Our investment in capacity and the passenger experience saw Sydney Airport’s operating expenses increase by 14.3% compared to 2015. Our increased investment included additional expenses from the first full year following the T3 transaction, terminal improvements and a step change in service standards under our international aeronautical agreements. Peak demand during the year also significantly increased activity and contributed to increased costs.
Employee benefits expense
Our investment in our people has delivered increased capacity to support our revenue growth, greater in-house capabilities across our operations, and a continuing focus on delivering an improved passenger experience. Our employee benefits expense – including the salaries and benefits of 418 permanent employees and contractors engaged by Sydney Airport – increased 15.6% from the prior year. This was the result of employing more people to support our significant passenger growth and ongoing capital investment program, as well as implementing normal salary and wages increases for existing staff.
Underlying operating expense by category
Operating expense by category1
Services and utilities expense
Our focus on enhancing the passenger experience and airport operations, along with additional costs from the first full year of T3 control, saw costs rise by 22.1% compared to the prior year. Service and utilities included the cost of electricity, water and gas used by the airport as well as baggage operations, cleaning, car park and kerbside management, and bussing.
Property and maintenance expense
Customer service level enhancements and the expansion of baggage facilities, together with the first full year of T3 control, led to costs increasing 29.4% on the prior year. Our investment continues to facilitate capacity increases and overall revenue growth. Property and maintenance covers the cost of maintaining airfield and airport infrastructure, contracted through eight major service contracts.
Security recoverable expenses
Security recoverable expenses relate to the cost of providing government mandated security measures, such as passenger and baggage screening. We recover these costs from airlines through per passenger charges at no margin. Security recoverable costs increased 6.8% from the prior year due to significant increases in international passenger volumes, the full year effect of opening three additional security lanes at T1 International and CPI increases.
Other operational costs
Other operational costs include corporate items. In 2016, we increased our marketing of discounted, online car parking booking and the opening of our new Domestic Priority pick-up zone as part of our commitment to offer a wider range of parking options to our airport visitors. This led to costs increasing by 2.1% from the prior year.
We expect overall operating expenses to increase as we continue to deliver an improved airport experience for our customers and passengers. Likely increases are expected to reflect improved service levels and additional improvements in passenger experience initiatives under international airline agreements, and normal escalations under contractual terms. We also expect additional costs relating to the new hotel, estimated to open mid-2017, and step-ups in electricity contract costs in line with the Australian electricity market.