Airline war on charges

By Graeme Kennedy

Friday 7th June 2002

CAPITAL REVOLT: Stewart Milne says the airport ignored commission recommendations

The Board of Airline Representatives New Zealand (Barnz) hopes a Commerce Commission airport pricing report due in the next few weeks will thwart Wellington Airport's plans for massive increases in its user charges.

The airport company, led by 66% shareholder Infratil, indicated this week it wanted to lift its return on capital to at least 10% - an increase of almost 50% above the return recommended by the commission in its draft report last year.

However, Barnz executive director Stewart Milne said he believed the price hike could be much higher - "Application of anything like the proposed increases will push the graph off the top of the page," he said.

"We are astounded and dismayed and at this point consultations with the airport company have reached a critical stage. It looks as if they have already made up their minds about an increase - it is just greed and a return of 10% is right over the top."

The commission has been investigating airport pricing for two years and will send its final report to the commerce minister later this month.

Mr Milne said Barnz was pinning its hopes on the report and expected it to set out clearly how and which assets should be valued and recommend a reasonable return for airports in monopoly situations.

He said the report would set the guidelines for asset valuation and returns and Barnz could seek redress from the commission if an airport stepped outside them.

The commission's draft report calculated Wellington's asset value and gave an after-tax return of 7.7%, compared with 8.4% at Auckland and Christchurch. But Mr Milne said Wellington appeared to have ignored the commission's recommendations, done its own valuations and set itself a huge return.

He said Wellington was already New Zealand's most expensive airport, with total revenues - including landing fees, terminal and departure charges - of $778 for a domestic 737 compared with $624 at Auckland and $626 at Christchurch. Landing fees make up the majority of the amounts.

Wellington gets $2765 for an international 737 while Auckland's charges total $2261 and Christchurch $2095. He said Wellington was more expensive than Sydney, which had recently increased prices.

"We feel helpless in the whole process and everything now rests with the Commerce Commission report although at the moment it appears Wellington is thumbing its nose at the commission," Mr Milne said.

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