The New Zealand Commerce Commission has released its final report on Auckland Airport’s pricing decisions for the 2022–2027 period.
The findings reveal that the airport’s expected revenue is too high, with profits exceeding reasonable levels by approximately $190 million.
While the commission doesn’t control airport pricing, its review aims to ensure these decisions benefit consumers in the long run.
Commerce Commission Findings
Commissioner Vhari McWha highlighted concerns about the airport’s approach. “Auckland Airport is aiming for excessive profits of about $190 million, and its charges are unnecessarily steep. This burden will likely fall on businesses and travellers,” she explained.
The airport’s targeted return sits at 8.73% for services like landing fees and terminal charges. In contrast, the commission estimates a fair return should range between 7.3% and 7.8%.
Planned Returns Excessive
McWha noted that price hikes are tied to funding major upgrades, such as improving customer service, strengthening infrastructure, and expanding capacity. However, she emphasized that these increases go beyond what’s needed.
One key project is a new domestic terminal, replacing the current 60-year-old facility. Integrated with the international terminal, it promises better service and room for future passenger growth.
Investment Planning Reasonable
Despite the high charges, the commission found the airport’s investment planning to be reasonable. “Auckland Airport worked with third-party experts to cost its plans and explored various options for the new terminal,” McWha said.
“While airlines and other stakeholders disagree on the scale and timing of these investments, our analysis shows the airport’s choices align with what we’d expect in a competitive market.” This reflects uncertainties like future demand and desired service levels.
The report also flagged an issue with how the airport recovers its investment costs over time, known as depreciation. The commission suggests a different method that could lower short-term charges for consumers.
This approach would better mirror a competitive market. Auckland Airport has agreed to revisit this during its next pricing review, which the commission views as a positive step.
These conclusions echo the draft report from July 2024, showing consistency in the commission’s stance.
Why This Matters
Auckland, Christchurch, and Wellington international airports operate under information disclosure rules set by Part 4 of the Commerce Act.
These rules don’t dictate prices but shine a light on profits, investments, and service quality. The goal is greater transparency for the public and stakeholders.
Under the Airport Authorities Act 1966, airports set their own prices after consulting major clients like airlines.
The commission steps in afterward, reviewing the results to encourage accountability. This process influences airport behaviour. For instance, in 2019, Auckland Airport cut charges by $33 million after a similar review.
Looking Ahead
The report covers Auckland Airport’s pricing from July 1, 2022, to June 30, 2027. The commission evaluated profitability, investment strategies, and pricing efficiency. While the airport’s investment plans pass muster, its high returns and charges remain a sticking point.
For travellers and businesses, this could mean higher costs unless adjustments are made. The commission hopes its findings prompt the airport to rethink its approach, especially on depreciation and profit targets. With Auckland Airport signalling openness to change, the next pricing cycle could bring relief.
In short, the report underscores a balancing act: funding growth while keeping prices fair. The commission’s oversight ensures this tension stays in check, pushing for outcomes that serve New Zealanders over time.
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