Moody's Investors Service says in a new report that Australian airports face a higher degree of uncertainty following a report published by the Australian Competition & Consumer Commission ("ACCC").

"The ACCC's monitoring report does not in itself have an immediate impact on the ratings of the Australian airports or on our stable outlook for the sector," says Paul Ovnerud-Potter, a Moody's VP/Senior Analyst and author of the report.

"However, the ACCC report and the prospect of an earlier review by the Productivity Commission raise some uncertainty surrounding the airports' rate-setting framework. Uncertainty and possible pressure to reduce charges, that currently support the airports' revenue stability, could ultimately have a negative impact on credit quality, and potentially ratings, over time," says Ovnerud-Potter.

"Moody's approach for rating airports specifically factors in regulation and rate-setting as major criteria for determining our ratings in the sector," he adds.

The report notes that the Australian airport sector has a high degree of leverage. This is tempered by airports' dominant market positions, certainty of rate-setting and a fairly benign regulatory environment - all supportive of earnings stability.

The airports rely on the current framework to develop pricing that supports the significant ongoing capital investment needed for upgrading and maintaining facilities, which by their nature are long-term assets.

"Moody's believes there will be continued focus on car parking pricing. This affects consumers more directly and is therefore a more obvious target for lawmakers."

The ACCC airport monitoring report released on 11th March 2010 questions price and service levels of the major capital city airports. The country's Minister for Transport and Infrastructure responded to the ACCC's critique the following day by asking Australia's Productivity Commission to expedite its review scheduled for 2012.

The ACCC uses its annual monitoring report to discourage airport operators from exercising their potential market power as monopolies. It looks at both aeronautical services and car parking, and examines performance indicators such as quality of service, prices, profits and levels of investment.

Moody's report, entitled, 'Australian Airports - Potential Risks from Competition Commission Review,' is available on www.moodys.com.