No price controls for airport

Friday 23rd May 2003

Controls will not be imposed on airfield activities at Auckland, Wellington or Christchurch international airports, Commerce Minister Lianne Dalziel says.

Dalziel's decision not to recommend controls on airfield activities at New Zealand's three major international airports followed an extensive inquiry by the Commerce Commission, which recommended control on Auckland airport.

"After considering recommendations from the commission, submissions on the commission's report, and advice from the Ministry of Economic Development, I have decided that control is not appropriate at these three airports," she says.

"In making my decision, I have taken into account a wider range of matters than those the Commerce Commission was asked to consider. I have given particular regard to the negative net public benefits of control and the relatively small net benefits to the airlines, and indirectly airline passengers.

"In the case of Auckland airport, the negative net public benefits of control amounted to -$0.7 million on average, while the benefits to the airlines amounted to $1.7 million per annum on average, being a 3.1% reduction in total charges payable by the airlines to the airports.

"It is estimated that if the airlines passed on the full reduction in charges to passengers, it would result in approximately a 35 cent reduction in the average price for a one-way trip.

"On balance, I am not convinced that these levels of reduction are sufficient to merit the imposition of control," Dalziel says.

In May 1998, the Commerce Commission was asked by the then Commerce Minister to consider price controls over airfield activities charges. This followed concerns over the lack of market competition for international airfield activities, and the possibility that this limited competition enabled them to earn monopoly profits.

The Commission's report was presented to then Commerce Minister Paul Swain on 1 August 2002 and recommended control on airfield activities provided by Auckland airport.
The Commission did not recommend control of Wellington airport, provided its landing charges were not significantly increased. Controls at Christchurch airport were not recommended by the Commission.

The Minister also took into account, the recent increase in charges at Wellington airport. In February, Wellington International Airport announced a 27.6% increase in airfield activity charges but given the resulting estimated net benefits to acquirers of control for Wellington were very small (ie, less than those for Auckland), the Minister considered control should not be imposed at Wellington.

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