8 Jun 2012

Airlines warn higher landing fees will increase airfares

6:39 am on 8 June 2012

Airlines have reacted strongly to higher landing fees set by Auckland International Airport Ltd, warning that passengers will pay the price.

Air New Zealand says it will be forced to increase airfares to pay for an extra $65 million in fees being charged by the airport over the next five years.

And the organisation representing airlines says the airport is simply overcharging.

The airport has lowered international passenger fees, but increased domestic charges to pay for a $28 million upgrade of the domestic terminal.

AIA chief financial officer Simon Robinson says the change will reward increased passenger numbers.

He says it will allow Auckland airport to continue with its new route development initiative to try and attract new services to Auckland and New Zealand.

Mr Robinson says that would give travellers more choice in terms of their travelling options, including more direct services into New Zealand.

But airlines are not happy. They will face increases of about 2% a year for the next five years.

The Board of Airline Representatives says the airport's rate of return of 8.5% is well above the Commerce Commission's recommendation.

NZ executive director John Beckett says carriers are disappointed, and ultimately consumers will lose out.

He says airlines are not happy there's an increase, but are relieved the increase is not greater than what's been announced.

Mr Beckett says although the international charge has gone down it's not by as much as airlines would have liked.

He says when airlines incur increased costs, because their margins are slim they will have to look at their prices.

Air New Zealand says it will have no choice but to increase its airfares to pay for an extra $65 million in new fees over the next five years.

And it's calling for Commerce Minister Craig Foss to overhaul legislation allowing monopolies like airports to increase their fees.

The commission is due to start a review of Auckland Airport's fees shortly.