Wellington Airport fee rise just the beginning

By DANIEL RIORDAN

Wellington International Airport is raising its aeronautical fees 10 per cent, but it wants a lot more and the real battle with airlines is still to be fought.

Passengers could be the casualties if the airlines end up passing on the higher fees.

None of the parties is commenting publicly, but the airport is understood to be seeking an 80 per cent increase in fees, which cover use of the runway, taxiway and apron (landing charges), and terminal charges.

Airlines would be happy with a 20 per cent rise.

The five-year fee agreement between the airport and airlines ends on June 30.

While the parties are far apart in their negotiations over the final increases, they have agreed to this interim fee rise, which takes effect from July 1 for Qantas and Air New Zealand (including its regional subsidiaries), and from August 1 for smaller airlines.

Listed utilities investor Infratil owns 66 per cent of Wellington Airport, with the Wellington City Council holding the rest.

Air New Zealand spokesman Mark Champion said it was too early to talk of passing on the higher fees in airfares, but Infratil spokesman Tim Brown said this month that if airlines passed on the increases the airport was seeking fares could rise $3 a passenger.

Last year, Auckland International Airport settled its dispute with airline customers, compromising on planned fee rises (which ranged from 5.5 to 8.5 per cent over three years) and avoiding a court battle.

An international Boeing 737-300 landing in Wellington pays $1494 in landing and terminal fees; the same plane travelling domestically pays $778.

The fees have two components: a charge per tonne and a charge for each seat.

Wellington Airport chief executive John Sheridan said it earned $17.5 million a year from aeronautical fees.

Assuming the same number and types of planes land next year, an 80 per cent rise would lift that income by $14 million to $31.5 million.

The move would particularly affect Air New Zealand, which is believed to account for more than 80 per cent of the airport's traffic.

At the heart of the dispute is the way the airport values its assets, which in turn determines the fees it can charge without running foul of the Commerce Commission's monopoly pricing guidelines.

Infratil's Brown says the airport wants to lift its after-tax return on $216 million of airfield assets to 10 per cent, up from just 3 per cent.

But it seems that valuing these assets is akin to skinning a cat - hence the year-long negotiations between the airport and airlines, with no end in sight.

Stewart Milne, who heads the industry umbrella group Board of Airline Representatives, said Wellington was already the most expensive airport in the country.

The group responded last week to the airport's latest proposal on final charges, and is hoping a commission report on airfield pricing will bolster its arguments against a big fee rise.

Independent of the negotiations, the commission has been investigating airport pricing for two years and in a preliminary report last July, found that Wellington's current charges were reasonable, based on its own estimate of the airport's assets and return (7.7 per cent).

The same report found Auckland had overvalued its assets and was generating too high a return on them.

The commission is due to deliver its final report to Commerce Minister Paul Swain this week.

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