Auckland Airport open to rethinking price rises as NZCC weighs in

The NZCC’s intervention comes amid a spat between Auckland Airport and an alliance of airlines including Air New Zealand, Jetstar, Air Chathams and Barrier Air, who have accused the airport of seeking excessive increases to aviation charges to fund its NZ$3.9 billion terminal overhaul.

Auckland Airport charges, which are currently NZ$10.25 per passenger, will move to $15.45 by 2027, which the airport says is similar to other major airports in the country.

In a statement, NZCC commissioner Vhari McWha said the consumer and competition watchdog “considered whether the Airport’s pricing decisions and expected performance are likely to promote the long-term benefit of consumers”.

“Some price increases are necessary to fund the investment needed to improve customer experience, build more resilient infrastructure and add additional capacity. However, in our view the Airport’s charges over the five-year period are in excess of what is reasonable to achieve these outcomes,” she said.

“These charges are a cost to airlines, and while it is up to each airline to manage these through airfares, we are conscious that travellers are likely to bear much of that cost when using Auckland Airport – and they don’t really have a choice, which is why we have a role as regulator in reviewing pricing.

“The return targeted by the Airport means it will earn about $200 million in excess profit, compared to the Commission’s benchmark over the five-year period.”

VIEW ALL

McWha did, however, give a thumbs-up to the airport’s capital expenditure plan, which will see a new domestic terminal integrated with the international terminal replacing the decades-old existing structure.

“While the Airport’s customers agree that there is a need for investment, there are differing views on the type, size and timing of the solutions,” she said.

“However, based on the information presented to and analysed by the Commission, the Airport has followed appropriate processes, considered a diverse range of options for its new terminal building, and applied rigour in costing its investment plan.”

In response to the draft conclusions, Auckland Airport CEO Carrie Hurihanganui said that the airport would be open to changing course if the NZCC determined its target weighted average cost of capital (WACC) is unreasonable.

“We respect the role the Commerce Commission plays, and we will review their feedback and provide additional context in our submissions for consideration in the Commission’s Final Report,” she said.

“If the Final Report continues to say that our WACC is too high, we will adjust our pricing – consistent with the approach we took in the previous pricing review. We will confirm the details of this after the Commission’s Final Report is released.

“When we set charges we carefully balance the need to keep charges fair to consumers while supporting investment in nationally significant aeronautical infrastructure. The Commission recognised that while Auckland Airport’s charges are increasing, domestic and regional prices across Price Setting Event 4 (PSE4) will remain at or below other regulated New Zealand airports.”

As part of a joint press release with other airlines, Air New Zealand CEO Greg Foran disagreed that the scale of the redevelopment was appropriate, and called for tougher airport regulations.

“New Zealanders are in the midst of a cost of living crisis and businesses are cutting costs, the last thing they need is for more costs to be piled onto travel because Auckland Airport isn’t acting in the best interests of New Zealanders,” Foran said.

“We agree some development is needed, but we’re ready to get back to the table with Auckland Airport to ensure that the airport has an affordable and enduring plan that helps connect New Zealanders with each other and the world. The right regulatory framework will allow us to do that.”

The NZCC is inviting feedback on its draft conclusions by 27 August.