Regulator affirms view that Christchurch Airport prices too high, lack transparency

Thursday 13th February 2014

Christchurch International Airport's targeted returns over the next two decades are too high and its pricing lacks transparency, the Commerce Commission says, affirming an interim view published in October.

New Zealand's second-largest airport's proposed pricing for 2012 to 2032 targets a return of 8.9 percent, above the 7.6 percent-to-8.5 percent range the regulator deems acceptable.

Wellington International Airport and Auckland International Airport are also regulated under the Commerce Act, which requires them to disclose price setting methodology, financial statements and business plans.

The commission is then required to report to ministers on how effective the disclosure regime is in promoting long-term benefit for consumers, limiting excessive profits, incentivising efficiency gains and passing on any gains to the customer.

"Overall, information disclosure regulation appears to have had little influence on Christchurch Airport's conduct or performance," Sue Begg, deputy chair at the commission, said in a statement. "Given the charges that Christchurch Airport has set, which were based on a 20-year pricing approach, our conclusion is that information disclosure regulation is not limiting excessive profits."

Begg said the airport company "has signalled its commitment to improve transparency."

In 2013 the airport grew revenue by 4.8 percent to $118.5 million and net profit declined by about 6.4 percent to $18.4 million.

Airlines, the biggest customers of the regulated services, say light-handed regulation allows airports to extract excessive profits.

"The latest finding that Christchurch Airport is targeting excessive profits over its 20 year pricing path shows that airports need to be subject to a stronger form of oversight than just information disclosure," said John Beckett, chief executive of the Board of Airline Representatives New Zealand, a lobby group that represents 21 airlines.

Beckett said the current disclosure regime for the airports is "too light-handed" and he called on the government to negotiate a pricing scheme more in line "with good international practice".

Under the terms of the regulations, the commission doesn't make any recommendations to the government as part of its review. Its review of Auckland airport found returns were within its target range while Wellington was deemed to have been targeting excessive profits, a view it has disputed.

Christchurch airport is about three-quarters owned by the Christchurch City Council.

BusinessDesk.co.nz

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