Airlines accuse Auckland Airport of making $3.6 billion in excess returns

An airline lobby group says Auckland Airport has banked excess profits of $3.6 billion over the past two decades.

In a submission to the Commerce Commission the group, Airlines for Australia and New Zealand, says more must be done to protect airport users from the market power exerted by monopoly airports.

Chairman Graeme Samuel said the group had been left in no doubt that Auckland International Airport is targeting excessive profits.

Historically, this has been demonstrable by observing returns to shareholders over the past 19 years.

According to A4ANZ estimates the value of excess returns to Auckland airport owners- which includes Auckland Council - may be upwards of $3.6 billion.

A4ANZ's submission references independent analysis from Frontier Economics, which confirms that earnings at New Zealand airports are excessive, with profit margins significantly higher – in some cases more than double – those of
other airports around the world operating in competitive markets or with greater regulation.

This was shown in a report released by A4ANZ last week.

The New Zealand Commerce Commission has also said Auckland Airport's profit may be too high.

Samuel said that based on both historic financial performance, and the recent decision of Auckland

Airport to target returns above the commission's estimate, his group did not believe that
Auckland Airport was appropriately constrained in its ability to extract excessive profits over the 2017 – 2022 pricing period.

Ealier this year, the commission said it was concerned the airport was planning to make $47 million more profits on its regulated assets than it should, and that customers would get overcharged.

Under a light-handed regulatory framework designed to curb price gouging in markets with little or no competition (like airports), Auckland Airport has to disclose its present and future profit expectations and the Commerce Commission periodically reviews them. Ironically, however, it can't force airports to change the amount of money they intend to make, or impose penalties.

In an initial finding, the commission said it was concerned about excessive profits. Auckland Airport is targeting a return on its regulated asset base of 7.06 per cent, against the commission's mid-point benchmark of 6.41 per cent.

Auckland Airport has yet to respond to the A4ANZ claims but after being criticised for its service standards earlier this week said it had been caught out by the rapid growth in tourism here.

''No one in the industry predicted this growth and, like in the rest of NZ, it has at times put pressure on both our and others' infrastructure whether it be getting to the airport, walking through terminal construction zones or getting through border processes,'' said the company's chief executive Adrian Littlewood.

'' While the airport system is made up of many different organisations responsible for different elements – for example, the airlines are responsible for baggage delivery, the border agencies for security and customs processing – we know that the core airport infrastructure system needs an upgrade and we are getting on with it.''