Qantas and Air NZ say Auckland Airport charges will hit travellers hard. Photo / Supplied
Transtasman rivals Qantas and Air New Zealand warn the doubling of aeronautical charges could ‘’close the door’' on this country.
In a rare joint statement from the airlines, they say the steep price rises over the next five years will push up the price of travel, and tourism and trade will suffer.
Qantas and Air New Zealand are the two largest customers of Auckland International Airport Limited (AIAL), and say they are united in opposition to the scale and cost of Auckland Airport’s planned redevelopment.
The airlines are calling for an urgent rethink of the plan.
AIAL announced in March this year that it would spend $3.9 billion on the initial phase of the airport redevelopment over the next 5-6 years. The cost of that redevelopment will be paid for by airport users.
In a statement, Air New Zealand and Qantas said they had each provided the airport company with details of their network impact, underpinned by independent economic analysis.
‘‘This shows the cost of the airport’s planned redevelopment is predicted to increase airport charges to the point that air travel may become unaffordable for a significant number of travelers. This would impact both airlines, including Qantas’ subsidiary Jetstar.’'
Airlines have themselves been under fire for hiking fares steeply during the past 18 months with Qantas and Air NZ enjoying record or near-record levels of profitability.
Under Auckland Airport’s plan unveiled today new charges will rise as follows:
Domestic jet travel (Auckland to/from main centres):
Airline domestic jet charges will average $11.85 over the five-year Price Setting Event Four (PSE4) period. Charges will initially rise $3.50 from $6.75 to $10.25. Prices will then reach $15.45 by the 2027 financial year (FY27), the final year of PSE4.
Regional airline charges:
Airline regional charges will average $8.15 over the five-year PSE4 period. Regional charges will initially increase by $2.70 in July from $4.40 to $7.10. Regional charges will reach $10.70 by FY27, the final year of PSE4.
International charges:
Airline international charges will average $37.25 over the five-year PSE4 period. International charges will initially increase by $9.40 from $23.40 to $32.80. International charges will reach $46.10 by FY27, the final year of PSE4.
Qantas and Air NZ say that given AIAL’s intention to spend billions more, there will have to be further significant increases to follow in the next pricing period, the extent of which AIAL has remained silent on.
‘‘Airports should be building their assets to fulfil the needs of their customers and the two major airline customers don’t agree with the scale and cost of the current plan.
“It’s also important to note that AIAL may have only released the first phase of the redevelopment plan, and it appears that the costs will keep climbing.’'
One analyst estimates the overall costs for phases one and two of the airport’s four phase master plan will likely be $6b, meaning there will be significantly more cost to come in the future, the airlines say.
“We all agree that some investment in Auckland Airport is necessary,” says Air New Zealand chief executive Greg Foran.
“However, this is an enormous spend over a short period of time that adds almost no additional capacity. All it is expected to result in is more costs for everyone who uses, relies on, or passes through the airport, including the aviation industry, the tourism industry, the whole economy, and Air New Zealand’s passengers.”
Qantas chief executive Alan Joyce says airlines accept that investment is needed, but what the airport is proposing goes far beyond what is needed or affordable.
“Based on Qantas’ experience, the necessary first phase of this redevelopment could be delivered for significantly less than $3.9b, and we’re conscious that the final number will probably be higher, with cost overruns common to most large infrastructure projects.”
Industry analysis shows the longer-term pricing outlook for airfares is downwards as capacity constraints ease globally. However, cost pressures for the airline industry are increasing, limiting how far airfares can fall.
Both airlines are calling on Auckland Airport to reconsider its approach.
They want:
A pause on major growth programmes and their enabling projects while an affordable plan is developed, either through reducing cost or exploring a more workable funding and pricing model.
The airlines argue what’s needed is a solution providing a basis for sustainable growth and improving amenities over the medium term for AIAL, the airlines, and a better result for New Zealanders and the travelling public.
Investing some of the profits the airport earns from other services like parking and retail to pay for some of the project; and prioritising reducing the impact of the cost of infrastructure so passengers and those who use airline services can afford to keep flying.
The airlines also describe as a ‘’myth’' the airport’s contention that it has to pass on costs to airlines because of the regulatory regime.
Current rules mean Auckland Airport is allowed to pass on all costs (plus a premium) for any investment in the terminal/airfield/roading and other aeronautical assets to airlines by way of increased charges.
The airport can keep all profits from the other things passengers pay for - parking, taxi, airport retail, and commercial property interests (totalling over $3.3b in dividends to shareholders since 2000).
‘‘There is nothing in the regulatory regime that stops AIAL from spending less or using all of the funds at its disposal, AIAL simply chooses to operate this way,” the airlines added.
“Over 68 per cent of the airport’s revenues come from activities that only exist because passengers fly. It could use some of the profit from those activities to limit the negative impact on New Zealand.”
Qantas and Air NZ also said the contention that landing charges are among the lowest in the region was a myth.
‘‘Landing charges have been low because AIAL has deferred upgrades. We recognise money needs to be spent, but not this much and not in this way. Charges will rise straight away, from July 1 and are expected to continue to increase dramatically for many years.’'
While Qantas and Air NZ compete strongly on international routes a ‘`frenemies’' deal in 2018 resulted in a codeshare agreement for each other’s domestic operations.
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