Landing prices shock Air NZ

Rob McDonald

Air New Zealand says it is "stunned and shocked" by new landing prices proposed by Auckland International Airport (AIA), as the pair trade accusations of posturing and game-playing.

AIA chief financial officer Rob Sinclair confirmed on Friday that the airport had delivered its new pricing proposal to Air New Zealand.

He stressed this was just the beginning of a consultation process and the airport was open to the airline's submissions on pricing.

Both parties are bound by a confidentiality agreement which prevents them revealing details of the proposed charges, which must be finalised by September next year.

However, the mood at Air NZ suggests a significant price rise has been proposed.

"We are stunned and shocked," said chief financial officer Rob McDonald. "[The airport] is right at the top of worldwide landing fees already. It makes more money on a margin basis than any airport in the world.

"It was actually time for prices to come down. They are just exploiting that revaluation."

Last week, AIA doubled its net asset valuation to $2.7 billion - a move Air NZ argues was a cynical attempt to bolster the case for higher landing charges.

Sinclair has dismissed that criticism saying the revaluation came as no surprise to the airline. There had been ongoing consultation for the past two years, he said. Air NZ's reaction had been "disappointing".

Accounting laws required the airport to revalue its assets every five years, Sinclair said. That had last been done in 2002.

Last week's timing - just days before the pricing proposal was delivered - had been related to the move to International Financial Reporting Standards (IFRS) which took effect from the new financial year, he said.

Both parties are now accusing each other of posturing.

"Perhaps they would see that as part of the process," Sinclair said. "We are very keen to keep discussions rational."

McDonald said that unfortunately this was a game where one player got to be the referee as well. The consultation was "just a facade", he said.

"You put in some high prices, you show some willingness to drop them, then you say: 'Gee, I was reasonable. Now it's only a really big increase not a massive one.' When in fact no increase was justified in the first place." There was little recourse for Air NZ if it was unhappy with the process. There was nothing the Commerce Commission could do, McDonald said, and it was ultimately an issue for the Commerce Minister.

But Auckland Airport was acutely aware of the risks of regulatory intervention, Sinclair said. "At the end of the day, on certain aspects of our business we are a monopoly. It comes down to how we behave."

The airport was also well aware of the tough times the aviation industry was gong through. Issues such as fuel costs were all relevant to the pricing discussions.