Airport to 'overcharge' up to $69m

JASON KRUPP
Last updated 11:15 09/02/2013
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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The Commerce Commission set off a flurry of finger pointing in the aviation sector yesterday after it said Wellington Airport will overcharge passengers by as much as $69 million.

The figure emerged as part of the competition watchdog's final report into light-touch information disclosure rules which govern the country's airports, which are aimed at promoting price competition in the sector. The report found anything but in Wellington.

Its analysis of the airport's price plan shows it will extract "excessive profits" of between $38m and $69m from consumers between 2012 and 2017 above what is needed to make a "reasonable return".

In its view a reasonable return is 7.1-8 per cent, while the airport is set to generate returns of between 12.3 per cent and 15.2 per cent over the period.

That means the airport will keep increasing landing charges over the next four years, which airlines will ultimately pass on to customers in the form of higher ticket prices.

Figures sourced from the company's 2012 annual report show the airport earned $10 per passenger in landing fees (an increase of 7.3 per cent on 2011) and a further $9 per head in other fees.

Auckland Airport's domestic landing fees on main trunk domestic routes are about half that, according to the Board of Airline Representatives (Barnz).

Air New Zealand said Wellington Airport's monopolistic position was strangling air traffic to and from the capital, particularly on provincial routes.

Air NZ chief operating officer Bruce Parton said airport charges can be as high as $20 on a one-way flight to the east coast of the North Island - about 15 per cent of the total $140 ticket price.

"In October last year we cancelled 25 per cent of flights between Wellington and Gisborne because of the introduction of these charges," he said.

Wellington Airport, meanwhile, said the regulator's calculation overstated returns by only looking at prices and not factoring in the $14m in discounts it gave to airlines due to delays in the overhaul of its international terminal.

Wellington Airport chief executive Steve Sanderson said $100m of capital expenditure was planned over the next five years and changes to the way it recoups investments could raise questions on whether it gives out discounts to airlines in future.

He also stressed the average landing fee was $11.34 per passenger, a relatively low level when compared with a $350 ticket and similar airport charges internationally.

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With limited powers to act on airport pricing, the Commerce Commission will be looking to Commerce Minister Craig Foss and Transport Minister Gerry Brownlee for changes to the currency pricing regime.

The airlines and Barnz say they will urge the ministers to adopt a negotiation/arbitration model. Mr Sanderson, meanwhile, is confident the Government will keep the current light-touch regulatory regime in place.

Wellington City Council sits in the middle, caught between maintaining dividend revenues from its one-third stake in the airport and the boost lower ticket prices could have on tourist numbers.

Councillor Ian McKinnon, who heads the Wellington transport portfolio and sits on the airport's board, declined to comment.

A final decision is likely to be some way off as the Commerce Commission has yet to complete a similar review of the Christchurch and Auckland airports.

LUCRATIVE

Wellington Airport results to March 2012:

$99m - Operating revenue, up $6.8m on the previous year

$75.5 million - Operating profits, up $5.2m

$120 - Dividend per Wellington City Council ratepayer in 2012

EXCESSIVE RETURNS: BY THE NUMBERS

The Commerce Commission says Wellington Airport's passenger and landing fees mean it will get between $38m and $69m more from consumers in the next five years than it needs to make a "reasonable" return.

  • 7.3 per cent: Landing fees increase in 2012
  • $10: Landing fees per passenger
  • $9: Other revenues per passenger
  • $19: Total fees per passenger
  • 110,000: Aircraft movements a year (takeoff or landing)
  • 5.19 million: Passenger movements a year
  • 20,000: Number of passengers on its busiest day, including three times the usual number of international passengers, after the quarter finals weekend of the Rugby World Cup 2011.

* Figures are rounded. Source: WIAL Annual report.

- The Dominion Post

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