Auckland Airport charges too high, Commerce Commission says

Auckland Airport says it will consider cutting charges after a draft Commerce Commission decision found its targeted returns exceed what is “reasonable” - a move that could offer travellers some relief in terms of airfare pricing. Auckland Airport had announced plans to increase aeronautical charges to airlines for the next five years to help fund its multibillion-dollar redevelopment plan, including the construction of a new domestic terminal. Airlines argued that passengers would foot the bill with higher airfares if the airport went ahead. Commerce Commissioner Vhari McWha said the commission looked at whether the airport’s pricing decisions and expected performance were likely to be of long-term benefit to travellers. “Some price increases are necessary to fund the investment needed to improve customer experience, build more resilient infrastructure and add additional capacity," McWha said. "However, in our view, the airport’s charges over the five-year period are in excess of what is reasonable to achieve these outcomes.” While it is up to airlines to manage such charges through airfares, travellers are likely to bear much of the cost when flying into or out of Auckland Airport, McWha said. The commission estimated that Auckland Airport could generate “excess profits” of between $193.4m and $226.5m as a result of its weighted cost of capital (WACC) estimate of 8.73%. Air New Zealand CEO Greg Foran said the last thing New Zealanders in the midst of a cost of living crisis need “for more costs to be piled onto travel because Auckland Airport isn’t acting in the best interests of New Zealanders”. “We agree some development is needed, but we’re ready to get back to the table with Auckland Airport to ensure that the airport has an affordable and enduring plan that helps connect New Zealanders with each other and the world. The right regulatory framework will allow us to do that.”<br/>