Wellington Airport's 'excessive' profit slammed

JASON KRUPP
Last updated 14:13 08/02/2013
Wellington International Airport
The Dominion Post

CASH COW? Wellington Airport's forecast profit has been labelled 'excessive' by the Commerce Commission.

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Wellington Airport is defending its pricing, saying a critical report focuses on the wrong numbers.

The Commerce Commission has criticised overcharging at the airport saying it could boost profits by up to $70 million.

The competition watchdog report said the airport's prices - for things including aircraft landing fees - mean it will receive between $38m and $69m more from consumers between 2012 and 2017 than it needs to make a 'reasonable' return.

It said a reasonable return for the airport would be between 7.1 and 8 per cent but that the airport's current prices would bring returns of between 12.3 and 15.2 per cent over the five years.

Wellington airport has challenged the Commission's findings, saying its projections are overly focused on pricing and not on actual returns, and exclude commercial concessions that benefit airlines.

"Wellington Airport's effective rate of return is 8.1 per cent which is in the range the Commerce Commission considers as reasonable," said airport chief executive Steve Sanderson.

But the report has been welcomed by Board of Airline Representatives New Zealand (BARNZ), who said travellers have long been the ones who've borne the cost of the regional monopoly.

"Airlines have only very thin margins and they have to pass costs like this on," said John Beckett, chief executive of BARNZ.

"While fierce competition on some routes might at some times provide some cheap fares, these unjustified costs do not just disappear. They still have to be recovered at other times, making travel dearer than it would be without Wellington's profiteering."

However Beckett says the report is still a long way from fixing the problem, with the Commission unable to regulate prices as it does in gas and electricity markets.

"We now have to look to the Government to provide some legislative teeth to curb Wellington Airport's greed - a greed the travelling public is already familiar with through parking at that airport," he said.

Commission deputy chairwoman Sue Begg said the "excessive profits are largely attributable to Wellington airport valuing its land higher than we think it should, and Wellington airport targeting a higher return than appropriate for its circumstances.''

She stressed that the report - required under law each time a regulated monopoly like the airport sets new prices - just looked at the airport's pricing methodologies and did not suggest future regulation as that was outside its scope. The airport can set its own prices but the theory is they will tend to gravitate towards the Commission's methodology.

Wellington Airport, which is owned by Wellington City Council and Infratil, is challenging the Commission's model in the High Court.

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- BusinessDay.co.nz

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