Airport price setting events

As an organisation, we are responsible for monitoring and reporting on the performance of the international airports in Wellington, Auckland and Christchurch under information disclosure regulation.

The next price-setting events for Auckland and Christchurch airports are due to come into effect midway through 2017. The pricing decisions that each airport makes are expected to remain in place for up to 5 years before being reset. After collecting information from these airports on their price setting events, we will then report on whether we consider that the airport has set prices in a manner consistent with the purpose of Part 4 of the Commerce Act.

Notably, our review will include an assessment of the expected profitability and proposed investment for the 5 year price setting period. The targeted profitability and planned investment of each airport are likely to be the main areas of focus for consumers, airlines and other interested parties. In addition, we have recently made several amendments to the way airports disclose information about their expected profitability in order to increase transparency for interested parties. This is will be the first opportunity to consider the effectiveness of these changes.

Our review will only cover certain airport services, which include aircraft, freight, airfield, and specified passenger terminal activities. It will not include car parks or retail facilities because these services are not regulated under Part 4 of the Commerce Act.

We have previously been required to report to Ministers on the effectiveness of information disclosure regulation for airports. Although we generally found that information disclosure was effective across a range of performance indicators, we found that it was not effective in limiting excessive profits for Wellington Airport. Wellington Airport subsequently reset prices in June 2014 which we estimate saved consumers more than $30m. As a result of this reset, the next price setting event for Wellington Airport is not expected until 2019, after we have reported on Auckland and Christchurch airports’ price setting events.

We look forward to engaging with the airports and other interested parties in preparing our reports.