Air NZ rejects airport price hike

2nd Jul 2007

The announcement that landing charges at Auckland International Airport will increase by more than 13% over the next five years again exposes the failings of having no effective regulatory regime to protect the interests of travellers from monopoly abuse, Air New Zealand said Monday. There is absolutely no justification for increasing charges at the airport,

Air New Zealand CFO Rob McDonald said.

Not only are airlines facing increased landing charges, but from 1 July 2008 there will be further increases in the Airport Development Charge. This has now been renamed the Passenger Service Charge, recognising that none of these charges have been separately applied to the development of airport facilities.

This comes on top of the 25% increase effectively borne by departing international travellers from October 2005, when the airlines assumed direct responsibility from AIAL for paying aviation security charges, without an associated $5 reduction in the departure charge. In less than five years time the price will have increased by 40%.

While AIAL is disguising the size of the increases, this ignores the fact that continued volume growth at the airport supports the case for a reduction in charges per passenger, Mr McDonald said.


AIAL had not reached agreement with Air New Zealand over the level of the new charges, which were simply being imposed on the airline by the airport exercising its statutory powers.

The airports suggestion that it had made significant concessions did not wash with

Air New Zealand, Mr McDonald said.

An aggressive approach to asset valuation and the treatment of revaluations has been used by AIAL to create the impression that aeronautical price increases are justified.

We are still miles apart. AIAL has moved from an untenable position to an unreasonable position and called the movement a significant concession.

Mr McDonald said AIAL had continued to ignore the Commerce Commissions recommendations regarding the treatment of non-land valuations, and only

partially adopted those regarding land valuations.

Air New Zealand has no issue paying landing charges that reflect investment actually made in facilities and infrastructure at the airport, but objects to paying charges based on asset values for which no outlay had been made and for which no commercial or regulatory risk is involved on the part of AIAL.

The 10-year moratorium on asset revaluation announced by the airport is in reality only a five-year moratorium and falls well short of addressing the fundamental issue, he said.

The so-called moratorium is cold comfort given the aggressive approach to asset revaluation already reflected in current prices. In our view it is a cynical attempt to divert attention from the MEDs current review of Parts 4 and 5 of the Commerce Act.

While Air New Zealand acknowledged the importance of continued investment in airport infrastructure, Mr McDonald said it did not believe that an increase in airport charges was required to achieve this.

What is needed is an effective regulatory environment with clearly defined pricing principles that produce efficient prices and timely investment, with the ability of a third party to intervene if these principles are flagrantly disregarded.

Mr McDonald said Air New Zealand was reviewing its options in light of todays decision.


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