Change regulatory regime to protect consumers

Media Release

10 July 2007

Change regulatory regime to protect consumers – Air New Zealand

New Zealand consumers stand to gain substantial benefits from possible changes to the regulatory regime that governs the activities of monopoly airport providers, Air New Zealand said today.

The airline’s comments follow the filing of its comprehensive submission to the Ministry of Economic Development on the Review of Regulatory Control Provisions in the Commerce Act 1986.

The 200-page submission highlights the inadequacies in the existing regime and makes recommendations on how to better protect consumers from continued monopoly abuse.

At the heart of Air New Zealand’s submission is a call for a pricing framework that replicates a competitive market. It says airlines and airports should have the ability to negotiate on a level playing field, and call in an expert to only arbitrate if they can’t reach agreement.

Air New Zealand CFO Rob McDonald said today this was an industry-driven approach that worked well in many other sectors including telecommunications and dairy.

“We are advocating regulatory involvement only as a fall back if agreement is not reached – not heavy-handed regulation of airports. The current approach, which was recently described as ‘no regulation’ by the Australian Productivity Commission, is clearly failing to deliver outcomes that protect consumers and other airport users,” he said.

Mr McDonald said the review of the Commerce Act was long overdue and had the potential to redress the one-sided approach which has long been to consumers’ detriment.

Under the current regime, airports are required to “consult” with airlines over charges but ultimately have the statutory right to set whatever fees they see fit.

“A privately owned unconstrained monopoly with the statutory right to set fees ‘as they see fit’ is tantamount to the privatisation of taxation,” Mr McDonald said.

AIAL is rated as the second most profitable airport in the world by the London-based Transport Research Laboratory.

Analysis undertaken by PwC and included in the submission reveals AIAL to be generating more than $90 million annually in excess revenue.

Mr McDonald said this reinforced the “absolute lack of justification” for price hikes in landing fees and the Airport Development Charge announced by AIAL last week.

“We want to see the ADC ($25 Departure Charge) scrapped as part of regulatory reform. It’s clear from the returns being generated by AIAL that it isn’t necessary to support infrastructure development. In renaming the ADC, the airport is finally acknowledging that the amounts collected have never been separately applied to or needed for the development of airport facilities,” he said.

Scrapping the ADC would see one of the benefits of an improvement in the regulatory regime go straight into the consumer’s pocket.

“Timely investment in essential infrastructure is of national importance, but policymakers and the travelling public should not be seduced into believing that excess returns and the lack of a sensible regulatory framework is the price that needs to be paid to achieve this.”

ENDS

© Scoop Media