Auckland Airport’s decision last month to reduce its charges to airlines by $33 million over the current five-year pricing period is a good development for the sector.
We want to acknowledge Auckland Airport’s willingness to engage and respond positively to our final report released in November 2018. Its decision to revise its pricing is a good result for consumers and shows the benefits of the current information disclosure regulations that are applied to New Zealand’s major airports.
In our final report, we estimated Auckland Airport would earn an additional pre-tax return of $53 million on the majority of its regulated services – the equivalent of 50c per passenger per flight over the 5 years – compared to our benchmark.
We considered that not all this additional return necessarily represented excessive profits, as Auckland Airport provided some evidence that an appropriate return may be above that benchmark. However, we were not persuaded that the full extent of its targeted return was sufficiently justified.
Auckland Airport has now reduced its targeted return from 6.99% to 6.62%, compared to our benchmark for airports of 6.41%. It noted the changes would take effect by way of discounts on landing and passenger charges from 1 July 2019 and apply for the remainder of the pricing period which ends in June 2022.
In our view the incentives from the information disclosure regime have strengthened over time, as both Christchurch and Auckland airports’ targeted returns are significantly lower than when the current regime was introduced.
We now look forward to working with Wellington Airport as it sets its prices later this year.