Sharechat Logo

Wellington Airport earnings 'excessive', regulator says

Friday 2nd November 2012

Text too small?

Wellington International Airport, which is co-owned by Wellington City Council and Infratil, has "excessive" earnings targets that aren't being pulled down by stricter disclosure rules, according to the Commerce Commission.

The antitrust regulator estimates the airport's pricing will achieve a return on investment of 10.18 percent in the period between 2013 and 2017, above the hub's own 9.5 percent target and above the 7 percent to 8 percent range the commission deems "reasonable." The finding comes in the regulator's draft report to the Ministers of Commerce and Transport on how well disclosure rules are promoting regulation for the airport.

"Our draft findings are that the information disclosure regime is working well in some areas, but it is not limiting Wellington Airport's ability to extract excessive profits," deputy chair Sue Begg said in a statement. "Either figure significantly exceeds our estimate of a reasonable rate of return, which we base on our cost of capital input methodology."

Wellington Airport has been accused of price gouging in the setting of its air service charges, with national carrier Air New Zealand flagging a $200 million lift in landing fees over the coming five years.

The commission put the excessive profits down to Wellington Airport's use of its own methodology to revalue assets without fully accounting for gains in fair value and targeting a higher cost of capital that could be expected if it faced workable competition.

"Information disclosure regulation has had a positive impact on quality and on how Wellington Airport collects revenue for different services and from different customers," Begg said. "Innovation levels also seem appropriate, and there has been less dispute about forecast investment for this next pricing period relative to the previous period."

Half-owner Infratil expects capital expenditure at the airport to increase over the coming five years, form the existing annual average of between $20 million and $25 million as it looks to build peak-time capacity and broaden the range of services available.

The regulator is required to report to the ministers of commerce and transport as soon as possible after airports re-set their prices, and expects to make a final report to the ministers on Dec. 21. Reports for Auckland and Christchurch airports are due next year.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar stalls amid doubts on US-China trade deal
Tourist numbers perk up in August as Aussies more than offset declining Asian demand
Peters to unions: strikes not helpful; no word on Fair Pay Agreements
Oil and gas critical to global emissions reduction effort - BP
Ebos pays A$34m for medical devices businesses
House price inflation ticks higher as sales volumes recover
Fletcher in $31 mln dispute with ministry over Greymouth hospital
NZ dollar eases as markets fret about US-China trade talks
15th October 2019 Morning Report
CTU pressures govt for Fair Pay Agreements

IRG See IRG research reports