Urgent Changes Needed for NZ’s Economic Regulatory Framework for Airports

Singapore – The International Air Transport Association (IATA) called for urgent changes to New Zealand’s Economic Regulatory Framework for Airports. This follows the publication of the New Zealand Commerce Commission’s review of Auckland Airport’s Price Setting Event 4.

“It is not surprising that the Commerce Commission has concluded that Auckland Airport’s charges are excessive in the range of NZD150 million to NZD226 million. While the airport has responded by lowering its charges over the next two years in response to the review, the process does highlight that the economic regulatory framework in its current form is not fit-for-purpose and change is urgently needed,” said Dr Xie Xingquan, IATA’s Regional Vice President for North Asia and Asia Pacific (ad interim).

IATA highlighted the following concerns in the economic regulatory framework:

• The current light-touch regulatory approach means Auckland Airport can set the aeronautical pricing as they wish. Auckland Airport, being the sole monopoly provider, can game the regulatory process by setting their pricing artificially high at the start of the regulatory process, and then respond, if they so wish, by lowering their pricing following the conclusion by the regulator or to ignore the report.
• Non-aeronautical activities (which generally draw much higher returns) are excluded from the purview of the Commerce Commission.

• While Auckland Airport is investing significantly in infrastructure, there are outstanding concerns highlighted by airlines about the size, phasing, cost allocation and affordability of these major investments. Some of these costs could have been avoided if infrastructure planning and investments had been managed appropriately in the past.

“Aviation is a key economic sector for New Zealand, supporting 5.6% of the country’s GDP and 177,000 jobs. The delivery of demand driven, functional and cost-effective infrastructure will support the continued development of New Zealand’s aviation sector. The current consultation process with Auckland Airport is ineffective and may not deliver outcomes that are in the best interests of passengers. This needs to change,” said Xie.

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