vehicles as well as FCEVs.It is important to remember that most of the benefits of hydrogen blended fuels hinge on the scalable deployment of hydrogen with a life cycle emission profile better than the current incumbent liquid fossil fuels such as gasoline and diesel.Potential improvements to battery technology resulting in lighter battery packs(improving energy density),faster charge times,and sufficient grid capacity to make them practical for heavy-duty transportation logistics applications may be a potential source of uncertainty.However,industry insiders currently appear not to see the type of battery improvements necessary in the heavy-duty transport market occurring in the next 510 years.This time frame aligns with the first Paris Agreement milestone set for 2030.HYDROGEN BLENDING WITH TRANSPORTATION FUEL35csagroup.org4.2 Blended Hydrogen Codes and StandardsCodes and standards development for fuel blending in North America is an ongoing process.Many of the current applicable codes and standards in use in North America specify applications involving natural gas or hydrogen exclusively,although some standards such CSA B51 offer guidance for blended hydrogen onboard vehicular applications.A survey of industry experts confirms the sentiment that more prescriptive requirements in the existing codes and standards for hydrogen dual-fuel vehicles and refuelling stations in North America are desired.As detailed in Section 3.4,the requirements of the standards vary from 2 %on allowable hydrogen volume fraction in natural gas systems.This report recommends harmonization on hydrogen blend fraction thresholds above which consideration must be given for hydrogen-specific hazards.Existing standards such as ASME B31.12 108,ANSI/CSA CHMC 1 116,and ANSI/CSA CHMC 2 117,and ISO 11114-4 102 provide guidance on material compatibility for hydrogen service.The conservative approach has been to ensure that components subject to any fraction of hydrogen must meet hydrogen service requirements.This approach may have the downside of imposing considerable cost on systems which may not require it.In addition,established specifications of hydrogen blends is desirable to help determine whether a legacy fleet or fuelling station requires design updates.Utilizing existing data and initiating new testing where required to define hydrogen blend fraction thresholds for materials can help address these challenges.Some of this work exists and was used as the basis for the hydrogen partial pressure threshold defined in ISO 11114-4.The harmonized standard(s)could support cost-effective and safe new system designs,as well as provide guidance to legacy system owners.Embrittlement has been thoroughly investigated for hydrogen storage tanks in the industry.Some work suggested that the embrittlement risk of hydrogen in storage tanks is mitigated by the presence of natural gas 137,but the results were not conclusive.Hydrogen-compliant materials such as stainless steels and composites can add cost to components and systems.Therefore,providing requirements for materials other than stainless steels is important to consider.For example,a harmonization on the 5 MPa hydrogen partial pressure threshold for embrittlement consideration for steel cylinders could,upon thorough review by SDO technical committees,be harmonized across natural-gas/hydrogen-natural gas blend standards.A similar examination for natural gas components onboard vehicles,as well as in dispensing stations is recommended as the standards do not seem to offer similar guidance as for steel cylinders in ISO 11114-4.For dispensing stations,SDOs guidance on gas leak detection for blended fuels is another gap that is important to address.Dual gas detection(natural gas and hydrogen)should be clearly indicated in the standards for applications utilizing blended fuels,such as dispensing stations.In addition to dispensing stations,the safety implications of blended fuels in maintenance garages must be considered.Existing standards such as CSA B401.1 address installation requirements for natural gas maintenance garages.CSA B401.3 is under early stages of development and is intended to address installation requirements for hydrogen maintenance garages.The SDOs should consider the development of a hydrogen-natural gas installation requirements for maintenance garages.4.3 Standard Development PrioritiesThe opinion of industry experts indicates that the timing of hydrogen blending technology development in the heavy-duty transport sector will be largely determined by at least two factors.The first one is the adoption of hydrogen blended fuel by the large heavy-duty engine OEMs.Without a clear direction from the large heavy-duty engine OEMs,interested and affected parties within industry indicate that blended fuel applications in heavy-duty transportation may be relegated to after-HYDROGEN BLENDING WITH TRANSPORTATION FUEL36csagroup.orgmarket conversions,which remain a small proportion of the registered vehicle population in Canada.For standards development entities,the release of hydrogen ICEs suggests a focus on hydrogen fuelling stations,and the equipment therein,and the interaction between natural gas network hydrogen blending and natural gas transportation fuelling infrastructure.To date,many natural gas network hydrogen blending projects in Canada have had a focus on evaluating the impact of blending in pipeline infrastructure 138 and end-user heating appliances 133.The implementation of hydrogen blending into the broader natural gas network may result in challenges requiring both technology and codes and standards development,occurring hand-in-hand.The following are recommendations for consideration by SDO technical committees:Harmonized hydrogen volume fraction limit in natural gas blends,below which design of the system may proceed as with natural gas.A hydrogen partial pressure limit as defined in ISO 11114-4 is beneficial,as it provides a starting point for discussion and understanding of factors taken into consideration for setting the limit.Identify industry requirements for hydrogen deblending from natural gas(separation of hydrogen from natural gas-hydrogen blends),if the practice of delivering only blended fuels becomes common.Consideration for the use of the separated hydrogen fuel should include vehicles that are intolerant of natural gas,such as FCEVs and(potentially)hydrogen ICEs.A review of TRL for these technologies and coverage by standards(or lack thereof)is also recommended.Development of a standard outlining requirements for installation,inspection,repair,and maintenance of the fuel storage and delivery system installed in powered industrial truck applications and vehicles for use with hydrogen-natural gas blends.Development of a standard giving requirements for maintenance garages for vehicles powered by hydrogen blended fuels.Consideration for dual-fuel/bi-fuel vehicles that contain onboard hydrogen in conjunction with separate gasoline or diesel tanks should also be considered from a hazard perspective.Consideration of the adoption of ISO 16380 120 in North America with deviations.“For standards development entities,the release of hydrogen ICEs suggests a focus on hydrogen fuelling stations,and the equipment therein,and the interaction between natural gas network hydrogen blending and natural gas transportation fuelling infrastructure.”HYDROGEN BLENDING WITH TRANSPORTATION FUEL37csagroup.org5 ConclusionsHydrogen fuel blending appears to hold promise as an interim solution toward a more sustainable energy future.The practice of blending hydrogen with traditional fossil fuels,such as diesel or natural gas,offers several advantages.It may reduce greenhouse gas emissions,improve air quality,and contribute to a more diversified and resilient energy mix.By harnessing hydrogens potential as a clean and efficient fuel,the hope of hydrogen blending proponents is that we could take significant strides towards mitigating the effects of climate change and achieve global energy transition goals.Challenges remain in the development of blended fuel supply,vehicle technology,and fuelling infrastructure.Continued research,innovation,and investment are crucial to overcome these hurdles and realize the full potential of hydrogen fuel blending.With the right policies and collaborative efforts from industry,governments,and individuals,hydrogen fuel blending could play a vital role in creating a sustainable and low-carbon future.Future standardization efforts in the field of hydrogen blended fuel for transportation should consider:Harmonization on the hydrogen volume fraction upper limit in natural gas,below which system design can proceed as with natural gas.This threshold is defined in the ISO 11114-4 102 standard for steel cylinders,but other thresholds are referenced in the standards discussed.A similar threshold covering vehicle components and piping,as well as dispensing station fuel delivery infrastructure,should be examined.Harmonization on the hydrogen volume fraction upper limit for natural gas as an automotive fuel.ASTM D8487 64 defines an upper limit of 10%hydrogen volume fraction for fuel;however,standards such as ISO 11439 63 limit hydrogen volume fraction to 2%.CSA B51 65 references ISO 11439 63 for gas composition requirements.Inclusion of hydrogen blended fuels in standards covering onboard vehicle fuel systems,dispensing stations,and repair and maintenance facilities.Such standards exist for either natural gas or hydrogen separately.Explicit inclusion of blends to provide clear guidance on requirements should be considered.This could take the form of defining a hydrogen volume fraction threshold,below which the natural gas standards apply,and above which the hydrogen standards apply.At present such clear guidance is not consistently applied.Standards coverage for hydrogen deblending,referring to technologies that serve to separate hydrogen from natural gas-hydrogen blends.Such technology would serve to address the gap between 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Climate Change Resilience and Adaptation for Public TransitSTANDARDS RESEARCHMay 2024CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT2csagroup.orgAuthorNicholas Roberts,P.Eng,MSc.,CPCS Transcom Ltd.AcknowledgementsWe would like to acknowledge and express thanks for the input of those consulted from various transit agencies and organizations across Canada during the interested parties engagement and workshop sessions.In addition,we would also like to recognize Elizabeth(Liz)Drake as a key contributor of the original study which formed the basis for this publication.Disclaimer:This work has been produced by CPCS Transcom Ltd.and is owned by Canadian Standards Association.It is designed to provide general information in regard to the subject matter covered.The views expressed in this publication are those of the authors and interviewees.CPCS Transcom Ltd.and Canadian Standards Association are not responsible for any loss or damage which might occur as a result of your reliance or use of the content in this publication.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT3csagroup.orgTable of ContentsExecutive Summary 51 Introduction 6 1.1 Canadas Changing Climate 6 1.2 Implications of Climate Change to Public Transit 6 1.3 Background and Objectives 62 Methods 7 2.1 Literature Review 7 2.2 Interested Parties Engagement 7 2.3 Validation Workshops 83 Results 8 3.1 National Perspectives on Climate Change 8 3.1.1 Climate Stressors across Canada 8 3.1.2 Summary of Climate Change Stressors 11 3.2 Examples of Climate Change Events and Impacts in Canada 11 3.2.1 Storm Surge,Winds,and Coastal Flooding in Atlantic Canada(2022)13 3.2.2 Intense Rainfall in Ontario(2013)13 3.2.3 Winter Storms in Central Canada(1998,2013,and 2022)13 3.2.4 Flooding in the Prairies(2013)14 3.2.5 Flooding in Central and Southern Alberta(2013)14 3.2.6 Wildfires in Northern Alberta(2016)15 3.2.7 Landslides in British Columbia(2021)15 3.2.8 Winter Storms and Melting Permafrost in Northern Manitoba(2017)15 3.2.9 Wildfires and Heat Waves in Western Canada(2022)15 3.3 Overview of Canadas Public Transit Sector 16 3.4 Emerging Developments 19 3.4.1 Decarbonization and Electrification of Public Transit Systems 19 3.4.2 Higher Order Public Transportation 20CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT4csagroup.org 3.5 Linking Climate Change Issues to the Public Transit Sector 21 3.5.1 Climate Change Adaptation 21 3.5.2 Resiliency of Infrastructure 24 3.5.3 Community Resiliency and Continuity Management 24 3.6 Current Approaches to Identifying Climate Risks in Public Transit 24 3.6.1 Municipal Approaches 24 3.6.2 Federal and Provincial Approaches 25 3.7 Summary of Climate Risks to Canadas Public Transit Systems 25 3.7.1 Inventory of Current Climate Risks 25 3.7.2 Short and Long-Term Factors 28 3.8 Response to Climate Change 28 3.8.1 Mitigation and Adaptation Actions for Climate Risks 28 3.8.2 Actions to Harden and Protect Road and Rail Infrastructure 32 3.9 State of Response in Canada 32 3.9.1 Response by Regulators and Government 32 3.9.2 Response by Transit Agencies 33 3.9.3 Response by Federal Research and Standardization Organizations 344 Discussion and Recommendations 36 4.1 Key Climate Risks 36 4.2 Opportunities for Standardization 365 Conclusions 376 References 39Appendix A Regional Efforts to Identify Climate Risks to Public Transit across Canada 49Appendix B Federal and Provincial Funding Programs Supporting Identification and Assessment of Climate Risks to Public Transit 52CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT5csagroup.orgExecutive SummaryCanadas climate is changing at an unprecedented pace,with rising temperatures and an increased prevalence of extreme weather events resulting in short and long-term impacts across the country.Climate change has already caused catastrophic events that have impacted public transportation in Canada,including floods and severe winter storms that have stranded passenger trains,and melting permafrost that is degrading the quality of vital transportation links to northern Canada.Overall,climate change is expected to increase the costs of building,operating,and maintaining public transit systems.Canadas public transportation sector is also changing in ways that may make it even more susceptible to climate change risks.The trend of decarbonizing public transit systems(e.g.,electrification of passenger rail,and electric and hydrogen fuelled zero emission buses)is changing their risk profile.The sector will require increased investment and improved resiliency to manage risks related to electrical power supply and distribution systems,among others.Transit agencies from across Canada have identified risks related to intense precipitation and extreme heat as the sectors most pressing concerns.These climate stressors can lead to infrastructure damage,operational disruptions,and in the case of extreme heat,health and safety concerns for people(e.g.,transit operators,construction workers,maintenance personnel,and transit riders).Both of these climate stressors are Canada-wide concerns that are projected to continue intensifying.This research report addresses four key questions:1.What are the top challenges and issues resulting from climate change currently facing Canadas public transportation sector(focusing on passenger rail and bus systems)?2.How are these challenges expected to evolve over the near and long-term?3.How are representatives in Canadas public transportation sector responding in the areas of climate adaptation and improving resiliency?4.What areas of opportunity exist for the development of standards to help respond to climate adaptation and resiliency needs in Canadas public transportation sector?The research included a literature review,meetings with representatives from public transit authorities,operators,and related entities across Canada,and two workshops with representatives to present and discuss key research findings.This report identifies ten areas for further exploration in the context of standards development and climate adaptation,which encompass standardization opportunities throughout an asset or system lifecycle to potentially yield improvements in climate adaptation and resiliency(design and planning,construction,operations,and maintenance)for Canadas public transit sector.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT6csagroup.org“Canadas warming trend is approximately double the global average.The observable changes resulting from climate change include ice melts and thawing permafrost in the north,a shorter duration of snow cover,and an increase in precipitation,most notably with more rainfall instead of snowfall 2.”1 Introduction1.1 Canadas Changing ClimateCanada is experiencing the effects of climate change,with rising temperatures across all regions of the country.Since the 1950s,Canadas average annual temperature has increased by 1.7C 1.Temperature change has been particularly evident in northern regions,the Prairies,and British Columbia(BC),where the average annual temperature has increased by 2.3C compared to 1948 1.Canadas warming trend is approximately double the global average.The observable changes resulting from climate change include ice melts and thawing permafrost in the north,a shorter duration of snow cover,and an increase in precipitation,most notably with more rainfall instead of snowfall 2.Furthermore,warmer air carries a higher moisture content,so higher temperatures can lead to higher intensity rainfall.These changes also affect seasonal events,such as spring thaw and the nature of extreme weather events 2.1.2 Implications of Climate Change to Public TransitClimate change is a mounting concern across Canadas public transportation sector.There is a need for increased adaptation and resiliency to respond to the challenges of climate change,as highlighted by the following recent events:Flooding and landslides in BC leading to train derailments;Winter storms in Ontario cutting power to stations and facilities for regional passenger rail service;Melting permafrost in Manitoba leading to unstable track conditions along rail lines connecting to rural and remote northern communities;and Wildfires in northern Alberta leading to the emergency use of public transit vehicles to support evacuation.Overall,climate change is expected to increase the costs of building,operating,and maintaining public transit systems,including passenger rail and urban bus systems.1.3 Background and ObjectivesIn Canada and the United States,there is evidence of a gap in standards to address climate adaptation,as captured in part by the following quote:“Amtrak adheres to standards defined by Federal entities,such as the US Army Corps of Engineers or FEMA floodplain management ordinances,which often do not include requirements for climate adaptation or future conditions.”3CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT7csagroup.orgThe Standards Council of Canada(SCC)published the report,Standards in Action:Building a Climate-Resilient Future 4,which identified gaps in standards,codes,and practices that leave Canadians vulnerable to climate change.The report also identified a significant need for investments in standards to ensure that Canadas infrastructure is climate ready.Between 2016 and 2021,with funding from Infrastructure Canada,the National Research Council(NRC)led the Climate-Resilient Buildings and Core Public Infrastructure Initiative(CRBCPI),with the goal to“provide the knowledge needed to integrate climate resilience into building and infrastructure design,guides,standards,and codes”5.The CRBCPI report highlighted a lack of common guidance on resilience for transit agencies that is specific to the Canadian context 6.With this background,this report addresses the following four key research questions:1.What are the top challenges and issues resulting from climate change currently facing Canadas public transportation sector(focusing on passenger rail and bus systems)?2.How are these challenges expected to evolve over the near and long-term?3.How are representatives in Canadas public transportation sector responding in the areas of climate adaptation and improving resiliency?4.What areas of opportunity exist for the development of standards to help respond to climate adaptation and resiliency needs in Canadas public transportation sector?2 Methods2.1 Literature ReviewThe research conducted for this report included a literature review of publications from industry associations,government reports,and studies from public transit agencies.The literature review highlighted key trends and risks resulting from climate change across Canada,identified key priorities that need to be addressed,and provided information about types of response and risk mitigation efforts.The literature review included publications from the Canadian Urban Transit Association,the American Public Transport Association,the Transportation Research Board,and the Railway Association of Canada,along with climate vulnerability and risk assessments from a variety of Canadian municipalities and transit agencies.All sources are cited throughout this report and listed in the References section.Reports such as Canada in a Changing Climate:National Issues Report 7 and Metrolinxs Climate Adaptation Strategy 8 can help bring into focus the key climate-related risks and issues currently facing the public transportation sector,as well as mitigation efforts,particularly in the Canadian context.While Amtrak is the national inter-city passenger rail service provider of the United States,it also runs service into Canada,connecting into Torontos Union Station and Vancouvers Pacific Central Station.Due to geographical proximity and similarities between Canada and the United States,there was merit to including climate-related passenger rail issues in the United States to better inform this study.2.2 Interested Parties EngagementThe research also included meetings with a selection of representatives from public transit authorities,operators,and related entities across Canada.This engagement supplemented the information gathered from the literature review.Engagement was prioritized with interested parties who could speak to a breadth of public transit modes under the scope of this study(e.g.,transit authorities that have passenger rail and bus operations)and agencies that are leading the transition of their assets to meet zero emission mandates(e.g.,leaders in fleet electrification)so the risks of new public transit assets and technologies could be discussed in the context of near and long-term challenges.A mix of representatives from small,medium,and large transit agencies were also targeted.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT8csagroup.orgTable 1:Representatives in the Engagement ProcessRepresentative TypeNumber EngagedCity,municipality,transit agency 7Provincial ministry,agency,Crown corporation3Federal agency,organization,Crown corporation,regulator2Standards development organization1Engagement with provincial authorities was also targeted,in order to understand climate resilience and adaptation issues relevant to road infrastructure,and consequently,bus transportation.Passenger rail transportation generally has dedicated fixed infrastructure(e.g.,rail,track)whereas bus transportation relies on the use of shared road infrastructure,which may be under the jurisdiction of municipal or provincial authorities.A goal of 10 to 15 meetings were targeted,and a total of 13 one-on-one meetings were held.Table 1 lists the types and numbers of interested parties that were represented in the engagement process.2.3 Validation WorkshopsTo validate the key research findings and the list of top climate-related risks to public transit systems across Canada,two workshops with interested parties were held,one virtually(by invitation)and the second as an in-person workshop organized as part of the Transit Rail Association for Canadian Contractors,Maintainers and Standards(TRACCS)conference held in 2023.Both workshops followed the format of a presentation of the key research findings followed by a discussion period with poll questions,prompts,and an open discussion.Questions were organized into the following three themes of discussion:1.What do you view as key climate change risks?2.What are you doing to mitigate these risks?3.How could standards support your efforts on climate adaptation?Attendance at the virtual workshop mostly comprised transit agencies and members of government,whereas the TRACCS workshop included slightly different perspectives from interested parties,such as contractors,who are more involved in the design and construction stages of infrastructure projects.3 Results3.1 National Perspectives on Climate ChangeThe impacts of climate change do not affect all regions in Canada equally.Section 3.1.1 highlights the key challenges faced by different regions of Canada under specific climate stressors.3.1.1 Climate Stressors across CanadaExtreme heat.Extreme heat events,often called heat waves,are characterized by high temperatures and humidity.Extreme heat events have been increasing over time.Environment and Climate Change Canada(ECCC)works closely with provincial and territorial health authorities to issue extreme heat warnings,which can vary depending on the region.Typically,extreme heat alerts are activated when temperatures reach 30C or higher for two or more consecutive days,and minimum overnight temperatures are expected to be at least 14C 9.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT9csagroup.orgPeriods of extreme heat in Canada are projected to become more frequent and intense 2.Extreme heat can impact infrastructure,the natural environment,and peoples health and well-being.This has implications for the design of ventilation and air conditioning(A/C)systems(for buildings,vehicles,and equipment),demands on the electrical power grid(brownouts or blackouts due to the increased draw of power for A/C during heatwaves),and the health and safety of workers and the general public.Wildfire risk and air quality.Prolonged periods of extreme heat can create drought conditions with tinder-like brush and vegetation.This increases the risk of wildfires,which can be started by lightning strikes or human causes(e.g.,campfires or vehicle exhausts).In Canada,wildfires are most common in two major areas:southern BC and the boreal forest,which extends from Alaska to Newfoundland and Labrador 10.However,forested areas throughout the country,such as in northern Ontario and Quebec,also face wildfire risk.Not only do wildfires pose a risk to damaging infrastructure but their smoke also causes poor air quality,which can impact peoples respiratory health and the ventilation and cooling systems of buildings,equipment,and vehicles.In recent years,wildfires in western Canada have negatively impacted air quality during the summer months.The City of Calgary reported that smoke hours observed at the Calgary International Airport have increased exponentially over the last 60 years 11.Transit agencies in western Canada have also noted that the historical wildfire season(May to September)has been extended(April to November).The impacts of wildfire smoke in major metropolitan areas,such as Vancouver,have become an annual concern.Severe storm elements.Across Canada,the occurrence and severity of storms are projected to increase 12.Convective storms(thunderstorms)bring the risk of high winds,short-duration high-intensity rainfall,lightning strikes,and hail.Climate scientists have indicated that hail storms have relatively low predictability because they cannot be captured in global and regional climate models due to limitations in resolution 12.However,an increase in atmospheric energy and occurrence of severe weather are likely to increase the probability of large hail events.There is a heightened risk in Canadas hot spots for thunderstorms,particularly the Great Lakes region and southwestern Ontario,as well as some regions in western Canada and Atlantic Canada 13.Lightning strikes and hail can cause severe damage to buildings and other infrastructure,particularly those that are not properly designed or electrically insulated.Furthermore,high-intensity rainfall can accompany these storms,which brings an increased risk of flooding.High winds.Atmospheric pressure gradients can form as low-pressure systems that move across the country and lead to high winds and severe storms.ECCC issues severe wind warnings when winds are sustained in the range of 70 km/h or greater,and a severe thunderstorm warning when wind gusts are 90 km/h or greater 9.Strong winds have the potential to damage infrastructure,down trees and telegraph poles,and cause blackouts due to downed power lines.In addition,strong winds coupled with precipitation can cause poor visibility(e.g.,whiteout blizzard conditions due to blowing snow).There is also a risk of short-duration high-intensity winds storms(tornadoes)forming due to specific atmospheric and geographic conditions 14.While CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT10csagroup.orgthe science of tornado formation is not completely understood,tornadoes are most often the result of thunderstorms with persistent updrafts causing wind shear and leading to a rotating column of air.Canada is experiencing more severe windstorms with tornadoes in certain regions of Ontario(e.g.,Barrie and Ottawa)and Quebec making news headlines in recent years.These tornadoes have been characterized by wind speeds in the range of 180 to 220 km/h 15.Intense or prolonged precipitation.Across Canada,annual precipitation has increased by an average of 20%since 1948 2.The most significant changes have been observed in northern Canada,Manitoba,Ontario,northern Quebec,and Atlantic Canada 16.Precipitation is expected to increase in all regions,but at a faster rate in northern Canada 2.Intense rainfall events are defined when 25 to 50 mm or more rain is expected to fall within one hour,although the downpour threshold varies by region 2.Flooding is usually caused by short-duration high-intensity rainfall events,which are expected to become more frequent 2.In addition to flooding,heavy or prolonged precipitation may cause mudslides and washouts 17.Regionally,along Canadas west coast,the intensity and duration of precipitation can also be affected by atmospheric rivers,which are concentrated bands of moisture carried over from the Pacific Ocean 18.This weather formation notably led to severe flooding in BC during 2021.Other precipitation events such as heavy snow fall or freezing rain can also cause operational disruptions and damage to infrastructure 19.Intense cold snaps.Although seasonal temperatures are projected to increase across Canada,there is still a risk for cold snaps triggered by cold masses of Arctic air moving south 20.In 2019,a polar vortex hit central Canada with wind chill temperatures in the range of minus 30C to minus 40C.An Alberta clipper or a chinook wind can also bring cold air across the Prairies and into central Canada 21.The requirements that ECCC follows for issuing extreme cold weather alerts varies by region.For example,in southern Ontario,extreme cold warnings are issued when temperatures,including wind chill,reach below minus 30C for at least two hours 9.In other regions of Canada,the wind chill threshold warning is set lower,such as minus 40C in BCs central interior,northern Ontario,and the Prairies(i.e.,Alberta,southern Saskatchewan,and southern Manitoba).Seasonal temperature variations.In recent decades,Canada has experienced an overall increase in mean seasonal temperatures,particularly during the winter months.As a result,winter,snow,and ice cover seasons have become shorter,affecting seasonal snow accumulation,which has decreased by 5 to 10%per decade since 1981 2.Moreover,thinner seasonal ice is replacing perennial sea ice in the Canadian Arctic,and seasonal lake ice coverage has declined across the country.Temperature changes in other seasons are causing drier conditions,increasing risks of drought and wildfires.Changing seasonal characteristics are also producing more extreme rainfall events,which affects the frequency and magnitude of floods 2.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT11csagroup.orgMelting permafrost.Permafrost refers to the thick subsurface layer of soil that remains frozen throughout the year.Warming seasonal temperatures are impacting geotechnical conditions and heightening the risk of seasonal flooding in Canadas northern regions due to melting permafrost.This is compromising ground stability,which has historically served as a solid foundation that supports various infrastructure,including roads and rail lines that offer connections into Canadas rural and remote northern communities.Notably,there is overlap between melting permafrost regions and transportation links to northern Manitoba,northern Ontario,and communities in northern Quebec.Storm surge and sea level rise.The rising sea levels projected along Canadas Atlantic and Pacific coasts are expected to cause an increase in flooding,leading to significant damage to infrastructure,ecosystems,and coastlines.Extreme high water level events are likely to become larger in magnitude and occur more frequently in areas along Canadas Arctic and Atlantic coasts.A decline in sea ice coverage will result in increased wave action and larger storm surges 2.The impact of storm surge on Canadas three coasts has already been severe,resulting in significant damage to infrastructure and habitats,in addition to the erosion of coastlines.Canada faced ten storm surges between 1970 and 2013 with combined damage costs estimated higher than$27.5 million 22.Atlantic Canada is projected to experience the largest sea level rise,on the order of 75 to 100 cm(mid-century vs.2005 baseline),while Pacific coastal regions are projected to experience a 25 to 50 cm sea level rise 2.3.1.2 Summary of Climate Change StressorsAs highlighted in Section 3.1.1,climate change stressors(or impacts)are expected to increase in severity and frequency,which in turn will increase the risks to Canadas built and natural environments,such as damage to infrastructure and ecosystems,disruptions to transportation systems,operations,economic activity,and safety concerns for the general public 23.There is no standard definition of climate stressors,so for the purpose of this report,a climate stressor is a fundamental climate causation factor from the natural environment.For example,precipitation(rainfall)would be a climate stressor,whereas flooding would be a climate risk,developed as a second-order effect of the precipitation.Most climate-related risks are expected to increase as global temperatures continue to rise 24.Scientific models and projections suggest that these effects will intensify in the future regardless of whether global emissions are reduced 2.Hence,adaptation and mitigation strategies are needed to reduce the magnitude of these effects.Climate adaptation is defined and discussed in detail in Section 3.5.1.Table 2 summarizes key climate change stressors in Canada,their related geographic concerns,and projections in terms of their frequency and severity.Impacts of these stressors are also discussed in Section 3.7.3.2 Examples of Climate Change Events and Impacts in CanadaThis section highlights the impacts of climate change and extreme weather events triggered by a changing climate across Canada.These historical examples serve as an indication of the scope and severity of impacts,and draw linkages to the public transit sector.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT12csagroup.orgTable 2:Summary of Climate Stressors and Their Projected Changes in Frequency and SeverityClimate StressorConsiderations and Geographic ConcernsFrequencySeveritySevere Storms(lightning,hail)Across Canada,the occurrence and severity of storms are projected to increase due to higher atmospheric energy from warming temperatures 12.There is a heightened risk in Canadas hot spots for thunderstorms,notably in southern Ontario 12.IncreaseIncreaseHigh WindsThere is limited data and research on the mechanisms and causes of observed and projected changes to wind speeds in Canada 2.However,high winds often accompany severe convective storms for which there is an expected increase in both frequency and severity(refer to considerations for severe storms)12.IncreaseIncreaseHeavy Precipitation(rain)More intense rainfall events are projected,which will increase the risk of flooding,notably in urban areas(due to an increased reliance on stormwater management systems)and areas in proximity to water sources.There is also a risk of landslides and washout in areas with large changes in elevation 2.IncreaseIncreaseHeavy Precipitation(snow)Across Canada,there is a projection for less snowfall and accumulation during winter months as warming temperatures transition snowfall to more rainfall.Less snowfall accumulation may decrease the impact of seasonal spring flooding in some areas 2.DecreaseDecreaseExtreme HeatPeriods of extreme heat are projected to become more frequent and more intense across all parts of Canada 2.Dense urban environments can act as heat sinks and further raise the risks associated with heat waves.Extreme heat also increases the risk of drought,wildfires,and poor air quality resulting from wildfire smoke 2.IncreaseIncreaseIntense ColdExtreme winter temperatures are projected to become less cold due to an overall warming mean temperature 2.However,there is still a risk of intense cold snaps and irregular weather patterns bringing cold Arctic air south and across into central Canada.DecreaseDecreaseSeasonal Temperature VariationsWarming temperatures are projected across all seasons in Canada 2.This will lead to continued thawing of permafrost and increase the risk of spring flooding,avalanches,landslides,and other geotechnical instabilities,particularly in northern Canada 2.IncreaseIncreaseStorm SurgeCoastal flooding risk is expected to increase in many areas of Canada due to local sea level rise 2.In particular,Atlantic and Pacific Canada will have greater flooding risks in low-lying areas adjacent to the coast.IncreaseIncreaseSea Level RiseThe loss of sea ice in the Arctic and Atlantic Canada further increases the risk of damage to coastal infrastructure and ecosystems as a result of larger storm surges and waves 2.IncreaseIncreaseCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT13csagroup.org3.2.1 Storm Surge,Winds,and Coastal Flooding in Atlantic Canada(2022)Atlantic Canada continues to face the impacts of climate change from coastal storms,including powerful noreasters 25,which typically bring severe winds and intense precipitation as they approach land,and can cause storm surge,coastal flooding,and erosion.A noreaster is a large-scale storm that develops in the Atlantic Ocean and travels up the northeastern coast of the United States and Canada.These storms commonly develop during the hurricane season(September to April).In addition to noreasters,storm remnants of hurricanes striking the east coast of the United States often travel up the coast and impact Atlantic Canada.In September 2022,hurricane Fiona made landfall in Atlantic Canada and knocked out power to more than 400,000 customers across New Brunswick,Nova Scotia,and Prince Edward Island 26.The storm surge caused flooding which resulted in closure of roadways and damaged infrastructure.High winds,recorded between 100 to 150 km/h,also contributed to the destruction 26.The cumulative expected cost projected for wind damage over the period from 2015 to 2040 for the Halifax Regional Municipality is estimated to be between$60 to$140 million 7.In 2022,the Province of New Brunswick launched a predictive flood modelling tool,which is available to the public,to highlight the potential impact of storm surge and coastal flooding caused by 1-in-20-year or 1-in-100-year events,such as hurricane Fiona.The tool brings to attention that major population centres,such as downtown Fredericton,risk being entirely covered by flood water 27.3.2.2 Intense Rainfall in Ontario(2013)On July 8,2013,public transit service in the Greater Toronto Area was severely disrupted by a summer storm and an intense downpour,as the equivalent of one months worth of rain fell during the evening rush hour 28.This led to track washouts in low-lying areas along some of Metrolinxs busiest passenger rail corridors(Lakeshore West and Richmond Hill).In the Lower Don Lands,flooding stranded approximately 1,400 passengers on a partially submerged GO train for more than five hours as they awaited evacuation by emergency response personnel 29.An absence of high water level detection systems along the right-of-way contributed to the passenger train becoming trapped in the valley and unable to reverse course.Although flood waters began to recede later in the evening,there was still notable damage to infrastructure and rolling stock.This event was one of several triggered by climate change that prompted Metrolinx to begin developing plans for climate adaptation and resiliency(discussed in Section 3.6).3.2.3 Winter Storms in Central Canada(1998,2013,and 2022)Canada has faced a long history of dealing with severe winter storms.This section provides a summary of some climate-related impacts of severe winter storms in the provinces of Ontario and Quebec.In December 2022,a winter storm crossing Ontario and Quebec with severe winds caused a tree to fall onto Canadian National(CN)tracks,obstructing the tracks and halting a VIA Rail passenger train along the TorontoMontreal rail corridor near Coburg,Ontario.Passengers were stranded on-board for more than 18 hours 30.The storm also caused power outages and road closures across both Ontario and Quebec due to fallen debris damaging power lines and blizzard-like conditions impacting road conditions and visibility.In 2013,an ice storm in southern Ontario caused widespread damage and prolonged power outages that affected approximately 300,000 households and caused delays across the public transit system.Metrolinx has noted that this ice storm emphasized the interdependencies between transit service and electricity infrastructure,as the power outages impacted the functionality of rail signals,switches,traffic lights,stations,facilities,power supply to overhead catenary for Toronto Transit Commission(TTC)streetcars,and a variety of other critical components in the transit system 28.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT14csagroup.orgThe January 1998 ice storm was one of the biggest natural disasters in Canadian history,triggered by low-pressure warm air carrying moisture from the Gulf of Mexico colliding with a cold Arctic air mass above Ontario and Quebec 31.Over the span of one week,nearly double the annual amount of precipitation fell in the form of freezing rain and ice pellets across regions from Kingston,Ontario to the Eastern Townships in Quebec.Widespread power outages and road closures halted travel and public transit across the affected regions in both provinces.Approximately 2.6 million people(19%of all Canadians)were impeded or prevented from commuting during the storm and its aftermath.The storm also cut power to 1.4 million hydro customers in Quebec and 230,000 in eastern Ontario.The financial cost of the 1998 ice storm was estimated at around$5.4 billion 31.3.2.4 Flooding in the Prairies(2013)On April 28,2013,a VIA Rail train passing through Togo,Saskatchewan en route to Churchill,Manitoba had a partial derailment.The locomotives and two leading passenger railcars derailed as they passed over a segment of washed out track.The diesel fuel tanks on both locomotives also ruptured and ignited a fire 32.The Transportation Safety Board investigation determined that the cause of the derailment was due to a collapse of the subgrade(i.e.,the ground beneath the track).Heavy rainfall coupled with an obstructed culvert caused by ice blockage led to washout of the subgrade and track instability 33.Greater variability in seasonal temperatures can lead to irregular and more frequent freezethaw cycles,which can compromise subgrade conditions and increase the vulnerability of infrastructure to floods.The Prairies are projected to experience increasing frequency of seasonal freezethaw cycles leading up to 2050 34.3.2.5 Flooding in Central and Southern Alberta(2013)In June 2013,southern Alberta experienced a 1-in-100-year flood that resulted in$6 billion in damages across the province.A record year of snowfall in the 20122013 winter season coupled with a heavy rainfall event in June 2013,where communities saw levels of rainfall that were equivalent to half the annual average rainfall in two days,caused rapid snowpack melt and the rise of water levels,which could not be contained by the Bow,Elbow,and South Saskatchewan rivers and their tributaries.Between June 19 and 21,32 communities declared a state of emergency and 80,000 Calgary residents were evacuated 35.A significant amount of critical infrastructure was damaged as a result of the flood,including washed out bridges and closure of major infrastructure,such as bridges and the Trans-Canada Highway and Highway 1A.The flooding was also determined to be the cause of the Bonnybrook Bridge collapse on June 27,2013,which derailed six Canadian Pacific(CP)freight tanker cars carrying petroleum dilutant 36.3.2.6 Wildfires in Northern Alberta(2016)In 2016,Alberta dealt with the largest wildfire evacuation in the provinces history,forcing over 80,000 people to evacuate from the town of Fort McMurray and surrounding areas.The socioeconomic impact of the wildfire has been estimated at around$10 billion,with$3.8 billion in insurable losses 37.“In June 2013,southern Alberta experienced a 1-in-100-year flood that resulted in$6 billion in damages across the province.”CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT15csagroup.orgA variety of vehicles,including urban transit buses,were used to assist with the mass evacuation 38,which caused gridlock on Highway 63 as motorists risked their safety to escape along the only major highway in and out of Fort McMurray.This event called into question the resiliency of Albertas road transportation links to the north and prompted proposals for a secondary highway route to alleviate the dependency on Highway 63 39.3.2.7 Landslides in British Columbia(2021)Over a three-week period in November and December 2021,heavy rains from an atmospheric river that formed over BC caused landslides,major outages,and washout on the CP and CN rail networks.These outages also impacted passenger rail as VIA Rail has track access agreements to operate service on CN track.A landslide triggered by this heavy rain also caused a VIA train derailment near Hope,BC and the evacuation of 200 stranded passengers 40.Flooding also washed out sections of major roadways,which impacted inter-city bus service.The cost of rebuilding the transportation infrastructure was estimated at around$9 billion and is likely to be revised upwards 41.3.2.8 Winter Storms and Melting Permafrost in Northern Manitoba(2017)In northern Manitoba,the Hudson Bay Railway connects The Pas to Churchill and to Flin Flon via two major branches.The railway provides essential transportation services,including freight and year-round local passenger traffic,for communities in northern Manitoba that have limited alternative transportation options and no year-round road access.Severe winter storms and subsequent spring flooding have led to washout of track in the past,which cut off the primary ground transportation link for many rural and remote northern communities 42.In 2017 and 2018,the railway was closed for 18 months due to the cumulative effects of flooding and permafrost degradation beneath the track 7.The loss of this ground transportation link has also raised the cost of living for northern communities as less cost-effective means of freight transportation had to be used to deliver essential goods such as food and medicine.Melting permafrost and ballast continually seeping into the muskeg(grassy bog)are deteriorating the subgrade conditions of the Hudson Bay Railway.Significant capital and maintenance expenditures will continue to be required to maintain even very limited operations for the Hudson Bay Railway.Further expenditures will be required to adapt the track to the changing climate conditions in Canadas north.3.2.9 Wildfires and Heat Waves in Western Canada(2022)Weather conditions in recent years have produced unusually dry winter seasons and high seasonal temperatures,resulting in extreme heat and wildfires.Historically,the North American fire seasons lasted from July through October,but fire seasons now extend into December and January,and start as early as March 43,44.This has a major impact on communities spanning the western United States up through northern Canada as they are challenged with larger and more intense wildfires and increased smoke days 45.Hotter and smokier summers have a significant impact on health of populations,and increasingly impact infrastructure that is not built and designed for prolonged extreme heat and smoky conditions,including buckling of road pavement,damage to streetcar and passenger rail infrastructure 46,47,cancellation of flights due to extreme heat 48,and intense power drawdowns from the grid resulting in rolling blackouts and calls for reduction in heating,ventilation,and air conditioning(HVAC)and electric vehicle charging usage 49.3.3 Overview of Canadas Public Transit Sector In addition to the impacts of climate change,the public transit sector itself is undergoing a number of changes and trends that are relevant in terms of climate change adaptation and resilience considerations.Public transit services can be found in all major cities and most towns across Canada.Depending on the nature of a service,Canadians leverage public transit for daily commuting,pleasure,tourism,or other one-off uses to meet their transportation needs.Table 3 presents a general overview of the types of public transit services offered in Canadian cities and towns.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT16csagroup.orgTable 3:Types of Public Transit in Canadian Cities and TownsTransit TypeTypical MetricsExamplesConventional BusLand use context:Low to medium density Capacity:55 per bus Operating right-of-way:Mixed trafficEdmonton Transit Route 201 Winnipeg Transit Route 95 Barrie Transit Route 1APara-Transit BusLand use context:Low to high density Capacity:1015 per bus Operating right-of-way:Mixed trafficHalifax Access-A-Bus TTC Wheel-Trans TransLink HandyDARTRegional BusLand use context:Low to medium density,suburban to urban Capacity:55(single level),80(double decker)per bus Operating right-of-way:Mixed trafficGO Transit Route 25 Ontario Northland (TorontoNorth Bay)Bus Rapid Transit(BRT)Land use context:Medium to high density Capacity:55(single),77(articulated)per bus Operating right-of-way:Mixed traffic or dedicated BRT lanes(painted or separate lanes)Mississauga MiWay Route 100(Airport Express)York Region Transit Viva Brampton Transit ZmStreetcarLand use context:Medium to high density Capacity:100130 per streetcar Operating right-of-way:Mixed trafficTTC Route 501(Queen St.)Light Rail Transit(LRT)Land use context:Medium to high density Capacity:250300 per LRT Operating right-of-way:Partially or fully separated operating environmentOC Transpo O-Train Grand River Transit IONSubway/MetroLand use context:High density Capacity:400500 per train(up to 1,100 standing)Operating right-of-way:Dedicated rail corridor TTC Line 1(YongeUniversity)TransLink Canada LineCommuter RailLand use context:Low to medium density,suburban to urban Capacity:160(per train car),1,900(per trainset)Operating right-of-way:Dedicated or shared railway corridor(shared with freight traffic)GO Train Lakeshore Line Montreal Exo(exo1)Inter-City Passenger RailLand use context:Varied Capacity:4060 per train car Operating right-of-way:Dedicated or shared railway corridor(shared with freight traffic)VIA Rail(OttawaMontreal)VIA Rail(VancouverCalgary)CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT17csagroup.orgNote that passenger and vehicle ferries(e.g.,BC Ferries)were not included in the scope of this study.From a physical infrastructure and assets perspective,a number of components are considered in the design,construction,operation,and maintenance of transit systems.Table 4 outlines the typical components that may be impacted by the effects of climate change.Urban or regional transit services are typically planned and operated by dedicated transit agencies overseen by dedicated arms of municipal or regional governments focused on transit service planning and provision.Some examples of the organizational structures apparent in Canadian cities or regional areas include:City or municipal department model.Edmonton Transit Service is the branch of Edmontons City Operations department that is responsible for the citys transit services.Here,transit services are planned,designed,and operated by city resources.Other similar examples include Calgary Transit within the City of Calgarys Operational Services department and Halifax Transit within the City of Halifaxs Transportation department.Table 4:Typical Components of Canadian Public Transit SystemsPublic Transit System ComponentsBuildings Buildings(administration offices)Maintenance facilities Stations(platform,complex,underground)Electrical equipment housings Storage facilities(bus garages and depots)Signage(static and dynamic)Linear Infrastructure Road system Track and guideway(rails,ballast,etc.)Culverts and drainage infrastructure Bridges Catenary(electrical)Rolling Stock Buses Trains,LRTs,and subwaysElectrical/Communications Switches,signals,traffic lights Substations Fare collection systems Traveller information systemsHuman Resources Drivers and operators Maintenance and construction workers Corporate resources Customer relations TicketingCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT18csagroup.org Transit agency model.The TTC is responsible for the City of Torontos transit services and management of all fleet and assets,with the exception of the roads,where their vehicles operate on a shared right-of-way.In this case,the city is responsible for road maintenance.Other similar examples include MiWay for the City of Mississauga,Grand River Transit for the Region of Waterloo,and OC Transpo for the City of Ottawa.Crown corporations.TransLink is Metro Vancouvers agency responsible for the regions transportation services,including the planning,design,and delivery of public transit in most cases.TransLink is a Crown corporation with a number of subsidiaries responsible for service provision of specific lines or management of assets(e.g.,Coast Mountain Bus Company and BC Rapid Transit Company).Other similar examples include Metrolinx for transit services in the Greater Toronto Area and Ontario Northland for transit services connecting to northern Ontario.In addition,VIA Rail Canada is responsible for operating national passenger rail services across Canada on behalf of the federal government.There is no national transit policy framework at the federal level in Canada nor is there a continuous funding source to cover transit operational costs,leaving much of the responsibility to plan,design,construct,fund,and operate transit services to the operators themselves.However,the federal government is planning to implement a$3 billion per year stream of permanent funding for public transit by 20262027 through Infrastructure Canada 50.Infrastructure can be owned by either public or private entities.The segregation of ownership and authority over track and road infrastructure can determine the entity responsible for implementing climate adaptation measures to make infrastructure more resilient.Two notable examples in the Canadian context include:Track infrastructure for commuter and inter-city passenger rail,which may be owned by private freight railways,who handle physical enhancements and maintenance.For example,VIA Rail and Metrolinx both have track access agreements with CN,under which they pay a fee to the freight railway for the right to operate passenger trains on CN-owned track 51.Road infrastructure in urban areas,on which public transit buses operate,generally falls under the responsibility of the city or regional municipality(e.g.,maintenance,repair,snow clearing,etc.).Highways fall under the jurisdiction of the provincial government ministry,such as the Ontario Ministry of Transportation,and the BC Ministry of Transportation and Infrastructure.Highways may be used by urban city buses or by inter-city coaches.“the federal government is planning to implement a$3 billion per year stream of permanent funding for public transit by 20262027 through Infrastructure Canada 50.”CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT19csagroup.org3.4 Emerging DevelopmentsTo assess climate risk and adaptation with a forward-looking perspective,it is important to understand not only climate change but also fundamental changes in Canadas public transportation sector.This section explores the major changes to Canadas public transportation sector,including decarbonization and electrification of public transit systems,implementation of higher order(capacity)public transportation,and inter-city passenger rail connectivity.3.4.1 Decarbonization and Electrification of Public Transit Systems3.4.1.1 Urban Buses Public transit agencies in municipalities across Canada are seeing a significant shift in planning for and implementation of alternative fuels and propulsion systems in their fleets.Agencies are taking their own approaches to fleet transition and are heavily influenced by local policies mandating greenhouse gas emissions reductions in conjunction with the Government of Canadas 2030 Emissions Reduction Plan 52 and Transport Canadas zero emission vehicle sales target of 100%by 2035 53,and by low-interest loan programs and zero emission bus funding offered through the Canada Infrastructure Bank 54 and Infrastructure Canadas Zero Emission Transit Fund 55.With public transit fleets rapidly adopting zero emission technologies,public transit agencies will require significant infrastructure investments,such as electrical power supply and distribution facilities,electric bus charging infrastructure,fuel or technology-specific infrastructure design considerations,and alternative fuel fuelling stations.These investments could expose agencies to different planning and operational risks.Furthermore,battery electric buses are generally heavier than internal combustion engine buses 56.The operation of these heavier buses will have a direct impact on the cost of road maintenance,which increases by a power of four(x4)as a function of vehicle weight 57.This could increase the risk of pothole formation,road wear,and the need for street closures as repairs are made to the road surface.Opportunities for new pavement compounds and maintenance practices to minimize road wear could arise as a result.3.4.1.2 Regional Express Rail in the Greater Toronto and Hamilton AreaThe Metrolinx GO eExpansion Program is a$20 billion program that will transform the existing GO rail network into a two-way all-day regional rapid rail service with frequencies of 15 minutes or better on core lines 58.In addition,Metrolinx plans to convert several rail corridors from diesel to electric propulsion.The electrified passenger rail system will include an overhead contact system(catenary),electrical feeder routes,and a number of electrical power supply and distribution facilities(traction power facilities)located in proximity and adjacent to the rail corridors 59.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT20csagroup.orgTable 5:Major Passenger Rail Projects in CanadaProjectLocationPhaseEglington Crosstown LRTTorontoUnder construction Finch West LRT TorontoUnder construction Hurontario LRT(Hazel McCallion Line)Mississauga and BramptonUnder construction Eglington Crosstown West ExtensionToronto and MississaugaUnder construction Ontario LineTorontoUnder construction Scarborough Subway ExtensionTorontoUnder construction Hamilton LRTHamiltonPlanning;construction scheduled for 2024On-Corridor Works (GO Expansion Program)Greater Toronto and Hamilton Area Planning Stage 2 ION LRTWaterlooPlanningO-Train LRT Stage 2OttawaUnder construction;target completion in stages from 2024 through 2026Rseau Express Mtropolitain(REM)MontrealPhase 1 open;Phases 2 and 3 under construction;target completion in stages until 2027 Le Tramway de Qubec Quebec CityPlanning;construction scheduled for 2024VIA High Frequency RailToronto to Quebec CityPlanningGreen Line LRT Stage 1CalgaryUnder construction Capital Line South ExtensionEdmontonPlanning;construction scheduled for 2024Metro Line Northwest Extension(Phase 1)EdmontonUnder construction;target completion in 2024Valley Line WestEdmontonUnder construction;target completion in 2027 Broadway Subway ProjectVancouverUnder construction;target completion in 2026 Broadway Subway Project UBC ExtensionVancouverPlanning;identified as a 10-year priority by the Mayors Council and TransLinkCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT21csagroup.org3.4.2 Higher Order Public Transportation 3.4.2.1 Light Rail Transit in Growing Population CentresTo provide improved public transit service for growing communities and population centres across Canada,many regions are moving toward higher capacity public transit modes.Higher order public transit can refer to surface level LRT,streetcars,and subways.Table 5 provides a sample of major passenger rail projects that are underway across Canada,in various stages(e.g.,planning,design,and construction).Most are concentrated in Ontarios Greater Golden Horseshoe region around Toronto and Lake Ontario.The expansion of public transit systems in heavily urbanized areas to include LRT and subways could expose the overall transit system to different climate risks compared to smaller transit services that operate only bus service.Some notable vulnerabilities of higher capacity transit systems to climate change include a greater reliance on electrical infrastructure that is exposed to risks of power outages in periods of extreme heat,flooding in tunnels and underground structures during intense rainfall,and heavy snow or ice obstructing guideways during winter storms.With many transit projects underway across Canada,it is also important to study how climate-related risks can be mitigated through the planning,design,and construction stages.This topic is explored further in Section 3.8.3.4.2.2 High Speed Rail for Inter-City ConnectivityHigh frequency rail(HFR)for inter-city passenger travel between southern Ontario and Quebec is currently being studied.VIA HFR would connect Quebec CityMontrealOttawaToronto with passenger rail service running on dedicated tracks(separate from freight traffic)60.The dedicated HFR infrastructure would enable electrification of the passenger rail service 61.This change from conventional diesel locomotives to electric propulsion would also introduce new climate vulnerabilities to the inter-city passenger rail service,such as risk of power outages disrupting operations.3.4.2.3 PublicPrivate Partnerships Private sector involvement is also becoming more prominent in the delivery of public transit service,whether through contracts for the design and construction of new systems(e.g.,LRTs and subways)or through operations and maintenance agreements.Understanding climate risks is particularly important in publicprivate partnership contracts because the parties need to agree on acceptable terms of risk sharing.Furthermore,these contracts are often set for long periods(e.g.,25 years),during which significant environmental changes could impact the cost and risk profile of the agreement.3.5 Linking Climate Change Issues to the Public Transit Sector3.5.1 Climate Change AdaptationThis section explores definitions of climate risk and adaptation and their relevance to public transit service and assets.Transport Canada uses the following definition in their Climate Change Adaptation Plan:“Climate change adaptation involves taking action to reduce the vulnerability of natural and human systems to actual or expected changes to the climate(e.g.,impacts of the environment on transportation).Adaptation is a form of risk management which can include adjusting activities,decisions and thinking in response to anticipated changes in climate,in order to moderate harm and take advantage of new opportunities.In other words,adaptation is a form of weather and climate risk management.In the context of transportation,adaptation addresses the impact of the environment on transportation.”62As depicted in Figure 1,the need for climate adaptation can arise from changes in either or both of the following two primary factors:CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT22csagroup.org1.Transit assets and operations.Changes to the underlying assets or operations of a public transit system can increase climate vulnerabilities.Currently,there is a significant shift toward transit decarbonization,as discussed in Section 3.4.1.This policy direction could result in new technologies being introduced,which could bring new or increased exposure to climate risk(e.g.,bus operations becoming more vulnerable to power outages due to fleet electrification).In addition,aging infrastructure could also be more vulnerable to climate change as the intensity of weather increases(e.g.,foundation cracking of old bridges).2.Environmental conditions.Changes to the environment in which a transit system operates can also expose climate vulnerabilities.Changes in seasonal temperatures and increased likelihood or severity of extreme weather can affect the risk profile of the public transit system.For example,warmer weather and melting permafrost in parts of northern Canada could destabilize segments of passenger rail,leading to an increased risk of train derailment or track washout during floods.Changes in the public transit system,environmental conditions,or a combination of the two can heighten existing risks or create new risks.Figure 2 presents a framework for assessing climate risk and adaptation that is used by several leading North American transit agencies in their climate adaptation plans,including the LA Metro 63,and the Massachusetts Bay Transportation Authority 64.Climate vulnerability comprises the following three elements:1.Exposure,which reflects the likelihood that an asset or service will be exposed to a climate stressor.For example,rail track running along a coastal region might have higher exposure to the risks of storm surge and coastal erosion compared to a track located further inland.2.Sensitivity,which refers to the magnitude of impact resulting from exposure of an asset to a climate stressor or hazard.For example,traction power systems for electrified passenger rail could have a greater sensitivity to power Figure 1:Drivers of change necessitating climate adaptation.Transit assets and operations(transit system driven)changesAging infrastructureElectrificationOther new technologiesIssuesEnvironmental conditions(climate driven)changesChange in seasonal conditionsIncreased likelihood/severity of weather eventsFigure 2:The composition of climate risk.VulnerabilityExposureSensitivityAdaptive CapacityCriticalityRiskX=CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT23csagroup.org“The resiliency triangle can be used to communicate the quality of infrastructure degradation and the corresponding time to recover in response to a disruption.”outages triggered by extreme heat compared to road infrastructure for which there is no direct linkage between electrical power supply risk and pavement.3.Adaptive capacity,which refers to the ability of a transit system or a particular asset to respond to a climate hazard or event.For example,during a flooding event,a bus route would have high adaptive capacity because buses could be re-routed to avoid the affected area(s).However,a subway line would have low adaptive capacity because flooding(even to a single station on the line)would impact operations along its entirety due to a greater reliance on fixed infrastructure(track)that cannot be easily adapted.Criticality can have varying definitions depending on each transit agency or authority.In a broad sense,criticality refers to the importance of an asset to the functioning of the overall transit system.Criticality can be assessed based on a variety of factors,including the assets connection and reliance to other transportation assets,location of the served population,demographic groups,and various socioeconomic factors.For example,a rail line serving a remote northern community with limited transit alternatives could be viewed as a highly critical asset,whereas a single urban bus would have lower criticality as spare vehicles are often available in the fleet of a transit operator.Risk is the combined impact of climate vulnerability and criticality on infrastructure(i.e.,capital assets),the natural environment,and the human users of the asset over its lifetime.Risk can be assessed on an asset-by-asset basis and rolled up to a global perspective of the public transit system and its performance.3.5.2 Resiliency of InfrastructureResiliency to climate change is distinct from adaptation.It is the ability of social,economic,and environmental systems to maintain performance in response to climatedriven stressors,trends,or disturbances.Systems may respond or reorganize in ways that maintain their essential function,identity,and structure while also maintaining the capacity for adaptation and transformation.An extensive review of the literature on resiliency concluded that“resilience is a commonly used,however ill-defined term”that“lacks a widely accepted,standardized definition and agreed-on measures”65.The resiliency triangle concept,depicted in Figure 3,draws attention to the temporal element of disruption response 66.The resiliency triangle can be used to communicate the quality of infrastructure degradation and the corresponding time to recover in response to a disruption.For example,the time for a rail line to be rebuilt and become operational again after a flood CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT24csagroup.orgFigure 3:Resiliency triangle concept (adopted from 66 with authors permission).timet0-disruptiont1-partial recoveryt2-full recovery25Pu0%and track washout event.However,in the conversation on climate adaptation,there is an argument that infrastructure should be rebuilt to a higher standard,so it is more resilient to future extreme weather and climate disruptions.In general,resiliency tends to incorporate common themes such as disruption,unexpected incidents,recovery,adaptability,minimizing impacts,and redundancy.The conceptualization of resiliency can vary depending on the interested party,which may reflect different elements of control.3.5.3 Community Resiliency and Continuity ManagementThe concept of resiliency extends beyond public transit due to its interconnected nature with other essential services,such as health care and medical services.The preservation of transit service at a minimum threshold during emergency situations is a critical component of business continuity and emergency management.For example,there should be planning and coordination between the city or municipal authorities and the local transit agency to ensure service on essential routes is maintained during extreme weather events,such as priority of snow clearing on transit routes serving hospitals and backup power provisions during power outages.In addition,public transit assets can provide support in emergency management.For example,transit buses can be used to evacuate residents from areas impacted by flooding or fires,or to shuttle vulnerable populations to cooling centres during summer heat waves.According to the consultations with interested parties,several transit agencies have already recognized the role of public transit in emergency response and have departments dedicated to developing integrated regional emergency and disaster response plans.Existing standards,such as ISO 22301 67,provide guidance on developing emergency response protocols and business continuity management.3.6 Current Approaches to Identifying Climate Risks in Public Transit3.6.1 Municipal ApproachesMany of Canadas larger municipalities,and some of the larger transit authorities,have started to formally identify and assess climate change risks to municipal infrastructure,and in some cases to transportation infrastructure.Based on a review of existing approaches,municipalities typically begin with an overall climate change strategy for all sectors,which some then follow with a specific assessment of climate change impacts and vulnerabilities for the transportation sector.According to the consultations with interested parties,climate risk and vulnerability assessments can vary in depth and scope,and there is no consistently used assessment methodology.However,a number of these assessments reference ISO 31000 68 and ISO 14091 69,which are used to evaluate climate change impacts on assets,systems,and operations.Assessments can also be informed by Infrastructure Canadas Climate Lens Resilience Assessment tool 70 and the Public Infrastructure Engineering Vulnerability Committee(PIEVC)Protocol 71.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT25csagroup.orgAppendix A lists some of the climate change risk assessment approaches and documents in the public transit sector,drawing on regional examples from transit agencies,cities,and municipalities.While most of the larger municipalities have prepared overarching,multi-sector climate risk assessments,few have developed targeted action plans for climate change adaptation and resilience in the passenger transit sector specifically.Furthermore,transit agencies have expressed a need for connecting climate adaptation measures and emergency management,as public transit can provide vital service during crises triggered by extreme weather.3.6.2 Federal and Provincial Approaches With the exception of VIA Rail,the federal government does not have oversight or ownership of public passenger rail or bus transit systems in Canada.However,the federal government does have a number of agencies and programs that support the identification and assessment of climate change risks.These key programs are highlighted in Appendix B.In general,federal programs are more targeted(i.e.,specific to climate adaptation and public transit)than provincial programs,which tend to have a broader scope on public infrastructure projects and funding streams related to adaptation measures.Provinces and territories that are not included in Appendix B(Newfoundland and Labrador,Prince Edward Island,Ontario,and Alberta)do not have targeted funding programs for climate adaptation at the time of writing this report.However,several of them have funding for greenhouse gas reduction,such as Newfoundland and Labradors Climate Change Challenge Fund 72,Prince Edward Islands Climate Challenge Fund 73,and Ontarios Green Investment Fund 74.Territories are captured under the federal Climate Change Preparedness in the North Program 75.In addition to funding programs,the federal government also supports research and analysis in the area of climate change resiliency and standards development through a number of federal entities,including the SCC and the NRC.3.7 Summary of Climate Risks to Canadas Public Transit Systems3.7.1 Inventory of Current Climate RisksTable 6 provides a summary of known climate risks to Canadas public transit system,triggered by the climate stressors described in Section 3.1.2,as identified through the literature review and consultations with interested parties.This list may not be comprehensive because climate adaptation is an evolving area of study and several interested parties indicated that they are still in the early stages of identifying climate risks and mapping them to their public transit systems.3.7.2 Short and Long-Term FactorsThe trends in the climate stressors described in Section 3.1.2 can be referenced to see how the resultant climate risks may evolve over time.In general,the only climate-related risks that are expected to decrease in frequency and severity over time are those related to snow and cold weather.As the climate continues to warm,it is expected that heavy snowfalls will transition to rain and there will be fewer severe cold snaps 2.In the SCCs Standards in Action:Building a Climate-Resilient Future report,experts from across Canada identified the following top climate-related risks 4:Extreme precipitation and flooding;Slow environmental degradation processes(e.g.,melting permafrost,freezethaw cycles);Extreme heat and drought;Sea level rise and coastal hazards(e.g.,erosion,storm surge);Extreme winds;and Wildfire and related interactions at urban interfaces.As public transit systems move toward decarbonization,there might be greater reliance on electrical infrastructure(e.g.,substations,transmission lines,etc.),which is likely to raise the vulnerability of public transit systems to certain climate-related risks or increase the severity of their impacts.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT26csagroup.orgTable 6:Summary of Climate Risks to the Public Transit SectorRisk IDRisk DescriptionAdditional ConsiderationsClimate Stressor:Intense Precipitation(IP)IP-1Flooding and washout of roads,bridges,rail lines,and other infrastructure.Canada-wide concern,particularly in low-lying areas(flood plains)adjacent to water sources(e.g.,rivers and lakes)and in urban areas with limited stormwater management capacity.IP-2Water ingress to tunnels and other subterranean structures(e.g.,underground stations)causing damage to infrastructure.Canada-wide concern,particularly in dense urban environments where there are many underground transit systems providing higher order transit services(e.g.,subways in Toronto and Montreal).IP-3Water ingress to housings of electrical systems,leading to short-circuits,power supply interruption,and possible system failures.Canada-wide concern,particularly in low-lying areas(flood plains)adjacent to water sources(e.g.,rivers and lakes)and in urban areas with limited stormwater management capacity.IP-4Impaired visibility to transit vehicle operators.Canada-wide concern.IP-5Loss of traction on roadways or track guideways and physical obstructions(e.g.,snow and ice build-up).Canada-wide concern,particularly in regions with a history of severe winter weather and heavy snowfall.IP-6Freezing rain causing an accumulation of ice on overhead catenary,leading to loss of power supply for transit vehicles.Canada-wide concern,particularly in regions with a history of severe winter weather and freezing rain.Climate Stressor:Extreme Heat(EH)EH-1Buckling of track due to thermal expansion and increased derailment risk.Canada-wide concern,particularly in dense urban environments,which act as heat sinks.EH-2Buckling or cracking of pavement due to thermal expansion.Canada-wide concern,particularly in dense urban environments,which act as heat sinks.EH-3Sagging overhead catenary due to excessive heat and thermal expansion.A concern for urban areas with electrified passenger rail.EH-4Failure of electrical systems,such as passenger rail signals,switches,and electric bus chargers,due to a lack of ventilation and/or increased load on A/C systems.Risk is further increased if wildfire smoke or poor air quality inhibit or impede the use of ventilation systems.EH-5Failure of electrical systems due to an increased load on the electrical grid(blackouts or brownouts).Canada-wide concern,particularly in dense urban environments,which act as heat sinks.EH-6Occupational health and safety risks to workers(heat fatigue).Canada-wide concern,particularly in dense urban environments,which act as heat sinks.EH-7Drought and increased risk of wildfire sparking,leading to damage of infrastructure.Risk is heightened if paired with high winds,which can accelerate the spread of wildfire.EH-8Drought and increased risk of poor air quality caused by wildfire smoke,potentially leading to failure of HVAC systems in buildings,equipment,and vehicles.Canada-wide concern,although historically this risk has been more prominent in western Canada(e.g.,Alberta and BC).CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT27csagroup.orgRisk IDRisk DescriptionAdditional ConsiderationsClimate Stressor:Intense Cold(IC)IC-1Formation of brittle cracks and structural failure of track infrastructure.Canada-wide concern,particularly in regions with colder winters(e.g.,Edmonton and Winnipeg).IC-2Seizure of track switches and other mechanical components.Canada-wide concern,particularly in regions with colder winters(e.g.,Edmonton and Winnipeg).IC-3Ice accumulation on overhead catenary.Canada-wide concern,particularly in regions with colder winters(e.g.,Edmonton and Winnipeg).IC-4Reduced operating range of battery electric transit vehicles.Canada-wide concern,particularly in regions with colder winters(e.g.,Edmonton and Winnipeg).Climate Stressor:Seasonal Temperature Variations(STV)STV-1Melting permafrost causing degradation of subgrade and instability of geotechnical conditions.A particular concern in northern Canada,the territories,and provincial regions with historically continuous permafrost.STV-2Increased frequency or severity of freezethaw cy-cles leading to road damage(pothole formation).Canada-wide concern,particularly in regions with milder winters,where there is a higher likelihood for temperature fluctuation around freezing.Climate Stressor:High Winds(HW)HW-1Structural damage to infrastructure.Canada-wide concern.HW-2Debris obstructing roads and track or guideways.Canada-wide concern.HW-3Impaired visibility to transit vehicle operators,if paired with intense precipitation.Canada-wide concern.HW-4Increased risk of rapid wildfire spread.Canada-wide concern,particularly in western Canada(e.g.,Alberta and BC).HW-5Downed trees or telegraph poles causing power outages.Canada-wide concernClimate Stressor:Severe Storms(SS)SS-1Increased risk of lightning strikes causing damage to infrastructure or power outages.Canada-wide concern,heightened risk in the Great Lakes region.Roof-mounted equipment may be more vulnerable to lightning strikes(e.g.,charging cabinets for electric bus garages and HVAC equipment).SS-2Increased risk of hail damage to infrastructure.Canada-wide concern,heightened risk in the Great Lakes region.Climate Stressors:Storm Surge/Sea Level Rise(SS/SL)SS/SL-1Storm surge causing flooding in coastal areas.A particular concern in low-lying coastal regions in Atlan-tic Canada(maritime provinces),along the St.Lawrence,and in western Canada(BC).SS/SL-2Corrosion of metallic infrastructure(e.g.,track and electrical connectors)due to standing sea water.A particular concern in low-lying coastal regions in Atlan-tic Canada(maritime provinces),along the St.Lawrence,and in western Canada(BC).SS/SL-3Coastal erosion and instability of geotechnical con-ditions leading to road or track washout.A particular concern in low-lying coastal regions in Atlan-tic Canada(maritime provinces),along the St.Lawrence,and in western Canada(BC).CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT28csagroup.orgThe ranking of specific climate-related risks is challenging because exposure and sensitivity characteristics can vary greatly by transit system and region.Furthermore,assets are often part of an interconnected system,thereby making it difficult to assess risk on an individual basis 4.3.8 Response to Climate Change3.8.1 Mitigation and Adaptation Actions for Climate RisksPrevious sections identified the causes of climate change risks and the approaches being used to identify specific risks for public transit.This section summarizes current or considered climate adaptation measures or actions performed by Canadas public transit sector to respond to climate risks.This summary of adaptation actions may help to inform areas of interest for standards development.Overall,there are three different approaches to address climate risk and resiliency through adaptation:1.Hardening and protecting infrastructure.This approach comprises engineering solutions for assets so they are better able to withstand the impacts of climate change and weather events.Examples include sizing drainage systems to accommodate 1-in-100-year flooding events rather than 1-in-50-year events,and the use of permeable pavement to pass stormwater into underlying soil during heavy downpours.2.Operational and maintenance adjustments.This approach comprises actions to adapt existing operations,procedures,or behaviour to mitigate or eliminate climate risk.Examples include the use of tensioners on overhead catenary wires to absorb extra slack during hot weather operating conditions,and frequent cleaning of culverts or installation of drainage systems to prevent obstructions to water flow.3.Relocation of infrastructure or services.This approach aims to permanently move an asset or service element out of the impacted or high-risk area.Examples include elevating segments of track,road,or stations in low-lying flood plains,and moving roads inland to avoid coastal erosion.It is common for interested parties to assess climate adaptation actions through a lifecycle analysis perspective.As illustrated in Table 7,each climate adaptation approach can be mapped to one or more of the stages in an assets lifecycle:a)planning,design,and procurement;b)construction,including rehabilitation;and c)operations and maintenance.Table 8 summarizes the various climate adaptation actions developed by transit agencies,regulatory agencies,various levels of government,and other interested parties in response to the climate risks profiled in Section 3.7.Each risk is linked to one of three mitigations(i.e.,adaptation actions),along with the applicable climate adaptation approaches and lifecycle intervention stages.“In general,the only climate-related risks that are expected to decrease in frequency and severity over time are those related to snow and cold weather.”CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT29csagroup.orgTable 7:Climate Adaptation Approaches and Lifecycle Intervention StagesLifecycle Intervention StageAdaptation ApproachA.Planning,design,and procurementB.Construction,rehabilitationC.Operations and maintenance1.Hardening and protecting infrastructure332.Operational and maintenance adjustments33.Relocation of infrastructure or services333.8.2 Actions to Harden and Protect Road and Rail InfrastructureSeveral innovative adaptation measures have been implemented to protect road and rail infrastructure against the impacts of climate change.This section highlights examples of such adaptation measures in response to risks triggered by intense precipitation and extreme heat.Permeable compounds and hardscape designs to mitigate flooding.Permeable hardscape allows rainfall to pass through to underlying soils or a stormwater reservoir.The hardscape design can include interlocking paving blocks(for parking lots or walkways)and permeable asphalt or concrete mixtures.Due to their mixture of coarse aggregates and bonding material,specialty mixes of asphalt and concrete can be more porous at a micro level,allowing water to pass through an absorbing subgrade(e.g.,soil).Permeable concrete mixtures have little to no sand,which increases the void content in the hardened concrete(voids in the range of 15 to 25%)78.Porous concrete has been used on highways to reduce water pooling during intense rainfall events and the risk of vehicles hydroplaning 79.Specialized pavement compounds to mitigate buckling in heat.Since 1997,the Ontario Ministry of Transportation and larger Ontario municipalities have used a specialized asphalt mixture,based on Ontario Provincial Standard Specifications 80.The mixture considers high and low-temperature performance for extending pavement lifecycles.Asphalt mixtures are specified based on different locations within the province,according to their seasonal temperature variations.Other provinces have also published pavement design guidelines that specify materials and thicknesses on different roadway designations(typically classified based on traffic volume),including BCs Pavement Structure Design Guidelines 81.Monitoring subgrade conditions for track infrastructure in relation to flooding and permafrost melt.Railways have a variety of methods at their disposal to actively monitor track and subgrade conditions.Inspection methods that can support identification of track segments at high risk of washout or collapse due to deteriorating subgrade from intense rainfall events or melting permafrost include:High water detection systems.Sensors along the right-of-way and in nearby drainage systems can monitor water levels and inform the risk assessment of potential flooding.Track geometry inspections.Railways conduct regular track geometry lasering inspections to assess any changes in track curvature or elevation,which may indicate changes in the subgrade conditions and the need for maintenance intervention(e.g.,re-ballasting or track replacement).Instrumentation cars.Railways also run specialized railcars outfitted with lasers and video cameras to record data on track geometry and condition.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT30csagroup.orgTable 8:Climate Risks and Associated Mitigation Approaches and Intervention StagesRisk IDClimate RiskMitigation(s)Adaptation Approach(es)Intervention Stage(s)IP-1IP-2IP-3Intense precipitation leading to flooding obstructions or damage to transit assets or infrastructure.Improve drainage system designs for more severe flooding events(e.g.,1-in-100-year vs.1-in-50-year events).1AElevate and/or relocate infrastructure.3A and BReplace under-sized culverts and outdated drainage systems.1BClear debris and obstructions from culverts and other components of the drainage system.2CReroute transit service to avoid impacted flood areas.3CUpdate design specifications for waterproofing of encasements that house vulnerable electrical equipment.1AInstall high water level detection systems to improve response time and utility of other flood mitigation efforts.2CIP-4Intense precipitation impairing visibility for transit vehicle operators.Issue speed restrictions on operations and implement use of sensors and other driver-assist technologies.2CIP-5Intense precipitation(snow or freezing rain)causing loss of traction on roadways or track guideways,and physical obstructions(snow and ice build-up).Improve road and guideway cold weather maintenance standards,which may include the frequency and method of snow and ice clearing(e.g.,plows,chemical compounds,etc.).Improved coordination between municipal services(e.g.,snow clearing)and transit agencies can also help to ensure transit service can function on priority routes(e.g.,links to hospitals).2CIP-6Intense precipitation(freezing rain)causing an accumulation of ice on overhead catenary,leading to a loss of power supply to transit vehicles.Update operations and maintenance practices to keep catenary clear of ice(e.g.,Region of Waterloo continually running ION LRT service to prevent ice build-up 76).2CEH-1Extreme heat causing thermal expansion and buckling of track.Lay track in warmer temperatures and apply low-solar absorption coatings to rail.1BIssue speed restrictions on operations.2CEH-2Extreme heat causing thermal expansion and buckling and cracking of pavement.Design and use specialized pavement compounds.1BCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT31csagroup.orgRisk IDClimate RiskMitigation(s)Adaptation Approach(es)Intervention Stage(s)EH-3Extreme heat leading to sagging of overhead catenary.Use tensioning mechanisms on catenary during hot operating conditions.2CEH-4Extreme heat causing overheating and failure of electrical systems.Improve A/C ventilation in electrical equipment housings,select colour to reflect solar radiation,use solar absorption coatings,provide shade(trees)or relocate electrical systems to cooler areas.1 and 3BEH-5Extreme heat causing failure of electrical systems due to an increased load on the electrical grid(blackouts or brownouts).Design the electrical power generation,transmission,and distribution system to be more resilient,and design transit operations with backup emergency power provisions.1AEH-6Extreme heat causing occupational health and safety risks to workers(heat fatigue).Update occupational health and safety standards for the use of personal protective equipment,more frequent breaks and hydration,and heat exposure monitoring.2CEH-7Extreme heat causing drought conditions and heightening the risk of wildfires sparking(e.g.,from rolling stock steel wheels or engine exhausts).Increase vegetative clearance in areas adjacent to track and increase stringency on locomotive exhaust cleaning.2CEH-8Extreme heat leading to poor air quality caused by wildfire smoke,potentially leading to failure of HVAC systems in buildings,equipment,and vehicles.Design ventilation systems with high efficiency particulate air(HEPA)filters.1AIC-1Intense cold causing brittle failure or structural cracks in track infrastructure.Select appropriate material for track design(e.g.,cold formed steel grades).1AIssue speed restrictions for operations in cold weather conditions(more appropriate for freight).2CIC-2Intense cold causing seizure of track switches and other mechanical components.Use gas-fed heaters for de-icing switches(e.g.,used by Chicago Transit Authority 77)2CIC-3Intense cold causing reduced operating range of battery electric vehicles.Draft vehicle performance specifications with larger battery sizes and/or diesel auxiliary heaters to compensate for reduced operating range in cold weather.2A and CSTV-1Seasonal temperature variations melting permafrost and causing degradation of subgrade and instability of geotechnical conditions.Rehabilitate subgrade with improved construction techniques.1BCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT32csagroup.orgRisk IDClimate RiskMitigation(s)Adaptation Approach(es)Intervention Stage(s)STV-2Seasonal temperature variations impacting freezethaw cycles and damage to roads(pothole formation).Improve drainage to avoid standing water damage and apply pavement waterproofing(sealant).1BHW-1 HW-2Severe winds causing damage to infrastructure and risk of debris obstructing roads and track guideways.Improve the design of infrastructure to withstand stronger wind forces(e.g.,aerodynamics to protect against wind shear).1ATemporarily suspend transit operations during high winds.2CHW-3Severe winds impairing visibility to transit vehicle operators,if paired with intense precipitation.Issue speed restrictions on operations and implement use of sensors and other driver-assist technologies.2CHW-4Severe winds leading to increased risk of rapid wildfire spread.Update vegetation management-related standards along rail or road corridors and prepare emergency response protocols.2CHW-5Severe winds knocking down trees or telegraph poles causing power outages.Plan provisions for backup power supply(e.g.,generators or batteries).1ASS-1Severe storms causing lightning strikes and power outages.Design buildings with lightning protection and grounds for electrical equipment.1BPlan provisions for backup power supply(e.g.,generators or batteries).2ASS-2Severe storms causing hail damage.Design modular structures to protect against hail damage(e.g.,overhead canopies and roofing).1BSS/SL-1Storm surge causing flooding in coastal areas.Improve design and construction in low-lying coastal areas by elevating vulnerable assets(segments of infrastructure)and constructing protective structures(e.g.,dykes and break walls).1 and 3BSS/SL-2Storm surge causing corrosion risk of metallic infrastructure(e.g.,track and electrical connectors)due to standing sea water.Design and select material to mitigate corrosion(e.g.,galvanic pairings,coatings,anodizing).1APlan provisions for the use of backup drainage systems(e.g.,pumps).2CSS/SL-3Storm surge causing coastal erosion.Improve design and construction in low-lying coastal areas and relocate vulnerable assets inland.1 and 3BN/ASeveral climate stressors interacting to reduce the operational lifespan of an infrastructure asset.Conduct periodic inspections and improve maintenance practices and lifecycle rehabilitation.2CCLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT33csagroup.orgDetecting track washout and other obstructions.Railways also use the following methods for detecting segments of track impacted by washout,rockfall,and avalanches:Slide detection fences.In high-risk areas,railways have wires strung along hillsides that trip the signalling system if broken by an obstruction(e.g.,rockfall in the Rocky Mountains)82.Monitoring of signalling system.Most track is electrified at low voltage for operation of the signalling system.A track washout could create a break in the low voltage circuitry and signal that there is an obstruction to that segment of track.3.9 State of Response in Canada3.9.1 Response by Regulators and Government Transport Canada has implemented several new regulatory measures to mitigate risks associated with climate change.Two notable actions taken by Transport Canada include mitigating structural damage to rail infrastructure in cold weather operations and new wildfire prevention regulations.3.9.1.1 Mitigating Structural Damage to Rail Infrastructure in Cold WeatherIn 2020,Canadas Minister of Transport issued a Ministerial Order under the Railway Safety Act 83 to reduce the risk of train derailments during cold weather through railway companies developing a Winter Operation Risk Mitigation Plan 84.This approach refers to a range of temperatures for restricting train speeds rather than relying on a specified period of calendar days during the winter months,which recognizes the rise in abnormal seasonal temperature fluctuations that may occur outside of the traditional November 15 to March 15 dates.In addition,the Ministerial Order includes measures to:Improve track inspection and track maintenance practices;Require further speed restrictions if warranted due to inspection results;Require risk mitigation measures to account for rapid temperature fluctuations;Require new technology to detect a rail break;and Require approval of the plan by a professional engineer 85.3.9.1.2 Mitigating the Risk of Wildfires from Rail OperationsIn 2022,Transport Canada published new rules on railway fire prevention and mitigation during the fire season,which runs from April 1 to October 31 86.The scope of these rules include:Establishing temperature thresholds at which train speed restrictions are issued and supplemental track inspections are required;Increasing stringency on locomotive exhaust cleaning and inspection;and Requirements for transportation operators to develop an Extreme Weather Fire Risk Mitigation Plan,which must be submitted to Transport Canada and reviewed every 5 years 87.At a minimum,an Extreme Weather Fire Risk Mitigation Plan should include the following measures to:Monitor fire risk levels;Detect and report fires along track right-of-way;Manage vegetation and the removal of combustible materials or debris from and adjacent to the right-of-way;Mitigate fire hazards during line work maintenance activities and respond to any fires resulting from such activities;Assess conditions and implement appropriate mitigations during active fire events on or encroaching on the right-of-way to maintain safe railway operations,including adjustments to train operations;and Respond to detected or reported fires,including immediate action to suppress the fire,communication with and/or deployment of appropriate emergency response resources 87.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT34csagroup.org3.9.2 Response by Transit AgenciesAs noted in Section 3.6.1,several large Canadian transit agencies have already started responding to the need for climate adaptation,similar to leading transit agencies in the United States,by preparing climate vulnerability assessments(or risk assessments).This involves understanding the environmental conditions in which their transit systems operate,identifying long-term climate projections,and mapping climate stressors and risks to individual assets of their transit systems(e.g.,mapping flood-prone areas to the location of stations and track).Transit agencies have noted a correlation between developing climate risk and resiliency plans and being successful in competitive federal funding applications.Federal programs often have tight application timelines,and transit agencies that have already completed climate vulnerability assessments are in a better position to respond to funding criteria.As a result of climate vulnerability assessments,some transit agencies are adapting their best practices for climate adaptation.For example,Metrolinx has revised its track laying temperature to mitigate the effects of track buckling during extreme heat.Traditionally,Metrolinxs track laying temperature was 32.2C.The climate-induced increase in the average summertime daily temperature has prompted Metrolinx to adopt a higher temperature for rail laying of 37.7C for all new track.Metrolinx assessed this preferred rail laying temperature by comparing it to future maximum temperatures from ClimateData.ca projections 88.Some transit agencies are also starting to incorporate climate risk assessment into the formal design review process of new infrastructure,while other agencies are doing this assessment on a case-by-case basis,notably for major infrastructure projects.Canadian transit agencies are also forming working groups via industry associations to promote knowledge sharing on transit decarbonization and climate adaptation.For example:The Ontario Public Transit Association(OPTA)has established the Zero Emission Bus(ZEB)Committee.One of its key topics is the need to better understand the risks associated with new low or zero emission technologies and how they interface with change climate conditions(e.g.,how electric bus fleets will operate in extreme heat or extreme cold conditions,and their risk of exposure to power outages)89.The SCC has formed a Hydrogen Codes and Standards Working Group that has three task forces that focus on:a)production,b)transportation and storage,and c)end-use applications,including transportation 90.Other working groups focus on topics such as reviewing technologies to monitor flooding risks along track rights-of-way,and revisions to operating and maintenance procedures.Industry associations include OPTA,the Canadian Urban Transit Association,and the Railway Association of Canada,which have relevant working groups established.According to the consultations with transit agencies,the constant technological advancement of low and zero emission technologies poses a challenge for the formation of standards.However,transit agencies are sharing within working groups their best practices and lessons learned from the deployment of new transit vehicles(e.g.,battery electric and hydrogen buses).3.9.3 Response by Federal Research and Standardization Organizations3.9.3.1 Standards Council of CanadaIn the area of climate change sustainability,the SCC launched a Standards to Support Resilience in Infrastructure Program in 2016,which supports projects ranging from publishing reports that identify priorities and best practices for climate change adaptation to supporting the work of national and international standards committees to funding the development of new standards and updating existing ones 91.The SCCs report Standards in Action:Building a Climate-Resilient Future 4 identified gaps in standards,codes,and practices that leave Canadians vulnerable to climate change.The report also identified a significant need for investments in standards to ensure Canadas infrastructure is climate ready,and emphasized that more than 100 standards are out-of-CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT35csagroup.orgdate and require updates to reflect Canadas current environmental conditions 4.The report acknowledged that Canadas responses to climate change are maturing,but there are still gaps to be addressed 4.Furthermore,it noted that standardization could aid the development of cost-effective solutions for responding to climate change but indicated that more effort will be required to promote awareness of standards and to build capacity to understand how standards can be applied 4.Overall,Canadas standardization efforts need to be more inclusive of diverse perspectives and must understand that the urgency and type of response to hazards triggered by climate change can vary greatly across Canadas vast geography 4.In 2021,the SCC also commissioned a Guide for Integrating Climate Change Adaptation Considerations into Canadian Standards 92,which is specifically relevant to standards development organizations.In 2022,the federal government announced an additional$11.7 million over 5 years for the Standards to Support Resilience in Infrastructure Program 91.3.9.3.2 National Research CouncilThe NRC is a federal agency reporting through the Minister of Innovation,Science and Industry,and is Canadas largest federal research and development organization.Among other areas,the NRC carries out research and provides guidance to support the federal governments climate change resilience agenda(as laid out in the Pan-Canadian Framework on Clean Growth and Climate Change 93).As previously mentioned,the NRC led the CRBCPI with the goal to“provide the knowledge needed to integrate climate resilience into building and infrastructure design,guides,standards,and codes”5.In 2019,the CRBCPI program published a detailed report on the state of practice and knowledge gaps on climate change adaptation,with a wide range of observations related to the public transit sector,among other sectors 6.The CRBCPI report noted that bridges are generally designed to the Canadian Highway Bridge Design Code,which is managed by CSA Group.However,there is no standard approach for determining the impact of future climate loads or the stresses of simultaneous extreme weather events on bridge performance.In addition,despite relatively standardized methods for road design and construction,there are still possibilities for improving pavement materials,road condition monitoring,and repair methods.Futhermore,railway engineering in Canada typically relies on standards published by the American Railway Engineering and Maintenance-of-Way Association(AREMA),which may not be fully applicable to Canadas environmental conditions.Climate issues and weather events,such as flooding,are addressed in some aspects of AREMA standards but often in a static reference,so they may not reflect the dynamic nature of a changing climate and environmental conditions.The CRBCPI report also stated that:“A complicating factor in providing guidance on climate change adaptation is that there is no single standard for rail transit infrastructure in use across Canada.The different systems were installed at very different times and have different legacy equipment and standards.Climate change resilience guidance will therefore need to be in the form of best practices,rather than codes or standards.”6 In 2022,the Canadian Government announced a new Climate Resilient Built Environment initiative,led by the NRC,which will provide knowledge to adapt public infrastructure where necessary,inform changes to building and infrastructure codes,and create guidelines,standards,and technical solutions for climate resilience.The initiative has been provided with$35 million in funding over five years 91.Under the Climate Resilient Built Environment initiative,the NRC has a 4-year working program within their Automotive and Surface Transportation Research Centre that is focused on safety,efficiency,and resilience of road,rail,and off-road modes 94.As part of this program,there is a monthly meeting with transit agencies across Canada to discuss and share information on resilience concerns in their operations.CLIMATE CHANGE RESILIENCE AND ADAPTATION FOR PUBLIC TRANSIT36csagroup.orgOne of key themes emerging from the NRC meetings is a lack of common guidance on resilience for rail transit agencies that is specific to the Canadian context 6.As noted,most agencies use AREMA standards or guidance from the American Public Transport Association,which may not always be suited to the Canadian climate.For example,Canadian rail operators typically face more challenges with ice and snow build-up than their American collagues.These increasing challenges could potentially affect operations and safety at crossings and switches,as well as overhead catenary and other power system sources.4 Discussion and Recommendations4.1 Key Climate RisksThe findings indicate that climate risks related to intense precipitation and extreme heat,as shown in Table 9,are the most pressing concerns for the Canadian public transit sector.Both of these climate stressors are Canada-wide concerns that are projected to continue worsening,which suggests that the benefits of developing or improving standards to account for these risks would be wide-reaching.In addition
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Domestic airline competition in AustraliaAugust 2024iiACCC|Domestic airline competition in Australia|August 2024 reportAcknowledgement of CountryThe ACCC acknowledges the traditional owners and custodians of Country throughout Australia and recognises their continuing connection to the land,sea and community.We pay our respects tothem and their cultures;and to their Elders past,present and future.Australian Competition and Consumer Commission Land of the Ngunnawal people 23 Marcus Clarke Street,Canberra,Australian Capital Territory,2601 Commonwealth of Australia 2024This work is copyright.In addition to any use permitted under the Copyright Act 1968,all material contained within this work is provided under a Creative Commons Attribution 4.0 Australia licence,with the exception of:the Commonwealth Coat of Arms the ACCC and AER logos any illustration,diagram,photograph or graphic over which the Australian Competition and Consumer Commission does not hold copyright,but which may be part of or contained within this publication.The details of the relevant licence conditions are available on the Creative Commons website,as is the full legal code for the CC BY 4.0 AU licence.Requests and inquiries concerning reproduction and rights should be addressed to the Director,Corporate Communications,ACCC,GPOBox 3131,Canberra ACT 2601.Important notice The information in this publication is for general guidance only.It does not constitute legal or other professional advice,and should not be relied on as a statement of the law in any jurisdiction.Because it is intended only as a general guide,it may contain generalisations.You should obtain professional advice if you have any specific concern.The ACCC has made every reasonable effort to provide current and accurate information,but it does not make any guarantees regarding the accuracy,currency or completeness of that information.Parties who wish to re-publish or otherwise use the information in this publication must check this information for currency and accuracy prior to publication.This should be done prior to each publication edition,as ACCC guidance and relevant transitional legislation frequently change.Any queries parties have should be addressed to the Director,Corporate Communications,ACCC,GPO Box 3131,Canberra ACT 2601.ACCC 08/24_2457www.accc.gov.auiiiACCC|Domestic airline competition in Australia|August 2024 reportContentsGlossary ivKey industry insights and developments 1Key results summary 2Executive summary 31.Introduction 51.1 Government direction to monitor domestic airline services 52.Industry developments 62.1 Rex enters voluntary administration 62.2 Bonza goes into liquidation 82.3 Sydney recovery continues to lag post-pandemic 92.4 Demand for international travel continues to increase 102.5 Qantas and Perth Airport reach landmark commercial agreement 112.6 Government commences process to appoint Slot Manager at Sydney Airport 112.7 Airservices Australia lodges amended proposal for price increases 123.Industry activity and reliability of performance 133.1 Bonzas exit reduces passenger levels and capacity in the last quarter of 202324 133.2 Industry service reliability moves closer to long-term averages 154.Competition 174.1 Rexs withdrawal from intercity routes would mean no routes serviced by more than 2 airline groups 175.Airfares and jet fuel prices 195.1 Airfares have trended lower in 2024,driven by a decrease in fares on Major City routes 195.2 Jet fuel prices continue to trend downwards 236.AircraftfleetmanagementinAustralia246.1 Airlines rely on different aircraft types to service their network 246.2 Australias aircraft fleet is about to go through a transition 276.3 Pandemic-induced supply chain issues continue to impact on airline competitiveness 29ivACCC|Domestic airline competition in Australia|August 2024 reportGlossaryABSAustralian Bureau of StatisticsBITREBureau of Infrastructure and Transport Research Economics CCACompetition and Consumer Act 2010(Cth)Dry leaseA lease arrangement whereby a lessor provides an aircraft without crew to the lessee.Golden Triangle routesFlights between Sydney,Melbourne and Brisbane airport.Load factorThe total number of passengers as a proportion of the total number of seats flown across all airlines.Low-cost carrier(LCC)Airlines that specialise in keeping operating costs low and without some of the more traditional amenities such as in-flight meals included in the fare,meaning they can potentially offer lower airfares.Major City routesClassified using the ABS Australian Statistical Geography Standard Edition 3(ABS 2021 version).Routes where both airports are in Major Cities of Australia.Refer to Appendix for a detailed list of Route Type.QantasQantas domestic passenger airlines that include Qantas Domestic and QantasLink airlines.Qantas GroupQantas Domestic,QantasLink and Jetstar Domestic airlines.Regional routesClassified using the ABS Australian Statistical Geography Standard Edition 3(ABS 2021 version).Routes where at least one airport is in Inner Regional Australia or Outer Regional Australia,but not in Remote or Very Remote Australia.Refer to Appendix for a detailed list of Route Type.Regular Public Transport(RPT)All air service operations in which aircraft are available for the transport of members of the public and are conducted in accordance with fixed schedules.It does not include charter or other non-scheduled operations.Remote routesClassified using the ABS Australian Statistical Geography Standard Edition 3(ABS 2021 version).Routes where at least one airport is in Remote or Very Remote Australia.Refer to Appendix for a detailed list of Route Type.Revenue passenger-kilometres(RPKs)Calculated by multiplying the number of revenue passengers travelling on each flight stage,by the distance in kilometres between the ports.Turboprop An alternative to a jet characterised by a propeller-powered engine.In Australia,turboprop aircraft typically service Regional and Remote routes.Virgin AustraliaVirgin Australia domestic passenger airlines that include Virgin Australia and Virgin Australia Regional Airlines(VARA).Virgin Australia also operated Tigerair until March 2020.Wet leaseA lease arrangement whereby a lessor provides an aircraft with crew to the lessee.1ACCC|Domestic airline competition in Australia|August 2024 reportKey industry insights and developmentsRex enters voluntary administrationRex entered voluntary administration,after seeking a trading halt and suspending sales on its intercity jet-serviced routes.Regional,turboprop-serviced routes remained unaffected and continue to operate.Government has since announced that it will guarantee regional flight bookings purchased for Rex customers.Bonzas exit reduces domestic passenger levels and capacityBoth domestic passenger and capacity levels had been tracking closely to 2019 levels in the early part of the year.However the recovery has since declined.This is partly due to the loss of dozens of routes across the east coast of Australia arising from Bonzas suspension of operations and subsequent liquidation.Airfares continue to trend downwardsBoth domestic and international airfares have continued to fall.Compared to June 2023,average revenue per passenger on domestic routes in June 2024 was lower in both real(-5.2%)and nominal terms(-1.6%).This was driven by falling average fares on Major City routes over the 12-month period.The ACCC will closely monitor airfares on intercity routes following Rexs exit on these routes.Airline services have generally been more reliable in recent monthsFor the first time since October 2020,cancellation rates were lower than the long-term industry average(2.2%),at 2.1%in May 2024.Despite increasing slightly in June to 2.5%,cancellation rates across the industry have continued to generally trend downward during 2024.Fleet constraints remain a challenge for airlinesGlobal supply chain issues in the aircraft manufacturing sector will continue to present challenges to airlines wishing to expand their capacity,renew ageing fleet or secure parts required for maintenance.Wait times for new-generation engines have grown by 150%,and 35%for legacy engines.2ACCC|Domestic airline competition in Australia|August 2024 reportKey results summaryPassenger market share as at June 2024Qantas 38%Jetstar 25%VirginAustralia32%Rex 5%April4.7m6.3mMay4.6m 6.1mJune4.5m5.9m2.2%3.3%JetstarQantas1.9%Virgin Australia1.1%RexBusiest domestic routes by passenger levels June 2024SydneyMelbourneAdelaideBrisbaneGold CoastADL MELOOL SYDBNE MELBNE SYDMEL SYD572,279354,691284,879190,564175,7682.5%Industry average2.2%Long-termindustry averagePassenger levels and seatcapacity June 2024Real average revenue per passenger index*Flights cancelled June 2024PassengersCapacity100.05.95.9.1Jun-24Jun-1999.35.25.2.1Jun-24Jun-23*Index(Jun19=100)3ACCC|Domestic airline competition in Australia|August 2024 reportExecutive summary The countrys third largest operator of passenger services Rex entered voluntary administration on 30 July 2024.It cancelled flights on its intercity routes,but administrators Ernst&Young said that Rexs regional routes would continue to operate.Rex has been connecting regional communities for over 20 years using turboprop(SAAB 340)aircraft.As at June 2024,it serviced 33 regional and remote routes,including 20 routes on which it was the only airline.In March 2021,Rex expanded into intercity routes serviced by jet(Boeing 737)aircraft by offering competitive fares on routes to and from Melbourne and Sydney.The expansion of its jet-based services continued in following years with offerings to Adelaide,Brisbane,Canberra,the Gold Coast and more recently Perth.However,the expansion did not prove to be as successful as anticipated.In addition to experiencing aircraft shortages and pilot attrition,the airline was not able to grow its share of the total domestic market much beyond 5%.In February 2024,Rex reported a statutory after-tax loss of$3.2 million for the 6 months ending 31 December 2023.Should Rexs intercity services not re-commence,consumers would miss out on the competition that Rex provided with Qantas,Jetstar and Virgin Australia on its jet-based intercity routes.The expansion of Rex and the launch of Bonza in recent years has meant that a sizeable proportion of passengers flying on Australian domestic routes benefited from competition between at least 3 competing airline groups.However,the collapse of Bonza and the withdrawal of Rex from intercity routes would mean that no route will have more than 2 competing airline groups.Airfares are generally lower where there is more competition on a route.The ACCC found that when Rex entered several intercity routes in 2021,the average airfare paid per passenger across those routes fell by around 25%.1Compared to their 2019 levels,average revenue per passenger on routes with increased competition has been lower than the broader domestic network in every month since February 2023,indicating that competition has resulted in lower airfares over that period.This was driven by Rexs expansion on to Major City routes from 2021.The ACCC will continue to closely monitor airfares on intercity routes.While their circumstances are different,Rexs news follows the decision of creditors to put Bonza into liquidation in early July 2024.Bonza entered voluntary administration in late April 2024 and there were ultimately no binding offers from potential buyers through June.Although Bonza only represented around 2%of the domestic air passenger market,its collapse has resulted in the loss of dozens of routes across the Australian domestic network.Bonzas collapse after just over 12 months of operations along with the possible loss of Rexs intercity services mean that competition would be further reduced in the industry.It also highlights the significant challenges faced by new and expanding airlines in this sector.Total domestic passenger levels and seat capacity in the first 3 months of 2024 was actually tracking closely to pre-pandemic(2019)levels.However,June 2024 saw capacity levels decrease by up to 3.2%relative to 2019,largely due to the collapse of Bonza.1 ACCC,Airline Competition in Australia Report 7:March 2022,ACCC,p 17.4ACCC|Domestic airline competition in Australia|August 2024 reportAside from some one-off events,industry cancellation rates and on-time arrivals also tracked closer to long-term averages.In May 2024,2.1%of flights were cancelled across the industry,representing the first month that it out-performed the long-term industry average(2.2%)since October 2020.Cancellation rates in June did increase to 2.5%,but overall,the trend shows improved reliability over the last 12 months.Industry on-time arrival rates were also relatively stable at 76.8%in June 2024.Despite remaining below the long-term industry average(80.9%)they have improved from 69.0%in June 2023.Domestic airfares have continued to trend downwards throughout the first half of 2024,with average revenue per passenger reducing in both real(-5.2%)and nominal(-1.6%)terms since June 2023.This was driven by falling average fares on Major City routes.The domestic aviation industry is facing challenges with ageing fleet,but airlines are starting to bring on new aircraft to replace or add to their existing fleet.For example,Qantas has introduced Airbus A220s on some domestic routes,as well as announcing a renewal of their turboprop fleet for regional routes.Jetstar has started flying some of its new Airbus A321 NEOs and Virgin Australia has plans to renew their Boeing fleet,although it has experienced between 6 and 18 months of delays.Persisting global supply chain issues across the aircraft manufacturing sector impacted on Rexs ability to compete and will continue to present challenges to airlines that wish to renew or repair aircraft fleet.Bain&Company has estimated that wait times for new-generation engines have increased by 150%,while times for legacy engines have increased by 35%.Some experts anticipate that these issues will continue for the remainder of the decade.5ACCC|Domestic airline competition in Australia|August 2024 report1.Introduction1.1 GovernmentdirectiontomonitordomesticairlineservicesThe Australian Competition and Consumer Commission(ACCC)is an independent Commonwealth statutory agency that promotes competition,fair trading and product safety for the benefit of consumers,businesses,and the Australian community.The primary responsibilities of the ACCC are to enforce compliance with the competition,consumer protection,fair trading and product safety provisions of the Competition and Consumer Act 2010(Cth)(CCA),regulate national infrastructure and undertake market studies.On 6 November 2023 the Treasurer directed the ACCC to recommence domestic air passenger transport monitoring under subsection 95ZE(1)of the CCA.This follows the direction issued to the ACCC by the former Treasurer,which expired in June 2023.Under the direction the ACCC is to monitor prices,costs and profits relating to the supply of domestic air passenger transport services for 3 years and to report on its monitoring at least once every quarter.The direction applies until December 2026.In announcing the direction,the Treasurer stated that ACCC market scrutiny will help ensure airlines compete on their merits and bring to light any inappropriate market conduct should it occur.The Treasurer also said that the direction will assist in providing continued transparency at a time when new and expanding airlines are still trying to establish themselves.2 The ACCCs monitoring and reporting on the domestic airline industry is separate but related to its enforcement of competition law under Part IV of the CCA.We will prioritise investigations about anti-competitive agreements and practises,and the misuse of market power.We will consider enforcement action where we form the view that conduct is likely to breach the CCA.Should the ACCC find that the level of competition within the industry is insufficient to meet the needs of consumers or identify anti-competitive behaviour that falls short of thresholds for enforcement action we will recommend potential policy options to government to improve competition.Under section 95ZK of the CCA,the ACCC can compel airlines to give information and produce documents to the ACCC relevant to that airlines supply of domestic air passenger transport services.We have established arrangements for the Qantas Group(including Jetstar),Rex and Virgin Australia to voluntarily provide their monthly and quarterly data to the ACCC.3 These airline groups supply close to all regular domestic air passenger services in Australia.On occasion we also seek qualitative information from the airlines,such as Board papers about company strategy.The ACCC has legislative obligations in relation to its management and disclosure of confidential information.4 In accordance with these obligations the public monitoring reports will present only some of the information collected from the airlines.2 The Hon Dr Jim Chalmers(Treasurer),ACCC directed to monitor domestic air passenger services,18 October 2023.3 Arrangements were also made to collect data from Bonza between February 2023 and March 2024 inclusive.4 ACCC,ACCC/AER information policy,4 June 2014.6ACCC|Domestic airline competition in Australia|August 2024 report2.Industry developments2.1 RexentersvoluntaryadministrationIn a significant development for the Australian domestic airline sector,Rex airlines entered voluntary administration on 30 July 2024.In the announcement,the airlines administrators Ernst&Young said that Rexs turboprop flights on regional routes had not been affected and would continue to operate.However,the airlines jet-based services connecting major airports had been suspended.Other airlines immediately offered to assist impacted customers.The administrators said that Rex customers with an existing ticket on a flight cancelled due to the administration process could transfer their ticket free-of-charge to the 13 overlapping Virgin Australia services.Qantas Group also said that impacted customers could contact Qantas and Jetstar to be reaccommodated on the same route as their original booking at no charge,where they had seats available.Both airline groups also said they would look to prioritise opportunities for Rex employees that were impacted by the announcement.On the 15 August 2024,the government announced that it will guarantee regional flight bookings for Rex customers throughout the voluntary administration process.This means that customers are guaranteed to fly or get a full refund if they book a flight during this period.The government reiterated the importance of air service reliability to regional communities.5Where a business enters voluntary administration,consumers ordinary legal rights such as consumer guarantee rights can be affected.What happens to consumers rights with respect to outstanding bookings,credits,gift cards,refunds and other reimbursements will depend on what happens in the administration process,and the appointed administrators have been providing information for consumers on this to date.The administrators should also provide information for consumers on these things in due course at the conclusion of the administration process.At the time of the initial announcement,the administrators said that Rex and Virgin Australia were exploring opportunities to support regional customers,which include Virgin Australia selling Rexs regional services through codeshare or interline arrangements and making Velocity Frequent Flyer benefits available to Rexs regional customers.In February 2024,Rex reported a statutory after-tax loss of$3.2 million for the 6 months ending 31 December 2023.This compared to a$16.5 million after-tax loss in the prior period.In early June 2024,the company issued a statement that John Sharp had been appointed to chairman from deputy chairman,and Neville Howell,who was the companys chief operating officer,had been appointed chief executive for 2 years.The same statement noted that Lim Kim Hai was removed as its executive chairman after 21 years in the role but has since remained on the board as a director.Rex serviced regional locations exclusively before it expanded onto intercity routes in 2021Prior to the grounding of its jet aircraft,Rex flew to 56 destinations across Australia.It commenced operations over 20 years ago as a regional service,servicing locations such as Dubbo,Merimbula and Mount Gambier.Rex also has arrangements with the Queensland and Western Australian 5 The Hon Catherine King MP,Flight guaranteed for regional Rex customers,media release,15 August 2024.7ACCC|Domestic airline competition in Australia|August 2024 reportgovernments to fly certain regional routes exclusively.At June 2024,Rex provides services across 33 regional and remote routes.After Rex entered voluntary administration,this included 20 routes on which it is the only airline.The airline has also played an important role in providing competition on some of Australias busiest routes since 2021 when it began offering services using leased Boeing 737 jet aircraft.Rex began offering services to and from Sydney and Melbourne in March 2021,and then expanded its offering to Adelaide,Brisbane,Canberra and the Gold Coast.In June 2024,Rex held approximately 5%of the total industry market share across both their jet-serviced and turboprop-serviced routes.Rexs circumstances are different from BonzasAlthough both Rex and Bonza have gone into voluntary administration,their circumstances are quite different.Bonza was a new company seeking to bring a new business model to Australia by using low airfares to stimulate demand on routes that were not served by any other airline.Some commentators have suggested that the large aircraft(186 seats)operated by Bonza,particularly on regional routes,did not support this business model.In contrast,Rex was a long-established regional airline that sought to take advantage of certain circumstances to expand on to larger routes with a new fleet of jet aircraft.For example,Rex used the opportunity to access cheaper aircraft during the pandemic,at a time when Virgin Australia was entering administration.6 The administrators have said shortages of pilots and supply chain issues around engine parts were both factors that put Rex in significant debt.A reformed slot scheme at Sydney Airport would have provided some limited assistanceBoth Bonza and Rex advocated for reforms to the way that take-off and landing slots were managed at Sydney Airport,saying that they could more effectively compete if they could get better access to peak time slots.Bonza did not include Sydney Airport in its network,while Rex holds slots at the airport for both its regional and now-suspended intercity operations.In February 2024,the Australian Government announced a broad package of reforms to the legislative slot management scheme at Sydney Airport,following a report by former Chair of the Productivity Commission Peter Harris in 2021.The reforms are welcomed and once in place,will help new and expanding airlines obtain slots at the capacity-constrained airport over time.Improved access to slots at Sydney Airport may have assisted Rex in building up its intercity operations.However,Rex going into administration also reflects the broader challenges of expanding an airline beyond the slot scheme.For example,with its limited fleet size relative to incumbent airlines,it is not clear whether Rex would have had sufficient access to additional aircraft,and the associated pilots and crew,should it have been able to obtain the additional peak hour slots.Further,due to its regional operations,Rex already held too many slots at the airport to be considered a new entrant under both the current and proposed version of the scheme,which means it would not benefit from any advantages for new entrants in the slot allocation process.6 ACCC,Airline competition report in Australia Report 3:March 2021,ACCC,2021.8ACCC|Domestic airline competition in Australia|August 2024 reportImplications for the domestic airline industryThe ACCC is conscious that decisions regarding Rex at this time will be critical for capacity and future competition.Should Rexs intercity services not re-commence,consumers would miss out on the competition that Rex provided with Qantas,Jetstar and Virgin Australia on 13 major routes including to and from Sydney,Melbourne,Brisbane,Cairns,Perth,and the Gold Coast.In June 2024,Rexs intercity jet-based services accounted for 2.8%of total industry market share,representing around 125,000 passengers.Airfares are generally lower where there is more competition on a route.In late June 2024,Rex introduced services between Perth and Melbourne,competing with Qantas Group and Virgin Australia.Following the entry of Rex onto this route,discounted airfares were available at$398,down 25%in real terms from July 2023.7 To promote this service,Rex also offered$99 sale fares Melbourne Perth one-way.8 This sale was then beaten by Virgin Australia within an hour of Rexs sale going live.9A competitive aviation sector is important to all Australians.The ACCC remains engaged with industry so that we can understand and protect competition in this sector.We use data obtained through our role in domestic airline monitoring to identify trends and behaviour in the industry,including that which may damage competition.The concentrated nature of the domestic aviation industry reinforces the importance of the ongoing transparency and scrutiny we bring through our monitoring role.We recognise the market position of Qantas Group and therefore pay close attention to both Qantas and Jetstars entry onto routes which are served by other operators.Competition and consumer issues in the aviation sector are a stated compliance and enforcement priority for the ACCC.We have investigated a range of concerns across the aviation industry,including those raised by Rex.In particular,we conducted a thorough investigation after Rex raised concerns in late 2020 and early 2021 about Qantas entering regional routes with low passenger numbers that had historically been operated by Rex,and Qantas adding capacity on intercity routes after Rex began operating on these routes.In March 2022,the ACCC concluded its investigation,noting that a range of factors impacted the competitive dynamics in the market at the time,particularly the COVID-19 movement restrictions and border closures.The relaxation of these restrictions simplifies evaluating the impact of capacity increases or pricing practices.The ACCC will continue to pay close attention to any behaviour that may be anti-competitive.2.2 BonzagoesintoliquidationIn a meeting held with administrators Hall Chadwick in early July 2024,creditors decided to place low-cost airline Bonza into liquidation.10 This followed the announcement in mid-June 2024 that there were ultimately no binding offers from potential buyers,despite multiple extensions of the deadline to submit offers throughout May 2024.7 BITRE Domestic Air Fares(Best Discount)index(cheapest available economy airfares).The price index is weighted across the 70 busiest domestic routes.8 Rex,Rex entices travellers west with snap$99 fare sale media release,20 June 2024,accessed 19 July 2024.9 R Ironside,Former Rex Chairman moves to reclaim position from directors who voted him out,The Australian,12 July 2024,accessed 25 July 2024.10 Hall Chadwick,2 July Press Release,media release,2 July,accessed 24 July 2024.9ACCC|Domestic airline competition in Australia|August 2024 reportAs a result,Hall Chadwick ultimately issued a statement confirming that over 300 staff had been officially terminated and all future flights cancelled.11Since late April,the competing airlines had offered free flights to Bonza customers and Virgin Australia had assisted travellers who were mid-journey at the time of Bonza suspending its operations.Following the announcement of staff terminations,Qantas,Jetstar12 and Virgin Australia also offered to prioritise hiring Bonza staff for all vacancies.As explored in the last Domestic Airline Competition in Australia report,13 although Bonza had not had the chance to expand and become a meaningful competitor to the incumbent airlines during its 12 months of operations,it significantly improved connectivity across the domestic network,particularly to regional areas.In March 2024,it serviced 30 routes exclusively,and competed with other airlines on a further 7 routes.With its limited capacity and market share(2%in March 2024)the collapse of Bonza is unlikely to have any immediate impacts on competition in the domestic industry,or on airfares.However,there are likely to be new entrants and added capacity on some of the routes serviced by Bonza over time.In June 2024,Jetstar announced that it will service Cairns Sunshine Coast from December 2024.14 This will be the first of Bonzas services that has been picked up by a competing airline.It was the most popular of the routes that were exclusively serviced by Bonza,in terms of both passenger demand and capacity.2.3 Sydneyrecoverycontinuestolagpost-pandemicAlthough the broader domestic airline sector has largely recovered from the pandemic in terms of passengers flying,some routes are faring better than others.Generally speaking,routes that represent leisure travel have recovered more strongly relative to routes that cater to significant levels of business travel.Furthermore,routes to and from Sydney have recovered at a slower rate relative to Brisbane and Melbourne.Although Melbourne Sydney is still the busiest route per month in Australia with over 570,000 passengers representing 12.7%of the market,it continues to have the lowest recovery rate of the Golden Triangle routes connecting Sydney,Melbourne and Brisbane.Passenger numbers in June 2024 on Melbourne Sydney were at 87.8%of pre-pandemic levels(June 2019),while Brisbane Sydney levels were at 93.4%of pre-pandemic levels.In comparison Melbourne Brisbane traffic was 3.7ove June 2019 levels(see figure 2 for more details of recovery rates on Major City routes).Outside of the Golden Triangle routes,the lowest recovery rate of the Major City routes was Canberra Sydney,which in June 2024 had reached just 67.4%of pre-pandemic levels.The sluggish recovery rates on these routes are reflected in seat capacity levels.Capacity levels at Canberra,Sydney and Melbourne airports in June 2024 were down by 11.6%,6.4%and 5.8%respectively from June 2019.However,airlines appear to have adjusted their capacity to reflect some of these structural changes in demand.Qantas Group maintained overall seat capacity and increased passenger levels by 1.9%over the last 12 months,but the composition across its 2 airline brands has changed.Since June 2023,Jetstar has increased its capacity by 9.7%(around 116,000 seats),while Qantas has reduced its capacity by 4.1%(around 101,000 seats).11 Hall Chadwick,11 June Press Release,media release,11 July,accessed 19 June 2024.12 Jetstar,Statement on support for Bonza customers,media release,30 April 2024,accessed 19 June 2024.13 ACCC,Domestic airline competition report in Australia May 2024,ACCC,2024.14 Jetstar,Jetstar announces new flights between Cairns and Sunshine Coast,media release,26 June 2024,accessed 30 July 2024.10ACCC|Domestic airline competition in Australia|August 2024 reportMeanwhile,recovery rates on other Major City routes surpassed pre-pandemic levels.Routes to and from Perth in June 2024 had increased capacity by 10.5%(87,000 seats)since June 2019.Capacity levels to the Sunshine Coast also increased significantly(by 15.7%),although from a lower base of around 112,000 seats.Following the collapse of Bonza however,capacity on the Sunshine Coast routes dropped by 34.5tween March 2024 and June 2024,representing around 68,500 seats.152.4 DemandforinternationaltravelcontinuestoincreaseDemand for international travel has continued to grow.Data from the International Air Transport Association(IATA)showed that globally,revenue passenger kilometres for June 2024 was 9.1%higher than June 2023.16 Separate data from the ABS showed that as at June 2024 short-term arrivals and departures to and from Australia increased by 12.8%compared to June 2023,but remained 2.2%lower than in June 2019.17Notably,the total number of short-term international arrivals into Western Australia increased by 23%in June 2024 compared to June 2023.International airlines have also continued to restore or add capacity,particularly on routes to and from Perth,notably:South African Airways recommenced direct flights between Perth and Johannesburg in late April.The route lifted capacity from 37%to 61%of prepandemic levels on services between Australia and South Africa.18Qantas introduced direct flights from Perth Paris in July.The new route will operate 4 flights a week over the European summer,Olympic and Paralympic periods before dropping to 3 services a week from mid-August.The service will add 75,000 additional seats between Australia and Europe each year.19 China Southern announced that it will recommence flights from Perth Guangzhou China in November.This service will operate 3 times a week and will deliver 86,000 seats to Perth.20Other additions to capacity from international airlines on routes to and from Australia include:China Eastern commencing 3 flights a week from Nanjing Melbourne at the end of June.The route lifts capacity on services between Melbourne and China to 92%of pre-pandemic levels.21 Beijing Capital Airlines also commenced a new service from Hangzhou Melbourne which began operating 3 times a week in mid-June.22Air New Zealand resuming direct seasonal flights between Cairns and Auckland on 2 April 2024.The route will operate 3 flights a week until 26 October 2024.2315 March 2024 was the last month of data the ACCC received on Bonza.16 IATA,Air Passenger Market Analysis June 2024,accessed 25 July 2024.17 ABS,Overseas Arrivals and Departures,Australia,15 August 2024,accessed 15 August 2024.18 Travel Weekly,South Africa bookings are back in action,30 April 2024,accessed 12 July 2024.19 Qantas,Au Revoir.Paris now just a direct Qantas flight away,media release,14 July 2024,accessed 24 July 2024.20 Perth Airport,Direct services from China return to Perth Airport with China Southern Airlines,media release,27 May 2024,accessed 24 July 2024.21 Melbourne Airport,Victoria connects with sister state as China Eastern expands operations,media release,29 June 2024,accessed 24 July 2024.22 J Nelson,Beijing Capital Airlines first Hangzhou flight arrives in Melbourne,Australian Aviation,17 June 2024,accessed 24 July 2024.23 World of Aviation,Air New Zealand resumes direct seasonal flights between Cairns and Auckland,10 April 2024,accessed 5 July 2024.11ACCC|Domestic airline competition in Australia|August 2024 reportSingapore Airlines upsizing the aircraft on the Singapore Cairns route.The A350 service will fly 4 days a week on the route and will deliver around 23,000 additional seats.24Recent data from Flight Centres FCM Travel and Corporate Traveller showed that the average cost of an international economy airfare departing from Australia decreased on average by 13tween January and June 2024.Flights between Australia and Indonesia recorded the most significant decline in airfares over this period,falling roughly 17.7%.252.5 QantasandPerthAirportreachlandmarkcommercialagreementIn May 2024,Qantas and Perth Airport reached a$3 billion,12-year commercial agreement for Perth Airport to invest in new terminal facilities and a new parallel runway.This investment forms part of a broader$5 billion capital investment program by Perth Airport which is set to also deliver 2 multi-story carparks,major access roadworks and the airports first hotel.This new agreement will position Perth to become the airlines second biggest international gateway behind Sydney.26Perth currently has 2 separate international terminals on either side of the airports landing strip,requiring a 15-minute drive for travellers transiting between them.Under the new agreement,Qantas and Jetstar will relocate to the new terminal and plan to add 4.4 million seats each year to and from Perth by the time the new terminal opens in 2031.This planned growth will transition the state into a major domestic and international hub for the airlines.The landmark agreement resolves outstanding commercial issues between Qantas and Perth Airport including a long court battle over fees and capital costs.27Perth Airport will undergo significant changes in preparation for the construction of the new facilities.The first change involves relocating Jetstars domestic services to Terminal 2 from 2 September.282.6 GovernmentcommencesprocesstoappointSlotManageratSydneyAirportThe reforms to the Sydney Airport Demand Management Scheme,which the government announced in February 2024,seek to improve the schemes compliance and enforcement framework and ensure that slots at the airport are allocated in a more competitive manner.On 5 August 2024,the government commenced a competitive tender to appoint a new Slot Manager at Sydney Airport,which is one of the proposed reform measures.The new Slot Manager will need to demonstrate how they manage and mitigate conflicts of interest and comply with a statement of expectations,including governance and transparency requirements.2924 Cairns Airport,Singapore Airlines launches A350 Service to Cairns in boost to Tropical North Queensland,media release,3 April 2024,accessed 5 July 2024.25 R Ironside,Overseas travel getting cheaper as fares fall for the fourth consecutive quarter,The Australian,24 July 2024,accessed 25 July 2024.26 Perth Airport,Qantas and Perth Airport reach landmark agreement,media release,31 May 2024,accessed 19 June 2024.27 A Whitley,Perth to be a Qantas hub under$3b peace deal,Australian Financial Review,31 May 2024,accessed 19 June 2024.28 Perth Airport,Passengers encouraged to plan their journey with major construction works to begin,media release,12 August 2024,accessed 12 August 2024.29 The Hon Catherine King MP,Albanese Government strengthens aviation competition at Sydney Airport media release,5 August 2024.12ACCC|Domestic airline competition in Australia|August 2024 reportThe ACCC considers that reforms to the Sydney Airport Demand Management Scheme,if implemented effectively,would help support greater airline competition,and therefore,improved consumer outcomes.The measures should make it more difficult for airlines to hold on to more slots than they need at a capacity-constrained Sydney Airport,meaning more slots will become available for new and expanding airlines.2.7 AirservicesAustralialodgesamendedproposalforpriceincreasesThe ACCC is currently assessing a proposal from Airservices Australia to increase prices for airlines for its flight navigation,air traffic control and aviation rescue and fire-fighting services.Airservices submitted an initial draft price notification to the ACCC in September 2023 covering the period from 202324 to 202627 and proposing price increases totalling 19%.Airservices submitted a revised draft notification in November 2023 removing 202627.The ACCC sought stakeholder views via an issues paper based on the revised draft notification.On 10 July 2024,Airservices submitted a letter outlining further amendments to its draft price notification,following stakeholder and ACCC feedback.The July 2024 proposal specifies a revised 6%price increase.Airservices said that if this price increase is most readily expedited by having regard to only the period from 202425 to 202526,Airservices would be happy for the ACCC to assess the proposal on that basis.Airservices has also provided revised operating expenditure and air traffic forecasts.The ACCCs assessment of Airservices draft price notification will be based on the amendments in the 10 July 2024 letter.The ACCC will consult with stakeholders on this proposal as part of the upcoming preliminary views paper,expected to be published at the end of August 2024.The ACCCs role is to advise whether or not it objects to the proposed price notification.13ACCC|Domestic airline competition in Australia|August 2024 report3.Industry activity and reliability of performanceThis chapter discusses domestic airline passenger numbers,seat capacity and rates of flight cancellations and delays.The Qantas Group(comprising Qantas and Jetstar),Rex,Virgin Australia(including Tigerair until June 2020)and Bonza(until March 2024)supplied the ACCC monthly passenger and seat capacity data up to June 2024 to inform our analysis in section 3.1.Section 3.2 uses Bureau of Infrastructure and Transport Research Economics(BITRE)data up to June 2024 to analyse cancellation rates and on-time performance.3.1 Bonzasexitreducespassengerlevelsandcapacityinthelastquarterof202324The collapse of Bonza has led to a reduction in aeronautical activity in recent months.This was followed by news of Rex entering voluntary administration and terminating its intercity services,however the impact of Rexs circumstances on passenger levels will be different.While Bonza stimulated new traffic on unserved routes with low fares,passengers who would have flown with Rex will likely switch to another airline,bringing less of an impact to overall passenger levels.Figure 1 shows the monthly passenger levels and seat capacity for 2019,2023 and 2024.It illustrates reductions in activity levels from April to June 2024,with June 2024 levels aligning closely with June 2023.Figure 1:Monthly passenger levels and seat capacity 2019,2023 and 2024Jan FebMar AprMayJunJulAugSepOctNov DecJan Feb Mar Apr May JunJul Aug Sep Oct Nov DecMillionsPassengersSeat capacity2019202320240123456701234567Source:Data collected by the ACCC from Bonza,Jetstar,Qantas,Rex and Virgin Australia.14ACCC|Domestic airline competition in Australia|August 2024 reportWhile passenger and seat capacity numbers had been tracking at 2019 levels for the first 3 months of 2024,both have dropped away in more recent months.The relatively lower levels from April to June is in addition to the seasonal decline in demand and can be partly attributed to the collapse of Bonza,which had accounted for about 2%of the market in March 2024.Australias major airlines carried close to 4.5 million domestic passengers in June 2024.This represented 97.8%of June 2019 levels and was consistent(0.3%lower)with June 2023 levels.The airlines flew around 5.9 million seats in June 2024,which was 3.2low the seat capacity level recorded in June 2019.This represents around 55,000 less seats(or 0.9%less capacity)than June 2023,when the industry was still considered to be recovering.The industry-wide average load factor,measured by the percentage of available seats filled by passengers,has also tracked generally along pre-pandemic levels.In June 2024 the load factor was 76.5%,which was half a percentage point higher than in June 2023 and 0.8 percentage points higher than in June 2019.Figure 2 ranks routes connecting Major Cities by the degree to which they have recovered to pre-pandemic levels of passengers(June 2019).Of these,9 routes exceeded 100%of pre-pandemic passenger levels,including 7 routes to and from the Gold Coast,and Perth.Figure 2:Passenger levels on routes connecting Major Cities June 2019 compared to June 2024PassengersPassenger recovery(%)%of June 2019June 2019June 2024CBR SYDAVV SYDCBR MELMEL SYDPER SYDMEL PERBNE SYDADL MELADL CBRCBR PEROOL SYDADL SYDBNE CBRADL PERAVV OOLADL BNEBNE MELMEL OOLBNE PEROOL PERADL OOLCBR OOL0100,000300,000500,000700,0000 000028.1%Source:Data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.Note:Virgin Australia data for 2019 includes data for Tigerair.15ACCC|Domestic airline competition in Australia|August 2024 report3.2 Industryservicereliabilitymovesclosertolong-termaveragesReliability of services in the domestic industry has continued to improve over recent months with cancellation rates trending towards long-term industry averages.Figure 3 shows the monthly cancellation rates,that is flights cancelled 7 days before the departure date,for each of the monitored airlines compared to the industry average.It does not include the cancellation of flights by Bonza after its collapse in April due to the unavailability of data.Figure 3:Airline cancellation rates June 2022 to June 2024QantasJetstarVirgin AustraliaRexBonza Industry averageIndustry long-term averageCancellation rate(%)02468101214161820Jun22Jul22Aug22Sep22Oct22Nov22Dec22Jan23Feb23Mar23Apr23May23Jun23Jul23Aug23Sep23Oct23Nov23Dec23Jan24Feb24Mar24Apr24May24Jun24Source:BITRE,On-time performance time series June 2024;data collected by the ACCC from Bonza(up to March 2024).Qantas figures include QantasLink and Virgin Australia figures include VARA.Note:A flight is regarded as a cancellation if it is cancelled or rescheduled less than 7 days prior to its scheduled departure time.In May 2024 the industry cancelled 2.1%or close to 1,000 flights.This represented the first time that the industry cancellation rate was better than the long-term industry average of 2.2%since October 2020.Despite worsening slightly in June 2024 to 2.5%,cancellation rates across the industry have stayed closer to the long-term average in Q4 of 202324.The ACCC considers that the results in May demonstrate the industry is capable of out-performing the long-term industry average and we will continue to watch this closely.Airlines have said that a fuel supply issue at Perth Airport and significant weather events on the east coast contributed to slightly higher cancellation rates in June 2024 compared to previous months.On 1 June 2024 Perth Airport lost access to jet fuel for 15 hours due to a load pressure issue within the fuel supply system.At least 44 domestic flights were cancelled or delayed as a result.30 Qantas recorded the highest cancellation rate in June 2024 at 3.3%,followed by Jetstar at 2.2%and Virgin Australia at 1.9%.Rex recorded the lowest cancellation rate amongst the airlines at 1.1%.30 H Cross,Perth Airport cancellations:Full list of flights impacted by major fuel issue,PerthNow,1 June 2024,accessed 12 August 2024.16ACCC|Domestic airline competition in Australia|August 2024 reportDespite the overall improvement in airline cancellation rates over recent months,some major domestic routes have continued to perform poorly.In June 2024 cancellation rates were relatively high on flights between Sydney and Melbourne(5.8%),Sydney and Canberra(5.0%)and Adelaide and Perth(4.3%).Figure 4 shows that on-time arrival rates also improved in the quarter to June 2024.Despite the improvement,the rate of flights that arrived on time in June(76.8%)remained below the long-term average of 80.9%and represented more than 10,000 flights arriving more than 15 minutes late.Figure 4:Airline on-time performance rates(arrivals)June 2022 to June 2024Ontime performance rate(arrivals)(%)0102030405060708090Jun22Jul22Aug22Sep22Oct22Nov22Dec22Jan23Feb23Mar23Apr23May23Jun23Jul23Aug23Sep23Oct23Nov23Dec23Jan24Feb24Mar24Apr24May24Jun24QantasJetstarVirgin AustraliaRexBonza Industry averageIndustry long-term averageSource:BITRE,On-time performance time series June 2024;data collected by the ACCC from Bonza(up to March 2024).Qantas figures include QantasLink and Virgin Australia figures include VARA.Note:A flight is considered on-time if it arrives within 15 minutes of the scheduled arrival time shown on the airlines schedule.Qantas reported the highest on-time performance amongst the monitored airlines in June 2024 at 78.5%,followed by Rex(75.9%)and Virgin Australia(74.8%).Jetstar reported the lowest on-time performance with 73.6%of flights arriving on time.This was a significant decline from 80.9%in March 2024.In June 2024,Qantas introduced Group Boarding which allows travellers to board the aircraft within smaller groups rather than queuing up with all passengers at the same time.It aims to make the boarding process more efficient to prevent departure delay.Qantas hopes the new process will improve on-time performance,following successful trials at Brisbane,Sydney,Melbourne and Perth airports.3131 Qantas,Group 1,please come forward:Qantas rolls out new boarding process,media release,3 June 2024,accessed 24 July 2024.17ACCC|Domestic airline competition in Australia|August 2024 report4.Competition This chapter discusses domestic airline competition and uses the number of routes operated by the 4 airline groups and domestic passenger market share by airline.As with chapter 3,Qantas Group,Rex and Virgin Australia have supplied the ACCC with monthly data up to June 2024 to inform this analysis.The ACCC only has data from Bonza for up to March 2024 even though it operated services until the end of April 2024.The 2 airlines within the Qantas Group(Qantas and Jetstar)are not considered to be in competition with each other.4.1 Rexswithdrawalfromintercityrouteswouldmeannoroutesservicedbymorethan2airlinegroupsIn recent years the expansion of Rex and the launch of Bonza meant that a sizeable proportion of passengers flying on Australian domestic routes benefited from competition between at least 3 competing airline groups.However,the collapse of Bonza and the withdrawal of Rex from intercity routes means that no route will have more than 2 competing airline groups.Figure 5 shows the proportions of passengers that travelled on routes with 1,2,3 or 4 different airline groups up until June 2024.For the past 12 months,routes serviced by 3 airline groups represented the largest share of domestic passengers,at 50%in June 2024.Between November 2023 and April 2024,for the first time in Australia there was a route(Melbourne Gold Coast)with 4 competing airline groups,representing around 4%of domestic passengers.Figure 5:Share of passengers on routes serviced by 1,2,3 and 4 airline groups January 2021 to June 2024Share of monthly passengers(%)1 airline group2 airline groups3 airline groups01020304050607080904 airline groupsJan21Mar21May21Jul21Sep21Nov21Jan22Mar22May22Jul22Sep22Nov22Jan23Mar23May23Jul23Sep23Nov23Jan24Mar24May24Jun24Source:Data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.Note:Airline groups comprise Qantas Group(including Jetstar),Virgin Australia,Rex and Bonza(up to March 2024).18ACCC|Domestic airline competition in Australia|August 2024 reportWhile not yet shown in the chart,this dynamic will change significantly with the collapse of Bonza in April and Rex ceasing its intercity operations in late July.Even though both Bonza and Rex provided relatively limited capacity on competing routes,the exit of both airlines may have consequences for passengers in terms of higher airfares and reduced choice.The Bonza and Rex developments have less significance for the distribution of passenger market share between the domestic airlines.Figure 6 shows that Bonza only accounted for 2%of the market prior to its exit.Rex held a 4.6%passenger market share in June 2024,of which its now ceased jet-serviced routes accounted for 2.8%.Figure 6:Airline passenger market shares across all domestic routes June 2022 to June 2024Market share(%)Qantas GroupQantasJetstarVirgin AustraliaRexBonza0 0Pp%Jun22Aug22Oct22Dec22Feb23Apr23Jun23Aug23Oct23Dec23Feb24Apr24Jun24Source:Data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.For 2 years to June 2024,market shares had remained relatively stable.Qantas Group(comprising of Qantas and Jetstar)continued to carry a majority of passengers(63.1%)in June 2024,followed by Virgin Australia(32.3%).Compared to June 2023,Jetstars market share increased 2.2%percentage points to 25.3%,Qantas market share decreased 0.8%to 37.9%,and Virgin Australia gained 0.4%to 32.3%.Rexs market share(4.6%)did not change between June 2023 and June 2024.The fall in Jetstars market share between April and June 2024 reflects the lower seasonal demand for the low-cost carriers leisure-based service routes.Over the same period,Qantas and Virgin Australias market shares increased,reflecting a shift in market demand to corporate travel.19ACCC|Domestic airline competition in Australia|August 2024 report5.Airfares and jet fuel pricesThis chapter discusses trends in domestic airfares and the price of jet fuel.The cost of jet fuel is a major contributor to ticket prices.The Qantas Group(comprising Qantas and Jetstar),Rex and Virgin Australia have supplied the ACCC with monthly data up to June 2024 to inform our analysis of average revenue per passenger in section 5.1.This section also draws on BITRE airfare data up to July 2024.The jet fuel data in section 5.2 is current to June 2024.5.1 Airfareshavetrendedlowerin2024,drivenbyadecreaseinfaresonMajorCityroutesAverage revenue per passenger reflects movements in airfares across all types of domestic tickets and fare classes.Much of the analysis in this section is based on changes in real prices,which means they have been adjusted for inflation.Figure 7 shows average revenue per passenger to June 2024,represented as an index to show changes relative to June 2019.In June 2024 average fare revenue was 5.9%lower than June 2019 when adjusted for inflation,but 13.8%higher in nominal terms.Figure 7:Index of average fare revenue per passenger June 2019 to June 2024Index(Jun19=100)020406080100120140160NominalRealJun19Aug19Oct19Dec19Feb20Apr20Jun20Aug20Oct20Dec20Feb21Apr21Jun21Aug21Oct21Dec21Feb22Apr22Jun22Aug22Oct22Dec22Feb23Apr23Jun23Aug23Oct23Dec23Feb24Apr24Jun24Source:ACCC calculations using data from the ABS and data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.Note:(1)Average revenue per passenger includes both economy and business fare revenue.It excludes data associated with ancillaries,such as baggage fees,fees for seat selection and food and drink sold on board.(2)Data has been adjusted for inflation using ABS CPI quarterly data up to June 2024.(3)Grey bars indicate December and Easter holiday periods.20ACCC|Domestic airline competition in Australia|August 2024 reportAverage fare revenues have trended lower in the first half of 2024.Compared to June 2023,average revenue per passenger was lower in both nominal terms(-1.6%)and real terms(-5.2%),driven down by falling average fares on Major City routes,as per Figure 8.Figure 8 shows the trend in average monthly airline revenue per passenger since June 2019 by route type(Major Cities,Regional,and Remote).Average revenue per passenger levels fluctuated most on Major City routes,falling to as low as 52%of the June 2019 level in January 2022 when airlines offered low fares to stimulate the post-COVID recovery.In June 2024,average real revenue per passenger levels on Major City routes were at 87.6%of the June 2019 price level,falling through 2024 due to lower fares on some east-west routes,and Gold Coast routes.Figure 8:Index of average real fare revenue per passenger by route type:June 2019 to June 2024Index(Jun19=100)Major CitiesRegionalRemote020406080100120140160Jun19Aug19Oct19Dec19Feb20Apr20Jun20Aug20Oct20Dec20Feb21Apr21Jun21Aug21Oct21Dec21Feb22Apr22Jun22Aug22Oct22Dec22Feb23Apr23Jun23Aug23Oct23Dec23Feb24Apr24Jun24Source:ACCC calculations using data from the ABS and data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.Note:(1)Average revenue per passenger includes both economy and business fare revenue.It excludes data associated with ancillaries,such as baggage fees,fees for seat selection and food and drink sold on board.(2)Data has been adjusted for inflation using ABS CPI quarterly data up to June 2024.(3)Grey bars indicate December and Easter holiday periods.Average revenue per passenger in nominal terms are not shown on the chart,but on Major City,Regional,and Remote routes were 6%,27%,and 18%higher respectively in June 2024 compared to June 2019.Average revenue per passenger levels have increased through 2024 on Regional routes,with revenue per passenger increasing on several regional Queensland routes.At June 2024 the regional revenue per passenger index was at 105.2%of the June 2019 level in real terms.On Remote routes,the index was at 97.3%of the June 2019 level.Average real revenue per passenger on Major City and Regional routes fluctuate month-to-month within similar revenue ranges.However average revenue per passenger on Remote routes are typically around 50%higher,because many of these routes do not have sufficient passenger volumes to allow economical use of larger aircraft.Airfares have not increased significantly since June 2019 on those routes where at least one additional airline group has serviced the route since 2023.Figure 9 shows the change in average real revenue per passenger relative to June 2019 levels.It compares routes with increased competition since January 2023 relative to 2019,with all routes continually serviced since 2019.21ACCC|Domestic airline competition in Australia|August 2024 reportFigure 9:Index of average real fare revenue per passenger routes with increased competition and all routes 3-month rolling average:June 2019 to June 2024 All continually serviced routesRoutes with more competitors in 20232024 than 2019Index(Jun19=100)020406080100120Jun19Aug19Oct19Dec19Feb20Apr20Jun20Aug20Oct20Dec20Feb21Apr21Jun21Aug21Oct21Dec21Feb22Apr22Jun22Aug22Oct22Dec22Feb23Apr23Jun23Aug23Oct23Dec23Feb24Apr24Jun24Source:ACCC calculations using data from the ABS and data collected by the ACCC from Bonza(up to March 2024),Jetstar,Qantas,Rex and Virgin Australia.Note:(1)Average revenue per passenger includes both economy and business fare revenue.It excludes data associated with ancillaries,such as baggage fees,fees for seat selection and food and drink sold on board.(2)Data has been adjusted for inflation using ABS CPI quarterly data up to June 2024.(3)All routes means routes continually serviced since 2019 and does not include regulated routes or multi-hop routes.Compared to price levels on all routes continually serviced,routes with increased competition have been subject to more significant price discounting in periods including winter 2021 and summer 202122.Average fare revenue per passenger has also remained lower in all months since February 2023,indicating that increased competition has delivered lower prices to consumers that travel on these routes over that period.The routes with increased competition are primarily Major City routes,particularly with the expansion of Rex into these routes,but also includes some regional routes.Following Rexs withdrawal from Major City routes,many of the Major City routes that did have increased competition now operate with the same number of airline groups as in 2019.Price indices calculated by BITRE have shown a fall in the real price of domestic airfares from July 2023 to July 2024.32 BITREs indices are based on the cheapest available fare from any airline and therefore may not represent price movements more broadly.Figure 10 shows that best discount economy airfares(measured in real terms)have remained subdued in between April and July 2024,following spikes in airfares in January and March 2024.32 BITRE collects the lowest fare available for the last Thursday of the current month in each fare class.This is recorded for each route.The survey is conducted 3 weeks ahead of the hypothetical travel date.All fares are one-way except for the best discount fare which is a return fare based on a return travel date 2 weeks after the departure date.22ACCC|Domestic airline competition in Australia|August 2024 reportFigure 10:Real price index of the best discount economy airfares June 2019 to July 2024Best discount Best discount(13 month moving average)020406080100120Index(Jul03=100)Jun19Aug19Oct19Dec19Feb20Apr20Jun20Aug20Oct20Dec20Feb21Apr21Jun21Aug21Oct21Dec21Feb22Apr22Jun22Aug22Oct22Dec22Feb23Apr23Jun23Aug23Oct23Dec23Feb24Apr24Jun24Jul24Source:BITRE Domestic Air Fares(Best Discount)index(cheapest available economy airfares).The price index is weighted across the 70 busiest domestic routes.Note:Grey bars indicate December and Easter holiday periods.Airfares recorded between April 2021February 2022 may be impacted by the governments half-price ticket program(TANS).Discounted airfares are typically at their highest during school holiday periods,particularly during Christmas and Easter,and lowest in winter months.In July 2024 the best discount economy airfares were 9%lower than in July 2023.By route,price changes in discounted airfares between July 2023 and July 2024 were mixed.Of the Major City routes,real prices fell on Adelaide Brisbane by 32%to$262 and on Adelaide Melbourne by 31%to$151.The most significant price declines were on Darwin Perth(-60%to$524)and Adelaide Darwin(-58%to$372).These routes were affected by price spikes in July of previous years but not in 2024.With Rexs short-lived entry onto Melbourne Perth in late June,discounted airfares were available at$398 for flights in late-July 2024,down 25%from July 2023.Rex also offered$99 sale fares Melbourne Perth one-way.33 This was beaten by Virgin Australia within an hour of Rexs sale going live.34The highest percentage increase in discounted airfares in the 12 months to July 2024 occurred on Melbourne Gold Coast,up 38%to$252.On other routes Bonza exited,over the 12-month period,discount airfares were:up 19%to$330 on Sunshine Coast Melbourne up 17%to$256 on Avalon Gold Coastup 8%to$398 on Melbourne Mildura.Discounted airfares also increased on the busiest route,Melbourne Sydney,up 21%to$183.Bonza did not offer services on this route.BITRE also calculates price indices for business and restricted economy airfares,which are derived from the lowest available fare observed by BITRE.In contrast to the trend in discount fares,between July 2023 and July 2024 the price index for business airfares increased by 9.2%to 62.2,the highest 33 Rex,Rex entices travellers west with snap$99 fare sale,media release,20 June 2024,accessed 7 August 2024.34 R Ironside,Former Rex Chairman moves to reclaim position from directors who voted him out,The Australian,12 July 2024,accessed 25 July 2024.23ACCC|Domestic airline competition in Australia|August 2024 reportlevel since September 2022.Restricted economy airfares remained relatively stable,increasing by 0.7tween July 2023 and July 2024.5.2 JetfuelpricescontinuetotrenddownwardsJet fuel is a significant contributor to an airlines operating costs.It will typically account for between 15%and 25%of an airlines operating costs,but this can vary depending on factors such as the price of jet fuel,the type of aircraft and the route.Some airlines will shield themselves from the volatility of jet fuel prices through hedging,which is essentially buying an amount of fuel at a fixed price for later delivery.Figure 11 shows the jet fuel prices in real terms between June 2022 and June 2024.In real terms,jet fuel was A$151.2 per barrel in June 2024,a 44.2crease from the high price recorded in June 2022(A$270.9),but still 3.4%higher than in June 2023.Figure 11:Real jet fuel and Brent crude oil prices June 2022 to June 2024$A per barrelJet fuelBrent crude oil050100150200250300Jun22Jul22Aug22Sep22Oct22Nov22Dec22Jan23Feb23Mar23Apr23May23Jun23Jul23Aug23Sep23Oct23Nov23Dec23Jan24Feb24Mar24Apr24May24Jun24Source:ACCC calculations using ABS,RBA and US Energy Information Administration data.Note:US Gulf Coast Jet Fuel prices converted into current Australian dollar terms.The price an airline pays for jet fuel will also vary depending on the ports to which its aircraft operate and the respective region-specific jet fuel benchmarks.The latest month of data is to June 2024.Brent crude oil was A$123.7 per barrel in June 2024.This represented a 35.6crease from the high price recorded in June 2022($192.2),but a 6.8%increase from last year.24ACCC|Domestic airline competition in Australia|August 2024 report6.AircraftfleetmanagementinAustraliaFleet management is a critical part of an airlines operations.It requires careful consideration of what aircraft to acquire,how many,and when.These decisions can have long lasting impacts on an airlines ability to meet customer expectations in terms of network reach,frequency of flights,airfares,passenger comfort,service reliability and environmental concerns.The high cost of acquiring,operating and maintaining aircraft also means these decisions need to be optimised if the airline is to be competitive and financially sustainable.Over the past few years,airlines have been affected by persistent global supply chain issues in the aircraft sector,following disruptions caused by the COVID-19 pandemic.These disruptions stemmed from labour force shortages for both building and maintenance of aircraft,as well as delays in delivery times for spare parts,resulting in longer than expected wait times and higher prices being paid for aircraft.These issues have in turn impacted airlines capacity planning and flight scheduling,as well as the financial sustainability of their operations and ability to compete.New and smaller airlines can face additional challenges.Firstly,relative to incumbent airlines,if existing aircraft are unavailable due to repair or maintenance,then these airlines are less likely to have fleet available to support their operations.They may also have reduced ability to access capital which can make it challenging to secure finance for fleet.This chapter provides an overview of the key characteristics of aircraft fleet in the domestic passenger market and how this has evolved over time.It also discusses some key fleet management issues and how this can affect the competitiveness of the domestic airline industry.6.1 AirlinesrelyondifferentaircrafttypestoservicetheirnetworkAirlines rely on a range of different aircraft to service the Australian domestic air passenger market.The choice of aircraft for a particular route can significantly affect the operational performance of the airline and its competitiveness in the market.Factors airlines need to consider include:expected demand and capacity on that route,accounting for factors such as seasonality and distancethe airlines expected demand and capacity across the broader domestic network(and internationally where applicable)andthe airlines fleet management strategy,including in relation to future fleet renewal and planned maintenance.The aircraft that predominantly service the industry can be broken down into 3 categories:wide-body,large narrow-body and small narrow-body(see Figure 12).25ACCC|Domestic airline competition in Australia|August 2024 reportFigure 12:Passenger aircraft body typesLARGE NARROW-BODYRange 5,0006,500 kmSeats 151 Single-aisle Cabin width 34 mAirbus A320Airbus A321Boeing 737800Boeing 737 MAX-8Boeing 737 MAX-10WIDE-BODYRange 11,00015,000 kmSeats 230 Dual-aisle Cabin width 57 mAirbus A330Airbus A380Boeing 747400Boeing 7878Boeing 7879SMALL NARROW-BODYRange 1,0006,000 kmSeats Up to 150 Single-aisle Cabin width 24 mAirbus A220Boeing 717200De Havilland Canada Dash-8Fokker 100Embraer 190SAAB 340Source:Massachusetts Institute of Technology Global Airline Industry Program.Note:Typical seat capacity is based on general 2-class seat configuration.Wide-body aircraft are characterised by 2 passenger(dual)aisles and are flown on long-haul international flights.In some circumstances,airlines have flown these aircraft on high-demand domestic routes such as Melbourne Sydney and Brisbane Sydney,but this is rare.For example,Qantas has flown the Airbus A380 which can seat up to 485 passengers.Large narrow-body aircraft by comparison are characterised by a single passenger aisle and are flown on most of Australias domestic Major City routes.They are typically favoured by airlines as they represent economies of scale in accordance with the level of demand.For example,Rex had been exclusively flying Boeing 737800s on its intercity routes,which have a seating capacity of 176.Small narrow-body aircraft are also characterised by a single passenger aisle but with less seats per row and includes both small jets and turboprop aircraft.There are also some significant variations in capacity within this category.For example,the Airbus A220 that Qantas has recently acquired can seat just over 130 passengers,compared to the Dash 8 that QantasLink utilises on remote routes such as Cloncurry to Mount Isa,which can seat around 70 passengers.The SAAB 340 aircraft utilised by Rex on routes such as Esperance Perth seat around 34 passengers.Small narrow-body aircraft are generally cheaper to operate and therefore suit routes with less demand,but the lack of economies of scale means the cost per passenger is normally higher.Figure 13 shows the aircraft utilised by each of the monitored airlines on domestic routes,including any wet-leased aircraft,in June 2019 compared to June 2024,allowing for an observation of the key changes in each airlines aircraft fleet over 2 stable time periods.3535 The period in between was volatile as it was largely impacted by COVID-19 disruptions.26ACCC|Domestic airline competition in Australia|August 2024 reportFigure 13:Aircraft fleet utilised by body type and airline,June 2019 and June 20240 0%Jun24Jun19Jun24Jun19Jun24Jun19Jun24Jun19Virgin AustraliaRexQantasJetstarShare of fleet by aircraft body typeWide-bodyLarge narrow-bodySmall narrow-body5!&wh86#0A8612254542442148168Source:Civil Aviation and Safety Authority and data provided to the ACCC by Qantas,Jetstar,Virgin Australia and Rex.Note:Aircraft totals included on the right-hand side of the chart represent aircraft utilised for domestic RPT services in the reference month,including wet-leased aircraft.Excludes aircraft in maintenance.Jetstar and Qantas have maintained a relatively similar fleet composition compared to 2019,although both airlines have increased capacity(by 13 and 30 aircraft respectively).Rex added 9 Boeing 737s(large narrow-body aircraft)to its fleet to expand into major city routes since 2021,although these aircraft are now being handed back to the lessor now that Rex has withdrawn from these routes.Virgin Australia utilised an additional 6 large narrow-body aircraft on its domestic routes in June 2024 than June 2019(excluding Tigerair).The wide-body aircraft that were utilised in June 2019 were no longer utilised in 2024.This reflects the fact that wide-body aircraft are rarely used for domestic flights.Fleet size can impact the ability for an airline to compete effectively.For example,airlines with a larger fleet are more likely to achieve economies of scale in terms of acquiring the aircraft,training staff(e.g.pilots and maintenance)and providing maintenance support.There may also be more options to switch aircraft around to accommodate capacity changes due to seasonal peaks.The delays in turnaround times for fleet repairs and new aircraft due to global supply chain issues across the aircraft manufacturing sector(see section 6.3.1 for details)may leave airlines with smaller fleet without the necessary aircraft to service their scheduled flights.27ACCC|Domestic airline competition in Australia|August 2024 reportAircraft fleet average age The age of a fleet can indicate whether the airline has continued to invest in the latest aircraft technology.This can improve the customer experience through modern interior design and facilities,as well as offer the airline improved reliability and fuel efficiency.In contrast,an older fleet may represent poorer customer experience and higher fuel and maintenance costs.Table 1 summarises the average age of aircraft in Australia by body type,compared to the national and global average.Table 1:Aircraft average fleet age by body type,national and global averages at June 2024NationalGlobalWide-bodyLarge narrow-bodySmall narrow-bodyAll typesAll typesAverage fleet age13.013.324.216.811.6Source:Domestic fleet age data is calculated from the Civil Aviation and Safety Authority(CASA)database.Global fleet age data is sourced from IATA.Note:Aircraft retrieved from CASA aircraft registration on 23 July 2024,including all aircraft registered under or operated by Qantas Group,Virgin Australia and Rex.Excludes cargo aircraft.Australias fleet is relatively old compared to the rest of the world.According to the database of aircraft held by CASA,the average age of aircraft registered or operated by Jetstar,Qantas,Rex and Virgin Australia was 16.8 years.This compares to the global average of 11.6 years.366.2 AustraliasaircraftfleetisabouttogothroughatransitionWhile Table 1 indicates that Australias domestic airline fleet is relatively older than the global average,a review of the airlines fleet renewal programs indicates that this is about to change.It is essential for airlines to ensure that they remain competitive by planning for investment in aircraft fleet.Fleet planning can involve adding capacity to existing aircraft and replacing ageing aircraft.Airlines need to plan for future acquisitions.Aside from the significant financial outlay of purchasing the aircraft,airlines also need to go through a range of regulatory clearances and training of pilots and crew to prepare for the operation of aircraft.From the time an airline places an order for aircraft,it typically takes several years before the aircraft are ready for flying.Global supply chain issues that have persisted since the COVID-19 pandemic have extended these timeframes further,with delays in delivery times and a shortage of trained pilots(see section 6.3 for more details).Alternatively,to operate additional services sooner,airlines lease aircraft or enter partnership arrangements with other airlines.Airlines may also choose to refurbish existing aircraft cabins in lieu of upgrading its existing fleet.Airline fleet renewal programsAn airline will often source aircraft from the one manufacturer to obtain economies of scale in terms of maintenance,training costs and spare parts replacement.37 Up until recently,Qantas,Virgin Australia,and Rex,have predominantly flown Boeing aircraft on major city routes.However,this is beginning to change with Qantas and Jetstar deploying fleet renewal programs that represent a transition towards Airbus aircraft.36 IATA,Balancing fleet age for efficiency and sustainable growth,IATA,8 September 2023,accessed 2 July 2024.37 A Nowakowski,Op-Ed:Flying Single vs.Diverse Aircraft Types,Airways,10 September 2023,accessed 18 July 2024.28ACCC|Domestic airline competition in Australia|August 2024 reportThere has been greater disparity in the aircraft deployed for regional and remote routes,with Qantas deploying Airbus,Boeing,Fokker,de Havilland and Embraer aircraft,while Rex has flown SAABs for its regional and remote routes.QantasQantas announced its current fleet renewal program in mid-2022.38 The program is expected to accommodate growth for at least the next decade with the first tranche of aircraft,the Airbus A220,that were announced as part of this program operating on flights in the first half of 2024.39In early 2024,Qantas announced that it had ordered 29 A220s which will gradually replace its fleet of Boeing 717s.Qantas A220s have a 2-class seat configuration of 137 seats compared to Boeing 717s which had up to 125 seats.Qantas commenced services on its first 2 A220s in March 2024,with the third A220 delivered in August.40 These aircraft have been used to fly passengers on its Canberra Melbourne,Brisbane Melbourne and Hobart Melbourne services.A further 5 aircraft are scheduled for delivery by mid-2025.According to Qantas,the A220 aircraft has up to 25tter fuel efficiency on a per seat basis on like for like routes compared to its existing fleet of Boeing 717s that the new aircraft will replace.41In late June 2024 Qantas also announced plans to replace its regional turboprop fleet,acquiring 14 additional De Havilland Dash 8-400(Q400)aircraft which has 74 seats.This will replace smaller aircraft from its existing regional turboprop fleet and bring the total Q400 fleet to 45.42JetstarJetstar has made some fleet upgrades to its domestic and international network with its 13th Airbus A321LR(NEO)aircraft(232 seats)expected by the middle of 2024,and 38 A321 NEOs due to arrive by 2029.The A321LR aircraft were initially deployed on domestic routes such as Melbourne Cairns and Melbourne Gold Coast but have also been used on international routes.The A321XLR aircraft has a longer range than the A321LR and are intended to expand Jetstars domestic and international network.43Jetstar has also ordered an initial 12 A320 NEOs to replace its existing A320 CEO fleet,the first 5 of which are expected to arrive in 202425.44 The airline is also refreshing its 787-8 Dreamliner fleet starting in 202526,which will enable long-haul international travel.45RexPrior to the news that Rex had entered voluntary administration,it had hoped to reinstate aircraft throughout 202425.Due to ongoing delays in acquiring spare parts for maintenance as well as pilot shortages,the number of available turboprop aircraft fleet has reduced since 2019.Rex has also faced constraints with utilising its Boeing-737 fleet which has resulted in the need to look at alternative short-term solutions.Last month,it utilised the Embraer 190 aircraft from National Jet Express,its charter services arm,to provide services on its intercity routes.38 Qantas,Qantas announces major aircraft order to shape its future,media release,2 May 2022,accessed 18 July 2024.39 Qantas,Qantaslink Airbus A220 takes flight,media release,1 March 2024,accessed 18 July 2024.40 Qantas,The third QantasLink Airbus A220 has arrived in Australia!LinkedIn post,Qantas,6 August 2024,accessed 7 August 2024.41 Qantas,Qantas Airbus A220.42 Qantas,Qantas Group invests in regional turboprop fleet,media release,25 June 2024,accessed 18 July 2024.43 Jetstar,Delivery of Jetstars new A321neo LR aircraft will improve range and comfort,media release,December 2023.44 Qantas,FY23 Results Supplementary Presentation,24 August 2023,accessed 30 July 2024,p 17.45 J Nelson,Jetstar adds its 12th and 13th A321neos,Australian Aviation,11 June 2024,accessed 18 July 2024.29ACCC|Domestic airline competition in Australia|August 2024 reportVirgin AustraliaVirgin Australia has had 7 737 MAX-8 aircraft in operation,with 7 additional 737 MAX-8 aircraft to join their fleet.Virgin Australia expects one additional MAX-8 to be delivered this year,with the remaining to be delivered in 2025.These timeframes have been extended due to production delays.Following news that Rex had grounded its Boeing 737 fleet,Virgin Australia moved to secure leases for 3 of the jets on the same day.This is likely to offset some of the capacity constraints experienced by Virgin Australia due to delays in receiving its 737 MAX-8 aircraft in the tight global aircraft market.46In addition,Virgin Australia has an order for up to 25 Boeing 737 Max-10s that were due to begin arriving in 2025.Due to the broader delays and operational issues faced by Boeing,the airline has pushed back its delivery timeframe to 202526.47Virgin Australia has also placed orders for 8 Embraer E190-E2 aircraft to accommodate future services on regional routes serviced by VARA,particularly in Western Australia.The first E190-E2 is expected to be in operation by October 2025 and will replace Virgin Australias remaining Fokker turboprop aircraft.486.3 Pandemic-inducedsupplychainissuescontinuetoimpactonairlinecompetitivenessAs noted above,airlines face a range of challenges that are not necessarily within their control when planning for,acquiring,and maintaining their fleet.These challenges can impact on airlines plans to add capacity to the network and their overall competitiveness in the sector.In recent years,the sector has faced persistent supply chain issues since the COVID-19 pandemic.While aircraft were readily available in 2020,the strong global recovery in aviation,labour force shortages and manufacturing issues have made aircraft difficult to acquire since.Airlines can respond to these challenges by looking at alternative ways to source aircraft,such as through leasing arrangements.While these challenges have impacted all airlines across the sector at a global level,smaller airlines face additional challenges due to potential diseconomies of scale,resulting in the need to make more difficult decisions such as reducing the routes serviced,or looking to partnerships to expand their fleet,as Rex has done with National Jet Express(see section 6.2).Supply chain bottlenecksGlobal supply chain issues continue to affect airlines operations and have resulted in significant delays in receiving new aircraft.This has limited airlines ability to offer more seats and led to an overreliance on old aircraft.In a recent report,Bain&Company noted that limited capacity for aircraft engine maintenance,repair and overhaul has become a choke point for civil aviation and could constrain air travel growth.The increasing delays are largely due to a surge in post-pandemic engine shop visits and new-generation engines requiring repairs in much greater numbers than anticipated.46 K Ainsworth,Rex Airlines staff told company unable to pay wages or redundancy packages as 350 workers immediately stood down,ABC News,31 July 2024,accessed 13 August 2024.47 A de Krester,Virgin set to ditech troubled max 10s for smaller Boeing plane,Australian Financial Review,24 March 2024,accessed 18 July 2024.48 Virgin Australia Virgin Australia Group secures new aircraft for WA regional business,media release,13 August 2024,accessed 13 August 2024.30ACCC|Domestic airline competition in Australia|August 2024 reportLong maintenance intervals,particularly for narrow-body aircraft engines,pose a threat to the post-pandemic recovery of the airline industry.Compared to pre-pandemic levels in 2019,engine shop turnaround times in Q1 2024 were up 35%and more than 150%for legacy engines and new-generation engines,respectively.49 Bain&Companys aerospace and defence co-lead,JimHarris,noted that unless maintenance and repair organisations act quickly to close this capacity gap,airlines will face higher costs to operate constrained fleets.50 Bain&Company also said that aircraft manufacturers demand for new parts has outstripped supply by 10%to 20%,which has reduced the availability of spare parts.51 Aircraft manufacturers have said that they have encountered quality and staff shortages in recent years as they continue to build production following the pandemic.52Aircraft financingAirlines can choose to either own or lease aircraft.Owning an aircraft has a significant cost up-front but can be relatively more cost-effective in the long run.On the other hand,leasing an aircraft can require less financing up front and provides flexibility for a faster expansion or contraction of services.In recent years,a majority(60%)of global commercial fleet were leased.Asia Pacific fleet has the second highest proportion of leased aircraft at 70%,after Latin Americas 74%,while North America has the lowest at 40%.53 Australia is leading in fleet ownership with only 17%of commercial aircraft being leased as of May 2024.54Airlines can lease aircraft under a wet lease or dry lease agreement.For a wet lease,maintenance,insurance and the crew required to operate the aircraft are provided under the agreement,whilst a dry lease involves exclusively leasing the aircraft only.Wet lease agreementscan be usedto quicklymeet demand fluctuations.Acquiring a fully operational aircraft can provide the opportunity to take advantage of peak periods.They can then be returned during quieter periods to avoid unnecessary service costs.In the case where the features of a particular aircraft type may not be appropriate,such as size and range,a lease could be used to source an aircraft that would improve efficiency.Despite offering additional flexibility,lease agreements are typically short-term solutions to fleet management.The short-term nature of aircraft leases means that airlines cannot heavily rely on them to maintain a stable fleet over the long-term.Smaller and emerging airlines can find it difficult to secure or maintain financing to buy or lease additional aircraft.This can impact on their ability to increase capacity and become a greater competitive threat to the incumbent airlines.49 Bain&Company,Get a Step Ahead of the Engine Maintenance Capacity Crunch,17 July 2024,accessed 24 July 2024,p 1.50 R Ironside,Airport figures show travel still behind 2019 levels as report warns fleet constraints are worsening,The Australian,24 July 2024,accessed 26 July 2024.51 Bain&Company,Get a Step Ahead of the Engine Maintenance Capacity Crunch,p 4.52 V Insinna et al,How production pressures plunged Boeing into yet another crisis,Reuters,9 February 2024,accessed 1 August 2024.53 IATA,More aircraft are leased than owned by airlines globally,12 April 2024,accessed 4 July 2024.54 Based on aircraft used by airlines for Regular Public Transport(RPT)in June24.Data provided to ACCC from Jetstar,Qantas,Rex and Virgin Australia;and aircraft registration data from CASA.
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August 2023202122Airport monitoring reportiiACCC|Airport monitoring report|202122Australian Competition and Consumer Commission Ngunnawal 23 Marcus Clarke Street,Canberra,Australian Capital Territory,2601 Commonwealth of Australia 2023This work is copyright.In addition to any use permitted under the Copyright Act 1968,all material contained within this work is provided under a Creative Commons Attribution 4.0 Australia licence,with the exception of:the Commonwealth Coat of Arms the ACCC and AER logos any illustration,diagram,photograph or graphic over which the Australian Competition and Consumer Commission does not hold copyright,but which may be part of or contained within this publication.The details of the relevant licence conditions are available on the Creative Commons website,as is the full legal code for the CC BY 4.0 AU licence.Requests and inquiries concerning reproduction and rights should be addressed to the Director,Corporate Communications,ACCC,GPOBox 3131,Canberra ACT 2601.Important notice The information in this publication is for general guidance only.It does not constitute legal or other professional advice,and should not be relied on as a statement of the law in any jurisdiction.Because it is intended only as a general guide,it may contain generalisations.You should obtain professional advice if you have any specific concern.The ACCC has made every reasonable effort to provide current and accurate information,but it does not make any guarantees regarding the accuracy,currency or completeness of that information.Parties who wish to re-publish or otherwise use the information in this publication must check this information for currency and accuracy prior to publication.This should be done prior to each publication edition,as ACCC guidance and relevant transitional legislation frequently change.Any queries parties have should be addressed to the Director,Corporate Communications,ACCC,GPO Box 3131,Canberra ACT 2601.ACCC 08/23_23-01 www.accc.gov.auAcknowledgment of countryThe ACCC acknowledges the traditional owners and custodians of Country throughout Australia and recognises their continuing connection to the land,sea and community.We pay our respects tothem and their cultures;and to their Elders past,present and future.iiiACCC|Airport monitoring report|202122ContentsGlossary and abbreviations vSummary 1Monitored airports key results 202122 71.Introduction 101.1 Airports importance to the Australian economy 101.2 Services provided by airports 111.3 Airport market power 151.4 History of airport regulation in Australia 151.5 The ACCCs monitoring role 201.6 Consultation 251.7 Structure of the report 262.Advice to enhance the current price monitoring regime 272.1 ACCCs advice on more detailed information on airport performance 282.2 ACCCs advice on airport quality indicators 333.Total performance 363.1 Passenger numbers began to recover in 202122,primarily due to a rebound in domestic travel 363.2 Most airports reported improved year on year financial outcomes in 202122 404.Aeronautical services 444.1 Impact of changes in terminal leases on financial results 444.2 Despite some rebound,all monitored airports reported aeronautical losses in 202122 465.Car parking 505.1 Monitoring airports car parking prices 505.2 Car parking operational and financial performance began to recover in 202122 but was still well below 201819 for most monitored airports 515.3 Car parking prices 56ivACCC|Airport monitoring report|2021226.Landside access 616.1 Monitoring airports landside access operations 626.2 Vehicle numbers began to recover in 202122 636.3 Landside access revenues rose but had not yet returned to pre pandemic levels 646.4 Compared against taxis,proportion of landside access revenue from rideshare continues to increase 667.Investments 687.1 Monitoring airports investments 687.2 Impact of COVID-19 on investment 697.3 Projects completed in 202122 717.4 Projects underway in 202122 727.5 Planned projects 75Appendix A:Landside access options access,pricing and facilities 78Appendix B:Supplementary results 83Appendix C:Background information 99vACCC|Airport monitoring report|202122Glossary and abbreviationsACCCAustralian Competition and Consumer CommissionActCompetition and Consumer Act 2010AerobridgeAllows passengers to board and disembark aeroplanes directly from/to the terminal gate lounge.Avoids need for passengers to go outside and use the apron.Aircraft related services and facilitiesServices and facilities provided by airports that are specifically utilised by aircrafts(for example,runways,aircraft parking bays and taxiways).The full list of aircraft-related services and facilities for monitoring purposes are listed in the Airports Regulations 1997.Airline surveysEach year,the ACCC sends domestic and international airlines a survey in which they are asked to rate on a scale of 1 to 5 the availability and standard of services and facilities provided by the monitored airports.Airports ActAirports Act 1996Airports RegulationsAirports Regulations 1997AirsideRefers to areas specifically in the airport that are dedicated to the provision of aircraft-related services and facilities and most passenger-related services and facilities for example,terminal buildings,runways and taxiways.Aeronautical services and facilitiesAs defined under the Airports Regulations 1997,services and facilities at an airport that are necessary for the operation and maintenance of civil aviation at the airport(including both passenger-related and aircraft-related services and facilities).ApronAirport aprons are areas where planes park and are refuelled,passengers embark and disembark and/or where planes are loaded and unloaded.At airport car parkA car park that is located on the airports land which could be either an at-distance or at-terminal car park.At distance car parkA car park that is located within the airport precinct but outside of reasonable walking distance to the terminal.Access to the terminal is via a shuttle that is operated by the airport.At terminal car parkA car park that is within walking distance of the terminal.BITREBureau of Infrastructure and Transport Research EconomicsCBDCentral business districtCompetition and Consumer ActCompetition and Consumer Act 2010COVID-19Coronavirus pandemic declared by the World Health Organisation on 11 March 2020.EBITEarnings before interest and taxes.EBITAEarnings before interest,taxes,and amortisation.viACCC|Airport monitoring report|202122EBITDAEarnings before interest,taxes,depreciation and amortisation.FACFederal Airports CorporationFIFOFly in fly outFYFinancial yearGeneral aviationAircraft operations that are not regular public transport,such as private charter and aircraft training flights,and Royal Flying Doctor Services.LandsideParts of an airport that are not airside areas for example,access roads and walkways within airport precincts.Long-term parkingParking for a period of one or more days.Monitored airportsAirports which are subject to price and quality of service monitoring and are specified in Parts 7 and 8 of the Airports Regulations 1997;currently Brisbane,Melbourne,Perth and Sydney airports.MTOWMaximum take-off weightObjective indicatorsAirport services and facilities listed in the Airports Regulations 1997 to be monitored and evaluated by the ACCC and of which monitored airports are required to keep records.Includes both physical infrastructure(for example,the number of check-in desks and flight information display screens)and other measurements(for example,number of passengers during peak hour).Off airport car parkA car park that is located outside of the airport precinct and operated by a third party.Access to the terminals is provided by a shuttle bus that is provided by the off-airport car park operator.Operating profitMeasured by earnings(revenue less cost)before interest,taxation and amortisation.Operating profit marginsIn this report,this is the ratio of EBITA(earnings before interest,taxes,and amortisation)to total revenue.Passenger-related services and facilitiesServices and facilities provided by airports that are specifically utilised by passengers(for example,check-in desks,aerobridges and gate lounges).The full list of passenger-related services and facilities for monitoring purposes are listed in the Airports Regulations 1997.Part IIIA Pricing PrinciplesPart IIIA Pricing Principles set out in section 44ZZCA of the Competition and Consumer Act 2010.2019 Productivity Commission inquiryProductivity Commission 2019,Economic Regulation of Airports,Report no.92,Canberra.Peak hourThe hour that,on average for each day in the financial year,has the highest number of(arriving/departing/total of both)passengers.Quality of aeronautical serviceA metric derived by aggregating the quality of aeronautical service monitoring results sourced from objective indicators and surveys of airlines and passengers on the quality of services and facilities provided by the monitored airports.Real termsA value expressed in the money of a particular base time period(for example,202122 dollars).Values in real terms remove the impact of inflation and provide a better comparison of values over time.viiACCC|Airport monitoring report|202122Return on assetsRatio of EBITA relative to average tangible non-current assets.The ACCC uses a line in the sand approach to valuing aeronautical assets(see Box 1.3 and Appendix C).Short term parkingParking for a period of up to one day.T1/T2/T3/T4Terminal 1/Terminal 2/Terminal 3/Terminal 4TaxiwayA road for aircraft that connects runways with airport facilities including ramps,hangers and terminals.viiiACCC|Airport monitoring report|202122In May 2023,the ACCC advised the Australian Government of its recommendations to enhance the price monitoring regime by requiring the monitored airports to report more disaggregated information in relation to aeronautical,car parking and landside access services,and updating reported measures of airport quality.The ACCC considers that these actions will improve transparency of airport performance for the benefit of airport users and inform analysis of whether the monitored airports are exercising their market power in relation to specific services.In 202122,the financial performance of Brisbane,Melbourne and Perth airports improved,but declined further for Sydney Airport.Total operating profit margins for all 4 monitored airports remained below 201819 levels,ranging between 8%and 42%.Passenger numbers increased across all 4 monitored airports following the reopening of domestic and international borders,largely due to a rebound in domestic travel.The rebound has continued in the first 3 quarters of 202223,with domestic travel reaching around 84%to 107%and international travel reaching around 61%to 71%of 201819 levels,respectively.The 4 monitored airports indicated that they were conservative with their investment programs in 202122 due to uncertainties associated with the COVID-19 pandemic.Some advised that they prioritised progressing projects that would otherwise have disrupted air travel.Despite some improvement,all 4 monitored airports reported operating losses from aeronautical operations in 202122.Aeronautical services provide the primary source of revenue for the monitored airports.Airport monitoring report 2021221ACCC|Airport monitoring report|202122SummaryThis report presents the Australian Competition and Consumer Commissions(ACCCs)analysis of monitoring the prices,costs and profits of Brisbane,Melbourne(Tullamarine),Perth and Sydney(Kingsford Smith)airports.Due to the continued significant impact of COVID-19 on the 4 monitored airports in 202122,the ACCC has largely confined its observations in this report on monitored airports recovery from the pandemic.The ACCC did not collect data on quality of service for 202122 from the monitored airports.We have resumed collecting quality of service data from the monitored airports and will recommence full reporting in our next monitoring report.Earlier this year,the ACCC provided advice to the Australian Government on an updated and enhanced price monitoring regime,as discussed below.If the Australian Government accepts our advice,we will start collecting and reporting new information in the future.Developments in 202122Overall performance of the 4 monitored airportsAs was the case in 202021,the COVID-19 pandemic continued to have a significant impact on the aviation industry in 202122.This section covers operational and financial results across the monitored airports overall operations.Passenger numbersWith the reopening of domestic and international borders in the latter part of 202122,the monitored airports benefitted from some rebound in passenger numbers from the lows of the previous financial year.As a percentage of 201819 levels,the total passenger numbers in 202122 reached 43%at Brisbane Airport,35%at Melbourne Airport,51%at Perth Airport and 30%at Sydney Airport,respectively.1The recovery in domestic passengers outpaced that for international passengers in 202122,as shown in table 1.Table 1:Domestic and international passengers in 202122 as a percentage of 201819 levelsAirportDomestic passengersInternational passengersBrisbane Airport54%Melbourne Airport42%Perth Airport68%Sydney Airport39%Source:ACCC analysis of information from the monitored airports.1 Sydney Airport noted that its passenger numbers for the 6 months to 31 December 2021 were significantly lower than passenger numbers in the 6 months to 30 June 2022,hitting their lowest point in late 2021,at just 1%of 2019 levels.2ACCC|Airport monitoring report|202122The rebound in both domestic and international travel has continued in 202223.As shown in Table 2,domestic travel has reached around 84%to 107%and international travel around 61%to 71%of 201819 levels,respectively.Table 2:Comparison of domestic and international passenger numbers in Q1Q3 of 20222023 to Q1Q3 of 201819 Number of domestic passengers in the first 3 quarters of 202223 as a percentage of number of domestic passengers in the first 3 quarters of 201819Number of international passengers in the first 3 quarters of 202223 as a percentage of number of international passengers in the first 3 quarters of 201819Brisbane Airport90a%Melbourne Airport86g%Perth Airport107q%Sydney Airport84i%Source:ACCC analysis of information received from monitored airports and the Bureau of Infrastructure and Transport Research Economics(BITRE).2Overall profitabilityRebound in passenger numbers led to some recovery in the financial performance of 3 of the 4 monitored airports,however,their financial performance was still below 201819 levels.This reflects the fact the pricing structure of the airports means that when passenger numbers are low,their revenues are also low.Table 3 compares operating profit margins3 in 202122 and 201819.Table 3:Total operating profit margin by airport,201819 and 202122Airport201819202122Brisbane Airport592%Melbourne Airport56.5%7.9%Perth Airport48B%4 Sydney Airport59.5%Source:ACCC analysis of information from the monitored airports.InvestmentsBrisbane,Sydney and Perth airports reported that,in aggregate,they completed about$90 million to$117 million in major investments in aeronautical,car parking and landside access facilities in 202122.Melbourne Airport did not report a figure to the ACCC.The monitored airports indicated to the ACCC that they remained relatively conservative with their investment programs in 202122 due 2 Bureau of Infrastructure and Transport Research Economics,Airport Traffic Data,released 16 June 2023,accessed July 2023.3 Earnings before interest,taxes and amortisation as a percentage of total airport revenue.4 Perth Airport reported that its profit metrics for 202121,as reported by the ACCC,have been favourably impacted by an inclusion of$73m in non-aeronautical fair value adjustments(non-cash).3ACCC|Airport monitoring report|202122to uncertainties associated with the COVID-19 pandemic.Some of the monitored reports advised that during COVID-19 they prioritised progressing projects that would otherwise have disrupted air travel.5 Performance of the 4 monitored airports across individual service segmentsThe monitored airports operations can be broadly split across 4 categories of services aeronautical,car parking,landside access and commercial.6 Table 4 shows the split in the revenue that the monitored airports derived from each of the categories in 201819 and 202122.Table 4:Revenue split by service categories,201819 and 202122Category201819202122Aeronautical 4556451r parking814q5%Landside access13%Commercial3442853%Source:ACCC analysis of information from the monitored airports.The ACCC focuses its reporting on aeronautical,car parking and landside access services.Aeronautical servicesOf the 3 service segments monitored by the ACCC,the aeronautical services were the most affected by the COVID-19 pandemic.Despite some improvement,all 4 monitored airports reported operating losses from these operations in 202122.7 The monitored airports aeronautical operating profit margins8 in 202122 were well below those they achieved in 201819,as shown in table 5.Table 5:Aeronautical operating profit margins,by airport,201819 and 202122Airport201819202122Brisbane Airport47%-5.9%Melbourne Airport40%-38.8%Perth Airport34%-0.05%Sydney Airport45%-27.4%Source:ACCC analysis of information from the monitored airports.Car parkingThe daily number of vehicles visiting car parks at all the monitored airports in 202122 was higher than in 202021,consistent with an increase in passenger numbers.While this led to improved car 5 Investments reported to the ACCC for 202122 included re-sheeting of taxiways and resurfacing of runways.6 Aeronautical:covers provision of aviation services including runways,aprons,aerobridges,departure lounges and baggage-handling equipment.Car parking:covers provision of at terminal and at distance parking and other related services.Landside access:covers services to parties seeking to access the airport to drop off or pick up passengers,including ground transport operators and independent car park providers.Commercial:covers services to retail outlets,car rental operators,hotels,corporate parks and factory outlets plus anything else that does not fall under the other 3 service segments.7 Aeronautical revenue minus aeronautical expenses.8 Aeronautical operating profit as a percentage of aeronautical revenue.4ACCC|Airport monitoring report|202122parking financial performance for each of the monitored airports,most monitored airports had not yet reached the car parking operating profit margins they achieved in 201819,as shown in table 6.Table 6:Car parking operating profit margins,by airport,201819 and 202122Airport201819202122Brisbane Airport67X%Melbourne Airport53%Perth Airport58X%Sydney Airport683%Source:ACCC analysis of information from the monitored airports.Landside accessIn 202122,all 4 monitored airports reported higher landside access revenues compared with the previous financial year,as more passengers used various forms of ground transport to access the monitored airports.9 However,when compared to 201819,landside access revenues in 202122 only reached 38%for Brisbane Airport,30%for Melbourne Airport,67%for Perth Airport and 29%for Sydney Airport.The ACCC advised the Australian Government on how to enhance the price monitoring regimeThe ACCC currently receives and publishes highly aggregated data on aeronautical and car parking services.Aggregated information does not allow analysis of individual services within these segments,such as international compared with domestic flights,or different types of car parking.Further,the information the ACCC currently collects on landside access services is incomplete and inconsistent,as there is currently no formal requirement on the monitored airports to provide this information to the ACCC.The lack of fulsome and consistent data:impedes the Airports Acts objective of facilitating the assessment and comparison of monitored airports performance(for example,in provision of landside access services)limits the usefulness of published information to airport users(for example,domestic airlines cannot distil data pertaining to provision of domestic aeronautical services)impedes the ability of the ACCC and Productivity Commission to assess whether the monitored airports are exercising their market power in relation to specific services(for example,at terminal car parking).In June 2022,the Australian Government requested the ACCC to provide advice on how to implement recommendations made by the Productivity Commission in a 2019 inquiry to enhance the price monitoring regime.9 Landside access revenue is derived from charges on landside transport operators such as taxis and rideshare.5ACCC|Airport monitoring report|202122Productivity Commission recommendationsIn 2019,the Productivity Commission completed its fourth review of the Economic Regulation of Airports.Overall,the Productivity Commission found that the current light-handed approach to airport regulation remains fit for purpose.However,the Productivity Commission noted that some airport indicators could present cause for concern if considered in isolation.In particular,the Productivity Commission stated that high international charges at Sydney and Brisbane airports,Sydney Airports relatively high returns,and high operating costs at Perth Airport show that there is reason to remain vigilant.10To strengthen the price monitoring regime,the Productivity Commission recommended that:the monitored airports report more detailed information to the ACCC in relation to aeronautical,car parking and landside access services to enhance the transparency of airports operations and to detect the exercise of market power more readily(Recommendation 9.4)the ACCC provide advice to the Australian Government on an updated set of quality of service indicators to improve their fit for purpose(Recommendation 9.5).11 The ACCC adviceThe ACCC consulted widely with industry stakeholders,including issuing several consultation papers and convening a joint consultation session with the monitored airports and the Australian Airports Association.In May 2023,the ACCC recommended that the Australian Government amend the Airports Regulations 1997 to require the monitored airports to report to the ACCC:systematically disaggregated data and detailed cost allocation methodologies for aeronautical,car parking and landside access servicesinformation relating to 53 quality of service matters to monitor the notional capacity or performance of particular airport services and facilities.12The ACCC considers that the publication of disaggregated information in relation to specific services will strengthen the price monitoring regime by:enhancing transparency of performance of the monitored airports for the benefit of airport users,assisting those users:in negotiations with the monitored airports to assess the reasonableness of charges and other terms of access to identify potential problems with specific services informing analysis of whether the monitored airports are exercising their market power in relation to those specific services.10 Productivity Commission,Economic Regulation of Airport Services(2019),https:/www.pc.gov.au/inquiries/completed/airports-2019/report,2019,p 2,accessed 13 July 2023.11 Productivity Commission,Economic Regulation of Airport Services(2019),https:/www.pc.gov.au/inquiries/completed/airports-2019/report,2019,p 42,accessed 13 July 2023.12 See https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/more-detailed-information-on-financial-performance-of-airports and https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/airports-quality-of-service-review.6ACCC|Airport monitoring report|202122For example,the ACCC expects that publication of disaggregated information will,amongst other things:for aeronautical services:improve the information available to domestic and international airlines for the purpose of their negotiations with the monitored airports allow the comparison of the monitored airports performance in supplying international and domestic aeronautical servicesfor car parking services:allow the analysis of the monitored airports performance in provision of at terminal car parking services for which there is limited,if any,competitionfor landside access services:increase transparency on whether the monitored airports are using landside access charges to off-airport car parking operators to give themselves a competitive advantage in provision of at distance car parking services.These changes will support the objectives of the price monitoring regime and the Airports Act for the benefit of airport users and the Australian community more generally.7ACCC|Airport monitoring report|202122Monitored airports key results 2021223.1m 417.6m 45.2%SYDNUMBER OF PASSENGERSInternationalDomesticCAR PARKING PROFIT MARGINS*AVERAGE DAILY CAR PARKING THROUGHPUTMONITORED AIRPORTS LOCATIONS AND TOTAL OPERATING PROFIT MARGINS*BNEMELSYD 58%0.7 pp40c.6 pp58.1 pp33.9 ppPER02,0004,0006,0008,00010,00012,000BNESYDMELPER32! pp7.9A pp421 pp11%8 pp01020304050Passengers(millions)MEL1.9m 850.0m 86.4%PER0.5m 0%6.9m 19.0%BNE0.9m 200%9.4m 23.7%BNEMELPERSYDBNEMELPERSYD201819201920202021202122201819201920202021202122AERONAUTICAL PROFIT MARGIN*BNESYDMELPER-5.9T pp-38.8 pp-0.058 pp-27.4) pp*Profit margin is measured as earnings before interest,taxes and amortisation(EBITA)as a percentage of revenue.Notes:Items as described qp are comparisons to 202021.pp means percentage point(s).8ACCC|Airport monitoring report|202122Key performance indicators for 202122Table 7:Key total airport indicators for 202122AirportPassenger numbers(millions)Aircraft movement(thousands)Total airport revenue($millions)Total airport profit($millions)Total airport operating profit margin(%)Return on total airport assets13(%)Brisbane10.3141.3500.6158.9322.9Melbourne12.9126.6519.741.37.90.7Perth7.4108.5428.5178.74214 6.1Sydney13.7138.6776.183.7111.6Table 8:Changes in key total airport indicators for 202021 to 202122 AirportPassenger numbers(%)Aircraft movement(%)Total airport revenue(%)Total airport profit(%)Total airport operating profit margin(percentage points)Return on total airport assets(percentage points)Brisbane31227216212Melbourne1105853137412.5Perth251158536315Sydney752-6-46-8-1Notes:Changes for financial data are presented in real terms(base year of 202122).Table 9:Key aeronautical indicators for 202122AirportAeronautical revenue($millions)Aeronautical revenue per passenger($)Aeronautical operating profit($millions)Aeronautical profit(EBITA)margin(%)Return on aeronautical assets15(%)Brisbane202.919.73-12.0-5.9-0.4Melbourne239.218.49-92.8-38.8-3.6Perth144.319.63-0.1-0.05-0.01Sydney394.628.76-108.1-27.4-3.513 This measure covers both aeronautical and non-aeronautical assets.The ACCC uses a line in the sand approach to valuing aeronautical assets(see Box 1.3 and Appendix C).14 Perth Airport reported that its profit metrics for 202122,as reported by the ACCC,have been favourably impacted by an inclusion of$73m in non-aeronautical fair value adjustments(non-cash).15 This measure is based on aeronautical tangible non-current assets.The ACCC uses a line in the sand approach to valuing aeronautical assets(see Box 1.3 and Appendix C).9ACCC|Airport monitoring report|202122Table 10:Changes in key aeronautical indicators for 202021 to 202122 AirportAero revenue(%)Aero revenue per passenger(%)Aero operating loss(%)Aero profit(EBITA)margin(percentage points)Return on aero assets(percentage points)Brisbane375-86*542.3Melbourne80-14-48*942.9Perth4819-100*383.6Sydney39.5-20-32*291.5Notes:Changes for financial data are presented in real terms(base year of 202122).*aeronautical operating loss is showing the reduction in losses.Table 11:Key car parking indicators for 202122AirportRevenue($million)Operating profit($million)Profit margin(%)Car parking spacesRevenue per car park space($)Operating profit per car park space($)Revenue share of total airport revenue(%)Brisbane6437.15819,961-13Melbourne7630.54026,6542,8531,14315Perth53.831.25819,3572,7781,61213Sydney56.318.83314,8924,7701,5937Table 12:Changes in key car parking indicators from 202021 to 202122AirportRevenue(%)Operating profit(%)Profit margin(percentage points)Car parking spaces(%)Revenue per car park space(%)Operating profit per car park space(%)Revenue share of total airport revenue(percentage points)Brisbane3839.50.74.6-3Melbourne9643463.60964343.2Perth489614.166-1118-0.4Sydney6127218.91.259267-2.8Note:Changes for financial data are presented in real terms(base year of 202122).10ACCC|Airport monitoring report|2021221.Introduction 1.1 Airports importance to the Australian economyAirports perform a vital role in supporting economic activity across Australia.Air travel and transportation have become increasingly popular and essential to several industries over the last few decades.Over the 20 years to 2019,prior to the onset of the COVID-19 pandemic,the number of passengers travelling through Australias airports more than doubled to over 160 million.16 The 4 monitored airports Brisbane,Melbourne,Perth and Sydney accounted for about 3 quarters of passenger movements across Australian airports in 201819.17 Apart from airports core activities,which employ a relatively small number of staff18,airport precincts support a much larger sphere of economic activity.This includes retail,office space,logistics and other aviation sector activity.19 Outside the airport precinct,airports are essential in facilitating economic activity in other industries.One of the most notable is tourism,which(before COVID-19)contributed around 6%to Australias gross domestic product and was its fourth largest export industry.20 The overwhelming majority(some 97%)of international tourists arrive in Australia by plane.21 The mining,construction and oil and gas industries also rely heavily on airports to facilitate transport of their fly in fly out(FIFO)workforce to remote parts of Australia.22 Numerous other industries rely on airports to facilitate business related travel.Airports also facilitate air freight.While this only accounts for 0.1%of freight transported between Australia and the rest of the world in volume,it represents around 20%of trade by value.23 The majority of the goods transported by air are high value and time critical,such as eCommerce parcels,perishable goods(particularly seafood)and medical supplies.24As well as supporting economic activity,airports also play a role in connecting family,friends and communities throughout Australia.16 ACCC calculation based on BITRE Airport Traffic Data(198586 to 202021).17 ACCC calculation based on BITRE Airport Traffic Data(198586 to 202021).Note that this share of total passenger movements decreased to 56%in 202021.18 IBISWorld estimated that airports directly employed some 12,593 in 201819 prior to the pandemic;see IBISWorld,Airport Operations in Australia I5220,IBISWorld website,2021,p 13,accessed 13 July 2023.19 These accounted for an estimated 206,400 full-time equivalent staff in 201617:Deloitte,Connecting Australia The economic and social contribution of Australias airports,Deloitte website,2018,p ii,accessed 13 July 2023.20 Department of Infrastructure,Transport,Regional Development and Communications(DITRDC),Future of Australias Aviation Sector,Issues paper,2020,p 5,accessed 13 July 2023.21 Deloitte,Connecting Australia,p 37.22 DITRDC,Future of Australias Aviation Sector,p 5.23 As above.24 Deloitte,Connecting Australia,p iii;DITRDC,Future of Australias Aviation Sector,p 5.11ACCC|Airport monitoring report|2021221.2 Services provided by airportsAirports provide a range of services to various users,including:aeronautical services to airlinescar parking services to passengers,airport staff and employees of businesses located at the airportlandside access services to transport operators,including taxis,rideshare services,private cars(including limousines),and public and private buses(including shuttle buses for off airport parking)commercial services(particularly leasing space)to retail outlets,car rental operators,hotels,corporate parks and factory outlets.The following sections discuss these in more detail.Aeronautical services Broadly,aeronautical services are services and facilities that airports provide to airlines for the operation and maintenance of civil aviation at the airport.25 Airlines operate aircraft on scheduled routes domestically and internationally to transport both passengers and freight.Airports provide services and facilities to assist with airlines use of the aircraft,including:runways,taxiways,aprons,airside roads and airside grounds airfield and airside lighting aircraft parking sites ground handling(including equipment storage and refuelling)airside freight handling and staging areas essential for aircraft loading and unloading.Airports also provide services and facilities to assist airlines passengers,including:terminals,including the necessary departure and holding lounges,and related facilities aerobridges and buses used in airside areas terminal access roads and facilities in landside areas(including lighting and covered walkways)baggage handling and reclaiming facilities.Airports and airlines engage in commercial negotiations to reach agreement on the terms and conditions of use of an airports aeronautical services and facilities,including charges and service levels.Under these agreements,aeronautical charges could be based on a variety of factors,such as the number of passengers,maximum take off weight,duration and time of day.While some airports levy charges for each aeronautical service component,other airports bundle some of those services into a single charge.Airports generally levy charges for access to terminals on the basis of the number of passengers per aircraft and type of flight.Many airports also have standard conditions of use or standard terms of service that apply to all airlines which use the airports services and facilities,but which have not entered into a service agreement with the airport.25 Part 7 of the Airports Regulations.12ACCC|Airport monitoring report|202122Airport car parking servicesEach of the 4 monitored airports provide a range of on-site car parking facilities for the public and staff.Each airport offers at terminal and at distance parking on both a short term and long term basis as well as a range of products and services in-between.For some airports,they have broadened their offering to include premium services such as valet car parking and guaranteed space allocations.Many motorists choose to park near the terminal as they drop off or pick up friends and relatives.At distance car parking is generally not located within walking distance of the terminals and therefore requires shuttle bus access.Despite the lower level of convenience,at distance car parks are often favoured by motorists parking for extended durations because of the cheaper parking rates.Airports charge the motorists directly for parking based on their choice of parking facilities and length of stay.Prices charged for parking near the terminal are typically higher than those for parking at some distance from the terminal.Most airports offer promotions that motorists can access online,such as for off peak periods,providing discounts on the standard drive up rates.The following section provides a brief overview of each airports car parking service offerings.Brisbane AirportBrisbane Airport has 3 separate car parking precincts,2 of which are within walking distance of the terminals.The third precinct is located at a distance from the terminals,with access provided via a free,regular shuttle bus service.The 2 facilities that are located at terminal are both multi-level car parks.One is located near the international terminal and one is located near the domestic terminal(comprising of P1 and P2 car parks):The International terminal offers short term(up to 4 hours of parking,also known as ParkShort),long term(over 4 hours of parking,also known as ParkLong)and valet parking services.P1 offers ParkShort,ParkLong,valet,premium parking and guaranteed space services.P2 offers long term and guaranteed space parking services.The car park that is located at a distance from the terminals(Airpark)provides open air and undercover parking for longer stays.A shuttle bus service picks up and drops off customers from 3 designated bus stops close to the entrance of both terminals.It is part of the central parking area that also includes staff car parking facilities as well as landside operator facilities and amenities.Melbourne AirportMelbourne Airport provides multiple car parking facilities for both domestic and international passengers.There are 2 main multi-level car parks that are located at terminal:At Terminal T123(for access to Qantas,Virgin and international terminals)and At Terminal T4(for access to other domestic airlines,including Jetstar,Rex and Airnorth).While both offer premium parking options,the T123 car park also offers valet parking services.The at distance Value car park provides open air parking for longer stays.It is serviced by a free shuttle bus that picks up and drops off customers at the entrance of all terminals.Perth AirportThere are 2 main car parking precincts at Perth Airport:T1/T2 and T3/T4.T1/T2 are serviced by individual at terminal car parks and common at distance car parks,while T3/T4 are serviced by common at terminal and at distance car parks.The T3/T4 precinct also includes a premium,undercover Fast Track car park in front of the terminals.13ACCC|Airport monitoring report|202122Perth Airports at distance parking areas are serviced by free shuttle buses.The airport also offers free parking for 10 minutes at the at terminal car parks and for the first hour in all at distance car parks.At terminal and at distance parking can be booked online except for some short term durations.Sydney AirportSydney Airport provides a range of car parking services and facilities.There are 2 at terminal precincts that are located close to the domestic terminal and international terminal respectively.During 202122,the domestic precinct consisted of 2 multi-level facilities(P1/P2 and P3)that provided both short term and longer term parking.In 202122 the P1/P2 car park was located closest to the domestic terminals and included a dedicated Guaranteed Space area,while the P3 car park is a longer walk away from the domestic terminals and offered discounted day rates as well as an express pick up area.The international precinct consists of a multi-level facility(P7)that provides both short and longer term parking,as well as the relatively new northern multi-level car park(P6)that provide short and longer term parking to the public and to the staff who work in the airport precinct.There is also a third long term car park(Blu Emu)located at a short distance from the terminals.A free regular shuttle bus service transports users between the car park and the domestic terminal.Landside access servicesAirports provide landside access services to a range of third parties seeking to access the airport to drop off or pick up passengers.These include various landside transport operators,as well as independent providers of car parking services.Landside transport operatorsApart from driving and parking on airport land,the public can access airports via a range of landside transport operators,including taxis,rideshare services,terminal pick up and drop off,private cars(for example,limousines),public and private buses,and(in some cases)trains.Airports provide access and facilities to all these landside transport operators such as forecourt and transport hubs,drop off and pick up bays,taxi stands,waiting areas and roads to facilitate movements around the airport.A table showing the alternative ground transport options and facilities available at the monitored airports can be found at Appendix A.Airports often charge landside transport operators an access fee each time they drop off or collect passengers.Independent car parking service providersAt each monitored airport,the public also has access to a range of off airport parking options.Customers typically drop off their vehicles at the relevant off airport parking facilities and are transported by a courtesy shuttle bus to their respective airport departure terminal,and later picked up from the relevant arrival terminal.The off airport parking operator may obtain airport access by way of a licence agreement granted by each airport operator.This permits the off airport parking operator restricted airport precinct entry and usage rights.Off airport parking operators may also pay airports an access fee each time they enter the airport precinct to drop off or collect passengers.14ACCC|Airport monitoring report|202122Each of the monitored airports is serviced by a varying number of off airport and independent parking operators:Brisbane:4 independent off airport car parking facilities are located near Brisbane Airport.Melbourne:at least 17 independent off airport car parking facilities are located near Melbourne Airport.Perth:6 off airport car parking facilities are located near Perth Airport.Sydney:at least 8 independent off airport car parking facilities are located near Sydney Airport.Commercial servicesAirports derive revenue through their ownership of property on airport land,most notably through leasing airport premises and land to a variety of parties.These include car rental businesses,retail outlets and other commercial tenants.26 Car rentalCar rental businesses located at,or near,airports lease vehicles primarily to arriving international and domestic travellers.Car rental businesses negotiate and enter into lease agreements(sometimes known as licence agreements)with airports to acquire facilities which allow them to operate their businesses.These include counter spaces at terminals and car parking bays,as well as signage providing directions to these facilities.Car rental businesses compete on convenience by locating themselves at,or in close proximity to,airports and require sufficient parking bays to accommodate their fleet.27Some car rental companies also partner with airlines and various tourism service operators.RetailRetail outlets operate within airport terminals,providing goods and services to passengers before or after boarding their plane.These include food and beverage vendors,newsagencies,fashion outlets,souvenirs,travel related goods,currency and phone services.All the monitored airports international terminals also have duty free shops.Retail outlets enter into lease agreements with airports to acquire the necessary facilities to operate their businesses.These primarily include the physical site within the airports terminal,although airports will also provide additional services such as storage space and promotional activities.Other commercial activities Monitored airports commercial activities also include lease of terminal space,buildings and other space on the airports land for hotels,business parks,office space and industrial business operators.For example,various hotels are located at Melbourne Airport while its Business Park spans more than 430 hectares with various types of tenants like a large plumbing supplies warehouse and many freight and logistics companies.28 Likewise,Perth Airport is home to a large supermarket and a shopping outlet.2926 Recognition of revenue from car rental operators varied between airports,with some including it as part of property,while some included it as part of landside access.As noted in Chapter 6 of this report,ACCC has historically analysed landside access excluding car rental data.27 IBISWorld,Car Rental in Australia OD5485,IBISWorld website,2021,p 34,accessed 13 July 2023.28 Australia Pacific Airports Corporation Limited(APAC),https:/.au/corporate/annual-reports,pp 345,accessed 13 July 2023.29 Perth Airport,Perth Airport Annual Report 2020/21,Perth Airport Annual Report 2020/21,p 22,accessed 13 July 2023.15ACCC|Airport monitoring report|202122Airports typically enter into lease agreements with these parties to use airport premises and land.However,in some cases,airports themselves will own and derive revenue from these assets,such as hotels.301.3 Airport market power Many airports in Australia are regional natural monopolies.Due to economies of scale and scope there is usually only one airport in a certain region.These airports typically have market power,as they do not face any effective competition from other airports for provision of air transportation services in the relevant region.The extent of that market power depends,in part,on how essential the airport is to those seeking to use it.Airports that act as a critical hub for economic activity will typically have substantial market power.The Productivity Commission has found in its previous inquiries that at least the 4 monitored airports in Australia have significant market power.31Each airport,just as any other private business in Australia,seeks to maximise its profits.As monopolies that are not constrained by competition,airports seek to achieve this by charging monopoly prices,while limiting output and service levels.Airports may also under or over invest in their infrastructure and lack incentives to operate efficiently or to adopt innovative technologies and service models.Such actions hamper productivity and lead to efficiency losses to the detriment of consumers and the broader Australian economy.Key infrastructure service providers with natural monopoly characteristics,similar to those exhibited by the major airports,are typically regulated to ensure that they will not exploit their market power to the detriment of consumers.Since 2002,the Australian Government has adopted a light handed regulatory regime for Australian airports,discussed in the next section.1.4 History of airport regulation in AustraliaUntil the 1980s,Australias main airports were owned and operated by the Australian Government,through the Department of Aviation(and its forerunner,the Department of Civil Aviation).Following the recommendations in the 1984 Report of the Independent Inquiry into Aviation Cost Recovery(Bosch Report),the Australian Government announced the corporatisation of the major Australian airports in 1985,with the goal of improving efficiency in airport operations,investment and pricing.This was part of a wide ranging program of microeconomic reform with a corporatisation model giving the management of airports greater commercial freedom and intended to emulate governance,management,and incentive systems used in the private sector.A total of 23 Commonwealth Airports were transferred from the Department of Aviation to a statutory enterprise,the Federal Airports Corporation,32 that began operations on 1January 1988.In 1996,the Australian Government commenced the phased privatisation(through long term leasing arrangements)of 22 airports,previously owned and managed by the Federal Airports Corporation,30 For example,Melbourne Airport is constructing a 464-room hotel on airport land,which it intends to operate through a third-party manager:see M Bleby,As demand takes off,Melbourne Airport gets its first new hotel since 2002,https:/.au/news/as-demand-takes-off-melbourne-airport-gets-its-first-new-hotel-since-2002-51387/,17 April 2019,accessed 13 July 2023.Note that this project is currently on hold:see APAC,https:/.au/corporate/annual-reports,p 34,accessed 13 July 2023.31 Productivity Commission,Inquiry report,Price Regulation of Airport Services(2002),2002,p 133,accessed 13 July 2023;Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2012),2012,p 63,accessed 13 July 2023 and Productivity Commission,Inquiry report,Economic Regulation of Airport Services(2019),2019,p 89,accessed 13 July 2023.32 The Australian Government established the Federal Airports Corporation(FAC)in the 1980s to own and manage airports on a commercial basis.Initially the FAC was required to notify the relevant Minister prior to setting or varying aeronautical charges.16ACCC|Airport monitoring report|202122to improve the efficiency of airport investment and operations,and to facilitate innovative management.33 The Airports Act sets out a number of public policy objectives for the corporatised FAC airports,that included the promotion of the efficient and economic development and operation of airports.Following the decision to privatise these airports,the Australian Government established a transitional price regulation regime,administered by the Australian Competition and Consumer Commission(ACCC).34 This was designed to limit the potential for airports to exercise their market power,and included price notification,price monitoring,price cap arrangements and special provisions for necessary new investment.Some 12 airports were designated as core regulated airports under section 7 of the Airports Act and subject to price regulation(Adelaide,Alice Springs,Brisbane,Canberra,Coolangatta,Darwin,Hobart,Launceston,Melbourne,Perth,Sydney and Townsville).35 These airports were also subject to quality of service monitoring to ensure that airport assets were not allowed to run down at the expense of service standards.2002 Productivity Commission inquiryIn December 2000,the Australian Government directed the Productivity Commission to inquire into the price regulation of airport services,including the price cap regime.The Productivity Commission released its inquiry report in early 2002,which concluded that many of the major airports did have substantial market power(particularly Sydney,Melbourne,Brisbane and Perth).36 It also concluded that the abuse of market power could manifest itself as one or more of:increasing prices above efficient costs deterioration in quality inefficient investment selective denial of access to airport facilities.However,the Productivity Commission considered that,while major airports did have market power,it was either:not exercised was exercised but did not cause inefficiencywas exercised but offset by the countervailing power of airlines.Furthermore,it considered that factors such as the countervailing power of airlines and the threat of re-regulation would act as a constraint on the exercise of market power in commercial negotiations between airports and users in the future.37The Productivity Commission concluded that price caps distorted production and investment decisions due to the inability of regulators to set prices accurately.38 Consequently,it recommended that the price regulation regime be replaced with a more light handed price monitoring regime,which the ACCC would continue to administer.This would apply to 7 of the 12 core regulated airports(Adelaide,Brisbane,Canberra,Darwin,Melbourne,Perth and Sydney),with the remainder no longer 33 Department of the Parliamentary Library Australia,Turbulent Times:Australian Airline Issues 2003 Research Paper No.10,2003,p 29,accessed 13 July 2023.34 This was under Part VIIA of the then Trade Practices Act 1974.35 Productivity Commission,Price Regulation of Airport Services(2002),pp 23.36 As above,p 133.37 As above,p XLII.38 As above,pp 3078.17ACCC|Airport monitoring report|202122subject to airport specific price regulation or quality monitoring.Additionally,a price cap regime would apply only to Sydney Airport in respect of regional air services(within New South Wales).Later in 2002,the Australian Government accepted this inquiry recommendation and replaced the price regulation regime with a price monitoring regime.This was intended to facilitate investment and innovation.The move also sought to promote transparency while retaining some oversight of the exercise of market power by airports in their dealings with airlines and other customers.2006 Productivity Commission inquiryIn 2006,the Australian Government requested the Productivity Commission conduct a second inquiry into the regulation of airports.The Productivity Commission found that the commercial constraints on airports market power it had identified in its 2002 inquiry were not as effective as originally supposed.39 The inquiry recommended that price monitoring be continued until 2013,with some adjustments to the scope of monitoring.Darwin and Canberra airports were removed from the monitoring regime following the inquirys recommendations,based on the Productivity Commissions conclusion that these airports did not have a level of market power warranting regulation.Following this review,the Australian Government set out the Aeronautical Pricing Principles,which build on the more general Part IIIA pricing principles in the Competition and Consumer Act 2010(the Act)for infrastructure of national significance(Box 1.1).39 Productivity Commission Inquiry report,Economic Regulation of Airport Services(2007),2006,p 39,accessed 13 July 2023.18ACCC|Airport monitoring report|202122Box 1.1:Aeronautical Pricing PrinciplesThe monitored airports together with the other FAC airports are required to follow the Aeronautical Pricing Principles in negotiating with airlines and setting aeronautical prices.The Australian Government specified a number of overarching Review Principles when changing from a price regulation to a price monitoring regime following the initial Productivity Commission review in 2002.40 The principles specifically referred to:pricing to recover efficient long run costs,including an appropriate return on assetsthe scope for price discrimination and multi part pricing the use of efficient peak/off peak prices to deal with capacity constraintsquality of service outcomes consistent with users reasonable expectationsthe negotiation of commercial agreements between airports and airlines.The Review Principles were intended to provide guidance on appropriate outcomes under the new regulatory arrangements.They were later extended based on Part IIIA pricing principles and renamed the Aeronautical Pricing Principles.The Australian Government has promoted the Aeronautical Pricing Principles as an expression of its expectations on the pricing behaviour and outcomes that should apply to aeronautical services and facilities that are subject to significant market power.The Aeronautical Pricing Principles are not part of any legislative instrument and are therefore not enforceable by private entities.However,the Australian Government has made it clear that it expects all airports,whether monitored or not,to comply with the Aeronautical Pricing Principles.While not enforceable,the Productivity Commission also draws on the Aeronautical Pricing Principles in its assessment of whether airports have exercised their market power and in its assessment of parties conduct in commercial negotiations.41Additionally,in its response to the 2006 review,the Australian Government supported the Productivity Commissions recommendation for introducing a show cause mechanism.Under this,a persistent failure to comply with the Aeronautical Pricing Principles could lead to more detailed scrutiny.The Government would have regard to the ACCCs annual monitoring report and other relevant information in assessing the behaviour of the airport to determine whether to request the show cause.42In 2008,the Australian Government directed the ACCC to formally monitor prices,costs and profits relating to car parking at Australias 5 major airports.In addition to its prices monitoring role,schedule 2 of the Airports Regulations provided for the ACCC to monitor the quality of service of car parking at the 5 specified airports.2012 Productivity Commission inquiryIn 2012,the Productivity Commission released its third inquiry report on the economic regulation of airports,following a direction from the government in December 2010.The Productivity Commission considered evidence of airports misuse of market power and again recommended the continuation 40 Minister for Transport and Regional Services and Treasurer,Productivity Commission Report on Airport Price Regulation media release,Treasury website,13 May 2002,accessed 13 July 2023.41 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 298,accessed 13 July 2023.42 Treasurer(Peter Costello),Inquiry Report,Productivity Commission Report Review of Price Regulation of Airport Services media release,Peter Costello,30 April 2007,accessed 13 July 2023.19ACCC|Airport monitoring report|202122of price monitoring.Adelaide Airport was subsequently removed from the monitoring regime following recommendations from this inquiry.The Productivity Commission also recommended that the ACCC,as part of its annual monitoring reporting,should be able to request an airport to show cause why its conduct should not be subject to a Part VIIA price inquiry.43 Where it is dissatisfied with an airports response,it should recommend to the relevant minister to invoke a Part VIIA inquiry,to be guided by the Aeronautical Pricing Principles.In its response,the Australian Government considered that the ACCC has the power to seek additional information from airports where necessary,and it can make a recommendation to the minister responsible for competition policy for appropriate action under the Act.442019 Productivity Commission inquiryIn 2019,the Productivity Commission conducted its most recent inquiry into the economic regulation of Australian airports,following a direction from the government in June 2018.The Productivity Commission commented that the monitored airports have significant market power in supply of aeronautical services.45 The Productivity Commission also stated that airports have a monopoly on access to terminals,which provides airport operators with market power in at terminal parking and landside access.46The Productivity Commission stated that airports could exercise their market power by:setting prices above an efficient leveloperating inefficiently and allowing costs to riserestricting competition from landside access operators,such as off airport car parking providers,by denying access or setting unreasonable terms of accessinadequate investment in infrastructure and operational aspects of services,which could affect service quality.47The Productivity Commission reported that it had found that the existing reporting framework remained fit for purpose and that,on balance,most indicators of operational efficiency including costs and service quality,aeronautical revenue and charges,and profitability are within reasonable bounds.However,the Productivity Commission noted that some airport indicators could present cause for concern if considered in isolation.In particular,the Productivity Commission stated that high international charges at Sydney and Brisbane airports,Sydney Airports relatively high returns,and high operating costs at Perth Airport show that there is reason to remain vigilant.48 In particular,the Productivity Commission observed that the high aeronautical charges at Sydney and Brisbane could be consistent with the airports exercising market power,or they could be explained by the costs of providing those services.However,the Productivity Commission stated that the ACCCs current monitoring reports do not contain the level of detail needed to make that assessment.4943 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2012),p 179,accessed 13 July 2023.44 Department of Treasury,Government Response to the Productivity Commission Inquiry into the Economic Regulation of Airport Services,Treasury website,30 March 2012,accessed 13 July 2023.45 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 37,accessed 13 July 2023.46 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 194,accessed 13 July 2023.47 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 194,accessed 13 July 2023.48 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 2,accessed 13 July 2023.49 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 308,accessed 13 July 2023.20ACCC|Airport monitoring report|202122More broadly,the Productivity Commission stated that data currently collected for the ACCCs monitoring is insufficient to assess whether charges for aeronautical,car parking and landside access services reflect the efficient cost of providing those services.50Accordingly,the Productivity Commission recommended that the current monitoring regime should be strengthened to enhance transparency over airports operations,enable greater scrutiny of airport performance and to detect the exercise of market power more readily.51The Productivity Commission recommended improvements to the monitoring regime,which included the recommendation that the monitored airports report more detailed information to the ACCC in relation to aeronautical,car parking and landside access services.This also included a recommendation that the ACCC should undertake a review of quality of service indicators to ensure that quality of service monitoring has a greater focus on outcomes and more closely reflects the expectations of passengers,airlines and other airport users.The Australian Government accepted these views and supported the inquirys recommendations.52 In June 2022,the Australian Government sought the ACCCs advice on implementation of these recommendations.The ACCC widely consulted with the industry and provided its final advice to the Australian Government on 10 May 2023.The ACCCs advice is available on our website.53 See chapter 2 of this report for more details.In each of the 4 inquiries above,while the Productivity Commission has recommended various adjustments to the monitoring regime,it has consistently favoured continuing with the existing price monitoring regime rather than reintroducing price controls or any other form of regulation.While the Australian Government has accepted the Productivity Commissions main recommendations from each inquiry,it has reserved the right to reconsider the existing light handed approach to regulation in the future.541.5 The ACCCs monitoring roleThe ACCCs monitoring functions originate from directions issued pursuant to section 95ZF of the Act as well as from the Airports Act and associated regulations.The ACCC monitors revenues,costs and profits of aeronautical services at the monitored airports,along with some non-aeronautical activities(car parking and landside access activities).We report this information annually under a dual till approach.This means that we separately report on aeronautical,car parking and landside access services.This allows us to assess trends in each of these segments.50 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 147,accessed 13 July 2023.51 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 2,accessed 13 July 2023.52 Treasury,Australian Government Response to the Productivity Commission Inquiry into the Economic Regulation of Airports,https:/treasury.gov.au/publication/p2019-41706,11 December 2019,accessed 13 July 2023.53 See:https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/more-detailed-information-on-financial-performance-of-airports/accc-final-advice-on-financial-information-may-2023 and https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/airports-quality-of-service-review/accc-final-advice-on-airport-quality-indicators.54 As above,p 8.21ACCC|Airport monitoring report|202122The following sections describe these directions and how they relate to the ACCCs monitoring role in greater detail.55Prices,costs and profits monitoringAeronautical and car parking services monitoringUnder directions made pursuant to section 95ZF of the Act,the ACCC is required to monitor the prices,costs and profits related to the supply of aeronautical services and facilities and car parking services by Brisbane,Melbourne,Perth and Sydney airports.56 Subsection 95G(7)of the Act requires the ACCC to have particular regard to the following matters in performing this monitoring function:the need to maintain investment and employment,including the influence of profitability on investment and employment the need to discourage a person who is in a position to substantially influence a market for goods or services from taking advantage of that power in setting prices the need to discourage cost increases arising from increases in wages and changes in conditions of employment inconsistent with principles established by relevant industrial tribunals.Financial accountsUnder Part 7 of the Airports Act and Part 7 of the Airports Regulations 1997,the ACCC collects and reports annual regulatory accounting statements,including an income statement,balance sheet and statement of cash flows,from the 4 monitored airports.Under Part 7 of the Airports Regulations,airports must:prepare a financial report which separately shows the financial details in relation to the provision of aeronautical and non-aeronautical services(regulation 7.03)lodge these accounts with the ACCC within 90 days of the end of the relevant accounting period(regulation 7.06).The ACCCs price monitoring and financial reporting information requirements for airport operators are outlined in our Airport prices monitoring and financial reporting guideline from June 2009.57Box 1.2 explains the choice of profit measures used in ACCC monitoring.55 The ACCC has some responsibilities in relation to regional air services at Sydney Airport.Prices charged by Sydney Airport for aeronautical services and facilities provided to regional air services are regulated under the price notification regime in Part VIIA of the Act.A declaration issued under section 95X of the Act requires Sydney Airport to notify the ACCC if it intends to increase the prices for regional air services.This declaration commenced on 1July 2019 and ceased on 30 June 2023.A new declaration was issued to commence on 1 July 2023 that will expire on 30 June 2026.The ACCC must assess any proposed price and either:not object to the increase;not object to an increase that is lower than the proposed increase;or object to the proposed increase.In undertaking its assessment of price notifications provided by Sydney Airport,the ACCC is required by a direction made under section 95ZH of the Act to give special consideration to government policy.To facilitate continuing access to Sydney Airport by operators of regional air services,the direction requires that the total revenue weighted percentage increase in prices over the relevant period should not exceed the total percentage increase in the Consumer Price Index over that same period.56 The ACCCs monitoring role for aeronautical services and facilities relates only to those terminals that are owned and operated by each of the monitored airports.For many years,some terminals at the monitored airports have been operated on an exclusive basis by a single airline under a domestic terminal lease.All terminals that previously operated under a domestic terminal lease have now reverted back to airport control.The implications of these changes on the ACCCs reporting of aeronautical data are discussed further in box 4.1 in chapter 4.Table C.2 in Appendix C sets out the terminal configurations at the monitored airports.57 See:https:/www.accc.gov.au/publications/airport-prices-monitoring-financial-reporting-guideline.22ACCC|Airport monitoring report|202122Box 1.2:Profit measures used in the Airports monitoring reportThe ACCC uses profitability to measure an airports financial performance.There are typically 3 ways to measure operating profit(as a dollar amount):earnings before interest and taxes(EBIT)earnings before interest,taxes and amortisation(EBITA)earnings before interest,taxes,depreciation and amortisation(EBITDA).As a measure of airport operating profit,each can be calculated using accounting data collected as part of the ACCCs monitoring activities.Historically,the ACCC used EBITA as the profit measure.Compared to EBIT and EBITDA,EBITA includes depreciation but excludes the associated financing costs and amortisation of any intangible assets.By excluding amortisation of externally acquired intangibles,EBITA provides a consistent profit estimate.In previous Airport monitoring reports,the ACCC typically reported 2 profitability measures:Operating profit margin EBITA as percentage of total revenue.This is the percentage of total revenue remaining after paying off the operating expenses and depreciation.Return on assets EBITA as a percentage of average tangible non-current assets.This shows the rate of return earned on the relevant assets.This measure looks at how effectively a business is using its resources to make a profit.The ACCC recognises that both EBIT and EBITA can be a more appropriate measure of operating profit in the utility sector than EBITDA,as they account for depreciation of tangible assets in the overall cost.As a measure of post depreciation earnings,they cover gross earnings to equity holders and debt holders.The ACCC considers that measurement of the return on assets by means of EBIT is the accounting measure that most closely resembles the concept of weighted average cost of capital.However,as the value of intangible assets(other than goodwill and leasehold land)is small or negligible for the monitored airports(other than Sydney Airport),the resulting difference in EBIT and EBITA is not material.Consequently,for airport monitoring reporting,the use of EBITA compared to EBIT will not have a material difference in assessing profitability.To measure return on assets,we use EBITA as a percentage of average tangible non-current assets:average meaning the average value of asset balances at the start and end of the financial year,to smooth out to a degree the effects of changes the airport has made to assets and asset values during the yeartangible meaning to exclude intangibles such as goodwill(for instance,a business reputation and its relations with its customers);and to focus on tangible assets such as property,plant and equipmentnon-current,similarly meaning to exclude current assets such as cash;and to,again,focus on hard assets such as property,plant and equipment.The ACCC also uses the line in the sand approach to asset valuations.Box 1.3 explains the rationale behind this approach,while Appendix C sets out the methodology.23ACCC|Airport monitoring report|202122Box 1.3:The use of a line in the sand approach to aeronautical asset valuationsIn its 2006 report into the review of price regulation of airport services,the Productivity Commission noted that most of the monitored airports had revalued above ground assets since the major airports became privatised.The Productivity Commission noted that one possible effect of these revaluations was to justify higher charges over time.58 For instance,an upward revaluation of airports aeronautical assets usually results in a lower return on assets measure.The lower rate of return on average assets could be used to argue for the raising of airport charges.The Productivity Commission recommended that from 30 June 2005,the ACCC adopt a line in the sand approach for valuing tangible(non-current)aeronautical assets to remove the effect of revaluations of aeronautical assets by the monitored airports.The Productivity Commission recommended that,for the purpose of the monitoring regime,among other things the value of an airports asset base should be rolled forward as follows:the value of tangible(non-current)aeronautical assets reported to the ACCC as at 30 June 2005plus new investmentless depreciation and disposals.The Productivity Commission line in the sand approach removes the effect of revaluations of aeronautical assets by airports for monitoring purposes.Quality of service monitoringPart 8 of the Airports Act provides for the ACCC to monitor the quality of services and facilities at the specified airports.More specifically,Part 8 provides for:quality of service aspects to be specified in the Airport Regulationsthe ACCC to monitor and evaluate the quality of the aspects of airport services and facilities against criteria determined by the ACCC records to be kept and retained in relation to quality of service matters information to be provided to the ACCC by airport operators and other relevant parties,including airlines,relevant to quality of service matters the ACCC to publish reports relating to the monitoring or evaluation of the quality of aspects of airport services and facilities.The ACCCs approach to its quality of service monitoring role is outlined in its airport quality of service monitoring guideline from June 2014.59 The ACCC did not collect quality of service data in 202122,to reduce the reporting burden on airports following the onset of the COVID-19 pandemic.58 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 12,accessed 13 July 2023.59 See:https:/www.accc.gov.au/publications/guideline-for-quality-of-service-monitoring-at-airports.24ACCC|Airport monitoring report|202122Limitations of the ACCCs monitoring roleThere are some limitations in monitoring.Typically,monitoring is limited in its ability to address behaviour that is detrimental to the market and consumers,particularly as a longer term measure where the threat of regulation is diminished.Monitoring does not directly restrict airports from increasing prices or allowing service quality to decline.It also does not provide the ACCC with the ability to intervene in airports setting of terms and conditions of access to airports infrastructure.Because airports approaches to valuing their assets may vary,it is difficult to meaningfully compare profitability between airports based on reported return on assets.The observations that the ACCC can make in relation to long term trends is further affected by the monitored airports applying various accounting treatments or changing their accounting methods in relation to revenue,expenses and/or asset values from time to time.60 The ACCC also has a limited power in collecting information for the monitoring purpose.For example,information on landside access is provided by airports on a voluntary basis.The incomplete and inconsistent financial information received from the airports over time has limited the scope of our analysis.Current monitoring information cannot be used to assess the appropriateness of the level of prices and profitsThe ACCCs monitoring of airports is limited in scope and does not enable us to assess in detail whether an airport has exercised market power to earn monopoly profits.One of the key limitations of the existing monitoring regime is that the data collected does not allow the ACCC to make conclusive assessments about whether monitored airports are earning economic returns that are consistent with the degree of risks they face or whether monitored airports have been operating efficiently.This is mainly because the various financial indicators and measures the ACCC reports are based on historical accounting data.As noted in box 1.2,we have typically used 2 profitability measures operating profit margin and return on assets.These measures reflect accounting rates of return,which rely on book values of investment,depreciation,and accounting profits.As they do not properly account for time value of money,the measured accounting rate of return does not coincide with the economic rate of return.The economic rate of return is most appropriate for analysing monopoly profits.This is because an economic rate of return is what provides signals to entry and exit for firms and resources,and therefore should be used and compared to an appropriate airport rate of return,over the long term,when assessing whether a firm is making excessive profits on a sustainable basis.However,the ACCC cannot estimate the economic rate of return because it currently does not obtain information needed to estimate economic valuation of airport assets or to assess the efficient long run costs of providing airport services.When assessing the level of prices and profits,it is common regulatory practice to undertake an assessment of the firms economic returns against their efficient long run costs of providing services.This may involve a public process to rigorously determine an economic value of the firms asset base(that is,the regulatory asset base)and the required rate of return on capital(that is,the weighted average cost of capital).60 The ACCC does not have a role in assessing revaluations in non-aeronautical assets or cost allocation methodologies.25ACCC|Airport monitoring report|202122In the case of airports,however,the benchmark for efficient long run costs has not been set.Instead,airports asset values under monitoring are based on their accounting values rather than their economic value.Importantly,the accounting value of assets may include revaluations that have been undertaken at airports discretion and that can distort assessments of airports performance.For example,in some years,some airports have revalued their assets upwards,which lowers their return on assets.Consequently,airports asset values under monitoring do not provide a reliable indicator of an airports regulatory asset base,which is needed to make a meaningful assessment of whether airports are earning monopoly rents.As discussed in Box 1.3,the ACCC has adopted the line in the sand approach since 200708 to address the issues associated with airports revaluing their aeronautical assets.However,this approach only removes any aeronautical asset re-valuations that have occurred after 30 June 2005.Judgement about airports performance cannot be made based on trends in airports prices,profits and quality of service aloneAn airport that is already pricing at or near monopoly levels may only report gradual increases in prices and profitability over time.Therefore,trends in prices and profitability alone cannot tell us conclusively whether an airport is extracting monopoly profits.Further,monitoring cannot clearly distinguish between various factors that may contribute to increasing profitability,some of which may raise cause for concern about an airports performance while others may not.For example,increasing profitability by increasing prices whilst lowering or holding constant quality of services over a sustained period of time may indicate an airport exercising market power,which may be a concern.In contrast,increasing profitability due to increased efficiency in operations or economies of scale may not necessarily raise concerns.1.6 ConsultationThe ACCC consulted with each of the monitored airports in preparing this report.We sought views from the monitored airports on major developments which affected their operations during 202122 as well as any factors that impacted on their recovery from the COVID-19 pandemic.We also consulted with each of the monitored airports on the confidentiality and accuracy of the information we proposed to publish.We thank participants for their time and contribution.26ACCC|Airport monitoring report|2021221.7 Structure of the reportThe structure of the remainder of the report is as follows:chapter 2 covers the ACCCs advice to the Australian Government to enhance the current price monitoring regimechapter 3 provides an overview of the operational and financial performance of the monitored airports chapter 4 covers trends in aeronautical services at the monitored airportschapter 5 covers trends in car parking services at the monitored airportschapter 6 covers trends in landside access at the monitored airportschapter 7 covers trends in investments made by the monitored airportsthe appendices contain further information on landside access options,supplementary tables and charts presenting data gathered as part of the ACCC monitoring regime,as well as additional background information on our monitoring role and methodology.This and past Airport monitoring reports can be found on the ACCCs website at https:/www.accc.gov.au/regulated-infrastructure/airports-aviation/airports-monitoring.The webpage for each report includes links to supplementary information.This includes the regulatory accounts for the monitored airports for that year and the supplementary database containing financial and operational data in relation to aeronautical,car parking and landside access services for each monitored airport.27ACCC|Airport monitoring report|2021222.Advice to enhance the current price monitoring regimeKey PointsIn May 2023,the ACCC recommended to the Australian Government that the Airports Regulations be amended to require the monitored airports to maintain records of,and report to us on,systematically disaggregated data and detailed cost allocation methodologies in relation to aeronautical,car parking and landside access services.We consider that this will:enhance transparency of performance of the monitored airports for the benefit of airport users,assisting those users:in negotiations with the monitored airports to assess the reasonableness of charges and other terms of access to identify potential problems with specific services inform analysis of whether the monitored airports are exercising their market power in relation to those specific services.We also recommended to the government that the Airports Regulations be amended to require the monitored airports to report information relating to 53 quality of service matters,which materially contribute to the outcomes expected by airport users.We consider that the actions set out in our advice will achieve the objectives of the price monitoring regime and the Airports Act for the benefit of airport users and the Australian community more generally.As discussed in section 1.4,in 2019,the Productivity Commission completed its fourth review of the Economic Regulation of Airports.The Productivity Commission found that the current light handed approach to airport regulation remains fit for purpose.However,the Productivity Commission recommended that:the monitored airports report more detailed information to the ACCC in relation to aeronautical,car parking and landside access services to enhance the transparency of airports operations and to detect the exercise of market power more readily(Recommendation 9.4)the ACCC provide advice to the Australian Government on an updated set of quality of service indicators to improve their fit for purpose(Recommendation 9.5).61 The Australian Government supported these recommendations in principle.In June 2022,the Department of Infrastructure,Transport,Regional Development,Communications and the Arts(Department of Infrastructure)requested the ACCC to review the current reporting requirements under Parts 7 and 8,and Schedule 2,of the Airports Regulations 1997,consult with industry stakeholders and to provide advice on amendments to these regulations.The ACCC consulted widely with industry stakeholders,including issuing several consultation papers and convening a joint consultation session with the monitored airports and the Australian Airports Association.61 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 42,accessed 13 July 2023.28ACCC|Airport monitoring report|202122On 10 May 2023,the ACCC provided its final advice to the Department of Infrastructure,which is available on our website.62 This chapter covers the ACCCs advice on more detailed information on airport performance and on airport quality indicators.2.1 ACCCs advice on more detailed information on airport performanceThis section presents a synopsis of the final advice provided by the ACCC to the Australian Government on reporting and publication of more detailed information on airport performance.Our advice is available on our website.63 Productivity Commission recommendation 9.4The Productivity Commission recommended that the monitored airports be required to provide the ACCC with more detailed information which will:show the number of passengers that depart from and arrive at each terminalseparately show the costs and revenues in relation to the provision and use of aeronautical services for domestic flights and for international flightsfor Sydney Airport,show the costs and revenues in relation to the provision and use of aeronautical services for flights servicing regional New South Walesseparately show the number of users,costs and revenues in relation to the provision and use of at terminal and at distance car parking and the utilisation rates for each type of parkingseparately show the number of vehicles using different landside services,and the charges(and other terms of access),operating revenues and costs attributed to the provision of each landside servicereport any costs that are allocated to the provision of specific services,including:international and domestic aeronautical services;at terminal and at distance parking;and landside access servicesreport the methodologies that they use to allocate costs to specific services.64Key matters considered by the ACCCIn formulating its advice,the ACCC considered:the objectives of the Airports Act and our price monitoring regimethe limitations of the information and data provided under the current monitoring frameworkthe data required to meaningfully enhance transparency over airports operations for the benefit of airport users and to detect any exercise of market power more readily62 See:https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/more-detailed-information-on-financial-performance-of-airports and https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/airports-quality-of-service-review.63 See:https:/www.accc.gov.au/by-industry/travel-and-airports/airport-monitoring/more-detailed-information-on-financial-performance-of-airports/accc-final-advice-on-financial-information-may-2023.64 Productivity Commission,Inquiry Report,Economic Regulation of Airport Services(2019),p 314,accessed 13 July 2023.29ACCC|Airport monitoring report|202122the Governments objective that increasing the transparency of prices and performance will assist it to assess airports market power over time,for aeronautical,car parking and landside access and services.This will benefit users of airports,both passengers and commercial users,and the broader community in the long run.65 feedback from all stakeholders.The ACCC also sought to implement any additional reporting requirements in a way that balances the regulatory burden on airports.The downside of reporting highly aggregated dataThe ACCC currently receives and publishes highly aggregated data,which has several implications for the efficacy of the current monitoring framework.First,the aggregated information is of limited utility to users of specific services.For example,domestic and international airlines negotiate with the monitored airports on terms and conditions of use of airport services and facilities,including charges.For the purpose of these negotiations,the airlines need information that is specific to the provision of domestic and international services respectively.Therefore,publication of aggregated aeronautical information by the ACCC only assists the airlines in their negotiations to a very limited extent.Second,aggregated information does not allow analysis of individual services,such as international compared with domestic flights,or different types of car parking.As a result,where there is potential for airports to exercise market power in one service,for example international aeronautical services,the current framework does not enable the ACCC or the Productivity Commission to effectively assess whether this is occurring or whether there are other explanations for identified differences in charges for certain services.Further,there is currently no formal requirement on the monitored airports to provide information about landside access services to the ACCC.The information that the monitored airports currently provide,under the existing framework,is voluntary.As a result,the information is often inconsistent,or incomplete,which limits the realisation of the Governments identified goal of transparency of prices and performance to assess airports potential exercise of market power over time in respect of landside access.The lack of fulsome and consistent data impedes the Airports Acts objective of providing transparency of airport operations and facilitating the assessment and comparison of monitored airports performance.65 Australian Government,Australian Government response to the Productivity Commission Inquiry into the Economic Regulation of Airports,https:/treasury.gov.au/publication/p2019-41706,11 December 2019 by the Deputy Prime Minister and Minister for Infrastructure,Transport and Regional Development,the Hon Michael McCormack MP,and the Treasurer,the Hon Josh Frydenberg MP,p 10,accessed 13 July 2023.30ACCC|Airport monitoring report|202122The benefits of reporting disaggregated dataThe ACCCs advice to the Australian Government,set out further below under the heading The ACCCs advice,would require the monitored airports to provide disaggregated information in relation to aeronautical,car parking and landside access services,which would have the benefits of:enhancing transparency of airport performance for the benefit of airport users,which would assist those users:in negotiations with the monitored airports,for example,by allowing the airlines to better assess whether the parameters of airports building block models are reasonable to assess the reasonableness of charges and other access terms and conditions to identify potential problems with specific services informing analysis of whether the monitored airports are exercising their market power in relation to those specific services.These benefits are discussed in more detail below.Disaggregating to enhance transparencyOne benefit of collecting and publishing disaggregated data for individual services is that it would provide greater information transparency for users of those services and assist them in negotiations with the monitored airport,where applicable.Specifically,domestic and international airlines negotiate aeronautical services agreements with the monitored airports for provision of domestic and international services respectively.Domestic airlines individually negotiate the terms of their aeronautical services agreements with each of the monitored airports.International airlines individually negotiate the terms of airline specific services(for example,access to lounges),while the Board of Airline Representatives of Australia bargains collectively on behalf of most major international airlines in relation to access to common-use services.As we discussed in 202021 Airport monitoring report,the monitored airports told the ACCC that they use a building block model in their negotiations with airlines.As part of this,some monitored airports provide their building block model(in its entirety or just the key parameters),and supporting information,to airlines,while others appear to use their building block models internally to arrive at price offers,but do not discuss the parameters that led to those offers during negotiations.66While the monitored airports consider that the level of information that they provide to airlines is sufficient,some airlines have raised concerns that many airports are not providing sufficient information in a timely manner during their negotiations.67Specifically,some airlines have informed the ACCC that many airports are not providing adequate information for airlines to allow them to estimate various building block model parameters,such as asset bases and operating expenditure.The airlines have said that this makes it hard for airlines to use the building block model to assess whether airports aeronautical price offers are set to recover long-term efficient costs of providing the aeronautical services.6866 See:https:/www.accc.gov.au/about-us/publications/serial-publications/airport-monitoring-reports/airport-monitoring-report-202021.67 See:https:/www.accc.gov.au/about-us/publications/serial-publications/airport-monitoring-reports/airport-monitoring-report-202021.68 See:https:/www.accc.gov.au/about-us/publications/serial-publications/airport-monitoring-reports/airport-monitoring-report-202021.31ACCC|Airport monitoring report|202122Some airlines have also stated that airports provide limited transparency about their actual capital expenditure.The airlines have said that this means that they are unable to verify whether the charges they pay under the aeronautical services agreements to recover capital expenditure over time are reflective of the costs actually incurred by airports.Therefore,a benefit of collecting and publishing disaggregated information on costs and assets relating to domestic and international services is that this would complement the information that airlines receive from airports during negotiations and allow the airlines to better assess whether the monitored airports building block model parameters are reasonable.Collecting and publishing further disaggregated data for car parking and landside access services would also improve information transparency relating to the monitored airports ground transport operation and pricing.This would assist relevant airport users to assess the reasonableness of landside access charges and other access terms and conditions,and thus facilitate airports consultations or commercial negotiations with landside operators.More generally,collecting and publishing disaggregated data improves information transparency of airport provision of specific services.Operational and financial performance of individual services over time can be analysed by relevant stakeholders in order to identify potential problems with specific services.Disaggregating to assess the exercise of market powerAnother benefit in seeking disaggregated data for individual services is that this would allow analysis of whether the monitored airports are exercising their market power in relation to those specific services(which is not possible to do using aggregated data).There are a number of reasons why this benefit is likely to be material,including:The monitored airports have different degrees of market power in relation to individual services(for example,it is likely that airports have a greater degree of market power in relation to at-terminal car parking versus at-distance car parking).Being able to undertake analysis of the individual services is likely to provide a clearer indication of the sources where airports are exercising their market power in support of the analysis using aggregated data.Obtaining disaggregated data would also allow comparison of the monitored airports performance across similar or related services,which may also give additional indications of whether airports are exercising their market power.For example,as the Productivity Commission noted in its 2019 review,obtaining disaggregated data in relation to international and domestic aeronautical services would allow an assessment of whether the difference in prices charged by the monitored airports for those services are due to a difference in costs of providing those services.The monitored airports have different incentives in relation to different access seekers,particularly on the landside.For example,the monitored airports are likely to regard off-airport car parking operators as their most direct competitors in the provision of at-distance car parking.Obtaining disaggregated data will allow a better assessment of whether the monitored airports are exercising their market power in setting terms and conditions of access(including prices)to off-airport car parking operators.32ACCC|Airport monitoring report|202122The ACCCs adviceTo overcome the limitations of the current price monitoring regime(as set out throughout this report)and to meet the objectives of the price monitoring regime and the Airports Act for the benefit of the airport users and the Australian community,the ACCC recommended that the Airports Regulations be amended to require the monitored airports to:disaggregate aeronautical financial statements69 and operational data by domestic and international passenger flights and other.Sydney Airport would also need to further disaggregate the data in relation to domestic passenger flights by regional and non-regional flightsdisaggregate non-aeronautical financial statements and operational data,specifically for car parking and landside access and other.Further:car parking should be disaggregated by at terminal and at distance landside access should be disaggregated by taxi,rideshare,private car,private bus,public bus,off airport car parking shuttle bus and train(as relevant).break down all expenses and assets into those which are:direct,which exclusively relate to a particular service shared but attributable,which are common amongst services but can be attributed to each of the shared services individually based on a clear causal relationship shared but unattributable,which are common amongst services but cannot be attributed to individual services based on a clear causal relationship.Instead,these should be allocated pro rata based on some high level proxy(for example,revenue share)describe the methodologies the airports use to allocate costs,assets and revenues across the different categories in preparing the above statements and provide those methodologies,together with underlying supporting data,to usstructure the disaggregation of service classification according to a mutually exclusive and collectively exhaustive principle.Throughout the consultation process,some monitored airports provided information to the ACCC about constraints they currently face in reporting certain disaggregated data,particularly in relation to landside access services.To address this,we advised the Australian Government:that the Airports Regulations should provide flexibility for the ACCC to allow some monitored airports to report certain additional financial data in respect of landside access services at a higher level of aggregation where the airport is unable to disaggregate the financial data because it does not have reasonable means of collecting the underlying operational data necessary for allocation of common costs and assets to consider whether there is certain disaggregated financial data,particularly in relation to landside access services,that is less amenable to an audit,and if so,make appropriate adjustments to the requirements on airports to independently verify the validity of that data.69 This includes the income statement,balance sheet,and schedule of assets.33ACCC|Airport monitoring report|2021222.2 ACCCs advice on airport quality indicatorsThis section presents a synopsis of the final advice provided by the ACCC to the Australian Government on quality of service indicators.Our advice is available on our website.70The ACCCs final advice relates to the objective indicators,being aspects71 and matters72 that are set out in Part 8 and Schedule 2 of the Airports Regulations.Separately to this advice,we intend to review other elements of its quality of service monitoring,including the subjective indicators(being airline and passenger surveys)and the ratings system(which we have used to convert all the objective and subjective indicators into a single rating).Productivity Commissions recommendation 9.5The Productivity Commission commented that the current set of airport quality indicators monitored by the ACCC that were determine
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