BARNZ Supports Commerce Commission’s Denouncement Of Auckland Airport’s Excessive Profit Taking Regime

Board of Airline Representatives (BARNZ) is pleased to see the Commerce Commission denounce excess profit taking by Auckland International Airport Limited (AIAL).

Auckland Airport prices set from 1 July 2023 may be some $226.5 million dollars too high, says Cath O’Brien, Executive Director of BARNZ.

“Auckland Airport has set profits based on what the Commission called unreasonable, unjustified, and inconsistent assumptions. Unfortunately, these excessive prices have already been paid by airlines since July 2023. It appears that airlines and travellers are stuck with paying for Auckland Airport’s excess profits until at least July 2025 before any re-pricing event occurs.”

O’Brien notes that the regulatory regime which applies to Auckland Airport allows the airport to set prices as they wish – even where they are excessive and unjustified.

“For two periods running, Auckland Airport price setting has been found to be excessive, and for two periods running Auckland Airport will lower those prices after regulatory examination. “

“Airlines will have paid prices including these excess profits over 2023 and 2024. Come 2025, some airlines may reduce their number of services to Auckland Airport, while some may have to leave the market altogether which will have significant knock-on impacts across the economy. A late period re-price in 2025 means that some airlines will have paid higher prices during 2023-24 and will miss out on eventual price reductions. “

The Commerce Commission’s Draft Decision considers the AIAL capex and prices over 2022-2027. However, AIAL has a capital plan which extends to 2032 at least, with the balance of capex applied to airline prices in the period 2028-2032. The Commission’s Draft Decision considers this capex is ‘reasonable’.

However, the Commission notes that analysis of prices for the period to 2032 is ‘speculative’.[1] The reality is that the Information Disclosure regime cannot consider these prices, despite that they are consulted on and analysed in the price setting process. This leaves New Zealanders taking the risk for even higher prices of the future; the regulator either cannot or will not consider the impacts of steeply rising prices.

“The information disclosure regime is backwards looking, nudging the door closed on prices already set too high. It cannot consider the impacts of future capital cost on prices. It is clear that the regulatory regime is not fit for purpose when it comes to ensuring oversight of such a significant capital plan – a plan much larger than any other infrastructure investment in New Zealand.”

“If we do nothing, Auckland Airport is likely to continue to target excess profits as it has done over the last two price periods. The capital plan will unfold, bringing higher prices with it. Ultimately, airlines and their customers will pay. It’s time for a sense check. We urge the Commission, and the Minister of Commerce, to consider an Inquiry for Airport Regulation.”

[1] Review of Auckland Airport’s 2022-2027 Price Setting Event, 17 July 2024, X9

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