Pay back security charges, say airlines

BY ROELAND VAN DEN BERGH

Airlines are demanding that the Government repay up to $36 million in overcharged airport security charges paid by passengers over the last two years.

The overcharge results from more passengers flying than anticipated.

The charges cover passenger and baggage screening at domestic and international airports by the Aviation Security Service for all aircraft with more than 90 seats. International passengers pay a $15 charge as part of their ticket price and domestic passengers are charged $4.66 on their fare.

Airlines want the money to be repaid to passengers over a maximum of two years by lowering the charge. Avsec has over-collected $26.2m in charges over the last two years. That amount is expected to grow to $36m by March next year. In the two years to June 30 passengers paid a total of $155m in security charges.

Avsec can recover only the cost of providing the screening services.

Aviation Industry Association chief executive Irene King says in a submission to an Avsec review obtained by The Dominion Post: "we are gravely concerned over both the amount of surplus and the speed with which it was accumulated".

Avsec began a review of the charge last month which includes a proposal to run down the surplus over the next three to six years. The review discussion document has not been made public.

But Ms King said the money must be repaid over the next year by nearly halving the charge on international fares to $8 and reduced it to $4 on domestic fares. Supporting a longer-term repayment plan would "condone an unlawful tax", she said.

Board of Airline Representatives executive director John Beckett said any reduction in the charge would be immediately passed on to passengers through lower fares. "This should have been corrected about a year ago. If a charge that is intended to recover the cost, does a lot more than recover the cost, that becomes a tax" which must be approved by Parliament, he said.Transport Minister Steven Joyce said the overcharging was the result of Avsec underestimating what it would collect during the recession. "They expected a far greater downturn in air travel ... That is part of where the blowout has come from," Mr Joyce said.

"There would be some questions asked" about Avsec's forecasting model. "It seems to me that they have overshot by a fair margin on this one," Mr Joyce said.

Avsec general manager Mark Everitt would not comment on the repayment proposals, but he said the review was needed "given we were in an over-recovery situation". The review was delayed pending the outcome of a separate Government review of domestic security after an alleged hijacking attempt of a regional Air New Zealand flight in February last year.

Avsec sets the security charge based on forecast of its costs over the next three years.

Ms King said Avsec's forecasting model "has a number of fundamental flaws" which appeared to overstate expected costs.

Avsec projections that its costs would increase by 15.4 per cent this year, followed by increases of up to 8.3 per cent in the subsequent three years "is unacceptably high" at a time of low inflation, Ms King said.

"There seems to be considerable padding in all of the numbers." Most of the increases are due to plans to employ another 71 staff over that time.

Given that international passenger numbers were expected to grow by just 1.11 per cent a year and domestic passengers by less than 2 per cent an increase in staffing was not justified, Ms King said.

Transport Ministry spokeswoman Lesley Reidy said a report and recommendation would go to Mr Joyce in February and new charges would take effect in April.

- © Fairfax NZ News