iscover
Auckland Airport will discount its aeronautical charges for the next two years after the NZ Commerce Commission found it was overcharging by around NZ$190 million (AU$172 million).
The fees have been at the centre of a row between Auckland Airport and its airline customers, with the airport arguing that upcoming price hikes are necessary to fund the NZ$3.9 billion integration of its domestic and international terminals.
This content is available exclusively to Australian Aviation members.
A monthly membership is only $5.99 or save with our annual plans.
- Australian Aviation quarterly print & digital magazines
- Access to In Focus reports every month on our website
- Unlimited access to all Australian Aviation digital content
- Access to the Australian Aviation app
- Australian Aviation quarterly print & digital magazines
- Access to In Focus reports every month on our website
- Access to our Behind the Lens photo galleries and other exclusive content
- Daily news updates via our email bulletin
- Unlimited access to all Australian Aviation digital content
- Access to the Australian Aviation app
- Australian Aviation quarterly print & digital magazines
- Access to In Focus reports every month on our website
- Access to our Behind the Lens photo galleries and other exclusive content
- Daily news updates via our email bulletin
According to Commissioner Vhari McWha, the airport’s forecast revenue for its 2022 – 2027 price setting event was “excessive” and targeted returns of 8.73 per cent from aeronautical activities “unreasonably high”; however, its forecast investments are “within a reasonable range”.
“The Airport is targeting excess profit of about $190 million and its charges are too high, with businesses and consumers likely to end up carrying much of the cost-burden,” she said.
“Price increases will fund investment needed to improve customer experience, build more resilient infrastructure and add additional capacity, but the increases are higher than what is needed to achieve these outcomes.
“While views on the type, size and timing of the investment differ among the Airport’s customers, our analysis shows Auckland Airport engaged multiple third-party experts to assist with costing its investment plan and considered a wide range of options for its new terminal building.
“There are a range of investment outcomes that are consistent with what we’d expect to see in a competitive market. This range reflects uncertainty about future demand and choices about factors such as service quality. We are satisfied that Auckland Airport’s decision is within this range.”
In a statement, Auckland Airport said its new charges for the rest of the price setting event will represent a new targeted return of 7.82 per cent, in line with the “reasonable” range of 7.3 to 7.8 per cent set out by the NZCC.
Regional per passenger charges will be cut by an average of $1.10 to $9.00, domestic by $1.70 to $12.80, and international by $4.80 to $38.90, over the next two financial years.
“We respect the regulator’s findings and since receiving an embargoed copy of the report, we have worked to apply price discounts for the remainder of the pricing period. These discounts will bring our prices within the range the Commerce Commission found to be reasonable,” said airport CEO Carrie Hurihanganui.
“Auckland Airport carefully balances how we set charges with the need to invest in the future resilience and capacity requirements of New Zealand’s gateway airport and one of the country’s most critical infrastructure assets. To support this, investors require fair returns and a stable regulatory regime.
“In July 2024, following the Commission’s draft report, we said we would discount our charges if the Commission’s final report took a different view on what a reasonable target return for [the current price setting event] was, bearing in mind the challenges involved when incorporating new information about pandemic risk into the weighted average cost of capital (WACC).”
Hurihanganui said the airport’s decision to cut its prices “demonstrates the regulatory regime working as it’s intended to”.
“The Commission’s new approach to WACC is subject to a merits review appeal by all regulated airports and the New Zealand Airports’ Association, due to be heard in July 2025 in the High Court.
“While Auckland Airport has aligned its PSE4 target return with the Commission’s target return range in the final report, the merits review remains important to resolve the differences in views on the best methods for estimating WACC.”
Vertical construction on the new domestic terminal, which will replace the existing building dating back to the 1960s and 70s, began in February and is due for completion in 2028-29.
