Jetstar passenger fee loophole to close

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The Ministry of Transport is preparing to close a trans-Tasman regulatory loophole that would otherwise blow a $3.5 million hole in the Civil Aviation Authority's (CAA) budget.

It is expected to bring low-cost Australian airline Jetstar in line with other carriers, by charging it passenger levies on domestic New Zealand operations from December 1.

Under an Australia-New Zealand Aviation (Anza) mutual recognition privileges agreement introduced two years ago, an anomaly meant Jetstar has avoided paying the levies since it began domestic operations in June.

But CAA spokesman Bill Sommer says the aviation body had recommended to Minister of Transport Steven Joyce to change the situation.   "The action is now with the ministry, and I understand that the change should be in place by  December 1,"  Sommer said.

Airlines operating domestic routes are charged $2 per sector per passenger by the CAA. The levies make up 73 per cent of CAA annual income. 

Under Anza, Australian and New Zealand airlines can operate in each other's country without the need for separate approval by the host regulator. Most have applied for Anza privileges so they can operate domestically on each other's turf.  But Jetstar is the first to use it to fly in New Zealand under a Civil Aviation Safety Authority of Australia (CASA) air operator's certificate.

The way the regulations  stand, that places Jetstar outside the CAA's levy powers, even though it operates under its safety umbrella.

Jetstar has also managed to exempt itself from the CASA safety levies because they are based on fuel purchased in Australia.  Jetstar buys its fuel in New Zealand for its domestic operations.

Since the CAA went public on the problem in July,  a meeting has been held between Auckland Airport's chairman and chief executive and CAA management to discuss ''the magnitude of the financial difficulties'' caused by the levy exemption.

CAA told the airport bosses in meeting documents obtained by The Independent that without corrective action it faced a deficit of $4.5m at the end of the June 2010 financial year, $3.5m of this being the non-payment of levies by Jetstar. The rest of the loss results from a 10 per cent reduction in domestic travel and a 12 per cent fall-off in international travel.

CAA argued Jetstar benefited from the authority's aeronautical safety environment so it should pay for the services.

Unsurprisingly, Jetstar's rivals Air New Zealand and Pacific Blue support the CAA. Otherwise, they face higher fees to fill the CAA's budget shortfall. 

The levy exemption helped Jetstar cut fares in its start-up phase to as low as $29 one-way between Auckland and Wellington.

Jetstar's PR man Simon Westaway says the carrier has not yet been informed about the proposed levy change, although parent company Qantas has been talking to CAA  about the issue.

Qantas, before Jetstar took over flying on New Zealand domestic routes, was registered and certified in New Zealand and therefore came under CAA jurisdiction, as does Pacific Blue.