The Commerce Commission has today published its observations on Christchurch International Airport Limited’s (CIAL) disclosure of revised pricing information.

Deputy Commissioner Sue Begg welcomed the initiative from CIAL to provide a revised disclosure clarifying its pricing methodology in response to conclusions the Commission had previously reached about the lack of transparency of its approach.

“It is clear that CIAL recognises that improvements in transparency are important to the success of the information disclosure regime. We appreciate CIAL’s efforts and have provided feedback in our report to help facilitate further improvements.”

The Commission has not revised its conclusions that CIAL is targeting an excessive return over the 20 year period it uses in its pricing methodology.

“While we gain some reassurance from the fact that for the current pricing period the returns CIAL targeted are within an acceptable range, we remain concerned it is targeting a rate of return over the longer term that is above the Commission’s estimated range of acceptable returns.” Ms Begg said.

The feedback the Commission receives on this report will inform any changes to the disclosure requirements that are advanced ahead of the next price reset in 2017.

For further information, including a copy of the Commission’s report, see the Airports information disclosure summary and analysis page.

Background

Wellington, Auckland and Christchurch airports are subject to information disclosure regulation under Part 4 of the Commerce Act. The Commission reviews the airports’ pricing decisions in its summary and analysis capacity. The Commission does not regulate the prices the three airports charge. Airports may set prices as they see fit, but they must consult with customers on any major capital expenditure that will impact future prices.

Prices are set for determined periods known as price-setting events. CIAL’s first price-setting event began on 1 July 2008 and its second on 1 December 2012, with the third scheduled for 1 July 2017.

In February 2014 the Commission released a report on the effectiveness of the information disclosure regulation in relation to CIAL as required by section 56G of the Commerce Act.

The report noted information disclosure regulation appeared to have had little influence on CIAL’s conduct or performance. Its proposed prices over the 20 years from 2012 to 2032 targeted a return of 8.9%, which is higher than the Commission’s view of an acceptable return as being between 7.4% to 8.4%. Unlike Wellington International Airport, CIAL has not changed its prices in response to the section 56G report.

A copy of CIAL’s section 56G report from February 2014 can be found on the Reports to Minister page.

The Commission’s ongoing regulatory role is to provide summary and analysis of the performance of the three airports. Any future decisions on airport regulation lie with Ministers.

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