BARNZ Supports Commerce Commission’s Report To Rein In Auckland Airport’s Excessive Charges

The Commerce Commission’s final report into Auckland Airport’s (AIAL) prices for 2023-2027 finds that AIAL has targeted excess profits when setting its prices with a target return of 8.73%.

“The report and its findings did not come as a surprise – the draft report from the Commission in July last year made the same point that AIAL has been targeting excess profits,” says Cath O’Brien, Executive Director at BARNZ.

Following the report, AIAL has stated it will lower its prices over the next two years, as it adjusts its target return down to sit at the highest point of the Commission’s acceptable range, at 7.82%. This adjustment is expected to lead to reduced landing charges over the next two years.

“While this is a step in the right direction, unfortunately these excessive prices have already been paid by airlines since July 2023. AIAL’s increasing prices are contributing to the flat demand for growth we’ve seen for air services to Auckland.

“It’s not yet clear how prices will be adjusted in the two-year period, but not all airlines are likely to benefit. Some airlines will operate fewer services to New Zealand in the two years ahead, or could withdraw from the market, having paid those higher prices since 2023.

“While BARNZ member airlines are pleased to see action taken by AIAL following the release of this report, the fact that excess prices have been charged since 2023 while the regulatory review slowly unfolds is deeply unsatisfactory.”

O’Brien says the report also provides options for further regulation of monopoly airports.

“AIAL is the mega-monopoly of New Zealand airports, handling around 75% of our country’s air traffic. Its $6 billion capital plan is funded wholly by airlines who fly to from and within New Zealand.

“This high-cost capital plan set by our largest monopoly airport has led to significant operating cost increases for airlines. These prices are likely to rise every year to at least 2032 so AIAL can recover the substantial rebuild.

O’Brien notes that New Zealand is becoming a high-cost destination for airlines and risks pricing itself out of the aviation market.

“New Zealand is now an outlier – airlines have not returned here. BARNZ members tell me that this is because New Zealand has become substantially more expensive to operate to in recent years and AIAL’s prices are the largest portion of those price increases.

“The ongoing cost increases are impacting New Zealand’s competitiveness as an aviation market, hindering the recovery of air connections and tourism. If New Zealand wants to boost tourism as part of its economic growth plan, we need to make sure costs for airlines and their passengers do not continue to rise without oversight.”

BARNZ calls on the Minister of Commerce to take decisive action, as outlined in the Commerce Commission’s report, to ensure airport pricing does not undermine New Zealand’s tourism and economic recovery.

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