Air New Zealand CEO Greg Foran had warned of serious consequences for consumers if there was no inquiry into airport regulation. Photo / Michael Craig
The Commerce Commission has ruled out calls for an inquiry into airport regulation.
The watchdog announced its decision on Auckland, Wellington and Christchurch airports today.
Air New Zealand in July said it believed there was enough “accumulated evidence and concern” to justify undertaking an inquiry.
But instead of scrutinising competition, the commission will focus on consulting next year about information disclosure requirements on big capital projects.
Airports including Auckland and Christchurch are investing heavily in some major infrastructure projects.
The New Zealand Airports Association this morning welcomed the decision not to proceed with an airport regulation inquiry.
The association said the current framework promoted transparency, accountability and long-term investment.
“The Government’s position provides much-needed regulatory certainty. A stable and transparent regulatory environment is vital to New Zealand’s economic growth agenda.”
Auckland Airport chief executive Carrie Hurihanganui said today’s report gave certainty for investors.
“Auckland Airport owns and operates one of New Zealand’s most strategically important infrastructure sites and we are investing to ensure it delivers for the future,” Hurihanganui said.
“These essential upgrades are creating jobs, boosting resilience, improving the customer experience and adding the capacity our national gateway needs for growth.”
Hurihanganui said Auckland’s regulated per passenger domestic jet charges were rising by an average of $1.26 a year between 2023 and 2027.
Hurihanganui called that a fair and reasonable price for capacity and improvements being delivered to “benefit all airport users, including airlines”.
Air New Zealand chief executive Greg Foran this afternoon said more action was needed for the sake of travellers and for the country’s long-term economic growth.
“In 2023, Air New Zealand paid Auckland Airport $61 million. This year, that’s risen to $144 million. By 2032, we expect to be paying them $476 million with no effective oversight of how those costs are set before they’re locked in,” he added.
“Unfortunately, it’s New Zealanders who will bear the brunt of these increases.”
He said the $1.26 domestic jet price increases at Auckland excluded the cost of the multibillion-dollar terminal, not yet due to open and not yet reflected in current prices.
“The airport has never publicly disclosed what that terminal will mean for passenger pricing and under the current regime they don’t have to.”
The Board of Airline Representatives (Barnz) said even though the commission ruled out a so-called Section 56G inquiry into the regulatory regime of airport services, today’s decision would still bring some benefits to consumers.
“The report, which examines the impact of major investment decisions made by regulated airports, finds that there is more that could be done to ensure benefits to consumers are delivered over the long term,” Barnz said.
It said the commission would make changes to information disclosure, which applied to Auckland, Wellington and Christchurch airports.
“At present, this regulation is backward-looking and focuses only on the capital committed for a single pricing period, without considering the full impact of forward-looking investment plans,” Barnz added.
“This means the commission only makes findings after major capital costs are announced and building is already underway, regardless of whether airlines support investment and regardless of whether the cost of that investment might impact growth.”
But the Aviation Industry Association (AIANZ) said Government intervention was needed.
The association represents the commercial aviation sector including airlines, drone operators and agricultural aviation companies.
It said today’s report proved the current regime gave no confidence that big investment decisions such as Auckland Airport’s terminal expansion could really deliver value for New Zealanders.
“In fact, what’s being talked about here is billions of dollars being spent by a monopoly provider, in this case, Auckland Airport, on a terminal expansion.”
The AIANZ also said regional airlines and routes in New Zealand relied on affordable infrastructure, not multibillion-dollar investments which spawned “rising charges that regional airlines cannot easily pass on to customers”.
The association said although the commission supported information disclosure on large infrastructure projects, “ultimately the dial will not move without legislative change by the Government”.
Minister of Commerce Scott Simpson said he was grateful for the Commerce Commission’s work on the issues.
“I’m pleased that progress is being made on the information disclosure requirements and the commission’s commitment to advancing this work.
“The Government remains committed to a strong and competitive aviation sector, supported by the Aviation Action Plan and work to strengthen airline connectivity.”
Simpson said the Government expected airports to engage constructively with the regulatory framework and demonstrate responsible pricing, especially during major investment.
“The current approach relies on transparency and good faith and I expect the regulated airports to uphold these principles.”
Foran in July wrote to Commerce Commission chair John Small.
“Regulated airports are contemplating large and sustained uplift in future investment programmes, particularly at Auckland Airport,” Foran said at that time.
“The need for and scale of this uplift remains debatable.”
He said the public would benefit if the commission had a bigger role in ensuring capital expenditure was appropriate.
The commission today said a Section 56G inquiry would be expensive.
It said another undesirable issue was “the lack of flexibility of any resulting regulatory changes, which we think would likely result in over-regulation across the regulated airport sector”.
The watchdog indicated it might be open to a law change without fully committing to one kind of regulation for the whole price-setting event at all three major airports.
Back in May, investment company Jarden said market concerns over Auckland Airport getting over-regulated were overblown.
Apart from the commission, airports have faced scrutiny from the Ministry of Business, Innovation and Employment (MBIE).
In April, MBIE asked for feedback on whether existing regulations were adequate.
Airports voiced displeasure with lengthy reviews imposed by bureaucrats, but Barnz said rules were needed to stop “monopoly” airports becoming exploitative.
MBIE in August said it considered the feedback and provided advice to Simpson.
No law change was being pursued, but MBIE said the Commerce Commission might review the information disclosure rules next year.
John Weekes is a business journalist covering aviation. He has previously covered consumer affairs, crime, politics and courts.
Listen and subscribe to the Today in Business podcast – the top headlines from the NZ Herald business team summarised and delivered by an AI voice as an easily digestible recap.