Competition now possible in air traffic control markets
Published17 Sep 1997
Changes to pricing systems for air traffic control services have now opened up markets to potential competitors.
Commission Chairman Dr Alan Bollard said that the Commission had late last year and early this year been investigating Airways Corporation of New Zealand for alleged breaches of the Commerce Act.
The investigation centred on the pricing system Airways then used. Part of that system allowed for cross subsidisation from air traffic control services over which Airways has a statutory monopoly, to services that are contestable. Its effect was to discourage potential competitors entering the contestable markets.
A new pricing system, which eliminates the possibility of cross subsidisation, is now in place at all airports except Ardmore and Milford, where negotiations are continuing between Airways and airport users.
The new system has already led to reduced fees at major airports for the main airlines. However, with the removal of cross subsidisation, fees have increased at some provincial airports.
"While the Commission is satisfied with the progress made to date in opening up these markets to competition, we will continue to monitor air traffic control markets," Dr Bollard said. "If anti-competitive behaviour occurs, we will have to consider taking enforcement action."
He said it is important to note that the Commission has not authorised the changes made by Airways, and Airways does not have the legal protection that comes with an authorisation. An authorisation, if granted, protects a business practice from court action under the Commerce Act.
After the Commission began its investigation last year, Airways applied for authorisation of a delay in introducing competition until March next year. However, Airways withdrew its application after the Commission said that its preliminary view was that it would not authorise the delay.
Airways then produced a timetable for introducing a new pricing system that would remove cross subsidisation and allow competition by September this year.
The Commission responded by saying that it would closely watch Airways progress towards the new system, and would have to consider taking enforcement action if progress was not satisfactory.
Background
The Commerce Act prohibits anti-competitive behaviour. However, the Commission can authorise some forms of anti-competitive behaviour if it is satisfied that public benefits from the behaviour outweigh its detriments to competition.
The Act applies to all organisations involved in business activities in New Zealand, irrespective of their ownership. That is, it applies in the same way to public and private sector organisations, New Zealand and foreign owned firms, companies, co-operatives, trusts, government departments, Crown corporations and local authorities.
Media contact: Communications Officer Vincent Cholewa
