Targeted return in line with Commission guidelines

Friday, 2 November 2012, 11:25 am
Press Release: Wellington Airport Limited

Media release - 2 November 2011

Wellington Airport’s targeted return in line with Commission guidelines

Wellington Airport are reviewing and evaluating the conclusions of a draft Commerce Commission report issued today on airport charging. The draft report found that the regulatory regime is working well in some areas, but the airport is questioning the draft findings on its forecast return.

“Wellington Airport’s targeted effective rate of return is 8.1% which is at the lower end of the Commerce Commission’s published cost of capital for airports at the time of price setting. While the Commission has focused on a forecast return of 9.5%, they have not taken into account the airport’s commercial concessions. The current pricing is below what the Commission considers as reasonable,” said Steve Sanderson, Wellington Airport’s Chief Executive.

“It has been recognised that the airport conducted a transparent and consultative approach to price setting, promotes appropriate innovation and delivers a quality passenger experience. The Commission has also supported the airport’s pricing structure in promoting operational efficiency.”

The current airport charge on average per passenger is $11.11 at Wellington. By comparison Sydney Airport’s average charge is nearly $16 which is 40% higher than Wellington’s.

“The draft report was released this morning and is a detailed technical document that we are working through.New Zealand’s airport prices are low when compared with airports worldwide with good investment and innovation further demonstrating that the market is functioning well,” Mr Sanderson said.

Wellington’s new charges introduced earlier this year are between those charged by Auckland and Christchurch airports, and in the lower range of Australasian airports in terms of cost per passenger. Wellington Airport’s pricing also provides strong incentives for growth and the introduction of new services. Jetstar recently announced an increase in capacity of 50% or 500,000 seats.

“We are confident that further detailed analysis and benchmarking of airport services and pricing will highlight the effectiveness of the current regulatory regime, which will enable the required $100 million investment in travel and tourism infrastructure forecast to be spent at Wellington to accommodate growth, safety requirements and air service connections over the next five years,” Mr Sanderson said.

The Commission’s draft report is on the effectiveness of the information disclosure regime for the setting of charges at Wellington Airport.

The regulatory regime requires that Auckland, Wellington and Christchurch airports make public specified financial, quality and pricing information to ensure transparency when consulting on and setting airport charge. The aim is to ensure that the airports have similar incentives and pressures to suppliers operating in competitive markets.

Wellington Airport is the first airport to have been reviewed following its setting of prices under the Airport Authorities Act earlier this year. This is also the first step in an overall assessment of the information disclosure regime for New Zealand’s three main airports.

ENDS

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