Airlines v Auckland Airport
Why it’s different this time. Is it mission accomplished for Foran?
passenger charges could increase from $9 to around $46 in this period. AIA says this is guesswork).
Bowley and Koraua say the big spending at AIA will drive a significant increase in AIA’S regulatory asset base and aeronautical prices.
Airlines say AIA has not been receptive to lower-cost alternatives as part of the consultation process.
Provisions for an inquiry exist in the Commerce Act and can be triggered in two ways, Bowley points out.
The Commerce Minister can tell the Comcom to undertake one. Second, by the Comcom on its own initiative, and Bayley has thrown the ball into its court as it reviews AIA’S current price plans with a decision expected in May.
The Comcom would consider whether, in addition to information disclosure, other forms of regulation should be imposed on airports.
These include the negotiate/ arbitrate regime wanted by the airlines.
“A potential move to negotiate/ arbitrate regulation would likely lower AIA’S capital development programme spend levels, and consequently slow its RAB [regulatory asset base] growth outlook,” the analysts say.
“Lower RAB growth would lead to lower future aeronautical earnings and a lower RAB multiple. Valuation would suffer, but we believe the impact would be modest, not significant.”
Airlines for Australia and New Zealand (A4ANZ), an industry lobby group, has entered the fray, chair Graeme Samuel venting about one of his least favourite airports which he labelled a “national disgrace” in 2018 .
The former chair of the Australian Competition and Consumer Commission says: “I am constantly bewildered by parties simply saying there is nothing to see here and don’t look. And that’s what the Auckland Airport is saying.
“We’re not looking for heavyhanded regulation of airports and airlines, what we want is some transparency and ultimately an independent commercial arbitrator to be able to sit down and work out what’s fair and what’s right rather than simply having the monopoly airport simply saying we will assess the charges that we think ought to be imposed.”
Air NZ’S chief executive Greg Foran, speaking after the airline reported an interim result hit by cost increases, including landing fee hikes, said it wasn’t so much AIA that was the main target but the system.
“This isn’t just an Air New Zealand thing with the airport. In fact, it’s not even about the airport, it’s about the regulations.”
Air Chathams is the latest airline to speak up, saying the increases already seen in this price period are extremely challenging, at a time when it faces an almost 50 per cent increase in commercial leases for hangars needed to service its Auckland-based fleet over the past decade.
Duane Emeny, chief operating officer of Air Chathams, says the airline is worried about the effect of even higher prices on the future viability of what is a family business.
The airport says it’s been a big supporter of the airline.
And Qantas this week said the airport’s plan threatens Jetstar’s ability to offer low fares and competition to the market.
Auckland Airport has in the past year been pushing back harder on airline criticism. Last year as it faced complaints about congestion it took the unusual step of making public the operational performance of its key customers — airlines — revealing only half were arriving on time last winter.
And this week AIA returned fire on Air NZ, pointing out the airline’s dominance of the domestic market and its steep fare increases during the past four years. It says landing charges are only 3 per cent to 5 per cent of an airfare.
It’s encouraging the Government to do what’s done overseas and actively monitor fares and the performance of the market.
It has a point. Aside from broad
"This isn’t just an Air New Zealand thing with the airport. In fact, it’s not even about the airport, it’s about the regulations." Greg Foran, chief executive of Air NZ
figures on air transport’s contribution to CPI movement, there’s a dearth of data on airfares and nothing official on airline service levels in New Zealand, which has some of the weakest protection for air travellers among comparative countries.
Just as regime change to use a commercial referee to help turn down the heat (rather than light) generated by inevitable airline v airport spats would be useful, so would a spotlight on the airline pricing and performance.