Airport pricing under careful scrutiny
On 20 October the Commerce Commission released a process and issues paper for its review of the prices Auckland and Christchurch International Airports have set to apply for the period 1 July 2017 to 30 June 2022.
Under Part 4 of the Commerce Act, which regulates markets where there is little or no competition, the airports are subject to information disclosure regulation. While the Commission does not regulate the prices the airports charge, its role is to review airport pricing decisions to promote greater public understanding about their performance.
Commission deputy chair Sue Begg says the paper outlines how the Commission intends to approach the review. “Areas we propose to focus on include the reasonableness of the airports’ target returns, forecast capital and operating spending, and the efficiency of pricing,” she says.
From her comments, the Commission intends to scrutinise very closely AIAL’s planned $1.8bn outlay on its infrastructure. Ms Begg says it will start with that airport company because it is of “greater interest to a wider variety of interested persons, given it is our largest national airport and the scope of the investment it is proposing”.
The Commission intends to release its draft report for Auckland International Airport in March 2018 and for Christchurch International Airport in May 2018. Interested parties will be invited to submit on both. The final reviews for both airports are expected to be released in August 2018.
Auckland, Christchurch and Wellington International Airports are subject to information disclosure regulation for specified airport services which include aircraft, freight, airfield and passenger terminal activities undertaken by the airports. The regulation does not cover other services such as car parks and retail facilities. The aim of this type of regulation is to improve transparency about how regulated businesses are performing in order to influence performance through greater public understanding.
The Commission reviews the airports’ pricing decisions in a summary and analysis capacity. “We do not regulate the prices the three airports charge,” says Ms Begg. “Airports may set prices as they see fit, but they must consult with substantial customers, like airlines, on charges payable and on any major capital expenditure plans.”
The Wellington Airport review is expected to be completed sometime early in 2019.
- Report by John King.
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