Analysts say Govt intervention more likely after airline’s attack

The latest dogfight between Air New Zealand (and other airlines) and Auckland Airport has a familiar look about it but the Government’s interest in it gives it a whole new dimension.

Forsyth Barr analysts says the regulatory risk to the airport has been elevated following Air NZ’S plea for a new approach to refereeing airport pricing was made public this week.

Air NZ (and others) accuse the airport of not listening to concerns about overspending and overcharging. They are familiar claims but the airlines are taking their fight to another level.

Pushing on an open door, Air New Zealand wrote a letter to the Government calling for an urgent change to the way the Commerce Act is applied. That’s resulted in Commerce Minister Andrew Bayley getting involved.

While he’s not rushing to launch an inquiry himself, he’s expressed concern about aeronautical charges at Auckland Airport (AIA) and yesterday was due to sit down with its boss, former Air New Zealander Carrie Hurihanganui, about them. He wants the airport to “constructively engage” with airlines.

He’s waiting for a Commerce Commission review of prices — which come close to trebling in some cases in the current five years — before any further action. He raises the idea of the commission considering whether there’s a case for moving to a stronger regime and warns he will closely monitor the process.

As airlines put it, airports set prices at will to fund infrastructure that isn’t always what is needed to operate planes (especially the ones each carrier flies), the big builds come in uneven waves and consultation isn’t working.

Airports can set charges as they see fit. AIA says investment in infrastruture is essential to keep the country moving and in some cases airlines appear to have forgotten what they’ve already agreed to.

These battle lines are familiar, barbs will be traded, but the bottom line is no matter what, the travelling public pays the cost.

Forsyth Barr analysts Andy Bowley and Paul Koraua say the Air NZ action adds to the risk that the current favourable regulatory backdrop for airports changes in future.

Air NZ and other airlines would prefer the framework to incorporate negotiate/arbitrate regulation. Such a change would shift the balance of power in the current aeronautical pricing framework (which favours airports currently) towards airlines.

“AIA would consequently have less control over its airport development. We caution that there are a number of ‘ifs’ before this would happen. While we acknowledge regulatory risk is rising, our base case assumes the regulatory status quo will continue for the foreseeable future.”

The analysts say airlines are striking while the iron is hot.

“Airlines have sought a move to negotiate/arbitrate regulation for many years. However, their leverage has been limited to date.”

The approach to Bayley reflects AIA’S current elevated aeronautical capex programme, in which it plans to spend around $6.6 billion in the 10 years to June 2032. (Air NZ calculates domestic