Air New Zealand has launched a scathing attack on Auckland International Airport in front of MPs, pleading for its fellow NZX-listed company to be more highly regulated.
But the Airports Association says Air NZ’s criticisms are just another in a long line of “toing and froing” between the two companies.
Speaking at the Transport and Infrastructure select committee on Thursday, Air New Zealand Head of Government and Industry Affairs Duncan Small argued high airport charges were hurting its customers and the company.
“Airlines' frustration with airport charging is long-standing,” he told MPs.
Small was submitting on the Commerce Amendment Bill, which would introduce competition studies regimes and update the regulatory regime for airports.
At the moment, he says airports are able to set charges prices as they see fit and this has resulted in an escalation price hikes.
He wants the Commerce Commission to have to power to step in.
“The current regulatory regime was designed in the days before airports were corporatised,” Small says.
He adds that Auckland Airport is essentially a monopoly and, as such, tighter regulation is needed.
“There are only two ways to make a monopoly asset owner respond to their consumers: either the threat of regulation or the threat of competition.”
As there is no “credible threat” of competition for the airport, regulation is the “only realistic way to make airports respond to their consumers,” Small says.
The current regulatory settings have not led to good investment in Auckland Airport’s infrastructure, he says.
This is despite its “unsurpassed and almost embarrassing ability to raise capital.”
Auckland Airport has a policy of returning 100% of its profit back to its shareholders.
In 2015, the company gave an additional almost $450 million in a special dividend to its shareholders.
Auckland Airport is in the middle of a $2 billion infrastructure upgrade.
Acting Prime Minister Winston Peters notes there has been a lot of controversy in this area for a while.
He says Auckland Airport is a monopoly and he is meeting with the company’s top brass soon to better understand the issue.
“The reality is there should be a fairness about it all,” he said, when asked if the airport should be regulated further.
Minister of Consumer Affairs Kris Faafoi would not go as far as saying the airport had a monopoly, by did say it was the only airport in the city.
“That’s why we have the legislation to make sure we can control pricing of airports because usually, we only have one airport in the main centers.”
Lower ticket prices?
Small is expecting Auckland Airport will continue to raise its airport fees, which are some of the highest in the world, without proper regulation.
“If airport charges were to reduce, a portion of that would be passed back to consumers and would form lower ticket prices.”
But the Airports Association Chief Executive Kevin Ward says the airport’s charges are “genuinely not that high.”
“At Auckland Airport, it’s little more than a cup of coffee that the airport charges onto the airline per passenger.”
He says the Commerce Commission has estimated the charges amount to roughly 60c per passenger.
“Airline tickets go up by $10, $20, or hundreds of dollars depending on the time of day or week – we think 60c would be lost in the mix.”
But Small says those costs add up for airlines.
“In the business airlines are in, which is very low margins, airlines are frequently making less than $5 per seat from that flight.”
The Commerce Amendment Bill is in the select committee process and MPs are hearing submissions from many interested parties.
24 Comments
The bigger question for Airlines and Airports (and the tram lines postulated to get pax to and from the latter) is this:
Within a planning horizon of (say) 30 years, will long-haul tourism and air freight even be a Thing, given that the 200+ ton birds cannot fly on sunshine and breezes?
A bifurcation:
- Some regions will go nuclear (high energy content per kilo, high availability) and carry on as before.
- Others will regress (a la James Howard Kunstler's doomster scenarios - Long Emergency and all that) to medieval methods. Including systems of governance.
T'will be, shall we say - an Awkward Moment......particularly as we can see some areas of the world in the latter, Game of Thrones-esque, quagmire now.....and keeping 'em apart will certainly be Interesting, no?
Gareth - the yardstick is that anything based on draw-down will not continue. It's just a matter of when.
Which leaves things which can be maintained. long term, if indeed our species is included in that list.
So it's renewables, non draw-down (Britain ran out of oak for ships, as an example of draw-down even though based on renewables).
There are believers in nonsense - one on this thread thinks you can fly on batteries, as Rebecca McFie swallowed in a recent Listener ' article' - but the laws of thermodynamics will always apply. You don't pull energy out of batteries without heat-loss, you don't land a long-haul aircraft with a full fuel load (which an empty battery still is.
That is nonsense of the ' first world would like to think that with an electric car here and an electric plane there, they can keep on keeping on' variety. The reality is that their draw-down is so large now that no move can effect a transition smoothly.
Sooner or later but before 2100, the global population will reduce to sustainable levels, or will do the overshoot/collapse thing. There may not be the good-quality energy left to re-boot, too.
But there will presumably be remnant technological memory, and a lot of recyclable material around. Turning heart kauri house frames (in an Auckland down to village population numbers) into sailing wakas is indeed a possibility....
We have several 200 ton birds that fly on sunshine and breezes (read gravity). I call them orbital satellites. We are about 30 years from passenger aircraft running on sunshine (converted to electricity) and breezes (or just air, lower pressure over the aerofoil and higher pressure under it, etc).
Whereas the real skin-in-the-game types are much more pessimistic....especially about long haul....
All we need is an order of magnitude improvement in battery technology... then an electric plane will be only 2x or 3x less efficient than a hydrocarbon powered aircraft. Still needs te next paradigm shift before practicality. Hopefully I'm not invoking Clarke's law on this...
Based on that article in 30 years battery capacity will be 8x current capacity. Adjusting jet fuel’s energy density for the difference in electric motor efficiency means that in 30years electric aircraft will be about half as efficient as today’s aircraft, still somewhat more efficient than aircraft from 15 years ago (many of which still fly). That assuming no major battery technology breakthroughs and no electric-electric hybrid aircraft that use capacitors (charged on the ground) during take off to save on battery weight. I do not see how a small efficiency reduction will cause a global catastrophe.
and in 20 years jet aircraft will be another 15-20% more efficient than todays aircraft, you are chasing a moving target.
Also the fun point of recharging the plane.. How big is the HV circuit to Auckland Airport going to have to be.. 5 or 6 777/A380 equivalents all trying to charge at once.. I guess Heathrow or LAX will just have to build their own nuclear power plant.
Probably better off looking at growing some sort of biofuel crop or synthesizing liquid fuel from landfill gas and sticking with liquid fuels.
Simplistically Auckland Airport has all the characteristics of a cash cow. Perhaps that is why when you pass through international arrivals and beyond, you are made to feel that you are nothing more than a member of a herd of cows. Try and avoid it, they sure know how to stuff up your holiday.
Slightly off piste but here one for you guys.
Auckland Airport covers all its operational costs from car parking alone. There is zero incentive for any public transport lobbying by them. One of many examples that AKL is a first world city that operates like a 3rd world one.
The costs of parking my car at Auckland Airport for a day on a 9 m2 piece of ashphalt would require many to take out a Mortgage , so I hate to think what airlines are having to pay for landing and parking an aeroplane.
The only way any sense would come to this rort , would be competition .......... the construction of a second airport north of Auckland would do the trick
Air New Zealand may well have a point – but I find a bit bloody rich for them to start banging on about monopolies.
When they in the past have had a sole run at a route in or out of NZ they have taken absolute maximum pricing advantage without one iota of blush.
Simply all part of their strategic business and pricing initiatives apparently.
What also amuses is that AIR has decided to make AIA its hub when it could have a smaller hub out of Christchurch and play both airports charges against each other. Look at the number of carriers going directly in and out of Christchurch shows there is an entire market they decide to ignore...
As it stands I go to Europe directly out of Christchurch and has already saved me from three disrupted days this year not going through Auckland as its capacity issues are magnified when scheduling goes wrong.
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