Christchurch Airport's proposed fees too high

Last updated 10:53 13/02/2014

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Christchurch Airport would make excessive profits from fees it plans to charge until 2032, the Commerce Commission says.

The competition watchdog said the planned profits were above its guidelines and there had been a lack of transparency in the airport's approach to setting its prices.

The commission today released its final report into Christchurch Airport's fees that are largely paid by airlines.

Some of those charges are passed on to passengers.

"Overall, information disclosure regulation appears to have had little influence on Christchurch Airport's conduct or performance," commission deputy chairwoman Sue Begg said in a statement.

"Given the charges that Christchurch Airport has set, which were based on a 20-year pricing approach, our conclusion is that information disclosure regulation is not limiting excessive profits."

Christchurch Airport's proposed prices over the 20 years to 2032 target a return of 8.9 per cent, which was above the 7.6 per cent and 8.5 per cent the commission regarded as an acceptable return.

While targeted return for the present five year period fell within an acceptable range, its price-setting behaviour for the period appeared to have been influenced by demand-related considerations such as the Canterbury earthquakes rather than by information disclosure regulation, the commission said.

"We also found that there was a lack of transparency in Christchurch Airport's approach to setting prices," Begg said.

"Christchurch Airport has signalled its commitment to improve transparency, which we welcome.

"The way Christchurch Airport structures its prices is likely to promote efficiency. However, information disclosure regulation has not been as effective as we would have expected it to have been at this time."

The review does not make any recommendations about whether regulation other than information disclosure should apply to Christchurch Airport, or whether information disclosure should continue to apply.

However, the report will be passed on to the Minister of Commerce Craig Foss and Transport Minister Gerry Brownlee.

The airport is 75 per cent owned by Christchurch City Council and 25 per cent by the Crown.

Christchurch is the last of the main airports to be scrutinised by the commission.

Last year it found Wellington's prices would result in excessive profits and the capital's airport is consulting with airlines on its charges. Auckland's prices were deemed to be acceptable after it made changes following an earlier commission review.

John Beckett, of the Board of Airline Representatives New Zealand (BARNZ), said airline complaints about Christchurch Airport's monopoly pricing were vindicated, and airport companies needed to be subjected to firmer price regulation.

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"The final report on Christchurch Airport's pricing plans by the Commerce Commission proves it," he said.

"The present regime is too light-handed and leaves the airports free to charge excessively when it pleases them."

The airline lobby group wants the Government to step up regulation by making airports negotiate their pricing rather than just consult over them to bring New Zealand into line with good international practice.

- Stuff

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