“The ongoing finger-pointing and contradictory narratives put forward by different sides to this dispute highlights the need for a market study into the aviation sector ... to provide the public with answers, independent of commercial interest or political positioning.”
The International Air Transport Association (IATA) called for urgent changes to regulation of New Zealand airports.
“The current light-touch regulatory approach means Auckland Airport can set the aeronautical pricing as they wish,” it said.
“Auckland Airport, being the sole monopoly provider, can game the regulatory process by setting their pricing artificially high at the start of the regulatory process and then respond, if they so wish, by lowering their pricing following the conclusion by the regulator, or to ignore the report.”
IATA regional vice-president for North Asia and Asia-Pacific Dr Xie Xingquan said the commission unsurprisingly found airport charges in the latest pricing period for July 2022 to July 2027 were excessive.
“While the airport has responded by lowering its charges over the next two years in response to the review, the process does highlight that the economic regulatory framework in its current form is not fit for purpose and change is urgently needed,” Xingquan added.
The IATA acknowledged Auckland Airport was investing significantly in infrastructure.
But it said airlines had serious concerns about the size, phasing, cost allocation and affordability of those investments.
“Some of these costs could have been avoided if infrastructure planning and investments had been managed appropriately in the past.”
Minister of Commerce and Consumer Affairs Scott Simpson said he was concerned about potential rising costs for flyers.
Asked about the current oversight regime, Simpson told the Herald: “While airports should be able to earn a reasonable return on investment, this should take into consideration the long-term interests of consumers.”
Simpson said he was concerned about flow-on effects for consumers from “unreasonably high targeted returns”.
He added: “I acknowledge Consumer NZ’s concerns about aviation sector pricing, and while no decisions have been made on future market studies, I will continue to monitor the sector and won’t hesitate to consider action if appropriate.”
Simpson’s predecessor Andrew Bayly last year did not rule out a market study into the sector but did not commit to one either.
The International Air Transport Association has weighed in on Auckland Airport’s pricing, and Consumer NZ says the whole sector needs to be more closely scrutinised. Photo / Brett Phibbs
Auckland Airport said the airport already moved to discount average per-passenger charges by between $1.10 and $4.80 over the next two financial years.
“Auckland Airport is not the reason domestic airfares are increasing at the rate they have been.”
It said as with all of New Zealand’s major airports, Auckland Airport was regulated.
“In stark contrast, we have one of the least competitive domestic airline markets in the world (84% of the market is controlled by a single airline), second only to Bolivia, and a monopoly airline that is subject to zero economic regulation.”
The airport said it had to balance the needs of travellers, government agencies and 26 airlines in deciding what infrastructure to build.
Air New Zealand chief executive Greg Foran earlier this week said he thanked the commission for its report.
“It’s largely our customers who will bear Auckland Airport’s excessive landing charges, so we welcome the commission’s recognition of the limitations in the current airport pricing regulatory regime and we look forward to working with the Government on next steps.”
The airline has previously said any market study or competition study should look at the industry as a whole, instead of singling out the airline.
On Monday, Auckland Airport announced cuts to projected airline charges after the Commerce Commission found its forecast revenue was excessive and targeted returns were unreasonably high.
Major airport projects included a new domestic jet terminal and converting a primary taxiway into an alternative or contingent runway.
Auckland Airport had been targeting an 8.73% return from priced aeronautical activities such as aircraft landing and passenger terminal charges, compared with the commission’s “estimated reasonable return”.
That reasonable return was previously estimated at 7.28-7.51%, but this week the regulator said it was 7.3-7.82%.
The airport said its charges for airfield use and other essential airport services represented a new targeted return of 7.82%.
Investment firm Jarden said that move by the airport was significant.
Jarden said it was surprised Auckland Airport “bridged the full gap”, having previously targeted a premium to the commission’s estimate.
Forsyth Barr downgraded Auckland Airport from “neutral” to “underperform” after the pricing tweaks.
It said the commission’s findings had more negative than positive aspects for the airport.
Forsyth Barr said the commission was leaving the door open to more scrutiny of the current information disclosure regime for airports, given issues raised about 2022-27 capital expenditure.
The airport’s domestic capacity was running at 89% of its pre-pandemic levels, the airport’s chief customer officer Scott Tasker recently told the Herald.
