New Zealand’s domestic airlines operating from Auckland Airport have welcomed the Commerce Commission’s draft report on Price Setting Event 4 (PSE4, 2023-2027).
The report reveals Auckland Airport is targeting excess profits of $193.4-$226.5 million during PSE4, up from $53 million in PSE3 (2018-2022). These excess profits ultimately impact airline passengers.
Domestic carriers have long voiced concerns about the scale and cost of Auckland Airport’s redevelopment, fearing it could make domestic travel less affordable.
Domestic Airlines’ Concerns
New Zealand’s domestic airlines have welcomed the draft report, viewing it as validation of their long-standing concerns about the airport’s redevelopment plans.
While the Commerce Commission suggests the investment may be appropriate, many of AIAL’s aeronautical partners disagree.
These carriers, including Air New Zealand, Jetstar, Air Chatham, and Barrier Air, argue that the current scale and cost of the proposed redevelopment could make domestic travel less affordable for many New Zealanders.
The airlines’ primary concern is that the burden of financing these extensive renovations will ultimately fall on passengers through increased fees and charges.
This comes at a time when many New Zealanders are already grappling with a cost of living crisis, making any additional travel expenses particularly unwelcome.
Domestic carriers are now urging the Government to commission an independent inquiry into airport regulation under s56G of the Commerce Act.
Comments from Domestic Air Operators
The Commission has regulatory options to control airports, including requiring commercial negotiations, arbitration, or setting prices and service quality. These options don’t require new laws, just the use of existing inquiry powers.
Air Chatham’s COO Duane Emeny stated, “An inquiry into airport regulation is crucial to protect consumers and ensure responsible, affordable airport investments.”
Air New Zealand CEO Greg Foran said, “New Zealanders face a cost of living crisis. They don’t need more travel costs due to Auckland Airport’s actions. We’re ready to work with the airport on an affordable, enduring plan.”
Barrier Air CEO Grant Bacon noted, “The proposed redevelopment still separates turboprops, affecting smaller carriers and regional passengers, while not including a new runway.”
Jetstar Group CEO Stephanie Tully added, “As a low-cost carrier, the proposed redevelopment would significantly increase passenger charges, impacting travel demand and our ability to offer low fares.”
Auckland Airport’s Importance
Auckland Airport’s significance to New Zealand cannot be overstated. As the country’s primary international gateway, it handles over 70% of international visitors. It also serves as a crucial hub for domestic connections.
The airport’s efficient operation and ongoing development are essential for supporting tourism, trade, and regional connectivity.
However, the current debate underscores the need to strike a delicate balance between necessary infrastructure improvements and the financial impact on airlines and travelers.
Summary: The Need for Balance
Auckland Airport argues that its redevelopment plans are crucial for meeting future demand and enhancing the passenger experience. On the other hand, airlines contend that the scale of the proposed changes may be excessive and potentially detrimental to the affordability of air travel.
The Commerce Commission’s final report, expected later this year, will likely play a crucial role in shaping the path forward.
Whatever the outcome, it’s essential that any development plans for Auckland Airport consider both the long-term infrastructure needs of New Zealand and the immediate financial concerns of airlines and passengers.
The call for an independent inquiry into airport regulation presents an opportunity to reassess the current framework and potentially implement changes that could lead to more balanced outcomes.
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