ComCom concerned about part of Christchurch Airport planned profits

The air traffic control tower at Christchurch Airport. Photo / Grant Bradley

Parts of Christchurch International Airport's profit could be higher than what the Commerce Commission considers reasonable.

In a draft report the commission says that while it is broadly satisfied the airport is not targeting excessive profits for the current five years, airport services including some lounges, freight storage, police services, customs, immigration and security would produce unreasonable returns.

"We do not consider Christchurch Airport has sufficiently justified its expected return of 7.87 per cent on these services,'' said commissioner Stephen Gale.

The higher return results in about $6 million in extra revenues – about 1.5 per cent above what the commission would consider to be reasonable, he said.

These services make up about 15 per cent of revenue and are priced under individual contracts with varying terms and start dates.

The commission has proposed assessing the returns on individually priced services over a longer period.

"These individual contracts are affected by a range of factors which make it difficult to determine whether the returns are appropriate over the five-year regulatory period. These factors include market conditions, interest rates and rent reviews."

However, the airport is unlikely to earn excessive profits on its priced services including airfield runways and taxiways, air-bridges and baggage handling services.

"Christchurch Airport's targeted return on the majority of its regulated services is just above our mid-point benchmark. We believe this is reasonable as it reflects its slightly higher cost of borrowing," Gale said.

Christchurch Airport is the country's second biggest with 10 partner airlines from 22 destinations. About 6.6 million passengers passed through its terminals during the last year. It is spending $10.4m on reconfiguring its integrated terminal, its biggest capital project.

Average charges for international passengers have fallen from $20.95 last year to below $13 in the current pricing period, domestic charges will increase from $10.25 to near $13 and those on regional flights will also pay more - average charges go from $6.25 to $8.62.

The report said the airport noted that during talks with airlines the Board of Airline Representatives and Qantas strongly supported the charging structure while Air New Zealand did not because it ''could adversely impact regional passenger numbers''.

Gale said the airport's pricing structure rebalanced its charges across international and domestic passengers to promote better use of its terminal facilities.

"Christchurch Airport's new charging structure does not raise significant concerns, with its per-passenger charges simple to understand and transparent. However, the new charging structure will significantly change costs for some airlines. We encourage airports to stabilise their pricing structures to support airlines in their planning and investment over the long-term," he said.

The airport said it would consider the report and work with the commission to provide further feedback on any matters raised in it.

The commission expects to publish a final report for both Christchurch Airport and Auckland Airport in October.