Airport monopoly 'hurts tourism'

Giovanni Bisignani says tourism growth here is dropping at a time when it is rising in the rest of the Asia-Pacific region

The Government's failure to regulate airport monopolies is an "embarrassment" and is damaging the tourism industry, says Giovanni Bisignani, the Geneva-based chief executive of the International Air Transport Association.

He said yesterday the airports were taking advantage of New Zealand's light-handed regulatory environment to generate ebit (earnings before interest and tax) numbers well in excess of successful international companies like Microsoft and Mobil Exxon.

Auckland International Airport's ebit was 66 per cent of its total revenue.

Bisignani, whose organisation represents the interests of 260 airlines, said: "You don't find that in any business in the world. I don't think that Auckland is more efficient than Bill Gates and Microsoft that has 37 per cent."

The airports were simply "abusing their monopoly situation with a Government that is silent and is accepting this situation".

This month, Auckland International Airport began a consultation process with its airline customers about new landing charges.

The process is confidential but Air New Zealand chief financial officer Rob McDonald said he was "shocked and stunned" by what he saw in the initial draft documents.

The airlines argue that present regulatory rules give them no negotiating power in the price setting process. Bisignani said the situation was embarrassing for the civil aviation industry and the Government.

People sometimes talked about "light-handed" regulation in this country. "I would call it a phantom regulation."

The issue of user charges was one of economic national interest.

Bisignani said New Zealand's tourism industry was suffering with growth dropping dramatically at a time when tourism was thriving in the rest of the Asia-Pacific region.

He had raised the issue with the Government during his last visit here three years ago and was told it was being addressed. But it appeared nothing had been done.

Representatives of Wellington and Auckland airports dismissed Bisignani's comments as misleading.

Auckland International Airport chief executive Don Huse said using the ebit figure for the airport's total revenue was erroneous as the regulated aeronautical part of the business generated less than 50 per cent of the revenue.

The ebit argument also failed to take into account the level of investment airports had to make.

Auckland airport had invested $1 billion in infrastructure since it was corporatised in 1988. In the four years to 2008, capital expenditure would average $130 million a year.

Huse said that investment was funded with sizeable levels of debt, making the interest component of the ebit figure significantly higher than for many other businesses.

Unlike some other areas of infrastructure, New Zealand had world class airports and that was of great benefit to the tourism industry.

Tim Brown, an executive with Wellington Airport owner Infratil, said the ebit argument showed IATA lacked any real evidence that the airports were earning too much.

A low cost to revenue ratio did not equal over-charging. It occurred "because, although Wellington Airport's charges are entirely consistent with other similar facilities, it is rated as the most efficient airport in Australasia".