BARNZ Allegations Unfounded

AIAL chief executive, Don Huse, has refuted claims from the Board of Airline Representatives New Zealand (Inc) that AIAL has been “selective” in its media releases today in relation to the new aeronautical prices.

In particular:

* While AIAL’s previous pricing model assumed capital works would be undertaken over the last five years, the level of investment incurred by AIAL over that period has in fact been significantly higher than was originally forecast.

* In the prices announced today, AIAL has given a $7.5 million credit to the airlines with respect to the additional $5 increase to the Airport Development Charge (ADC) from 1 October 2005.

* Landing charges were last agreed with the airlines in 2001. This is the first opportunity to reset landing charges since that time and in doing so, AIAL has closely followed the Commerce Commission’s approach to land optimisation and valuation methodology.

* The move to have the ADC (to be renamed the Passenger Service Charge) paid by the airlines, rather than being paid by passengers at the airport, will significantly improve the passenger experience, and bring Auckland Airport into line with almost all other international airports around the world. Auckland Airport fully expects that the airlines will in turn pass this cost onto the passengers by way of a charge on the ticket. The change is simply one of collection mechanism. AIAL has also acknowledged the costs to the airlines of this change in collection process.

* The WACC return has been determined based on expert advice, and takes into account the very high level of interest rates at the moment. These are real costs faced by AIAL.

* The actual asset revaluation for identified airport activities included in AIAL’s disclosure accounts is $439 million, not $469 million referred to in BARNZ’s release. While asset appreciation since 2002 has been greater than expectations, more than half of the $439 million revaluation shown in last year’s disclosure accounts is related to airfield land which AIAL has shared with the airlines. Some of this revaluation was also for assets which fall outside the scope of consultation. A portion of the $100 million non-land assets referred to by BARNZ has been allocated to AIAL’s commercial activities.

* An important point is that there was no agreement between AIAL, BARNZ and the airlines with respect to the treatment of past asset revaluations. AIAL has received consistent expert advice that, unless the treatment of asset revaluations is agreed at the outset of a pricing period, there is no requirement to revisit assumptions made in the past. Over the last pricing period, AIAL invested significantly more in aeronautical assets than was forecast. AIAL is not, however, seeking to revisit this assumption.

* Most importantly, AIAL has agreed to credit the airlines with more than half of the unanticipated gain in airfield land, and we have also agreed to a ten year asset revaluation moratorium going forward. Furthermore, we have adopted a lower opportunity cost approach to valuing land and not updated the 30 June 2006 asset values to current market values.

* BARNZ and the airlines were not “required” to sign confidentiality agreements. Both parties agreed to conduct this process under normal confidentiality arrangements.

Despite this, Mr Huse said “As previously stated, Auckland Airport has had three years of positive and constructive discussions with our airline customers.

“We believe these prices are very fair and reasonable, given our significant investment programme over the last five years and future proposed investment programme.

“A key outcome of these negotiations is that travellers will no longer pay a departure fee at Auckland Airport, instead all charges related to travel will be included in their airline ticket.”

ENDS

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