Auckland Airport boosts profit and landing charges

Friday 31st August 2001

By Graeme Kennedy

Auckland International Airport Ltd yesterday announced a record annual profit and thumbed its nose at the Commerce Commission, lifting landing charges a further 5%.

The latest fee hike follows an 8.5% lift a year ago. Another 5% rise is planned for September 1, 2002.

Airlines have complained bitterly about the fee rises and the Commerce Commission has called for regulatory controls. Its inquiry into airfield pricing is continuing.

The airport's after-tax profit rose 15.8% to $59.1 million on operating revenues 11.4% higher at $189.4 million.

Declaring a fully imputed dividend of 6.25c a share, directors said the June year had been "another excellent year for the company" with a return on average equity of 12.9% and earnings a share of 14.1%.

Chairman Wayne Boyd said the expected on-going improvements in AIAL's key activities and financial performance in the current financial year. Tourism numbers looked set to show significant further growth over the next few years.

Total dividends for the year were $47.3 million, representing 80% of the after-tax surplus.

The company said its performance was driven by increases in key activities.

International passenger movements rose 5% to five million and domestic was up 5.5% to 3.4 million. The departure tax on international passengers was lifted from $20 to $22 in October.

Retail revenue increased 11.8% to $56.6 million while the company's investment property portfolio grew to $81 million.

Total assets stood at $884.2 million.

Operating costs increased 8.7% to $50.2 million including $1.6 million in costs associated with the pricing consultation process and the on-going Commerce Commission charging inquiry.

Air New Zealand, the airport's biggest customer, has begun court action over the fees and is seeking a judicial review of the consultation process to be heard in February.

The carrier has refused to pay last year's increases and directors said invoiced charges at balance date were about $1.5 million.

The commission's draft report, released last month, said it had reached a "preliminary view" that Auckland Airport should be subject to price control because of over-recovery in a monopoly position.

The report said Christchurch Airport could also be subject to control but the cost of administering it would not justify the measure.

All parties, including the airlines represented by the Airline Board of Representatives New Zealand, were to respond to the report by yesterday.

They have been joined by the Auckland City and Regional Councils and Christchurch City Council - which all support the airports' stand - and several utilities concerned by the commission's interest in monopoly pricing.

A joint commission conference where all groups will reply to the submissions will begin in Wellington on Tuesday and is expected to last two weeks.

The commission will make its recommendations on airfield price controls to Commerce Minister Paul Swain by November.

The major issues are the appropriate methodology to be used for evaluating runways, taxiways, and aprons, and the ability of airport companies to get a "fair return" on land held for future development.

"The company believes that runway, taxiway and apron assets should be valued on an optimised depreciated replacement cost basis as this method of valuation best replicates a competitive market position," the directors said.

The commission, however, said in its draft report that a historical cost basis was a more appropriate valuation methodology.

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