The Commerce Commission found some charges were justified to pay for a new terminal and other infrastructure at Auckland Airport. Photo: RNZ/Nick Monro
Auckland Airport's proposed increase in charges are too high and will result in excess profits, the Commerce Commission says.
In a draft report, the regulator said the airport's proposed charges would see it make $200m excess profits over a five-year period.
It said some charges were justified to pay for a new terminal and other infrastructure and the airport company had followed the right processes and considered a broad range of options.
But commissioner Vhari McWha said the airport's profit targets were unreasonable and would likely force up airfares.
"We set a benchmark return based on our standard methodology and the return that the airport is targeting are significantly above that and we estimate that they would earn approximately $200 million in excess profits compared to our benchmark over the five year period.
"So the profit that they're targeting is 8.7 percent, and we think that a reasonable return sort of the maximum reasonable return would be about 7.5 percent."
Earlier this year Air New Zealand said the airport's regulated charges would make flying unaffordable for some passengers, expected to add about $46 to the price of a domestic ticket by 2032 - a five-fold increase from today's rate of about $9 per passenger.
In a statement Auckland Airport said it would consider reducing future charges after further consultation with the commission.
Vhari said she would expect the airport to knock back its pricing following the final report from the regulator.
"What the airport has indicated they will do and what they've done in the past, in response to our final findings, is they've adjusted their prices.
"What they would need to do would be to make an adjustment over the balance of the period. So the pricing period that we're talking about has actually already started and it runs through to 2027. So they would make an adjustment over the last part of the period in order to balance out the return they've made in the first part of the period."
Air New Zealand, Jetstar, Barrier Air and Air Chathams welcomed the draft report, but wanted an urgent independent inquiry into airport regulation.
In a joint statement, the airlines said they wanted the commission to use its regulatory options to keep airports under control.
"These include steps that require airports to negotiate with their airline customers on a commercial basis, go to arbitration if that fails, or the regulator can set the price and quality of their service.
"These options do not require new laws to be passed, so it's not a case of more red tape or government intervention - airlines are simply asking the commission to use its existing inquiry power to determine which regulatory option will deliver more control over airports and, therefore, better value for consumers."
The group disagreed with the commission, saying the airport upgrades were too expensive and left costs to be forced on customers.
Meanwhile, the NZ Airports Association said the upgrade was significant but reasonable.
"This is a significant capital programme, but it is essential for New Zealand's international and domestic connectivity. Airlines' attempts to defer the build risk a greater infrastructure deficit in the future - exactly the problem we see in other infrastructure classes around the country."
Interested parties can make submissions on the draft before the commission releases its final report in the first quarter of 2025.
