Airport backs down on charging airlines

AUCKLAND: Auckland Airport will cut its charges to airlines by $33 million over five years, and the airlines say passengers will be the winners.

The airport had been under increasing pressure from airlines and feeling the political heat over the aeronautical charges.

In a backdown yesterday, the company said it had listened to different views and decided to cut its charges.

Airlines have welcomed the move, saying it is a win for passengers.

The Board of Airline Representatives in New Zealand (Barnz) said the $33 million will flow back to airline customers’ pockets.

‘‘We are pleased the Airport has listened to both its customers and Commerce Minister Kris Faafoi, and acted in good faith,’’ executive director Justin TigheUmbers said.

He said it had been a ‘‘long journey to get closer to fair pricing’’, with consultation beginning in 2016.

The board’s members supported the airport’s capital plan build and airports and investors making a fair rate of return for their investments.

Auckland Airport chief executive Adrian Littlewood said the approach to pricing reflected the need to provide for the future, including undertaking a multibilliondollar 30year infrastructure programme.

Over the present fiveyear pricing period it is equating to 31c per passenger per flight and Mr Littlewood said he hoped it would be passed on.

‘‘It’s up to them to do what they want with it.

‘‘It would be nice to see it passed through.’’

While the regulatory regime for airports is lighthanded in New Zealand, with emphasis on disclosure, Mr Faafoi had referred to a speedier process for setting up an inquiry to pricing under changes to the Commerce Act late last year.

Asked whether there were fears of tougher regulation, Mr Littlewood said the airport was always ‘‘mindful of the regime’’ which was being tested by an unprecedented investment programme.

The pricecut move had been tipped in the Herald and he said it would help with negotiations with airlines over infrastructure projects as it built the ‘‘airport of the future’’.

‘‘We’re really focused on the future and getting on with big projects.’’

Estimating a target return is not an exact science and while the commission acknowledged the airport could justify a slightly higher return than its benchmark, the company had reached different views on what was justified.

‘‘We have listened to their feedback and believe this is reflected in the reduced charges to airlines.’’

The airport has reduced its target return from 6.99% to 6.62%, compared to the commission’s benchmark for airports of 6.41%.

The changes will take effect by way of discounts on landing and passenger charges from July 1 this year and will apply for the remainder of the pricing period, which ends in June 2022.

Previously, effective international charges per passenger fell by 1.7% a year in real terms. Now the reduction is 2.5% a year.

Effective domestic charges per passenger will, instead of increasing by 0.8% a year in real terms, now fall by 0.1%.

The pricecut announcement came as the airport reported its halfyear results to December 31.

Auckland Airport reported a net profit of $147.2 million from $165.9 million. That included a smaller property valuation gain of $11.1 million in the latest period, compared to a $41.5 million increase a year earlier.

Underlying earnings increased 2.9% to $136.9 million.

The airport restated guidance for annual underlying earnings of $265 million$275 million, reflecting lower regulated pricing and higher interest and depreciation from the infrastructure spending.

It also lowered its capital expenditure forecast for the year to $280 million$330 million from a previous estimate of $450 million$550 million, as it changed the timing of some anchor projects in the upgrade.

The airport is 22.4% owned by Auckland Council and will pay an interim dividend of 11c per share, payable on April 5 with a March 22 record date. That is up from 10.75c last year. — NZME