4 Nov 2012

Commission powerless to stop airport 'overcharging'

9:42 am on 4 November 2012

The Commerce Commission has found Wellington International Airport is overcharging the airlines that use it, but says there is nothing it can do about it.

In March this year, the airport set new landing fees, aiming for a 9.5% return on assets over the next five years. Landing charges have increased by 41 cents to $11.11 on average across domestic and international travellers, who pay a higher fee.

In a draft report into how well new information disclosure rules are regulating regional airport monopolies, the commission says the tougher rules are not limiting Wellington airport's ability to make more than their fair share.

It says the airport is on track to make a 10.18% return, a profit of up to $39 million, in the period between 2013 and 2017.

The commission says this is far too much, and is above the airport's own target rate of a 9.5% return. Deputy chair Sue Begg says a reasonable return would be in the order of 7% to 8%.

Ms Begg says the airport is a monopoly and it is using that power to charge airlines, and ultimately passengers, more than is necessary for delivering the service.

Under the law, however, airports are able to set prices as they see fit.

Ms Begg says it will be up to government ministers to decided whether regulation heavier than the present information disclosure requirements is needed.

Options could include linking prices to the quality of services provided, or giving the regulator the ability to make airports' cut prices if it decides they are making excessive profits.

Wellington International Airport chief executive Steve Sanderson challenged the draft findings, saying New Zealand's airport prices are low when compared with airports worldwide.

"If you compare it against Sydney airport, for example, they charge $16 per passenger. So we're 40% less than Sydney airport and if you benchmark us against several airports overseas you'll find Wellington is on the lower quartile."

Airline board seeks tighter regulation

But the board of airline representatives says Wellington's landing fees are too expensive and the comparison with Sydney is unfair because it is one of the most expensive airports in Australia.

The board is calling for tighter regulation of airport prices. Executive director John Beckett says domestic passengers through Wellington pay about $10 while those travelling through Auckland pay $5 and the board wants the Government to take action.

"We'd like the see the Government accept the case for bringing in what we would call a negotiate-arbitrate regime where Wellington airport, for example, would be required to negotiate with airlines and if the negotiation succeeds, that's great.

"On the other hand, if it does not succeed, there would be arbitration by the Commerce Commission."